Bergman & Beving’s Interim Report 1 April–30 June 2023
Interim Report 1 April–30 June 2023
First quarter (1 April–30 June 2023)
- Revenue rose by 2 percent to MSEK 1,228 (1,200).
- EBITA increased by 15 percent to MSEK 105 (91) and the EBITA margin improved to 8.6 percent (7.6).
- Net profit totalled MSEK 48 (55).
- Cash flow from operating activities increased by 127 percent to MSEK 179 (79).
- Three acquisitions have been completed, one of which after the end of the period, with total annual revenue of approximately MSEK 160.
Good start to the new operating year
The first quarter of the operating year was a continued step in the right direction. EBITA in the first quarter increased 15 percent year on year and the EBITA margin rose by 1 percentage point to 8.6 percent. The increase was mainly driven by acquisitions with favourable profitability, an improved product mix and increased operational efficiency. We established concrete targets and activities for each company prior to the new fiscal year, focusing on earnings growth ahead of revenue growth. This contributed to a modest revenue growth of 2 percent in the quarter, with organic revenue declining by 8 percent. Combined with a reduction in working capital, the increase in earnings boosted cash flow from operating activities, which amounted to MSEK 179 during the quarter.
Increased market uncertainty
Our operations focus on the professional market and the main indicator for the Group´s underlying demand is number of employees in the construction and industrial sectors. Economic uncertainty increased during the quarter, particularly in the construction sector. In the construction sector at our largest markets Sweden and Norway there was a reduction of 6 percent in the number of employees compared to last year. This resulted in weaker demand for several of our companies with end customers in the construction sector. Nonetheless, we are experiencing continued stable demand in the industrial sector, partly due to an increase in the number of employees in industry in the Nordic region.
Company-specific activities to increase profitability, earnings, the margin and cash flow
Given the increased economic uncertainty and the fact that we still have companies that are not delivering on their financial targets, we have intensified our efforts to improve our working capital efficiency and to continue improving our operating margin, which for some companies means efficiency measures. Our initiated cost savings are gradually taking effect, as evidenced by the continued reduction in like-for-like costs. We are continuing our efforts to improve our working capital efficiency, mainly by reducing inventory levels, which is expected to have a further positive effect on cash flow.
Acquisitions of market-leading niche companies will continue
We acquired two companies during the first quarter and one additional after the end of the reporting period. Through the acquisition of Tema Norge, we increased our presence in the growing niche of orbital and mechanised welding technology, an area where Tema Norge, together with our company Retco, is growing into a strong position in the Nordic market. During the quarter, we also acquired Elkington, the Swedish leader in floor access hatches for infrastructure and commercial premises projects. After the end of the reporting period, we acquired Itaab, the market leader in metal suspended ceilings in Sweden, mainly installed in public properties. The two most recent acquisitions are part of the Building Materials division and sell to niches in the construction sector that are expected to have underlying growth. The acquisitions provide the Group with annual revenue of approximately MSEK 160 with favourable profitability and based on our capital allocation model - the Focus Model - the focus will be on supporting the companies in their growth journey.
Earnings expansion will continue
Despite a potentially weaker underlying market, I believe that we have favourable conditions to increase the Group's profitability, margin and cash flow through improvements in our 26 companies and through further acquisitions during the operating year. I therefore strongly believe that Bergman & Beving will continue to deliver on the target established in April 2021 of reaching an operating profit of at least MSEK 500 latest by the 2025/2026 operating year.
Stockholm, July 2023
President & CEO