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21 July 2023, 08:00
Sdiptech AB (publ) publishes interim report for the second quarter (April - June) 2023
The report is available on the company's website: www.sdiptech.se
STRONG ORGANIC DEVELOPMENT AND CONTINUED MARGIN STRENGTHENING
SECOND QUARTER 2023
FIRST SIX MONTHS 2023
EVENTS AFTER REPORTING
On 11 July the acquisition of Kemi-tech ApS was completed.
No other significant events are noted after the period.
COMMENTS BY THE CEO
We can proudly summarize another strong quarter for Sdiptech. Since the listing in 2017, the Group has shown an annual profit growth of 41 percent. The second quarter confirmed this firm development with an EBITA* growth of 44 percent, of which 15 percent was organic excluding currency effects. Demand was solid and the organic sales growth was also 15 percent excluding currency effects. The multi-year margin strengthening continued and the group's EBITA* margin amounted to 19.7 percent.
During the second quarter, demand from our customers has been persistently strong, resulting in net sales increasing by 38 percent, of which 15 organically excluding currency effects. Market conditions in the Group's business units were favorable and the good demand continues. Our unit for EV chargers is developing in a stable manner and delivered according to plan.
The Group's EBITA* increased by 44 percent, of which 15 percent organically excluding currency effects. We have caught up with passing on increased purchase prices and personnel costs to our customers, and profitability in comparable units has thus been restored. At the same time, margin strengthening has continued and the EBITA* margin amounted to 19.7 percent (18.9), driven by acquired companies with strong market positions.
Cash conversion for the quarter is weaker than Sdiptech's normal levels. This is primarily a result of the strong increase in sales, which has resulted in increased accounts receivables. The Group's larger units also built up their inventories during the quarter to meet the increased demand. All in all, this has affected the cash flow negatively during the quarter, but it is a result of strong demand combined with ensuring solid delivery capacity to our customers. We expect the cash generation to return to normal levels around 80 percent.
Our financial net debt in relation to EBITDA amounted to 1.76, which is well within our financial target of 2.5. Total net debt, i.e., including provisions for future earn-outs, amounted to 3.40 in relation to EBITDA. These provisions are booked as liabilities, the amount of which assumes that the Group's profits will increase over a number of years from today's levels. This is a central part of our financing model as it means that if profits do not grow as expected, the debt decreases. For example, if profit were to remain at the current level in the future, the book liability for earn-outs would decrease by approximately 40 per cent.
During the period, Sdiptech entered into an agreement to acquire Danish Kemi-tech ApS, a leading supplier of tailor-made chemical products for industrial water treatment. Through industry-leading solutions, the company has established a strong market position and delivers to stable customers. In addition, Kemi-tech contributes to UN global goals 6.3, 7.3 and 12.2. The acquisition was completed in July after approval from Erhvervsstyrelsen, and Kemi-tech is included in the Resource Efficiency business area as of July.
I would like to take this opportunity to repeat the basics of Sdiptech's business. Our customers are found within the infrastructure segment and important societal functions such as electricity supply, water treatment, transport systems, schools, hospitals, etc. The customers are typically solid, and demand is stable regardless of economic conditions. Our business model consists of developing our own products that meet critical needs of our customers. Product development takes place close to the customer and meets specialized needs, which leads to competitive advantages that are difficult to copy. Our solutions usually consist of both hardware and software that provide a good mix of new sales with associated installation, as well as service, subscriptions and other recurring revenue. The development of infrastructure largely drives societal development, which means that the more our societies develop towards increased sustainability, efficiency and safety, the higher the demand for Sdiptech's solutions. It is worth mentioning that our exposure to consumer goods and residential construction is very small.
The strong order intake from the beginning of the year continued during the second quarter and we currently see no clear signs of a slowdown. We are experiencing good demand in several of the areas in which Sdiptech operates, not least in energy efficiency, water treatment, traffic planning and safety solutions in public environments.
One of Sdiptech's long-term sustainability goals is to reduce our carbon dioxide emissions (Co2e/turnover in scope 1 and 2) by 50 percent between 2021 and 2026. The Group is strongly committed to implementing important changes and reducing our climate footprint. We measure our carbon dioxide emissions quarterly and while we achieved the target for 2022, we are pleased to note that we are also on track to achieve the 2023 reduction target.
Sdiptech's acquisition pipeline remains solid, and we look forward to welcoming more high-quality companies to the Group within the framework of our acquisition targets.
Finally, I would like to extend a big thank you to all our dedicated employees for your commitment and strong efforts this first half of the year and thank all shareholders for continued support.
President and CEO
For additional information, please contact:
Bengt Lejdström, CFO, +46 702 74 22 00, email@example.com
My Lundberg, Sustainability & IR Manager, +46 703 61 18 10, firstname.lastname@example.org
Sdiptech’s common shares of series B are traded on Nasdaq Stockholm under the short name SDIP B with ISIN code SE0003756758. Sdiptech’s preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Further information is available on the company's website: www.sdiptech.se
Sdiptech is a technology group that acquires and develops market-leading niche operations that contribute to creating more sustainable, efficient and safe societies. Sdiptech has approximately SEK 4,000 million in sales and is based in Stockholm.
Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The information was provided by the above contact persons for publication 21 July 2023, at 08:00 CEST.