Instalco (INSTAL) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales declined 4.6% year-over-year to SEK 3,656 million, with EBITDA/EBITA margin at 7.2%, reflecting a focus on margin over volume in a challenging market.

• Service revenue remained strong, accounting for 33% of Q2 revenue, and a new automation business area, Inmatic/Inmatiq, was launched to expand the technical consulting division.

• Order backlog at period end was SEK 9,058 million, essentially flat year-over-year.

• Cash flow from operations in Q2 was SEK 158 million, impacted by lower EBITDA and increased working capital.

• Positive market signals are emerging, but installation remains a late-cyclical sector with gradual recovery expected.

Financial highlights

• Q2 net sales were SEK 3,656 million, down 4.6% year-over-year; organic sales declined 6.4%, acquired growth was 2.1%.

• EBITDA/EBITA for Q2 was SEK 265 million (margin 7.2%), down from 7.7% last year.

• Cash flow from operations in Q2 was SEK 158 million, with cash conversion improving to 89% (rolling 12 months).

• Dividend of SEK 179 million paid in Q2, in line with 30% payout policy.

• Order backlog at SEK 9,058 million, down 1.4% year-over-year.

Outlook and guidance

• Market remains challenging with high interest rates and inflation, especially in southern Sweden and Stockholm, but gradual improvement is expected.

• Recovery is anticipated to be slow, with no material improvement before the end of 2024.

• Margins are expected to follow historical seasonality, with Q3 typically lower than Q2 and Q4 stronger.

• Long-term demand is expected to rise due to green transition and EU regulations.

• Financial targets include ≥10% average sales growth, 8% EBITA margin, 100% cash conversion, and net debt/EBITDA below 2.5x.