Lagercrantz Group AB

STO:LAGR B

Earnings Call Transcript 2022-Q1

[Jörgen Wigh, President, CEO & Director]

Good morning, everyone. Jörgen Wigh speaking, CEO of Lagercrantz. We will start the presentation in just a minute. I just like to introduce myself and also Kristina MacKintosh, our CFO, is also with us on the line here. And we have -- for Lagercrantz, we have released our numbers this morning, and we will try and run you through them, through the presentation that is available on our website. We will start by reaching everyone, and we will open up for questions at the end of the session. Yes. Thank you. So a warm welcome to everyone. Again, our -- the presentation is available on our website in lagercrantz.com. And you can follow it, too. And I will try to highlight where we are on every page as we go through the presentation. And again, we will open up for questions at the end of the session. And hopefully, we will start to keep it brief and be done in 45 minutes to an hour or so with all the questions as well. So we released our numbers for the Q1 here this morning. As you -- all of you have been following us, you know that we have a year ending the end of March. So our Q1 is the April to June then, which we again released this morning. We feel it was a very strong report. We've had a very strong quarter. And I think we also, compared to what the market expectations were, had a very strong quarter as well. But before we get to that, I have divided the presentation into sort of 3 chapters. The first one is a short introduction to the group, and then we will look at the numbers. And at the end, we have the chapter 3, which is then going over some things that we feel are important to know about us as we go forward. So -- and we will then round up with the Q&A as well. Looking at Page #2 of the presentation. With a short introduction, I mean, Lagercrantz is and has been for a while a tech group. And we work very -- we think in, niches. So we have a group of some slightly less than 60 companies, which are basically working under separate niches, trying -- with doing business-to-business technologies in different niches and trying to do a lot of value creation for our customers, primarily, but also, of course, for the suppliers that we get to [ spend ] in some instances as well. Revenues in the group exceed some SEK 4 billion. And we have some 1,800 employees within the group after our last -- latest acquisitions with [ Mönchengladbach ] within the group. So 1,800 is the current number. You can see where we are present over to the right on the slide there, where we have our pins or needles where we are located. And as you can see, Sweden is our biggest market, but we also are strong all through the Nordic. But we also are strong in some Northern European countries with Germany and the U.K. and the Dutch region and also Poland. And you can see over to the right where we're also present because most of our companies are also going for exports and, therefore, we also have some footholds in other parts of the market -- of the world, with especially U.S. and China and also India, as you can see, obviously to the right. We -- I've said already, we work in a very decentralized way, running it through decentralization and management by objectives. So each profit center have their own sort of profile. They have their own work and their own brand name, our own company name on addressing the specific market and specific technologies and specific product. And as of now then, first, as of the last quarter, yes, we are working in 5 divisions. It used to be 4. And you can see the 5 divisions that we have up there. I will comment on that later, that reorganization that we made starting at the 1st of April. Acquisitions is a very key thing in our DNA, and we try to make 5 to 8 acquisitions per year. And in the last 12 months or so, we made 10 acquisitions. So acquisitions is a really important thing for us as a growth -- a way of growing the business. We have been separated and listed since 2011. And before that, we were part of the Bergman & Beving Group. So we have been on the stock exchange since 1976, really under another name up until 2001, but on our [ old name ]. So that's an introduction to the group. Looking at our performance. You can see here on Page #3, we started out from -- in 2005 or so with some lower margins and has, since then, really been growing our profit. We had a down shift in the financial crisis in 2008. But otherwise, it's been growing nice and steadily. And now that we can conclude that we had an all-time high in our profits and a very strong quarter, as you can see, all over to the right there. You can also see that the scales there are proportionate from the left to the right. And you can see that the margins have been improving along the way. And we've been, in quite some years now, above 10% in EBITA margins. And that has also been in force now by the strong last quarter we've had. And you can also see over to the right there, we also have some significant sales growth here in the last quarter. We have been affected by the COVID-19. But since now, 3, 4 quarters, it's been improving again and we're coming back. And now we're also growing the business on top of that, both organically and through acquisitions and then concluded a very strong quarter here with the SEK 589 million, I think, is the moving 12-month figure for our profits at the moment, up quite significant here in the last quarter. So it's been a good performance for us. A few more comments on the Q1 report, you can see them on Page 4. I mean we have -- as already pointed out, we have set up the new structure with the 5 divisions. Previously, we were 4. And before that, we were even 3. But since now, 1st of April, we have 5 divisions. And our focus in doing that has been to clarify the attractiveness that we see in some of the segments that we are working. We have some companies that are really addressing the electrification on the whole society. We have a couple of other segments, which I can come back to later. But we would like to highlight that both internally, but also externally towards the stock market and the M&A market, we would like to highlight where we would like to be and what segments and what markets we'd like to address. And in order to do that in a better fashion, we have now put together the new structure and reorganized the business. I will come back a little bit more to that later on. What was good with the quarter was really the strong organic sales growth with 18% organically. We had just as much coming from acquisitions. And then we had an FX effect that was basically slightly negative. But underlying, the sales growth was very strong, the 18%. That is new very strong number from us. We have been much lower than that before. But it was great to see that we managed to get the 18%. That came from both that we see some recoveries in some of the markets. We had some easy comparables to some extent. But on top of that, we also had significant growth coming from many of the companies and broad based in the group. Some companies in Germany and Denmark has been doing it quite much better with some strong underlying market, but also with some restructuring taking effect along the way and where some companies have come back to growth here after some restructuring in some instances. So a general improvement in recovery during the quarter in most markets was -- we concluded was a strong market. We see it going -- moving forward. And also in this quarter, we saw some component -- some effects from the component shortages. Many companies are now talking about the prices, rising prices in raw materials and shipping costs as well. And that we saw some effects of. I think that it's a -- on broad basis, I think we've dealt really very well in our company. We are very niche-oriented. And that means that we see some effects in some instances, but it's not -- very rarely sort of affecting us on a group level. But it might affect some specific profit centers within the group. And we also feel that by being niche-oriented, we can also have some good pricing power because we are the specialists that basically are delivering some clear values to the customers. And therefore, I think we've been pretty good at also raising our own prices to compensate for higher cost of goods sold, really, in our businesses. Nevertheless, that, of course, constitutes an uncertainty going forward. I think we see price changes quite a lot in a lot of markets right now. And we are basically there to compensate and determine to compensate in most cases. But of course, it's a volatile market, and it might affect us here in the quarter to come or so. So I think it's something to be aware of when we work -- when we go forward. The new acquisitions during the quarter was also coming in very nicely, the CW Lundberg, which is the CWL, and also Libra in Norway came in very nicely. So they added to the numbers. But again, I think 60% of the profit growth came from organically and 40% from acquisitions. And while on the sales growth, it was 18% -- both from sales growth organically and 18% from acquisitions. So that, I think, is the split.We can also sit down to the bottom here in the charts on Page 4 that we can also see nicely that, I mean, we are really developing our group. We see some improvement when we're looking at the proprietary products. It came out to the 68% there. I'll have another slide on that later on. But it's improving as we are aiming for the 75%, which is a key strategic target for us. And we also see that we are also becoming more and more international with more and more sales coming as exports. We feel that we have very strong product companies within the group. And the aim is to go more for exports where we are really pushing some of the companies to go that route, and that is also affecting the growth and the opportunities for the group in the long run, which we feel is important. And you can see that over to the right there, that is slightly growing along the way. Looking at the Q1 report figures on Page 5. I mean we had -- the net revenues have increased by 33%, and it reached SEK 1.031 billion. And that was really a strong number with the organic growth, and part of that was 18%. And as again, the addition from M&A was 18%, and then we have a slightly negative FX effect in sort of the split in the revenues, how that was sort of developed. And there, we had the EBITA then with the 212 million, which is a very strong growth of some 70%. And the EBITA margin was then 16.3% as opposed to 12.7% the same quarter last year. And then the profit after financial items then almost doubled, 94% increase and amounted then to SEK 180 million for the quarter. And you can see also the profit after tax amounted to SEK 139 million. As already highlighted, we made 2 significant acquisitions really. So those are slightly bigger than we normally do. And therefore, they are very important to us about the CWL numbers, which will be part of the TecSec division and then the Libra that will be part of the International division. And they are groups, really, so they have businesses in different parts of the world. You can see where they have subsidiaries here from -- with CW Lundberg having Sweden, Norway and Poland, while Libra has it in Norway, Latvia and Vietnam. So that was also important for the quarter. Then return on equity amounted then to 25%. That is meeting our financial target of 25%. We have been in that neighborhood for quite some years. But in the last year or so, we've been slightly below. So the 21% was the number for last year or -- yes, the same period last year. And that was -- but now we reached the 25%, which is also, I think, is a positive sign from us. The operational net debt increased to the SEK 1.293 billion as opposed to the SEK 992 million, which was the end of the last fiscal year. That is -- the sole thing there is really the acquisitions we made during the quarter, which affected that number. So we have made some good acquisitions. But of course, that also increases our gearing a little bit. And as already communicated earlier, the Board of Directors will be proposing SEK 1 per share in dividend. The annual shareholders meeting will be here in August 24. So that is the proposal for that annual shareholders' meeting. Looking at the Q1 report by division, we have that on Page 6. You can now see the 5 divisions as opposed to the 4 we used to communicate around. I think we have really 5 very strong divisions here. You can see that the EBITA increased in all divisions. We also had some good growth in basically all divisions as well. And you can also see the EBITA margins down there, how that has evolved in the different divisions. And especially, I think you have been keeping your eyes on the International division, which was lower a year ago and that we communicated quite a lot around, but they are now up to the 12.1% and have been doing it better now for a couple of quarters, which I think is very promising. We can also see the Niche Products division, where we have most of our product companies, the niche-oriented product companies, and they are slightly above 20%, which I think is a very strong sign as well. But also, we see TecSec and Electrify being a very strong as well with a 19.4% and 17.8%. So I think we have a very good portfolio of companies. And the quality of the companies are improving all along. And we also see the share of proprietary products and the opportunity for exports being developed quite a lot along the way as well. So it's -- I think we are really building a group in the right way here. And that, I think, is very promising for the future. A few comments by division, and we also have on Page 7 and 8, and we can see that all divisions really grew their profits or their EBITA. Within the Electrify, many companies did very well. Our biggest company, Elpress is within this division. And they did it very well, again, I would say. And we also had the QD division -- the QD Company in providing the brackets for the antenna systems also did it very well but also had some project -- more project-related transactions during the quarter. So that also added to the number here in the Electrify division. We also concluded that VP metall and Esari, which was the acquisitions we made this [ manner ] also added a good quarter from the Electrify division. Also, the Control division did very well. Here, we saw that EBITA margin reached 14.5%, which I think is -- and EBITA was SEK 22 million as opposed to SEK 15 million last year. And here, we can see that many units showed a good earnings improvement with especially in Precimeter and GasiQ reported some particularly strong quarter. So a very strong quarter as well. They didn't have any acquisitions here in this period. So it added to the numbers really. So this EBITA is a pure organic change along the way. The TecSec division increased the EBITA by 100%, so they doubled it, really. And that came from a lot of the companies doing better than last year, R-Con, which is the biggest company within the division but also ISG Nordic and Idesco did very well. And then we added the CW Lundberg, new business that we acquired here in April that also came very nicely and added to the very strong development of the TecSec division. We move on the Niche Products division on Page 8 then. We can also see that increase their profits by 31%. Here, we have some companies doing it very well, while others did it very well also last year. So -- and you can see there's a very strong EBITA margin of 20%. So it's -- here, we saw some acquisitions coming onboard as well in a very nice fashion. We can also see that as the countries and markets open up after the closure of the pandemic, due to the pandemic. For instance, the ASEPT business is coming back. That was more severely hit by the effects of the COVID-19 but they're doing it better again, and that looks very promising. On the other hand, the Tormek business did it well this quarter as well. But we also see that they were positively affected by the COVID-19 closures, and that effect is also declining a bit along the way. Last but not least, you see International division then increased by EBITA by 125%. Here, we see that both Germany and Denmark, which is very [indiscernible] within the International division, improved. And we also see some good effects on the restructuring that we made a year ago coming into the numbers here. We see the Schmitztechnik, Unitronic, for instance, which is the German units, they did it very well. But also the Danish unit ACTE DK, ISIC and Skomø did it well. And also the acquisition from Libra came in very nicely here as we have planned. So that's a few comments by division. So that was basically the comment I would like to make around the report. Looking ahead, I think it's important to know about us is that -- I mean we have clearly communicated now that we are aiming for the SEK 1 billion in profits. We feel that we have a very strong business concept, and it has been successful for many years. So we plan to sort of move along those lines and continue developing the group the same way we have been doing really but also pushing for some focus, pushing for some greater ambitions along the way and doing it even better in the coming years. So -- and then really to build the strong business-to-business tech group and reach the SEK 1 billion in profit. And what are the key themes in this new strategic program then? Well, it's the clarification of the strategies and financial goals. We have been doing the reorganization. I talked about it already. I'll will give a couple of more comments. And then we're also looking at M&A capacity that we have within the group. We plan to increase that and are about to do so already. And we also have the focus on the sustainability where we have put some clear goals and targets around that to make it even more viable and even more sort of working into our processes and into our group and the way we work. So a lot of those things, I think, we are pushing in order to escalate a little bit further and push for better growth along the way. And looking at those key themes, I mean we plan them to work with our vision and financial goals, and we have also done a little bit in development a little bit here. For those of you that have been with us, you have seen this slide many times. I mean we plan to be a very strong and sustainable supplier of value-adding technologies with market-leading positions in several expansive niches. That is our vision statement. And we plan to build a very strong group with these sort of very short and specialized companies and a very specialized and very sort of strong industry respective niches. And through that, we plan to grow our profits, the earnings before tax seems to be more than 15% per year. And we have clarified then we feel that at least 1/3 of that should come organically. But M&A will remain and be very strong, very important to us. And we are pushing the number and making a little bit more acquisitions that have been doing. So 5 to 8 is the current number, 5 to 8 new companies coming into the group. And by that, basically grow the business by some 10% per year through acquisitions. And we would like continue our good path of high returns and high return on equities. The return on equities there, our financial goal, which should exceed the 25% that we -- and as pointed out already earlier, we are currently at the 25%. So we improving from last year. So we are basically already there, but we'd like to push it even further along the way. In doing this, we aim then, on Page 11, you can see that we are aiming for the 75 proprietaries, so our proprietary products. We used to be very much more of a trading company, very much more of doing value-adding distribution. And as you can see here, all the way since 2006, '07 where we acquired the Hillcrest Group, we have been pushing for more proprietary product. That gives us better opportunities for -- I mean those companies that have usually better margins, and they also have better opportunities for organic growth through -- especially exports. So therefore, we are putting that up as a strategic aim for us to move to 75% proprietary. And you can see it from the slide previously that as we have been doing this, our margins have been pushing, and we have been -- the performance of the group has improved as we have moved this through this way, and that we will continue to do. So that's important to us. And the latest number there is the rolling 12 month, that is the 68%. So it's been increasing again with the latest acquisitions we made here during the quarter and previously as well during the [ winter.] We really in this [indiscernible] towards SEK 1 billion also, of course, remain our focus on value add. Here, you can see how that's evolved over time. And this has also been a very strong sort of important thing for us to basically being very focused on value add and push for higher gross margins. Earlier on in this time series, we did that reorganizing and also some pruning and carrying out the sort of businesses, which we didn't feel was profitable enough. But we have continued to push that. And here, in the latest years, it's been also been pushed quite a lot with improvement of more of our proprietary products within the group. And that we would like to continue. And again, in Q1 here, we pushed the number a little bit further from the 38.6%. We have moving 12 months from -- of the fiscal year 2021 to the 38.8%. So definitely in the right direction here as well. Reorganization is another key thing in the strategic program. We have the 5 divisions here as you can see from Page 13. Here, we have basically been moving around companies. We used to have 4 divisions with some headlines or some that have been -- that we felt that we needed to develop, that we felt that we should push for finding areas with more structural growth and highlights adapted to everyone. We have a lot of companies investing these different segments and these different markets already. I would like to also highlight which way we would like to go. So in the Electrify division, we are pushing for products that sort of enables the electrification of the society. For instance, development of electricity infrastructure and components and network products and that type of thing. And we have a number of companies within that area already. And we plan to grow that further, both organically but also through acquisitions. And here, we are expecting some structural growth along the way. And within the Control division, we are basically looking at the same studies, area of very high around sustainability. Also with measure and control, doing things remotely rather than to travel, using a lot of sensors and communication devices and solutions around that. And also light and control is also an area within the Control Division. The TecSec division is then having solutions with -- for increased security in society such as the assets control surveillance system, fire security, et cetera, also an area which is -- has some underlying growth and that we also feel that we have some strong companies within that area. And now we added also the CWL number here, which is then I will come back to that acquisition, but that will be important also for the TecSec division. The Niche Products division is basically having -- they have been very successful for many years. So we try to keep -- so we'll keep the sort of the recipe or the strategy that we have within the Niche Products and doing it very well. You can see here they have been growing quite significantly, and they also have a very strong EBITA margin here and doing it very well for us. And within the International division, we are taking the companies that we already have in, especially Denmark, in Germany, in Poland, in the U.K. and trying to build something more around proprietary products around the division as well. So we're basically taking the concept that we have been doing in the Nordics and taking that broad really. And that is a bit of a new thing, and we will push for that. And the Libra acquisition was the sort of the first thing going in that direction where we already have some companies within the marine sector, but Libra is now adding to that companies as well. So I think it's very promising to have these different new reorganization and the new divisional structure here, which is -- which we feel is having a good effect already here working with it only for some 3, 4 months or so. So that's good to see. Another thing within the Lagercrantz towards EUR1 billion is the increased focus on sustainability. Here, we are working both on a group level, which is -- was illustrated here over to the right on Page 14. We were working on -- with the key areas, the ESGs, the ESG goals and UN-stipulated and different types of goals that we're working with. You can find that in our sustainability report as well, which is very sort of extensive and put into our annual report, which was made public here just a week ago or so. You can read more about that. On top of that, we have also put in some 50-plus local initiatives. I mean we are working very decentralized and would like things to happen in our companies. So we have basically been working with this on all levels within the group and are basically looking quite a lot on making this thing for us when we go to offer new price and solutions for our customers that they should be sustainable and that we are focusing on that one in our offerings to our customers. But also, of course, taking care of our own and upstream as well with our suppliers and trying to doing it better. And in order to do that in a very local way, we have put together some local initiatives in all of our companies, and we are highlighting that also in our sustainability report. So this, I think, is very promising for the future and important as well. And last but not least, they increase the capacity within M&A, which is also part of the Lagercrantz towards SEK 1 billion. Here, we have been working quite a lot within the Nordics and have been doing some M&A also in lately in Germany and in the DACH region, in Holland, but also in the U.K. And here, we plan to do more of that. We are putting together the organization. We are stipulating putting together the international division as 1 thing. But we're also addressing with some new resources and doing it a bit more broad-based than we have been doing in order to increase the capacity with M&A. We would like to have multiple acquisition processes going at the same time simultaneously. And that -- this is the way for us to do this. And I think it's been very promising. And you can also see from our latest acquisitions, which we have here on Page 16, that we have -- or in 2021, basically made 8 -- or 7 acquisitions that add approximately SEK 580 million to our sales volume. And you can see that's more than 10% in just last year, 6 months or so, 7 months. And that, I think, is very promising along the way. And we also then concluded and pointed out the CW Lundberg and the Libra, which we -- I would like to comment here on Page 17. And the CW Lundberg will be very important for us. That is a clear market leader in the case of products for reach and for sales. They're very strong in Sweden but also have some clear export ambitions in Norway and also set up a business in -- from their own premises in Poland. And you can see down to the right there, they have been growing and they're also producing some nice EBITA margins and profits along the way. And this will be a very strong company for the buildup of the TecSec division along the way. And they have been doing a very good first quarter here for us and came in very nicely. So it's very promising for the future with the CW Lundberg company. The other company we acquired here during the quarter is the Libra company. That is a Norwegian company, producing or a leader within premium quality doors and hatches, storage units for the marine industry with also some good numbers in terms of sales and profits. You can see that down to the right there. They are very strong in Norway especially but also strong -- within their niche, they're also very strong in Europe and North America and also with some sales in Asia as well. They have subsidiaries and production facilities in Norway and in Latvia but also through a minority shareholding in -- with the company in Vietnam. So this we have and just sort of came into the group here in, was it April or so, May even, and have been coming in very nicely within the group. And the [ family ] in Lundberg here will remain as the shareholders of 25%. So this will be -- they will be with us here for the future as well. So -- and that will be part or is part of the division international here, yes, as of last quarter. So to round up, I think, the financial overview says that this is really our long-term trajectory. And you can see how we have been growing. On Page 19, you can see how we've been growing. We haven't updated it in the last quarter here, but this is the last fiscal year. And you can see that we are -- have a long history of improvement and growth and also some strong margins and also some strong return on equities. So -- and that is basically what we have been doing and plan to do for the future as well. So with that, I think we should open up for some Q&A. Kristina, would you like to add something before we open up or? [Operator Instructions]

[Victor Hansen, Research Analyst]

Can you hear me?

[Jörgen Wigh, President, CEO & Director]

Yes.

[Victor Hansen, Research Analyst]

This is Victor Hansen from Nordea, analyst, Nordea Research. So you've completed 2 relatively large acquisitions recently in CW Lundberg and Libra. And you mentioned that they are slightly bigger than what you normally do again. And I'm wondering, if you shifted your focus on what -- towards larger platform acquisitions and for the larger acquisitions somewhat common in the future?

[Jörgen Wigh, President, CEO & Director]

Yes. I think the simple answer to that is yes, somewhat. I think that we would try to do both. I think we will move up a little bit, but we will still sort of make a lot of acquisitions. So the 5 to 8 is still the relevant number. But to some extent, I think we will look for some bigger ones as well. I mean both CW Lundberg and Libra are a little bit bigger than we have been doing. But it's not -- it's not like it's a huge difference. So its -- but we're moving up the scale to some extent, yes.

[Victor Hansen, Research Analyst]

Okay. And regarding your M&A pipeline, what does it look like now that society is reopening? Maybe are there negotiations that can now enter the next phase and due diligence that can start now that traveling becomes easier?

[Jörgen Wigh, President, CEO & Director]

Yes. Yes, it is. I think it has been good for some time now. We feel as of last August or so last year, I think it's been picking up. I think it's a lot of these being done. And we also see as markets open up, we have the opportunity to travel, so it's -- and visit the companies. That has been difficult for some time. So I think that will also add to the sort of the speed of the market and that, I think, is promising. So for instance, we have been now visiting a company in mid-Europe and another company in the U.K., and we've been able to do that after societies have been opened up. And I think that will be happening more and more here in the fall as well.

[Victor Hansen, Research Analyst]

Okay. That's exciting. And you mentioned planning on adding more M&A capacity. And I'm just wondering, do you refer to expanding your M&A in headcount? Or could you clarify that?

[Jörgen Wigh, President, CEO & Director]

Yes. To put it simply, I think that's what it's about as well. We have been adding -- we are adding people on the divisional level as we put in together the new divisions. M&A focus will be very strong also on a divisional level. That has been so for some time, but it's being enforced here along the way. And we're also adding -- putting up some resources and finding some sort of key people to work with in markets like Germany and the U.K. So it's been also expanding some resources and being able really to run more processes simultaneously.

[Victor Hansen, Research Analyst]

Okay. And regarding the business areas, if you could add some flavor to Control, would it be possible to give a guestimate or maybe you have the numbers on how much of the EBITA improvement comes from restructuring and good business momentum?

[Jörgen Wigh, President, CEO & Director]

I think most of it is embedded business momentum, but we also have some smaller units that have -- were struggling last year. We had especially one in Sweden that turned a small loss into profit this year. But most of it was sort of a stronger market.

[Victor Hansen, Research Analyst]

Okay. And my final question, for international, you mentioned the reopening of Germany and Denmark. Was the strong results and the strong margin due to temporary pent-up demand? Or is this more representative of the run rate going forward?

[Jörgen Wigh, President, CEO & Director]

I think it should be a view that's more representative of the margin going forward. We are aiming for the 12% or so, that level we feel that we are on at the moment. So it's -- that we hope to be able to continue on.

[Unknown Analyst]

[ Marcus Samworth ]. Can you hear me?

[Jörgen Wigh, President, CEO & Director]

Yes.

[Unknown Analyst]

So starting out asking a little bit about underlying demand. It's -- the feeling I get on reading the report and listening to you is that the market is actually quite strong. I'm talking about the underlying market. So it's stronger -- it's not just pent-up demand but it's actually underlying strength that is going on. Do I read you right? And could you talk a little bit about segments or industries which stick out here which is driving this?

[Jörgen Wigh, President, CEO & Director]

It is a strong underlying market demand, I would say. I mean in looking at [ lower ] kind of portfolio companies, I mean we are working quite a lot in niches. And that means that we see it on a broad front, and we see it a little bit here and a little bit there. And all in all, it's sort of -- the conclusion is that it's a strong market. We see some -- within the sort of more electronics-related sectors, we see some strong demand due also to the shortages such that customers want to place extra orders and that type of thing. That is driving the demand there. But what I think is more important to us going forward and now as well is also the electrification of society. I think we are still seeing some good growth coming in from that. We are building networks. We are building more electricity infrastructure around -- in the markets we are present in. So that's also driving it. So I think its -- and I think it's really a broad-based strong demand that we see in many different parts of the business. And that's added out for the whole group.

[Unknown Analyst]

But you would agree with me that it's just -- it's a broad-based recovery. It's not just pent up. It is actually the market is quite strong. And that's all with the kind of communication that you get when we talk to your customers and your subsidiaries?

[Jörgen Wigh, President, CEO & Director]

Yes. I would say so, yes.

[Unknown Analyst]

Okay. And then the second question is, so the earnings growth was quite impressive. And I mean the margin expansion was very, very good. Now you had obviously, with 18% organic growth, you get quite good leverage. But if I look at the drop to your rate, our incremental margin is still just 30%. So it's not -- you still have the impact from the acquisitions, et cetera. So what is the main driver would you say, on the margin side? What is driving the margin in the way it is right now, if you can just give a little bit of color about the components.

[Jörgen Wigh, President, CEO & Director]

I mean the demand growth and the volume, I mean, we have some share of fixed costs, right? So of course, that's not driving it as well. But we also see -- and I think the shortages and sort of the freight price is working the other way. But I think also that we have been good and are good at pushing that over to our customers. I think everyone is realizing that in this sort of situation, it's a bit extraordinary that we need to push prices as much as we do and also what our suppliers do that everyone does in the market. So prices are on the way up. And it's difficult also to judge what is what because we might end up with sort of having a price increase from our suppliers starting the 1st of May, and then we get -- we raise our own prices 1st of June. And therefore, it's sort of a bit different -- difficult to sort of give an overall perspective on that. But I think we -- as we are getting more and more proprietary products into our group, I think we are definitely pushing for better both for the gross margins but also operating margins in the group as we go forward.

[Unknown Analyst]

Okay. Then just a housekeeping question. So your acquisitions, when were they consolidated? So the Libra and...

[Jörgen Wigh, President, CEO & Director]

The Libra, 1st of April. Both of them.

[Unknown Analyst]

Okay. And CW Lundberg?

[Jörgen Wigh, President, CEO & Director]

Yes. 1st of April as well.

[Unknown Analyst]

Okay. Okay. Perfect. And then my final question is just on the -- I know you've said this before, but the SEK 1 billion in profit, have you said or quantified in any way what part of that is margin expansion and what part is sales or if you expect to -- if most of this is going to be top line or there will be mixed. Have you quantified that in any way?

[Jörgen Wigh, President, CEO & Director]

No. We haven't. I think we need to be opportunistic on that one because it depends on what type of acquisitions we find, and we would like to push a little bit of both. But I also feel that it's important for us to not get so sort of tied up with the margins that we only can acquire companies that have 25% margin. And then I think the hunting ground becomes too small. So I think it's important for us to realize that we need to push for organic growth, and through that, also build profit but not necessarily every time pushing for the better margins. It will be both. But I think it's important to realize that we are planning to build earnings per share. That's the key thing. Okay. Someone else? [Operator Instructions] Okay.[Operator Instructions]

[Herman Eriksson, Research Analyst]

Yes. Can you hear me?

[Jörgen Wigh, President, CEO & Director]

Yes.

[Herman Eriksson, Research Analyst]

Perfect. Herman Eriksson here from Handelsbanken. I just have one question. Regarding the Control Division, I can see that it's quite large petition in the EBITA margin. So I was just wondering if you can light some color on what is driving these large rotations in the margin for the Control Division?

[Jörgen Wigh, President, CEO & Director]

The improvement in margin is that -- I didn't hear you really.

[Herman Eriksson, Research Analyst]

I mean looking at the previous quarter as well, it's quite large expectation in the margins. They jumped quite a lot between -- from quarter to quarters. So I was just wondering if you can shed some color on that.

[Jörgen Wigh, President, CEO & Director]

Yes. I think it's -- I think we have some seasonality here. So for instance, there -- one key profit center within that division, the Control Division, it's a rather older business. And they have a very strong winter period. So They usually come in very strong. And if you look back in our numbers 2, 3 years back, you will see that, especially the Q3 and Q4, our Q3, Q4 is usually very strong, while the summer quarters are less strong. What happens here now is the Precimeter business is coming in, and they have more of a sort of a project-related business. And they have been doing very well and have been -- also been -- have been doing very well both sales and order-wise here lately. So I think that will sort of balance it a little bit. But especially the Control division will have a stronger winter season than the summer season. But again, also as pointed out, we have also made some other acquisitions within the Electrify division, which is the seasonality is different. So all in all, I think the seasonality has pushed us to having a very strong Q1, really. That was supported now then. Some of the causes is seasonality, yes.Good. What do you think? Should we leave it at that? [Operator Instructions] But otherwise, I think both me and Kristina will be available here today. So if you would like to put in -- if you would like to call us, feel free to do so. So thank you. Thank you all for listening in. Have a good day. Have a good summer. Hope for every one to have some summer days as well. We plan to take a few weeks now. So thank you all for listening in, and have a good summer. Thank you.