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Welcome to the Balco Q1 Report 2021. [Operator Instructions] Today, I'm pleased to present, CEO, Kenneth Lundahl. Please begin your meeting.
Thank you. We'll start with presenting the Q1 report of Balco on Page 2. Balco is helping customers, which have problem with existing balconies, and also looking to calculate all balconies that are bigger balconies, open organized. We are mainly focused in the renovation segment where we will sell sales process and have a very strong logistic delivery function.Page 3. Sales and profit is negatively affected by COVID-19 in the quarter. Order intake, plus 5% higher than sales. Order backlog increased by SEK 40 million in the quarter. Net sales challenged SEK 50 million compared to SEK 321 million last year. And operating profit, SEK 22 million compared to SEK 34 million last year in the quarter 1. COVID-19, Balco is heavily affected of COVID-19. The last 12 months, our order intake has been weak. And this affects turnover and profit in Q1. We believe it will affect also negatively in Q2 and Q3. But we believe that the order intake this year will be good. So Q4, we will be back on track as it looks today.We have a strong financial position. Equity asset ratio of 50%, and our net debt-to-EBITDA is 0.4. On April 8, Balco acquired RK Teknik AB with net sales in 2020 of SEK 115 million and an operating profit of SEK 10 million. The acquisition strengthens and complements Balco Group's product range and our customer offering. I will come back later to the acquisition in the presentation.Michael, stage is yours.
Yes. Michael Grindborn, CFO of Balco, and I will give you some financial highlights of the quarter.Our net sales was down from SEK 321 million down to SEK 250 million, where the renovation segment accounted for 79% of sales and the New Build segment for 21%. Our order intake was stronger than the net sales, up 5% higher. So it was SEK 263 million, but down from SEK 341 million last year. Renovation segment had order intake that was 93% of the total order intake in the quarter.Order backlog is SEK 1.13 billion, down from SEK 1.56 billion last year same period. And our net profit -- operating profit for the quarter was SEK 22 million, down from SEK 34 million. And the operating profit margin 8.7%, down from 10.7% last year. Our operating cash flow amounted to minus SEK 13 million. We had cash and cash equivalents at quarter end of SEK 186 million. Turning to next page, Page 5, and a quick summary of the first quarter. Order intake, down 23% to SEK 263 million. Revenue down 22%, of which 26% negative organic, and we had acquired order revenue of 4%, so down to SEK 250 million. Order backlog, down 28% to SEK 1.13 billion. And operating profit, down to SEK 22 million.Turning to Page 6 and look at our business segment and start with the renovation segment, our biggest segment. And it's heavily affected by COVID-19. But we see some light in the tunnel when it comes to order intake. So the order intake was just down 7% to SEK 246 million, down from SEK 265 million. So almost the same as last year, while the revenue is heavily affected and down 29% to SEK 199 million. Also, order backlog has decreased quite a lot, 30%, down to SEK 935 million. And also the operating profit, down to SEK 18 million and an operating profit margin of 9.1%. Last year, we had operating margin of 11.3%, quite heavily affected. And it is because we have decided not to put the company long term and want to keep all resources. And also, we have worked quite a lot with the development and R&D during this period. And so we don't want to have our leng-term growth. Look at the New Build segment. Order intake decreased quite a lot, down to SEK 17 million. And the main reason is that, last year, we got a big order in the Maritime segment in quarter 1. While revenue increased SEK 31 million, up to SEK 52 million, and it comes from both the acquisition of Stora Fasad that is mainly in the New Build segment and also quite strong sales in the Maritime segment and also in U.K. when it comes to New Build segment. Order backlog, down slightly to SEK 193 million. And the operating profit improved by 31%, up to SEK 4 million and an operating profit margin of 7.5%. So it decreased slightly compared to last year. Turning to Page 8 and looking at our financial position, and it's still very strong. We had an equity-to-asset ratio of 50.5%, and it's an improvement of more than 4 percentages compared to last year when it was 46%. Our net debt-to-EBITDA is still very low, just 0.4. And if you exclude leasing debt, it's just 0.2, and it's also an improvement compared to last year.Our profit after tax was 19 -- SEK 16 million in the quarter, down from SEK 25 million last year, and it corresponds to an earnings per share of SEK 0.74. We still have acquisition headroom. We have banking agreement until September 2022, and we have also unused acquisition credit of SEK 100 million. And as mentioned, we had cash and cash equivalents at quarter end of SEK 186 million. We also have the possibility to authorize and issue shares for acquisitions. And as mentioned, we acquired RK Teknik on April 8, and they had net sales in 2020 of SEK 115 million. Turning to Page 9, the financial targets of Balco Group. We had a group target of 10% per year, and we have been heavily affected now when it comes to our revenue. So it's been down 11% for the last 12 months. We also have a profit target of reaching SEK 13 million (sic) [ 13% ]. And looking at the last 12 months, we are currently at 10.8%. We also have a goal for our capital structure that our interest bearing net debt compared to EBITDA should not be more than 2.5% more than temporarily, and there we are as low as 0.4. And then we also have a dividend policy that we should distribute half of the profit after tax to our shareholders. But given the reason that we have right now, since Yande Yarra has people on furlough, we are not able give any dividend for the current period, but also the Board is open to have an extraordinary general meeting later in 2021, if it should be possible to give dividend.And turning to Page 10, and a little bit about our ESG initiatives. We have products with material and construction that lasts at least 90 years, and it's fully recyclable after that and only need 2 minor services and visit for our glazed balconies in Sweden. And we have this documented by external companies. Also, our city balconies, open balconies lasts for over 70 years. And our glazed balconies gives energy savings of 15% to 30%, depending on which products you buy and also the conditions if it's in the south or west or east where they put up the balcony. It also give reduced maintenance on facade and windows. So valuable to save money. And giving this, we are climate positive of the 30 to 50 years for our glazed balconies in Sweden. And we have a goal that will be reached here in the first half year of this year, but we reduced this by 5 to 10 years even. So it will be climate positive, 25 to 40 years instead.We have also decided that all purchase will be from suppliers in Europe, and we are almost there right now. And from this year, we also had a stand-alone sustainability report that came out the same day as our annual report, April 16, and is available on our web page. You can also go over it if you want it in a printed copy.Back to you, Kenneth.
Thanks, Michael. New acquisition strengthens and complements Balco's product offering. RK Teknik offers balconies for extension, renovation and new construction and assembly operation as well as related services. The company products strengthen and complements the Balco products range and customer offering, of course, in Sweden, that is our main market. But RK Teknik don't sell anything outside Sweden. So here, we can really expand in their product offering in Denmark, Norway, Finland initially. And in addition to this, they have started the City balconies, which is really big for us in Denmark. And this area, we will really focus in Sweden, together with RK Teknik, both with our financing and also with the product range we had in Denmark. Financials. Revenue 2020 of approximately SEK 115 million; EBIT, SEK 10 million; order backlog of about SEK 60 million. Purchase price of SEK 62 million in cash upfront and a possible additional purchase price, depending on the development between 2021 to 2023, and we estimate that approximately SEK 20 million. It is financed through existing cash and tax. The outlook. The acquisition will be consolidated from 1st of April, and the acquisition is expected to make a positive contribution to earnings per share already in 2021. We have said before that we make 1 to 3 acquisitions a year. This is the second acquisition, and this really is a good acquisition. We did TBO a couple of years ago, and that was really excellent. And the complement now with Balco in Sweden, TBO, RK Teknik and also still facade gives us a really, really strong position in Sweden, which we also can expand in other countries. So questions, answers, please. Go ahead.
[Operator Instructions] The first is from the line of Julius Rapeli of SEB.
I have a couple of questions. I could start with one regarding order intake development. And maybe if you could just elaborate a bit of order intake developments within the quarter. Did you see some improvement towards the end of Q1? And then to follow that up, how has the development been between different geographies you're operating in?
We could say like this that we have there in Q1, the restrictions in Q1 has never been harder ever, although we have found ways of selling. So even if now it's opened up in every country, quick. Sweden now, there's changed from 8 people to 50 people is really important. But even if the restrictions wouldn't change, we see that they're all selling and we are all selling going forward, but due to the ways we have implemented, how potentials, meetings, mail voting, digital voting. But of course, the demand, the need from the customer is really, really high. So as I said before, that order intake this year will be good, even if there still will be some restrictions. But now, we see that is opening up in Sweden -- every country, actually, I would say. So there are -- I would say, it's going very, very quick in the opening up. So order intake in the last 12 months, really weak. The interest from customer offering calculation is really, really high. And as we have said in the report, these 12 months, we really have tried not to destroy anything of the good path that we are doing in Balco. We are putting a lot of development resources, new products, new segments. We have worked with the financing a lot. We have really -- I would say, most of the countries we're working with, we have actually decreased the monthly cost to 20% during this corona period. So if we look -- we have done some of the acquisitions we want to do, and we are working continuously there. So I would say that 12 months of weak sale, high interest from customer, we believe that order intake this year will be good. Absolutely. But due to the low order intake last year, the turnover and profit will not -- will be pretty weak in Q2 and Q3. But we believe that Q4 will be really good. And we also think that due to the way we have the work in COVID, we think that when we go into next year, we think we can be pretty good on track with our old business plan. That was a very short answer to you, Julius.
Maybe if I can follow up with another question regarding revenues during the quarter. I mean at least on the renovation side, the actual revenues in Q1 came slightly below what I had expected. And you mentioned the low order intake during the previous quarter being the main reason for that. Was there something else, I mean, timing issues during the quarter or postponement and some projects relating to COVID that may have affected negatively the revenue generation on the renovation segment, especially during Q1?
Yes, actually, immovably. The problem with -- the order take has been the problem one here, but we have been able pretty well with operation. But Norway did some stupid things in Q1. So we could actually not bring people there to build some of the projects. Projects leader were not able to go there. Assembling people were not allowed to go there. It was a mess in Q1 in Norway due to the -- I would say, how you could move through the border.
Yes, when they closed the border.
yes. But that's, now, no problem.
All right. Good. That clarifies. Maybe my last question relating to the raw material situation. We are seeing globally a quite swift price increases in some input materials, how are you seeing the development? And then how do you perceive your possibility to pass this cost on to your end customers?
You can say like this, we have increased prices twice this year so far, and we are really on the correct side when we look at the calculation of the material prices. So the customer will -- they will pay, absolutely. You should know that we have actually decreased the cost to the customer with an average 20% for the end consumers with our lifetime of the product, and we are financing. But of course, the investment cost will go up for them pretty much. As we see that we have -- we get material, we book materials, we have no problem with suppliers, we don't believe that it will leave me a problem during the year, actually. But the actions regarding price increases, we have done. All offers, no problem. Orders without building permission, there, they can also do index changes. But it's -- but if we have started the building, we cannot increase the prices, of course. So it will affect us some, but not so much.
And normally, the material part of cost is slightly 20% to 25%. So of course, it will have some effect, but not very much.
Our next question comes from the line of Kenneth Toll at Carnegie.
So first, on RK Teknik. From their perspective, what can you add to their business to improve their business? Why are you a better owner, so to speak?
We believe that we can increase this company with a lot more than our financial growth, and due to this is that they are only in Sweden today. They are a good complement to other countries. And it's also like this that when we -- if you look at all customers in Sweden, we should be able to deliver all product segments to all our customers. You can say like this -- and this means that we will help them to sell. So the sales organization in Balco, TBO, we also sell their product. And the same sort of organization outside Sweden, they also sell their product. What you should note is that this is a concrete plate. We have an integrated system with other patents. We have the TBO system. This is another system that is, in some cases, really, really unique. They can actually make balcony made up this 11 meters wide. We can't do that in other situation. This is also a good complement in some countries when it's opened balcony. So you could say like these, people who know this factory, the factory size is as big as the factory in Sweden and Poland together. And actually, yesterday, we took an investment decision to invest in this factory so that we can increase the capacity in the balcony plate production with 100%. And this is needed to be done very quick. So I would say that the TBO acquisition, that was a smash hit. This is even better. And also -- so yes, those kind of acquisition, that's really, I would say, perfect for Balco and for them, of course. And also, they have a good competence. They have a good organization. And also, the City balconies, we are now the first one -- we were the first one offering monthly cost of City balconies in Denmark. Now this month, we are the first one offering City balconies with all financing in Sweden. So this, I'm really happy of this acquisition. They still have sort of acquisition. Perfect. This acquisition, really good and it strengthen them and Balco a lot.
Then you said also in the beginning that you target 1 to 3 acquisitions per year. So do you think you have the capacity to make the third acquisition this year?
Yes, yes. We believe that we will be 1 to 3 acquisitions this year and the coming years. We are taking decision how -- regarding our strategy in the balcony segment, and we are the biggest one in the renovation segment. And we will really take a full grip of the balcony segment in the Nordic countries.
Okay. And then you talked in the report and also now quite a lot about the Nordic countries and that's where you have most of your activities, of course. But is there anything happening in markets outside of the Nordics, like the Netherlands or Germany? Or...
Yes. Good that you mentioned that. Thank you, Kenneth. Finland, Holland, Germany and U.K. looks really promising, order intake wise. And what is interesting also is that, Holland and Germany, that's the country that is all actually educating us with the financing, with ESG, the sustainability. So the things that is happening in Holland and Germany -- and also Germany now, that I think will happen also in the Nordic countries. So you can say that in Holland and Germany, the projects we are running there, we help the customer with the balcony. They have a problem with the balcony. But pretty much of the projects is more that help. And with the balcony and with, I want to say, energy analysis and...
And then that's the good we can get from energy savings.
Actually, Kenneth, you know about the tax amendment and the money floating there, that is actually what we see in Holland and Germany. So everything regarding renovation solved the problem, all building and energy saving. Energy saving is the key in many segments, and we see that they are pushing in money to actually solve all buildings. So actually, we are pretty optimistic about the -- very optimistic about the future, but we have had 12 months with a weak order intake.
That's good. And then you can take those, what you learn in Germany and Holland, you can apply it to Nordics and sort of be ahead of competitors here, I guess?
Yes, we have, we have. Yes, yes. With the financing, the way we're working. We have actually in Sweden today, we have a company that is working in this way to help the customer with the balcony, to help them with the energy-efficient solutions regarding the building. This is a trend. You know the big, big product we did run in -- sold in Poland. That's actually, you can say, renovated building and solve the energy problem they have.
That's great. And on the cruise ship side, is there anything to report there? Is it business as usual? Or...
It's running very well, and we are earning pretty much money that's there. It's a strong, stable segment with high profitability. And one of our customers, they have actually, soon, a new ship, new cruise ship that we will offer. So it's not stoned going forward. And I think that there are so many cruise ships that has been understanding still with high corrosion. So they probably have to buy a lot of new ones.
[Operator Instructions] There seems to be no further questions on the line. So I hand back to our speakers for the closing comments.
Okay. Excellent. Thank you, everyone. Have a wonderful day.
Thank you.