Green Landscaping Group AB (publ)
STO:GREEN
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Green Landscaping Group AB (publ)
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Hello, and welcome to the Green Landscaping Group AB conference call. [Operator Instructions] Today, I'm pleased to present Johan Nordstrom, CEO; and Carl-Fredrik Meijer, CFO. Please go ahead with your meeting.
Thank you very much, and welcome to this phone conference, where we will present our Q1 report covering January through March of 2021. As mentioned, my name is Johan Nordstrom, I'm the CEO of Green Landscaping, and together with me here today is also our CFO, Carl-Fredrik Meijer. And by that, we dive into the presentation here, so the next slide. So for the Q1 '21 highlights, we reached a sale of SEK 669 million compared to SEK 375 million in the first quarter of 2020. And that represents a significant growth, I would say, by 78%. Organic growth was 33%, and we had or carried out normal winter activities during the year. EBITA amounted to SEK 14.7 million compared to a negative SEK 18.7 million a year ago. So it's a significant and sharp increase in the EBITA performance of the company in the quarter. The EBITA margin amounted to 2.2% compared to a negative 5-point -- 5% previous year. So -- and cash flow from operating activities amounted to SEK 36.9 million compared to SEK 42.2 million previous year, which is a kind of a flat development there. Net debt increased from SEK 719 million to SEK 953 million, and that is due to the continued acquisitions of a company that we have performed. And subsequently, one company was acquired during the first quarter, and that was in Norway, and the company was Akershusgartneren. And the last bullet there is about the ongoing COVID-19 situation, which still is an effect in both Sweden and Norway. And it has a, and I would say, a negative impact on our business. It's not a significant impact but we do suffer from some reasons or activity or lack of activities, I would say, because of the COVID-19. The next slide, please. Looking upon the LTM numbers or the trailing 12 months, we can clearly see that our sales has gone from 1.9 million to -- sorry, SEK 1.9 billion to SEK 2.4 billion, and that represents an increase of 27%. The EBITA have grown significantly. So that one is up with 160%. So it's a sharp increase where we at quarter ago -- year ago had SEK 51.4 million in EBITA and right now, we are at SEK 134.5 million, so a significant change there. In terms of margin, we recorded 3.7% a year ago, and right now, we are at 5.5%. So that means we are up by 1.8 unit of 1%, and that equates to an increase of 48% in the profit margin. In terms of acquired annual sales, so during the last 12 months, we have acquired companies or other companies have joined us with a combined revenue of -- yearly revenue of SEK 720 million, so it's a strong growth there. The order backlog had grown significantly, both through acquisition as well as through organic renewal of contracts. So a year ago, we were at SEK 3.5 billion. And right now, we are at SEK 5.2 billion. And cash flow is at -- I would say it's a healthy cash flow now, where we are at SEK 187.6 million in cash flow from operations. Next slide, please. Taking a somewhat longer look, I would say on -- and look upon the CAGR for the last 3 years. And that means that you can see that our sales has grown by 25% so it's a fairly steady growth driven both organically but primarily from acquisitions. And the EBITA has grown significant, I will say. Here, we can see we have an 86% CAGR in profitability of the business. So it's going according to plan, I would say, and we're happy to report that we continue to improve both in revenue as well as in profitability. Next slide, please. As mentioned, we have made one acquisition in the first quarter of this year, and that was Akershusgartneren in Norway. It's a well-known company to us because they have been in cooperation with, in particular, Hadeland Maskindrift in the past. And it's led by Snorre and Halvor, who are 2 very skilled entrepreneurs. And we are quite happy with adding that company to the group. And as mentioned, it's a well company to us, and we have been working with that company in the past. So right now, as we're growing in Norway, I would say that we have a very strong presence in Norway, and we have built up a great team in Norway. Next slide, please. Then we have Hadeland Maskindrift, who is, I would say, a major player in Norway in terms of maintenance of the road network. And they have been rewarded their main contract. They are the current supplier to that contract, and it amounts to about NOK 660 million. It's a fixed contract for 4 years with options for 2 additional years, so that means that to a certain extent, the coming 6 years for Hadeland Maskindrift is secured. So we're quite happy that they got their renewed confidence from the Municipality of Oslo to continue to carry on those services. And by that, we move on to the order backlog increase and Carl-Fredrik will take over.
So next slide, please. Order backlog increased by 45% to SEK 5.2 billion, as Johan mentioned, up from SEK 3.6 billion a year ago. This is driven again by the acquisition of Akershusgartneren and the new contract that Hadeland Maskindrift secured. One can also say that this SEK 5.2 billion is actually the result of thousands of contracts that we have through our 28 subsidiaries, so it's a quite diverse contract portfolio. Next slide, please. Performance per segment. First of all, we are reporting the segments in a new way starting this quarter to better reflect the group today. So we report Norway as its own segment. The old Mid segment is now part of Region North. And we have changed names. So the old Region West is now Region Mid. And what you can say is that sales is up in all segments compared to quarter 1 last year. The margins is improved in all segments but it varies if you exclude Norway, of course. And we had only one company one month last year in Q1. So the comparison is not -- it's not like-for-like. Looking at the LTM numbers, it's quite interesting to see the margins in the different regions. And you see that Region Norway has a quite strong margin. Region North is on a satisfactory level of 8.5%. Region South and Region Mid is a bit too low, and Region Stockholm is at an unacceptable low level. Next slide, please, financial position. Net debt in relation to EBITDA pro forma was 2.9x in Q1. Cash flow from operations after leasing payments was SEK 17 million versus SEK 22 million last quarter. Cash flow from working capital was basically 0 this year, where it was quite strong last year of SEK 42 million, and that is due to the low account receivables outstanding last year as the revenue was quite low in that year. We have used SEK 94 million for acquisitions during the quarter, and we have repurchased own shares of SEK 30 million in the quarter. Next slide, please, and over to Johan.
Yes, thank you. So moving on to the financial targets here. So we have 4 of those, and the first one is that we should grow by 10% year by year. And right now, we are at 27% on the LTM growth number, so we are clearly surpassing that number. The profitability and the EBIT margin should be 8%. And right now, we are at 5.5%. So we are growing or increasing our profitability, and we are slowly but surely heading towards the financial targets we have there. We have a goal of a leverage of 2.5x. And as Carl-Fredrik mentioned, we are right now at 2.9x. So we are slightly above or slightly we are above that particular target and the reason being the number of new companies that have joined the group. So we are acquiring at a fairly high pace. And there, we use, of course, the leverage, and then it goes up as we acquire companies. So given the pace and given the company we have acquired, that means that we are at 2.9x. And it's a bit high, but not to a stretched level at this point of time. And then, of course, we have set a target to have a dividend of 40%, and the status right now are at 0% and the reason being, we are growing quite rapidly as we are acquiring companies and being joined by new colleagues. And that means that we choose to not make any dividend and instead growing by acquisitions. So we use our cash to buy new companies instead of the dividend. So that's pretty much where we are on the financial targets. And to sum up the first quarter, it's a quarter with a very strong growth and a significant improvement in margin, reason being that we have normal winter activities, and we have acquired great companies who contribute to both growth and profitability. And I would say that the legacy group of companies have also performed to expectations. So it was a solid quarter in terms of the financial performance. And as can be seen here, the revenue growth is quite dramatic at 78%. And to some extent, we are comparing to previous year, which was, as we have communicated, a bit unusual in terms of that it was very, very warm. So I would say that the number we are comparing ourselves to is quite easy. And I'm very happy to see that we have an EBITA margin which is positive of 2.2%. The first quarter is, by default, our weakest quarter given the nature of the business. And being on a 2.2% margin, it makes us good and it looks good for the coming year, I would say. And we have also made, as we mentioned, one acquisition with Akershusgartneren year-to-date. So all in all, we are quite happy with the outcome of the first quarter of this year. So that was the formal part of the presentation. And by that, I hand it back to the conference here and see if we have any questions, we can open up that part.
[Operator Instructions] Our first question comes from Fredrik Moregard from Pareto Securities. .
So first off, a question on -- first off, a question on acquisitions, clearly, making a substantial contribution to both EBITA and to revenues in the first quarter. Is it possible to give us a sense of how accretive acquisitions have been to your Q1 margins and bridging that through to last year?
I think it's -- I mean, of course, the segment Norway is, of course, a new segment, making a big impact on the year-to-year development. So it's a combination of acquired companies and, we'll say, lost ground from last year and organic development. You can see that in basically all segments, we're making improvements. So it's...
Sure. So I understand that Norway definitely makes a massive contribution clearly from acquired companies. Then when it comes to Region Stockholm, where you had some issues with some underperforming business units, you're seeing substantial sales recoveries in the 60% or so from Q1 last year, at the same time, EBITA is, I mean, quite a small improvement on that sales growth going from a loss of 10 to a loss of -- sorry, from a loss of SEK 14.7 million to a loss of SEK 10 million in EBITA. Are there any additional costs that you've incurred in the first quarter? Or if you could please help us understand why that difference isn't larger.
We are continuing to improve the situation. And I think there is an improvement, and we would like to see a faster pace in the improvement because we are making changes to what we are doing there. The winter in the previous year impacted Stockholm quite negatively. And with the revenue back, of course, we are making more money in the region. But as Carl-Fredrik mentioned, we are not where we would like to be in some of the companies. We have great companies in Stockholm or good companies in Stockholm as well, but then we have a few companies who are not up to standard in terms of where we would like them to be. And we are continuously improving those units that are underperforming. So in the coming month and the coming quarters, we expect to see a steady improvement in those entities.
Okay. And is it possible to get into more detail exactly what you're seeing in terms of improvement in those units?
Well, it goes back to the types of contracts they have and how they perform. So yes, we are making quite significant changes. I am not really in a position right now to go into too much details. There are some sensitivities going on in what we are doing here. So I'm happy to elaborate on the question in a couple of months from today in what we are doing in certain entities in Stockholm.
All right. All right. Looking forward to that. Just a final question then on discussions that you're having with customers ahead of the landscaping season, which actually, I mean, that season has obviously started here in the beginning of May. Could you just tell us something about what customers are saying? Do they remain cautious? Are you still seeing a negative impact from COVID? Any implications for budget allocations, mainly from your public sector customers or are they planning to execute on the delayed projects that they didn't do last year?
In terms of budget discussions and money allocations and so forth, we have no information that there has been any significant or dramatic or, I would say, material changes in the budget and the way they have allocated the funds in correlation to COVID-19. So from that perspective, we don't see that there has been any changes or that we foresee any changes to come. But also, we see clearly that getting into meetings with the customers, getting the purchase order for additional contracts and so forth are complicated because you cannot do the work where you actually physically visit the surroundings and where you can discuss what type of activities should be done. And that makes business a bit slow. So it's hard to -- or harder, I would say, to get in contact with the customers and discuss with them additional work that needs to be done because we don't set up meeting, we don't have physical meetings. People are hard to reach. So the fixed contract works according to plan. It's the additional work that is harder to get. It's not a major issue, so we can be clear about that. But it's been -- business is kind of a bit slow in certain areas when you can't have physical meetings. And that, of course, has, to some extent, a negative impact on our business. But going back to the original part of the question in terms of budget or if there has been any changes on the customers' budget, not to our own knowledge at this point of time, no.
[Operator Instructions]. Our next question comes from Dan Johansson from SEB.
I have 2 additional questions from me. The first question on Norway, is it possible to share some insight into the margin profile of your Norwegian business? Would you say that the margin is more stable compared to Swedish operations with less seasonality given the service offering you have in Norway compared to Sweden?
Dan, no, there are seasonalities in Norway as well because the companies are operating in the same type of business as we have. So we have businesses there where that have a kind of even revenue and profitability but also seasonality where we clearly see that they have a weaker first quarter compared to the other 3 quarters of the year. And then we have one exception, that is Hadeland, who basically have, I would say, a stronger fourth and a stronger first quarter compared to the service companies we have, both in Norway and Sweden. In terms of profitability, the average profit level is higher in Norway than what we see on the average in Sweden.
Perfect. And another one on Norway, if I may. How do you feel about the acquisition pipeline you have currently? Are you going to do more M&A? Or do you want some time to digest and integrate the companies you acquired during the past quarters and perhaps take down leverage a bit as well? It would be interesting to hear your thoughts about that.
Yes. I was going into the COVID-19, again, I was a bit, let's say, scared that we had a pipeline of companies which we were in contact with and then as we couldn't have physical meetings, I was a bit scared that, that could have had a negative impact on the acquisition pipeline. As it turned out, we are still having meetings. We are having meeting by representatives, in particular in Norway as we have a platform and Norwegian colleagues to carry on the work with -- meeting with new companies and taking on that discussion, meaning that we don't physically have to meet with them as we can't travel to Norway or outside Sweden at this point of time. So I would say that the pipeline is still active. We still have companies we are in discussions and contact with. We are also, from a financial perspective, in a position to carry on with the current pace at which we are acquiring companies. So our ambition is not to slow down or consolidate. We clearly believe that we have the momentum going. We have a window of opportunity in Norway, which we would like to pursue. So the current pace and the pipeline, I don't see any major changes going into the future here. So I'm happy with where we are at this point of time.
There seems to be no further registered questions, so I'll hand back to the speakers.
Okay. I think we have had a few questions on the e-mail as well but we basically covered those on the questions we received from the 2 previous of Dan and Pareto. So by that, we're kind of happy with the phone conference. And thank you very much for listening in, and have a good day. Thank you.
Thank you.