Lagercrantz Group AB

STO:LAGR B

Earnings Call Analysis

Solid quarter with strategic acquisitions and positive outlook for growth

In the latest earnings call, Lagercrantz reported a net revenue increase of 10% to SEK 2.253 billion, with 12% driven by acquisitions. The EBITDA rose by 8% to a margin of 17.1%. Key acquisitions added SEK 1.175 billion in annual sales, representing a 15% increase. Organizations from the Niche Products division shifted to Control, aiming for improved synergy. Management is optimistic about future market conditions, forecasting a 15% profit growth annually to reach SEK 2 billion in five years, supported by a focus on electrification and ongoing acquisitions in the UK.

Strong Financial Performance in a Challenging Market

In the latest quarter, Lagercrantz reported a robust financial performance with net revenues increasing by 10% to SEK 2.253 billion. Despite a challenging economic environment, where organic growth saw a decline of 3%, the company offset this decline largely through acquisitions, which accounted for a 12% increase in revenue. This indicates a strategic focus on growth through mergers and acquisitions even when organic avenues present difficulties.

EBITDA Growth and Margins

The company's EBITDA rose by 8% to SEK 385 million, with the EBITDA margin slightly dipping to 17.1% compared to a peak of 17.5% in the previous year. This decline in margin reflects the strong comparable from last year, especially given some impactful projects that were absent this quarter. However, three of the company's five divisions improved their EBITDA margins, with particular strength shown in the TecSec division, which focuses on construction.

Acquisition Strategy Boosting Growth

Lagercrantz is actively pursuing acquisitions, with a total of eight completed in the last year that contributed SEK 1.175 billion in annual net sales, representing a 15% increase compared to the prior year. This strategy allows the company to expand its market presence and foster growth in various technology sectors. Recently, the firm completed significant acquisitions like the Nordic Road Safety and Principal Doorsets, which they expect will enhance revenues and profitability in the coming quarters.

Positive Outlook Amid Economic Pressures

Despite a backdrop of inflation and rising interest rates, management expressed cautious optimism for the future. They foresee a gradual improvement in market conditions, especially as interest rates stabilize and project demand picks up. The company targets an annual profit growth of 15%, aiming to reach SEK 2 billion in profits within five years, alongside maintaining a return on equity above 25%.

Sector-Specific Insights

The Electrify division demonstrated significant performance, growing revenues by 17%, driven by strong demand for services related to power grid and fiber optic network constructions. Conversely, the Control division faced challenges due to its exposure to the softer construction market in Europe. The Niche Products division performed well, with an EBITDA increase of 8% to SEK 100 million, while the International division grew steadily, particularly benefiting from marine sector projects.

Navigating Future Challenges

Looking forward, Lagercrantz anticipates continued challenges but is adapting by building a more diversified portfolio and enhancing operational efficiencies through their decentralized model. The management cites a solid order book, typically spanning three to four months, suggesting that future demand may stabilize as the economic landscape shifts positively.

Effective Use of Proprietary Products

The company is also enhancing its product portfolio, with the share of proprietary products improving to 76%. This focus not only strengthens the company's competitive advantages but also aligns with its strategy to capture expanding niche markets. Successful integration of proprietary solutions is expected to drive future revenue growth and margin improvements.

Strategic Focus on Acquisitions

Lagercrantz has set a clear roadmap for growth through acquisitions, targeting 8 to 12 companies per year. This aggressive M&A strategy places emphasis on integrating firms that complement existing operations and foster greater market reach, particularly in the Nordics and expanding into Central Europe.

Conclusion

In summary, Lagercrantz showcases resilience through strategic acquisitions and a solid operational model in the face of market challenges. Their commitment to growth, both organically and through M&A, combined with a robust financial outlook, positions the company well for future success, making it an appealing prospect for investors seeking long-term value.

Earnings Call Transcript 2025-Q1

[Jörgen Wigh, executive]

Thank you. And yes, and good morning, everyone. Jörgen Wigh speaking here, CEO of Lagercrantz. And together with me here today this morning, we have our CFO as well, Peter Thysell. We will guide you through the interim report. We just a few weeks back, released our annual report and everything. So I think you're fairly up-to-date with what we have. So we will keep this session a little bit shorter than normal, it's only our first quarter here.

But as we think it's a solid good quarter and a good start to the year. We will -- we have put together the presentations as we normally do with just a brief introduction to all of those that are new to the group. But along the way, we will discuss them in the second phase, the numbers and the Q1 and where we are with everything. And then we will round off with also some discussions a little bit more future looking. And what we are about to do in the group and also the more recent acquisitions we just closed here. We actually closed one last night as you as you may have seen this morning.

So we have had concluded some two acquisitions here during this -- here very recently. So with that, I will start off with the first slide of the introduction. I mean Lagercrantz is the tech group and a serial acquirer without an exit horizon. Where we are building the group through both organically and through M&A. And we have some -- currently some 80 or 75 to 80 companies, depending on how we define them between 75 to 80 companies within the group. And we have organized ourselves into the five divisions that you can see here with the electrified control TecSec Niche Products and the International Divisions.

We are working in a B2B space, building a tech group where all our companies are offering some value-creating technologies in expansive niches, either with our own proprietary products or through products from leading suppliers.

Revenues of the total group is around exceeding some SEK 8 billion at the moment, SEK 8.3 billion is the current number. And we are growing some 15% per year or so. And we are currently some 2,800 employees within the group. We are true believers and are working very much with our decentralized organization with our decentralized model, where each company are working under their own brand name independently, working and driving their businesses in their -- with their local management. And we are owners and working through boards with different companies throughout the group.

And as true believers in a lot of independents, a lot of freedom, but also accountability in our decentralized model within the group. You can see over to the right, where we have our companies, it's in Northern Europe, most of them. and we are gradually growing more into the Central Europe with the U.K. or yes, this Northern Central and you can see Germany and the Benelux and also Poland.

While we're also growing continuously with acquiring more companies in the Nordics. All the way over to the right, you can see where we also have some footholds. We are growing our businesses outside the Nordics and in Northern Europe also with some additional volumes coming in, in, for instance, the U.S. but also in China and in India are some important sort of export markets for some of our companies. M&A and acquisitions is a very central part of our business model as we acquired some 8 to 12 companies per year, growing the business through, as I said, organically and through acquisitions.

And we have been on the stock exchange since 2001, where we were formerly a part of the Bergman & Beving Group before that, but have been on our own feet since 2001, gradually growing the group over many years now.

With the -- and to jump into the numbers then our Q1 figures, I think we posted another solid quarter. according to many of the expectations and also according to the consensus, as I understand it. And it was -- where we have seen the trends, did it continue. We have, over the last year or so due to the downturn in the economy seeing some slowdown in the markets. But we feel that it's bottoming out in some aspects. And as we see interest rates and inflation rates coming down.

But currently, we have some slower organic growth, and we have been compensating that with some more -- through M&A instead, posting some two major acquisitions for us in the early year in February and March. And now adding a couple of more here in here in July. So we are compensating, to a large extent, the slower organic growth with some more M&A.

As we normally do in time periods where we see some slower organic growth and the downturn in the market. We have some companies that are related to the construction sector and especially those and have had some slower market at the moment. We see that within the Control division within the TecSec division, especially -- we've seen that for , but I'll come back to that later on. But another solid quarter. And as you can see here from the bubbles, we have -- are aiming higher every year. We have the ambition to grow some 15% per year. And here, we surpassed it Lagercrantz towards SEK 1 billion goal here last summer.

And now here, the fall, we put up the Lagercrantz towards the SEK 2 billion. And you see that where sort of the trend is heading. And we have said that we will reach that within 5 years. And we think that we -- we're approaching that in a good way here also with this recent developments.

With that, I'll hand over to you, Peter. Yes, sorry, I should cover this one as well. We also commented a little bit on the business conditions. We feel that the market situation remains stable for most of the businesses. This is really a headline we've had for a couple of quarters now. But we see it bottoming out in some areas. Demand was strongest in the Electrify in Niche Products divisions.

Electrify actually posted a very strong quarter, given that they also had some project volumes last year. So Electrify did it really well this quarter. and some of the Niche Products division -- product companies did that as well. They posted a very strong Q4 within the Niche Products. So that was a lot to live up to. But still a very good continuous path for the Niche Products division. While it's been slightly weaker within the control and TecSec divisions, within the control divisions, we have a couple of companies that are more related to the construction sector also to some aluminum production in Europe, which has been holding -- been a bit down for a while.

And within the TecSec division, we have the CW Lundberg and the R-Con businesses that are more construction-related and late cyclical to some extent, and those have also been struggling a little bit through the quarter here. But otherwise, it's holding up very well for us.

Within the demand continues to be good, especially within International division, especially with the customers related to the marine sector. We have 2, 3 companies there that are related to that, and that has been a driving force for them or for that division here during the quarter. And previously as well, and that looks to continue as we -- as we're looking forward. And all in all, I think the order intake for comparable units, which is a measurement we're using, the order intake for comparable units were in line with invoiced sales during the quarter, and that was slightly better than in the previous quarter. So I think we see some trends that it's actually improving to some extent or at least stabilizing and some type of improvement we see along the way.

And we hope that or see that, that as inflation rates and interests are coming down that we see more projects coming in, more requests coming in, and we -- it looks promising for the fall and winter. So a little bit further. We have also, as we see here down here, we could see also that the share of proprietary products, which is a KPI for us has continued to improve over the years, and it's currently at 76% and we also see that we are gradually becoming more international.

And we have actually splitted this up compared to previous reports. So now you can see the share of U.K. and the share of Germany and some other markets, which have been important to us in the last few years. And we can see that those markets are actually picking up over the years as we are acquiring more companies within the -- especially in the U.K. So a couple of comments around that.

Looking at the hard numbers, I will hand over to you, Peter then.

[Peter Thysell, executive]

Thank you, Jörgen. And before going through these numbers, I want to remind everyone that Lagercrantz had a relatively tough comparables from a very strong Q1 report last year. Anyhow, our net revenues increased by 10% to SEK 2.253 billion and some 8% -- 12% growth came from acquisitions and the organic growth was minus 3%. This is to a high degree explained by a project that we had in QD last year of some SEK 45 million that was not covered in this quarter this year. So about 2 percentage units out of the 3x is explained by this. Our EBITDA increased by 8% and the EBITDA margin was at a good level of 17.1% compared to a record high 17.5% last year.

The cash flow from operations were at a good level of SEK 235 million. And profit after financial items increased by some 9%. And this is, by the way, a record for a single quarter, so relatively good level. The return on equity is 26% and the equity ratio is 36%. Our profit over working capital was at 74% compared to 72% last year. And as Jörgen mentioned earlier, we completed two acquisitions after the Q1 reported should stated more clearly in this slide that it was after the quarter. So in July, we completed two acquisitions, the principal door sets and the CP Cases I believe Jörgen will come back and present these cases a little bit later on.

And these had some SEK 280 million in annual net sales. And this means that in the last 12 months, we have acquired some SEK 1.175 billion in annual net sales, and this is some 15% compared to the net sales in the previous year. So a relatively high rate of acquisitions. And the earnings per share increased to SEK 4.32 up from the previous financial year. And as you know, the Board has proposed an increased dividend to SEK 1.90 per share. If we look into the division, I want to emphasize that we have moved two entities from the Niche Products division to Control from the 1st of April.

And all these numbers that you can see on this slide are pro forma numbers. So they are changed with respect to this move. The overall conclusion is that here that the net revenue growth and EBITDA growth in all divisions have improved from the previous years. And for the EBITDA margin, we can see improvement in three out of five divisions. And special notice is that the TecSec division where we have most of our construction-related businesses are holding up pretty good. and has actually improved the EBITDA margin in Q1 compared to Q1 last year.

We can see that Niche Products has a little bit lower EBITDA margin this quarter, but please notice that they had an exceptionally high EBITDA margin in Q4. So some of that is probably explained by this. And we also noticed that the International division continues to improve and the achieved average group level on a rolling 12-month basis, which is -- we're very happy about. So Jörgen, back to you.

[Jörgen Wigh, executive]

Yes. And some comments on the -- how the businesses are running and -- what to be said about sort of some -- some things around the different divisions. And in the Electrify division then posted a very strong quarter, we think. The revenues were up to 17%. But we also had the strong as we already talked about, the project deliveries of last year, which has amounted to SEK 145 million in QD and Electrify actually managed to compensate for that during the quarter here with improvements in other areas.

So when we talk about profit. So the Elpress and Tykoflex especially had a strong quarter, continue to with a positive development with deliveries to the power grid and fiber optic network builders in the Nordic countries. So that whole thing with the electrification is happening along the way, and it looks promising also from -- with the increased demand from the wind power industry as well.

Also what was important here was also the acquisition of the Nordic Road Safety, which we concluded here in -- was it February or March don't remember February or March this year. Last fiscal year, but still, and that has come in very well for us with some -- adding some volumes here. They have a strong summer season in that company and has promised to be so also this year with this strong start to their presence here with us in the group. So the Nordic Road Safety has been good for us.

So strong from electrify, a little bit more of a stable quarter for the Control division. I think what we have done here is we have restructured the Control division. It's been lagging behind a little bit for the last couple of years. So we are actually putting some new focuses within the Control division along the way.

And I think if they posted a strong and stable quarter here with especially the Load Indicator and NIKODAN, which was the company we moved here, started out very well. And also the Geonor and Excidor reported a positive development during the quarter. But we also, within the Control division have a couple of more important units with more related to the construction sector with especially the lighting control and the companies that we have within the Vanpee both in Denmark and Norway -- was impacted by the weaker construction sector.

And also the Precimeter which is a really strong and important part of the Control division, also continues to see challenges in its main markets in Central Europe, as I already mentioned earlier on. I think the control will benefit now also from the CP Cases acquisitions acquisition they made yesterday.

So I think we are building control to a new level here going forward and a little bit of a new focus and changing it a little bit around where we'd like to be with the control division going forward. Within the TecSec division also struggled a little bit with some companies, especially then the CW Lundberg and the R-Con businesses that were impacted by the weaker construction market.

But we also saw other markets with the traditional more of TecSec type companies, the security companies within ARAS, Idesco, FireCo in U.K. and also our group the group's largest business, PcP, which we acquired some 2 years ago, has been doing it very well for us, both throughout their period really with us, but also here during the quarter continue to do it very well in many of their markets, around in Europe.

Also, the newcomers within the TecSec division, the Diesel Voima Finland got off to a good start in the group and contributed positively to the result. It's a strong company related to the R-Con business similar to the R-Con business that we acquired here in December, I think it was. That is coming in very well for us in Finland. With some good volumes coming there. A few comments also on the Niche Products division concluded another strong quarter, even though they didn't live up to their very, very strong Q4, but still doing it very well. The EBITDA increased by 8% to SEK 100 million. And we could see many of the sort of different cluster is doing it very well, especially the Asept with their dispension pumps, especially in the U.S. had a strong quarter, but also Wapro in the U.S. and PST Sweden related and Nordic related and SIB also did it very well here during the quarter. We also saw some interest rate-sensitive businesses that struggled a little bit more, which was the Truxor, Westmatic and Waterproof Diving. So a few things still to work with there.

Here is also important to comment on the Prido acquisition we made in February, I think it was, which is a leading manufacturer of high-quality industrial folding boards, which is also major bigger investment for us has got off to a good start within Lagercrantz and contributed very well during the quarter here.

And last but not least, we have the international Division. A few comments there is that they delivered a strong quarter and grew quite nicely as they have been doing for a while now. and especially the marine businesses within Libra in Norway, the ISIC in Denmark and Tebul in Finland contributed very well. but also other companies, the Schmitztechnik in Germany and E-tech did it very well for us. In general, very positive sort of outcome for the International division here.

And we also see other companies -- the acquired companies, the Glova Rail and the Supply Plus and the DP Seals in the U.K. delivered improved earnings as part of the Lagercrantz. Along the way here. Supply Plus and has been with us for a year now, but came in last -- Q1 last year but has had a good first year with us. As Fireco has had also with the TecSec division. So that was comments on the different business segments. As we move along then, I think we feel very happy with the first quarter. We feel that it's been a solid quarter and along the trends and the outlook that we've seen. We see a slower market, but it has leveled out and it's balancing and bottoming out. We feel in a couple of -- in many important segments where we are operating.

And along the way, we are optimistic or cautiously optimistic for the future and for the fall. We usually have an order book of some 3, 4 months or so within the group. And therefore, the sort of outlook for the fall is something that we are not fully aware of or I see. But according to what we see in the different markets and the requests, it's looking fairly promising for the fall. We will continue to grow the group with the annual profits of some -- with ambition to grow the profit by 15% per year, reaching the SEK 2 billion within the 5 years that we set out then.

the return on equity then should be at least 25%. Those are for the financial goals that we're working with, and we will continue working with those along the way and continue building the five divisions. I think that the Electrify division, as pointed out already earlier, are growing with the electrification of the society, the Control division, we change in the scope a little bit along the way, changing a few things there.

Looking a little bit broader, finding new companies and also putting in the Nikodan and MH Modules type businesses into the Control Division and also with some additional acquisitions I think the Control Division will grow quite nicely as well along the way. The TecSec has been doing it very well for us in the last few years, growing significantly both organically but also through acquisitions with some major acquisitions, the PcP and a few others is really adding to the TecSec division. It used to be one of the smaller divisions we have within the group, but it's currently then at least revenue-wise, the biggest one.

And the Niche Products is the most -- is the one we've been growing since 2012 with acquisitions coming on stream along the way. And it looks continuously very promising with the Niche Products, and that has actually been the most sort of margin-wise, the most profitable businesses that we have within the group.

And International, as for those of you that have been with us for quite some years, you see that International has been lagging behind looking further back, but has picked up quite nicely here in the last year -- a couple of years and doing it very nicely with adding acquisitions with more proprietary products and building the marine cluster, building more in the U.K. and other markets and has picked up very nice for us. So the International Division is also looking very promising along the way.

So we are continuing with the recipe or the business idea that we have, building the positions in sustainable segments with underlying structural growth is what we're aiming for with all our divisions along the way. And we will continue to do those in the future.

Last but not least, I'd like to go into the acquisitions look and present newcomers to the group. We have posted some 8 acquisitions here during the last 12 months. adding up some SEK 1,175 million in terms of annual business volume. Which is around 15% or so ourselves. So well above the 10%, which is -- we set as a target along the way. We have the plan to acquire some 8 to 12 companies per year. And currently, we are at the eight now for the last 12 months then. So we're keeping the pace where we should be.

You can see over to the right, where we have listed all the companies that we have acquired recently and since 2006, there's been some 80 acquisitions that we made. So I think we're well aware of what we're doing, and we are well aware of what we're after, what we're aiming for, and have a very sort of developed process and team around building through acquisitions.

And you can see here the eight acquisitions, especially the ones here in 2024, I'd like to go over them a little bit. because the first two ones, the Prido and the Nordic Road Safety are a little bit bigger and then the more recent one, the Principal Doorsets and the CP Cases I'd like to introduce to you guys. So we will move on here and start with the principal door sets then. Again, we have put -- since a couple of years back, we put feet on the ground in the U.K. So we're actually out looking more for companies in the U.K. space and I have now been here in just a couple of weeks, concluded another two deals within -- in the U.K. We are, of course, looking throughout the Nordics.

So it's more of a happening. That is all in the U.K. at the moment, but we are also looking at -- yes, in the markets where we are in the Northern Europe markets. The Principal Doorsets then is a good company developing and growing working with innovative and bespoke fire doors in the U.K. We acquired te fire doors company some years back with the Door & Joinery, which we were also part of the group. This is a similar company but addressing some other segments.

So they are aware of each other, but it's not really competitors to one another. They're more working as colleagues in the market. Sales are about GBP 9 million and with good profitability and the company is located in Barnstaple in the Southwest Devon of the U.K. Fire doors are a crucial part of the passive fire protection within the building. And this is an area which is picking up in the U.K. and been much more important to -- in the construction sector within the U.K. and has seen some good growth over the years. And here we have another company that we could add to the group.

And you can see some good numbers as normal down to the right there. We have definitely the ambition to keep the EBITDA margin well above 15% in all our companies. And here is another good solid company that is coming in to the group with some good numbers and good profitability. And this company will be part of the tax activation from here from July in 2024. That -- these acquisitions we made last week and here then yesterday, we released another information around the CP Cases.

The CP Cases is another U.K. company, manufacturing, high-performance protective cases and racks used for mission-critical equipment for commercial and military applications. You can foresee the different type of protective cases that is needed for electronics or different type of vital equipment that you might use for -- yes, you need to travel with or that you need to enclose in a good way, keeping it in vehicles or carrying it around or bringing it to the front or whatever it might be.

And those type of cases, this cases company has been very good at manufacturing and providing to customers all over the world really. And they also have a subsidiary in the U.S.. So they're also located in -- on the East Coast -- they have a manufacturing plant also on the East Coast of the U.S.. Some sales of GBP 12 million with good profitability, as you can see down to the right there as well, another good solid company.

And here, we also are having the former owners has continued on as managing the company and also with some stake in it, so a minority shareholding of some 13% there, as you can see, keeping that. And this is also was released yesterday.

So another good company adding to, in this case, the Control division from July 2024. And just a small reminder then. I mean, Prido we released earlier on. I think it's important for you guys to realize that this -- I think this is a really good company that we acquired here in Sweden here in February. And you can see down to the right that, that is actually significant for us in terms of profits, and it's been coming in very nicely within the group providing these type of doors.

They have been working with a one shift sort of setup for a while and producing for a year or so. Delivering very good numbers on a lower level, but they are also then looking into increasing the production capacity a little bit for the fall here. So that's also a sign that we see some improvements in some of the markets where we are. And here are -- the last one I'd like to remind you as well of is the Nordic Road Safety. Which is a supplier of permanent road safety and noise barrier systems, especially in Sweden but also in Norway and in Finland.

A company located in [indiscernible] in North of Sweden with some -- also a significant adding to the sales. And here, adding to the Electrify division from March 2024. They have a strong summer period, which we've seen already and strong summer and fall. So our Q1 and Q2 will probably benefit from the Nordic Road Safety sort of development here as well as we move forward within the Electrify Division.

So to round off before we do the Q&A, just the overall chart of our financial overview, where we posted, as we said, another solid quarter. And net sales now approaching SEK 8.5 billion, and we see the EBITDA at almost at [ SEK 1.5 billion ], and we're aiming then for the EBIT to go to the SEK 2 billion, as we said earlier, we are currently at [ SEK 1,141 ] million with some EBITDA growth -- EBIT growth here in the last year or so, a little bit below the 15% but still at the very near that to 13% and the return on the equity well above the 25% or above the 25%, at 26% and earnings per share and EPS growth is also at a good level here.

And as we see the more M&A coming in and also hopefully some improvement in the market, we will continue our journey going forward. I think that was all from me and us. So I think we'll round off there. Peter, would you like to add something before we go into Q&A.

[Peter Thysell, executive]

No. I think we're ready for all the questions.

[Operator]

[Operator Instructions] The first question comes from Max Bacco from SEB. Please go ahead.

[Max Bacco, analyst]

Good morning, Max Bacco from SEB. Well done on another stable quarter. Nice to see the acquisition pace, remaining high. Yes, two, three questions from my side. So sourcing with the electrified segment, the EBITDA margin was down some 2 percentage points year-over-year. How much of that was explained by the lack of project deliveries from -- or for QD, would you say, if it's possible to quantify?

[Jörgen Wigh, executive]

I think it was most, if not all of it, actually. I think that we see a good sort of margin development in our existing businesses. But the add-on of some SEK 45 million with yes some contribution margin will actually be a very good sort of project to have had last year. So that's actually most of it, if not all.

[Max Bacco, analyst]

Yes, understood. And for the coming, say, two quarters here, did you have any similar project deliveries during the comparable quarters last year that we should be aware of?

[Jörgen Wigh, executive]

I think we commented on a little bit on Q4. And I think we also had something but related more to the EL capsuling business. So these projects come and go a little bit. And I think the reason for us commenting now, it was a significant sort of project last year that we would like to enlighten everyone that actually is something that we were beneficial to us for last year. And as you saw from last year, the Electrify posted a very strong quarter last year compared to the year before. So it's actually -- it was a very tough comparable for us to meet this year within the Electrify.

[Max Bacco, analyst]

Yes. Understood. And then finally, I mean.

[Peter Thysell, executive]

Sorry, Max, I can maybe add to that, that you can assume some around 50% margin or so for the QD, SEK 4 million to SEK 5 million. So of course, that explains a lot about the drop in EBITDA. And this was, of course, to a high degree compensated by other entities. But that's why we think that except from the QD project-related business, it was a rather strong quarter for the Electrify division.

[Max Bacco, analyst]

Perfect. Understood. And then a final question. I mean when reading the CEO comment here in this report compared to previous quarters, Jörgen, you do sound a bit more optimistic -- is it that you are actually right now seeing a gradual improvement in the market? Or is it that we are getting closer to an improvement, would you say?

[Jörgen Wigh, executive]

Yes. I think what we've said earlier on also after Q4, I think we saw that the markets were down a bit that we saw that the construction sector was really struggling here during the winter and the past winter and the past spring. And I think we said already then that we would -- we expect it to be improved a little bit along the way, that we saw that the fall is probably looking better due to that.

We see that interest rates are coming down and inflation rates are coming down, things are stabilizing and that we see the willingness to invest is coming back. And I think what we are actually saying now is that we see that, that is actually also happening that we see the trend is actually there.

So we are closer to it. It's probably the answer to what you're asking. It is hard for us to know what's going to happen during the fall because we don't have that long order books. But based on the number of requests, the number of projects, the things that we see in the market, the sort of -- how things are turning out, I think it's according to what we expected really is more what we're saying.

[Operator]

The next question is from Karl Bokvist from ABG Sundal Collier.

[Karl Bokvist, analyst]

My first one is on the NIKODAN and the material handling decision that you made here. Just a bit curious why you felt that it's better in within control. And the follow-up is that when we look at the restated figures, it seems like NIKODAN had a strong fiscal year '22, '23, but then notably lower in terms of margins at least '23, '24. So just what happened during last year.

[Jörgen Wigh, executive]

Yes. I think both NIKODAN and MH modules, which the companies you're referring to are building different type of conveyor systems for different type of customers, production lines and that type of thing. It's more of a system integration type business. And it is -- has some projects going up and down -- but over the years, both especially in NIKODAN, MH modules is a fairly new company to us, right? We acquired that in December of last year. those type of businesses are related also to control and steering things.

And we think it fits better into the into the Control division and is also an area we would like to build over the years. And by putting it as a more of a key area and a focus area within the control made a lot of sense to us, and that's why we moved them.

Commenting a little bit on the numbers there. I think NIKODAN has been doing it very well. I think the year before last, the one you're referring to, that was exceptionally strong. due to they have some positive effects from the COVID pandemic with some customers adding some more volumes in that part of the -- in that time period. So I think last year was actually more of a normal year. And hopefully, now they've gotten off to a good start to this year as well and will add to the Control division.

[Karl Bokvist, analyst]

Understood. And then perhaps a question more towards Peter, but were there any particular effects in the divisional numbers outside of the reshuffling of the companies under the QD that you helpfully pointed out, I know there's a positive earn-out revaluation on the group level, but anything else on the divisions worth highlighting?

[Peter Thysell, executive]

Not any significant things. And regarding the revaluation of contingent considerations we added for your convenience, we added the last -- the same quarter last year, in the table, so you can compare how that has changed.

[Karl Bokvist, analyst]

Understood. My final one was just on companies with exposure to environmental trends. I mean you say [ Wapro ] still performs really well. And if I understand it correctly, it's mainly flood protection. But are there other areas within your business where you feel that, let's call it, a structural trend, but where you have companies that benefit from the world being more volatile or more harsh?

[Jörgen Wigh, executive]

Yes, I think we have that in different parts of the business, the whole green transition and also the electrification. And as you're referring to the environmental sort of the transition or environmental focus is beneficial to some of our companies. A couple of other examples is the [ Geonor ] in the Norway, for instance, measuring temperature and rainfall is another company. The radon Measurement business within the control is another one, which is also sort of we are working in the environmental trends. So I think we have 5 to 10 different businesses that have some sort of some type of positive effects from those type of trends.

The [ Wapro ] is another one. We have the SIB and especially the [indiscernible] business in Finland, which is making the road sweeping business, and that's also changing quite a lot due to environmental aspects of the brushes and how they are working. So they are in the forefront of that development. So I think we have 5 to 10 different businesses that are actually benefiting from that type of trend, megatrend.

[Operator]

[Operator Instructions] The next question from Niklas Sävås from Redeye.

[Niklas Sävås, analyst]

It's really encouraging to see the strong acquisition activity in the U.K., again here after the close of the quarter. And especially interesting, I think, is to see what you're building within fire safety with another acquisition of Principal Doorsets, complementing Door & Joinery and FireCo. And Jörgen, I know that you dislike the word synergies, but please talk about what type of benefits you see with building a cluster of similar companies?

[Jörgen Wigh, executive]

I mean, yes, as you're touching up on there. I mean, we run all our company sort of in a decentralized autonomous fashion. So that's the basis for things, right? But I think by people feeling and our managers feeling that they are in related businesses, they recognize a customer here and there from one another, and they can maybe transfer a phone number for some important customer in between each other or so that they can sort of benefit from each other being part of the same group and sort of talk the same language. Of course, that's good for us.

And we encourage that. We worked with -- we had our MD conference here just a month ago or so when we went to Finland all of us. and especially the whole U.K. sort of -- the whole U.K. team really teamed up quite a lot. We watched the football together and yes, looked at that and had a lot of fun together. And of course, that is encouraging a lot of collaboration between the companies. In one way or the other.

It might be that they are talking about lean manufacturing in one end. They're talking about ERP systems in another end. They're talking about customers and providing different type of customer projects together or sort of giving information around what's going on in the specific part of the market to some extent, at least -- so it is actually a lot of collaboration.

But the companies are run separately, and we don't integrate them in terms of production or in terms of other sort of more operational things that we would like to keep separate so that everyone if they want to collaborate, they can do that, but it's not that if we requested or forced up on them. That's how we'd like to run things. But I think the whole fire cluster or the fire protection cluster that we're building in the U.K. and also outside the U.K., we have companies in other markets that are also in fire protection.

And that, of course, is good for us that we are in a good growing sector with many of our companies.

[Niklas Sävås, analyst]

Good to hear. And a follow-up on that is when you find these type of companies, is that -- I mean, as you build this cluster, I guess the managers of these companies have a strong network and now the other peers and so on, how much -- how much do you benefit from that both in terms of sourcing, but also in terms of maybe I mean, management capabilities and so on. I mean ensuring that you have a team of managers that understand the market is, of course, good for you?

[Jörgen Wigh, executive]

Yes. Yes, definitely so. And we are -- I mean, we are sharing ideas or asking for ideas around another company that is good and the other peers in the specific markets and adding in to our M&A sort of process with some good ideas coming in there. And encourage it also with actually a bonus scheme for tipping off or when we see a very good company that actually are ending up as a new company to the group.

So it is actually very beneficial for us. And we also see that the quality improves when we are working together and collaborating and that's good. But nevertheless, we would like the companies to feel fully accountable and free to choose the path for that company.

So we don't -- again, we don't force synergies or are not that occupied, we're looking for cost synergies in between the companies that is up for each of them to find out. We drive hard on the targets and the goals that we set for each company, but we don't force synergies up on them, especially on cost synergies.

[Niklas Sävås, analyst]

Great. My last question is more broadly on the acquisition market. I think -- I mean you have had a really strong pace in terms of acquisition during the last 12 months or so. And I think at least some of your peers have lagged behind a bit. Have you seen like sort of a high competition for targets? Or have the supply benn lower than normal, so to speak, what do you see out there?

[Jörgen Wigh, executive]

I think from an outside perspective, you might think it changes quite a lot over time. We don't really think it does. I think it's very stable. I think what we see -- seen has been very good for us is setting up the divisional structure. So we're actually working quite a lot. We are more people working with finding acquisitions. It used to be more like a little bit more around sort of us in the top management team to look for acquisitions and be very occupied with that.

Now we have it more on a divisional level and that means that we have really set up a structure where we have 5x maybe the -- it's a too much of a simplification to talk like this, but still, it's improved with finding more good quality targets when we have -- when we're working more in the divisional level. I also feel that the feet on the ground that we put in the U.K. has also added to this.

So we actually have -- I think we have a good pipeline and a lot to look at also going forward. And we also have the balance sheet to do so. So it's actually -- the M&A will be very important for us going forward as well.

[Operator]

The next question is from Gustav Berneblad from Nordea.

[Gustav Berneblad, analyst]

Yes. It's Gustav from Nordea. Just to start off, I mean, in terms of the Control division, I think you said here during the presentation that you have implemented some initiatives. I guess this is sort of besides the companies you shifted. So maybe just what exactly are these initiatives? Is there anything -- or is there a support for the margin from this going forward?

[Jörgen Wigh, executive]

Yes. I think moving the companies is part of the new a bit of the new recipe that we are broadening the scope. We talk about sort of areas we would like to be in and sort of scoping where we would like to be with the divisions and that has been broadened a little bit within the Control division. So that's actually happening along the way as well. So I think we will see. And we also then -- when we're looking at our companies, we're also looking very much company by company.

We have companies that are more struggling with growth issues. And as we see the -- but we're also having companies that are struggling more with getting sort of things to work and see them struggling with the construction sector and so forth. So it's actually a recipe company by company. But I think the new thing is really that we are setting a new sort of scope for the -- offset the new scope, a little bit broader scope for the Control division.

And along those lines, also move the two companies there. I think the CP cases acquisitions we made, you could debate whether that is a control, sort of a clear fit for the Control division, but that's also to be seen as a little bit of the broadening of the scope within the Control division. So it's some of those things is what we've done.

[Gustav Berneblad, analyst]

Okay. Got it. Got it. And then also, you commented on more, I guess, broadly across the group, but more requests coming in. Are there any specific, if we boil it down any specific read we can do there?

[Jörgen Wigh, executive]

It's always within our group a lot of different things happening and a lot of different businesses, right? So it's hard to talk about sort of a general trend. But we feel that the willingness to invest and the attitude for growing businesses has come back to some extent. And that we see also in the -- but we don't really measure the number of requests on a group level, but it's a tendency, it's the mood of our MDs that I think is along the way has been stabilizing and picked up a little bit.

[Gustav Berneblad, analyst]

Yes. Okay. Perfect. And then just the final one here on the higher tax. I mean, can you just explain this a little bit and how we should think forward?

[Jörgen Wigh, executive]

That's for you Peter.

[Peter Thysell, executive]

Yes. Yes. First of all, I think we had a very low tax in the previous year. That was the extraordinary thing. And the -- if your question is regarding the -- a little bit higher tax rate in this quarter. So it's usually in this quarter in some of our company's correction after the annual accounts. So we normally have a little bit higher tax rate in the first quarter, and this will correct itself in the coming quarters.

[Operator]

There are no more questions from the teleconference at this time. So I hand the word back to you, Jörgen and Peter.

[Jörgen Wigh, executive]

Well, thank you, everyone, for listening in. And I think thank you for spending the time with us. We will now have a couple of weeks off for a good holiday. I hope you do as well. And we'll meet soon again in August. And thank you for today, and have a good summer.