Bergman & Beving’s Financial Report 1 April 2022–31 March 2023
Financial Report 1 April 2022–31 March 2023
Fourth quarter (1 January–31 March 2023)
- Revenue rose by 3 percent to MSEK 1,237 (1,205).
- EBITA increased by 18 percent to MSEK 104 (88) and the EBITA margin improved to 8.4 percent (7.3).
- Net profit rose by 2 percent to MSEK 54 (53).
- Cash flow from operating activities totalled MSEK 145 (-36).
12 months (1 April 2022–31 March 2023)
- Revenue rose by 4 percent to MSEK 4,749 (4,575).
- EBITA increased by 15 percent to MSEK 382 (331) and the EBITA margin improved to 8.0 percent (7.2).
- Net profit rose by 6 percent to MSEK 214 (202).
- Earnings per share for the 2022/2023 operating year increased to SEK 7.80 (7.55) before dilution.
- Cash flow from operating activities totalled MSEK 333 (225).
- Six acquisitions have been completed, one of which after the end of the period, with total annual revenue of approximately MSEK 380.
- The Board proposes a dividend of SEK 3.60 (3.40) per share.
Strong end to the operating year with increased earnings
It is gratifying to report yet another quarter with increased earnings, despite a global uncertainty. EBITA in the fourth quarter increased by 18 percent year on year to MSEK 104. The EBITA margin rose by 1.1 percentage points to 8.4 percent, mainly driven by profitable acquisitions, a higher share of sales of proprietary products and improved operational efficiency. Our focus on earnings growth ahead of revenue growth remains firm. We avoid volume-based transactions with insufficient profitability. This is one of the reasons that organic revenue declined by 6 percent in the quarter. The increase in earnings was delivered despite earnings being charged with non-recurring items affecting comparability during the quarter. Along with lower working capital, the increase in earnings resulted in a strong operational cash flow of MSEK 145.
Continued stable demand despite uncertain market
Despite high inflation, a continued weak SEK and economic uncertainty in the construction and industrial sectors, stable demand continued for our companies. Our operations focus on the professional market, and demand is mainly impacted by the number of employees in construction and industry in the Nordics, where the employment rate remains high. However, the companies’ reseller customers continued to reduce their buffer inventories. This impacted sales for some of our units in the spring, but we are seeing signs that customers’ inventory levels are starting to normalise.
Company-specific activities to increase profitability, earnings, the margin and cash flow
While the majority of our companies displayed profit growth during the quarter, we still have companies that are not delivering on our financial targets. In these operations, the focus is on improving our working capital efficiency and increasing the operating margin, which for some of our companies involves cost savings. The Group’s like-for-like costs continued to decline, even though we were unable to fully compensate for cost increases as a result of inflation and higher purchasing prices. The cost savings we have initiated are gradually yielding results and we selectively chose to initiate additional measures during the quarter. We will continue to improve our working capital efficiency, mainly by reducing our inventory levels. This is expected to have a positive impact on cash flow during the coming quarters.
Acquisitions of market-leading niche companies continued
We acquired two additional companies during the fourth quarter and one after the end of the reporting period. Together, the companies contribute strong market positions in their respective niches and an annual revenue of approximately MSEK 175 and favourable profitability. The UK company A.T.E. Solutions and the Norwegian company Tema Norge are part of the Tools & Consumables division, while the Finnish company Kiilax is part of the Building Materials division. We look forward to supporting the companies to help them realise their growth potential.
Successful operating year
All in all, we can look back on a successful operating year in which we advanced our market positions, increased our earnings by 15 percent and improved our EBITA margin by nearly 1 percentage point. However, the year was not without its external challenges. We were forced to handle supply chain disruptions and compensate for increased material and production costs, which were at historically high levels. The construction and industrial sectors also faced growing economic uncertainty, although this did not have any major impact on demand. Overall, our companies strengthened their market share by securing new business and through more companies conducting successful market and product launches. Luna’s external logistics provider was the target of an IT attack in the autumn that halted the company’s deliveries for a number of days and resulted in a significant loss of earnings. However, I believe that in situations like these, our companies are able to adapt quickly to changing conditions thanks to the commitment of our employees and our decentralised governance model, which allows us to take rapid action close to our customers. During the year, we established tangible targets and activities for each company with a focus on earnings growth ahead of revenue, which resulted in a moderate increase in revenue. The year included a range of activities in our various companies based on our capital allocation model – or as we call it, The Focus Model. Along with increased cost control, our companies’ efforts to change their product mix – not least to increase the share of proprietary products – had a positive impact on our margin performance. We also improved our efficiency and started reducing our buffer inventory, which strengthened our cash flow, not least in the fourth quarter. Five additional companies were also acquired during the year, with annual revenue of approximately MSEK 350 and profitability well above the Group’s average.
Ambition of MSEK 500 in operating profit remains firm
Adjusted for the extraordinary loss of income in the second quarter due to the temporary suspension of Luna’s deliveries, our earnings have increased for 13 consecutive quarters. Our prospects for improving the profitability, margins and cash flow of the Group’s companies remain favourable. We have the capacity to continue to acquire highly profitable, niche companies with strong cash flow and growth opportunities, and we are still aiming to acquire four to six companies in the next operating year. I therefore believe that Bergman & Beving has good potential to continue to improve its earnings, and our ambition of reaching MSEK 500 in operating profit by the 2025/26 operating year remains firm.
Stockholm, May 2023
President & CEO