Teqnion (TEQ) Q4 2024 earnings summary

Executive summary

• Q4 2024 results were significantly below expectations, marking the weakest quarter since 2020, with profitability declines driven by underperformance in Swedish subsidiaries and macro headwinds, despite stable net sales year-over-year.

• The business model focuses on acquisitions, a strong core portfolio, and turnaround of underperforming subsidiaries, with major restructuring actions including merging manufacturing units, workforce reductions, renegotiated supplier agreements, and new CEOs in struggling companies.

• Management is confident that 2025 will see a record number of high-quality acquisitions, supported by improved processes, a strengthened team, and a robust pipeline, especially in the UK.

• No dividend is proposed for 2024 to prioritize reinvestment and the acquisition pipeline.

• The majority of the portfolio is performing well, particularly in the UK, electrification, and defense sectors, while significant restructuring and leadership changes have been implemented to address struggling subsidiaries.

Financial highlights

• Q4 2024 net sales were SEK 403.7m (+1% YoY), with full-year net sales at SEK 1,567.0m (+6% YoY), but organic sales declined 3%.

• Q4 EBITA was SEK 25.3m (-42% YoY) and EBITA margin 6.3% (vs. 10.8% in Q4 2023); full-year EBITA was SEK 149.7m (-12% YoY) and EBITA margin 9.6% (vs. 11.6% in 2023).

• Q4 EPS was SEK 0.74 (-62% YoY); full-year EPS was SEK 5.58 (-26% YoY).

• Free cash flow conversion declined, with free cash flow (excluding acquisitions) for 2024 at SEK 77.8m (vs. SEK 117.9m in 2023), and leverage increased.

• Two-thirds of the group performed well in 2024, but this is below the target of only 10% needing improvement.

Outlook and guidance

• Management expects 2025 to be a record year for acquisitions, with a focus on balancing Scandinavian and UK divisions and a robust pipeline in place.

• The focus remains on restoring profitability in underperforming subsidiaries, with clear action plans, leadership changes, and ongoing operational improvements, though the timeline for recovery is uncertain.

• If subsidiaries cannot return to profitability in a reasonable timeframe, further decisive actions, including closures, will be taken.

• Financial targets are set on a five-year basis, with confidence in meeting or exceeding them.