CEO comments from the first quarter 2017

Dear Shareholders,

 

The first quarter was characterized by a good acquisition pace and preparations for listing our common stock.

 

During the first quarter, we have maintained a continued good acquisition pace and acquired a wastewater treatment company that is a new niche for us. We also signed an agreement to acquire an elevator company in Austria, which is a new geographic market. In addition, we signed a letter of intent for additional acquisition and have ten ongoing bid discussions with niche companies focusing on urban infrastructures.

We have also allocated extensive time and resources to prepare for the planned listing of ordinary shares of Series B on Nasdaq First North Premier and a current new issue of approximately SEK 500 million. Hereby, we create opportunities for maintaining a high growth rate and for establishing solid financial conditions to continue creating value for all our shareholders through acquiring and developing companies focusing on urban infrastructure.

 

THE QUARTER IN BRIEF

During the first quarter of the year, net sales increased by 109 percent to SEK 237.2 million and EBITA increased by 341 percent to SEK 27.8 million. The Group’s run rate for net sales on a full-year basis is currently SEK 944 million and the corresponding EBITA figure is SEK 150 million. Including the acquisition in Austria, which we expect to finalize before the end of the second quarter, the run-rate would increase to approximately SEK 1,015 million and the EBITA to SEK 157 million.

 

The first quarter is seasonally a weaker period for us since many of our customers are focused on procurement at the beginning of the first quarter, with the year starting with lower delivery intensity and thus lower revenues and operating margins. However, the activity in the first quarter has been in line with expectations and we assess the order levels for the year to be normal.

 

ACQUISITIONS

The Group acquired a company in Stockholm operating within waste water treatment and signed an agreement to acquire two companies in Austria.

 

New niche in wastewater treatment

With the acquisition of Topas Vatten och Service during the first quarter, we take an important step into the installation and operation of wastewater treatment, which is a central part of growing urban infrastructures.

 

With ST Liftsystems GmbH, which we signed an agreement to acquire during the first quarter, we complement our offering in the elevator industry with a new export product: a compact elevator suitable for renovations where the spaces around the elevator are tight. The product is thereby relevant to many established metropolitan areas with large existing property stocks, including our main market in Stockholm.

 

Several ongoing acquisitions processes

In addition to the agreement to acquire two companies in Austria which will add approximately SEK 7 million to the EBITA run rate, we have signed a letter of intent for an acquisition with an EBITA of approximately SEK 5 million in run-rate. In addition, we are in bid discussions with companies corresponding to a total EBITA of SEK 100-150 million in run rate, which are well in line with our goals. The majority of the acquisition candidates in our short to medium-term pipeline are companies active in the business area Niched products and services.

 

OUTLOOK

We see a continued good outlook to acquire and develop companies within urban infrastructure. Therefore, during the first quarter we spent a lot of time preparing Sdiptech for a new share issue of approximately SEK 500 million and for listing the ordinary shares of Series B on Nasdaq First North Premier.

 

New growth targets

As part of the listing preparations, Sdiptech’s Board has updated the financial targets to better reflect the current operations and future growth opportunities. The new growth target is to grow to SEK 600-800 million EBITA before the end of 2021.

 

The whole organization and, not least, I am inspired by the new financial goals which imply a high growth rate and a stimulating motivational force. Our highly skilled employees have proven their ability to deliver the required growth, and both the acquisition organization and the operational organization are well-positioned for continued growth.

 

Good profitability today and in the future

Our previous target margin of at least 10 percent operating margin has been replaced by an overall growth target of SEK 600-800 million EBITA in 2021. Our current EBITA margin, which comes from an underlying stable business, is approximately 15 percent and we put equally high requirements for the profitability of future acquisitions.

 

Intention to list the ordinary share and raise approximately SEK 500 million in growth capital

Sdiptech has had a strong growth trajectory and ahead of us we see a great opportunity to create additional shareholder value by continuing to acquire and develop companies within urban infrastructure. As recently announced on April 19, we are now planning for a new share issue and for listing the ordinary shares of Series B on the Nasdaq First North Premier. This enables us to maintain a high growth rate and we look forward to welcoming new shareholders who will continue to build Sdiptech together with us for a long time to come.

 

Finally, I would like to thank all our fantastic employees who constantly have a drive to deliver top quality.