SP Group A/S

CSE:SPG

Hi, and good afternoon. On behalf of Hans Christian Andersen Capital, I'd like to welcome you all to this presentation of the Q1 2025 report from SP Group that was published yesterday. My name is Rasmus Køjborg, and I have the pleasure of welcoming both CEO, Lars Bering; and CFO, Tilde Kejlhof. They promised to take us through the quarterly numbers here, the recent highlights. So a warm welcome to you, too.

Thank you.

Thank you.

And before I hand over, also a warm welcome to all of those of you who signed up for today's presentation. As usual, you can ask your questions in the chat room. You can either do it in English or you can do it in Danish, and we'll help with the translation. And should you miss anything, we will record the presentation here and publish it on different platforms afterwards.

But with that, I'll leave it to you, Lars and Tilde.

Thank you very much, Rasmus. And first of all, thank you very much for -- to all of you listening in. We'll start with an ultra short intro. But as always, if you -- if anyone behind the screen wants to hear more about SP Group and what we do, please feel free to reach out. We are always available for a call or Teams meeting.

We are a global manufacturer of plastic solutions with 31 factories around the world. We have 2,400 employees. We have increased the amount of employees a little bit since New Year, and this is mainly in United States. Our revenue comes from being a sub-supplier of plastic parts, that is 71% of our revenue in the first quarter. And then we have our own brands, a number of niche products within the plastics industry that goes for 29% of the revenue in the first quarter.

We group our products in health care, cleantech, foodTech and others. And especially in the first quarter here, we have had a good increase in the health care part, which I'll come back to later. If you take the highlights, please change, Rasmus, for the first quarter, we have had a strong growth, especially within the health care. The growth has been both in the sub-supplier business that we have, but also in our own brands.

In fact, the first quarter has been a record high in revenue and record high on the bottom line. So all in all, we are very happy with this first quarter. However, we have also had a lot of discussions with our customers about tariffs, trade wars and the uncertainty related to all of this. We see that there is a risk of customers pulling the brakes a little bit, and that could have an influence in the coming months.

We are in a very close dialogue with all our customers about making sure that we are producing their parts in the right location. So we avoid tariffs. But as everyone probably just have seen on the news right now, so it can change rapidly the picture that we are looking into. Since we were here the last time, we have started up a share buyback program. We have started a DKK 40 million share buyback program in order to reduce the share capital.

And if we go to the figures, we had an 8.8% increase in revenue from DKK 723 million to DKK 786 million in first quarter. We realized an EBITDA at DKK 166 million, which is 12% more than same time last year. Depreciations were kept at the same level, and that resulted in an EBIT at DKK 117 million, which is an increase on almost 19%. The sales of our own products increased 10% to DKK 226 million, which was an all-time high in the first quarter for our own products. And the reason for me mentioning the own products is that they are very important for us because we are able to have margins that are better than being a sub-supplier on these types of products.

So they are very important for us, and it's very important that we can grow these own products a little bit faster than the whole business in average. That was -- yes, that was the right one. Thank you, Rasmus. This revenue led to a profit before tax on DKK 101 million, which is 19.2% more than same time last year. It is for the first time we have had earnings before tax at this level, above DKK 100 million. So we are very, very pleased with this. It gave earnings per share in the level of DKK 6.51, an increase of 19%. And we have been able to reduce the debt by -- to DKK 764 million. The equity grew DKK 69 million to the level DKK 1.766 billion. So all in all, a very strong and nice quarter for us.

Our biggest investment in 2024 and so far also in '25 is going really well. We have started up a new injection molding plant in Peachtree City just outside Atlanta, which now is in operation. We have 14 injection molding machines running. We have 40 employees. We have passed the ISO certification for medical production. We have established a 1,000 square meter Class 8 clean for medical device production. And we see possibilities for maintaining a very strong growth for production of components for the health care industry.

Until now and in the coming months, we have focused a lot starting up a company, SP Meditec, which is focusing solely on components for medical devices. Later this year, we will also start up with SP Molding, focusing on technical parts for the broader industry. But all in all, this has been a very big part of the investments that we have done last year and also the first quarter this year. So we are very pleased that it runs well and follows the schedule.

When it comes to our own products, as I mentioned before, we have had a nice increase. And as you can see here on the graph, DKK 226 million, best first quarter ever. And this was realized by selling more guidewires from SP Medical, more vials from MedicoPack and last but not least, more products for industrial work environments from Ergomed.

And all of these were in the health care sector and has contributed a lot to the good increase in the industries, the health care industry that we focus on. However, we have also had a very nice growth for the sub-supplier business for the health care industry where we are producing plastic components for medical devices. So in first, we were able to increase the health care part of our revenue from DKK 280 million to DKK 335 million, 17.1%.

On the other hand, it was more slow on the Cleantech side, where we saw some stopping in the demand. We have had a lot of new parts coming in, but we have also seen lack of demand in other places. So it's a blurry picture, but all in all, basically on the same level as last year. The FoodTech was a little bit going backwards. On the other hand, the group, the rest, which we call other, had a nice increase, mainly due to some very big projects within satellite communication, which were delivered in Q1 and also some nice project orders on furniture.

Then we come to you, Tilde.

Yes. As Lars already explained, we had a very nice Q1. The top line was up by 8.8% to DKK 786 million. The EBITDA was up by 12% to DKK 166 million. We had an EBIT on DKK 117 million, and then we have an earnings before tax of DKK 101 million. Earnings per share was DKK 6.5, it's an increase on 19%. If we look at the cash flow, then cash flow from operations was DKK 131 million. We used DKK 58 million for investments. That's a lot of investments in the U.S. plant.

And then we had DKK 107 million for paying off debt and also buying back shares. The net interest-bearing debt was DKK 764 million. It has a gearing of 1.3. And it's also worth mention that here in Q2, we paid dividend to all our shareholders for DKK 50 million.

And if you take the next one. The light blue that shows the last 12 months, we almost had a revenue on DKK 3 billion. And historically, the growth has been driven by acquisition and organic growth.

EBITDA and EBITDA margin performance. The last 12 months EBITDA was DKK 606 million. It's the first time that we see it's above DKK 600 million. The increase are mainly driven by more sales of own products and also better use of our capacity.

Earnings before tax. Earnings before tax in the last 12 months was DKK 361 million. Here, it's the same story that the increase during the years that have been due to increased sales of own products and also capacity -- better use of capacity.

Yes. Despite we have had a first quarter that was in the top of the range in the growth, and it was good earnings. We put that together with a very blurry picture for the coming months with a lot of uncertainty on tariffs, geopolitical issues. And all in all, we say that we believe we are able to maintain the same guidance as we have given originally that we will have a revenue growth of between 3% and 10%. Our EBITDA margin will be somewhere between 19% and 21%, and EBT margin between 11% and 13%.

And if we put all that together, we have had a very nice Q1 with record sales, record levels on EBITDA and EBT. We have had good improvements in both own products and sub-supplier orders. We have a U.S. factory that is well underway. It is in operation, and it is running very smoothly for us right now. We have started a new share buyback program in order to reduce the share capital. But we see, in the coming months, some uncertainties due to tariffs and geopolitics. But we maintain our expectations for the full year as stated.

Very good. Thank you very much, Lars and Tilde, for the rundown here of the quarter. Let's jump into some of the questions that came up, and I'll flip a little bit through your slides here. I think we'll go to this one on the financial ratios because there is one related to sort of your debt level towards the EBITDA.

So you have a net debt-to-EBITDA at the moment at 1.3, the lowest in recent years. With a strong balance sheet, how are you prioritizing capital allocations in '25 between sort of the elements you have, you have the M&A, you have the CapEx, you have dividends and share buybacks. So could you give a little thought on that?

Sure. First of all, the level in quarter 1 was really low. We have paid out DKK 50 million in dividend now in quarter 2, and that will have an effect. So the number will go a little bit higher. But I think also we are at a low level. We -- first and foremost, we will invest in the equipment that we need. And we will especially need to invest more in production for the medical industry, for medical devices and medical packaging.

We are in process of investing in a new clean room in MedicoPack, and we will need more machines for SP Meditech as well. It is -- the level of investments is -- needed investments in the other part of the business is not so high as the development is not so strong there. But it's -- there's a huge need on the medical side.

After that, we will, of course, pay a dividend and prioritize that. Normally, we have done that this year in the level that we normally do. And if there is acquisition possibilities, we will also, of course, also take them. And then if it is not possible to make further acquisitions where we can find good companies at a fair price, then we will do more share buybacks.

Very good. And then perhaps a follow-up on the M&A. Is it possible at the moment to find companies, good quality companies at a reasonable price? Or would you have bought them if that was the case?

We would already have bought them if that was the case. But we still believe that it is possible.

Very good, very good. Let us then also -- let's stay on this slide actually because there was a question related to -- as you mentioned on the U.S. slide that you are establishing these clean rooms. And we could also see in the report that you have done the same thing in Poland, I think it was -- because there was a question related to this if these clean rooms must be very costly, is this where you spend most of your investments at the moment? We could see the DKK 58 million on this slide.

Yes, we spent most of our investments in the medical sector. And this clean room, that is a huge investment. It's a house inside the house with a lot of requirements for that is to keep it sterile. There is like a lot of changing for people that need to go into [indiscernible] door change and then go to another door. So there is requirement for this clean room, and they are very costly. Of course, it's also products that has a higher margin normally that we can produce in these rooms.

Okay. Very good. And if we sort of stick to the health care part, I'll just flip back here one slide. As we can see, it's around 43% of your revenue, and it's growing quite well as it says here also. Health care is a substantial part of your business and still growing. There's one question whether the growth is related to new or existing clients?

It's both new clients and existing clients. And what is worth mentioning here, the part where we are a sub-supplier where we are producing plastic components for medical devices, it's typically something that takes a very long time to establish from we sent the first offer until we have a good serial production that can go -- easily go 2, 3 years.

So some of the increase we have seen here in quarter 1 is also as a result on good sales work done in '23. And as we know, what we have been doing in '23, '24, and we are doing right now, then we are quite confident that we will keep on adding more health care business in the revenue during '25.

Very good. And a follow-up in relation to that because there was also a question going on. If you should point to something where you make a difference in this segment and it was asked if it was quality sales full time. But as I understand it, sales has been an important part. If you are to point to other things that helps drive this growth in health care, what would that be?

We have had the health care as a main priority for many years in SP Group. And it is both in our own products and in our sub-supplier business. So we have put a lot of energy in securing new agreements with new and existing customers. And something that is probably worth to notice here is that we are not only targeting the world's biggest customer. Basically, we are too small for that.

But we are targeting very big customers with a demand for plastic components, but we are actually also quite -- or try to be active within start-ups, med tech start-ups where we would like to bond a good relationship with them very early on and hopefully being able to produce everything from the first prototypes in 3D printing on to the injection molded components that they need for their products.

And we can see that some of that they will most likely become some very, very nice interesting customers in the future. And we believe in very long relationships with our customers. So it's natural to start with them when they are very, very small.

Very good. And then a question related to sort of the sales of your own products. We'll just flip back to this slide because as I think you also ran through in the presentation, this is where that has been a good part of the health care growth also with your own products. And the question here goes, could you elaborate more on your strategy to increase the share of own brand sales in your non-health care markets? In the [indiscernible] the other one, the FoodTech and the Cleantech and the other, I presume.

Yes. But here, we are doing the marine products with the floats from Atlantic floats, and we are doing [ floats ] and fenders from [ Dan-Hill ]. We are doing animal housing ventilation components in TPI. And we are continuously here developing new products, finding new ways of helping our customers with the solutions. Of course, if we see interesting own products that could be an acquisition possibility, then we will, of course, also look at that.

Okay. Good. I think we're through most of the questions, but we have one last here, and that is sort of what has -- what have been the implication for you in regards to the U.S. tariffs? What have you seen there with the feedback from your clients and also what you can see is hitting your own business, perhaps also the sourcing of raw materials? Have you been challenged here?

The major part of the raw material, for example, that we use in the U.S. is produced in the U.S. The major part of the raw material that we use in EU is produced in EU. So here, we have not seen anything. I would say the major implications and the major part in quarter 1 has been discussions with our customers on where to produce.

We have discussed with customers to move parts from China to Europe or from Europe to the U.S. So we make sure that we find solutions where the tariffs or the overall cost with tariffs and transport and labor costs will give the best optimum. But all in all, we need stability in order to finalize that. It's difficult to plan when we -- as what we have seen an hour ago, now see some new threats on tariffs.

Good. And one last question came in here. I think we should also address that one. That is also related to the M&A strategy we discussed earlier. It says given the lack of acquisitions in the last -- or the past few years, do you think you need to invest more resources in those efforts? Or has that not been sort of the caveat here that, yes, on the resources side?

No, I actually don't believe it's a resource question. I think it is a question about finding the right companies at the right price. Actually, we have seen a number of companies for sale. We are getting pitch basically every week with something -- and here, we start to evaluate, does it fit into our strategy? Does it fit into SP Group? And in the case it does, we look into it and see if it's a good company with a good management. And finally, we see if it could be a win-win for both parties, meaning that it could also be a company acquired for the right price. And I must say, we have not seen anything at the right price yet.

Okay. Very good. We will conclude by that. Thank you very much, Lars and Tilde, for the presentation here.

Thank you.

And thank you to all of those of you who participated today and with some good questions. We'll just wish you all a nice day and a nice weekend later on. Thank you.