Teqnion (TEQ) Q3 2024 earnings summary

Executive summary

• Margins and profits declined due to underperforming subsidiaries, especially in Sweden's weak industrial market, while UK operations and some foreign subsidiaries contributed a significant share of profits.

• Net sales increased 12% year-over-year to SEK 381.8m, but organic growth was only 2%.

• Management is intensifying efforts to support struggling subsidiaries, improve profitability, and focus on operational improvements and cost control.

• Two acquisitions completed in Q3: Avelair Ltd and UK Lanyard Makers Ltd, with integration ongoing.

• Diversification outside Sweden and expansion in the UK are strategic priorities.

Financial highlights

• EBITDA/EBITA margin decreased from 11.7% to 10.9% year-over-year, with profit for the quarter down 8% and EPS down 10% to SEK 1.59.

• Net sales: SEK 381.8m in Q3 2024 (+12% year-over-year); YTD SEK 1,163.3m (+8%).

• Net debt to EBITDA increased from 0.5 to 1.2, remaining well below the 2.5 target.

• Free cash flow before acquisitions is lower than last year, impacted by higher inventory, receivables, and interest expenses.

• External costs rose 47% year-over-year, driven by increased travel and marketing expenses.

Outlook and guidance

• Management remains confident in long-term value creation, focusing on acquiring resilient, high-ROIC companies and operational improvements.

• The acquisition pipeline is strong, with continued expansion in the UK and plans to enter other Nordic countries.

• No plans to acquire more house builders or highly cyclical businesses.

• No forecasts or annual targets are provided; long-term ambition is to double EPS every five years.

• Emphasis on cost control and active sales to navigate the recession.