Bergman & Beving's Interim Report 1 April

Bergman & Beving's Interim Report 1 April–31 December 2021

Press release

Interim Report 1 April–31 December 2021

Third quarter (1 October–31 December 2021)

Revenue rose by 7 percent to MSEK 1,163 (1,086).
EBITA increased by 24 percent to MSEK 84 (68) and the EBITA margin improved to 7.2 percent (6.3).
Net profit rose by 19 percent to MSEK 51 (43).

Nine months (1 April–31 December 2021)

Revenue rose by 5 percent to MSEK 3,370 (3,196).
EBITA increased by 23 percent to MSEK 243 (198) and the EBITA margin improved to 7.2 percent (6.2).
Net profit rose by 21 percent to MSEK 149 (123).
Earnings per share for the most recent 12-month period increased to SEK 7.15 (5.65) before dilution and SEK 7.10 (5.65) after dilution.
Four acquisitions (Abtech, Albretsen, (3) Screen and Safety Technology) have been carried out, with total annual revenue of approximately MSEK 90.

CEO’S comments

The Group’s positive performance continued during the third quarter of the financial year. We increased our earnings for the eighth consecutive quarter and delivered our highest quarterly earnings to date since the split in 2017. While organic growth in the quarter was low, this is not entirely accurate since the preceding year included non-recurring transactions related to breathing protection and disposable gloves driven by the pandemic. We have also increased our focus on transactions where we offer higher added value and have deliberately assigned a lower priority to lower-margin transactions. This has had a negative impact on our business volume, but a positive impact on the gross margin and earnings. I am proud that we delivered our highest gross margin to date as an independent company and that we have improved our operating margin (rolling 12 month) each quarter.

During the quarter, we faced challenges in the form of global supply disruptions. The challenges that arose have been handled extremely well by our companies and have had only a limited impact on the Group’s overall delivery capacity. Thanks to our decentralised model, with a large share of responsibility and decision-making taken on by the individual companies, we have been able to offset rising costs for freight, raw materials and production. It is gratifying to see that our governance model, with entrepreneur-run companies close to the market, has proven to be capable of handling the situations that have arisen and create the conditions for long-term, profitable growth.

To date in the operating year, we have acquired four companies, including the add-on acquisition of Safety Technology (part of Cresto Group, which is included in the Workplace Safety division), which was carried out in the third quarter. The add-on acquisition of Safety Technology increased Cresto’s presence in the UK and the US, in line with our ambition to grow our internationally competitive companies.

All divisions improved their earnings. The Tools & Consumables division continued its positive performance and increased its earnings by 43 percent, with Luna reporting the strongest improvement in earnings. This increase was enabled through revenue growth combined with a stronger margin, driven by changes in the mix, including increased sales of proprietary brands. The Workplace Safety division increased its profit by 5 percent, despite strong non-recurring sales of breathing protection and disposable gloves via the companies Zekler, Guide and Skydda in the preceding year. Building Materials improved its earnings by 67 percent, mainly as a result of increased revenue and lower costs in ESSVE and KGC.

In addition to the positive earnings trend, there is further improvement potential in all divisions. During the first half of the year, we established a plan to double the Group’s operating profit in the next four to five years. The plan includes clearer decentralisation, an increased focus on profitability, intensified management by objectives and increasing our acquisition rate over time.

After my first eight months at the company, I believe we have the potential to continue boosting our earnings, profitability and cash flow in the coming quarters. As a first step, we have strengthened our decentralised governance model, under which each company is to have strategies and priorities adapted to its individual circumstances, based on each company’s profitability and growth potential. Taken together, this determines the companies’ strategic balance between profitability and earnings growth – a set of priorities refer to internally as “the focus model.” Our management by objectives has been strengthened, and all companies have now established short, medium and long-term operational and financial targets that have been approved and will be followed up by the individual company’s board of directors.

We will continue to implement improvement initiatives through our decentralised governance model, with clear objectives transformed into tangible action plans for each company covering organic growth, improved margins and working capital optimisation, with the aim that all of our companies will achieve the Group’s profitability target. Given the prevailing circumstances, with long delivery times, we have been forced to selectively and temporarily increase our inventory levels to ensure our delivery capacity but are carrying out projects in parallel with this that, over time, will create the necessary conditions to optimise our working capital. I therefore anticipate a relative reduction in working capital over time, which along with increased earnings will improve our profitability and cash flow.

We have also intensified our work related to acquisitions. The aim is to increase our acquisition rate, while also improving our profitability and cash flow. When conducting acquisitions, we prioritise leading product companies with offerings targeting niche needs in construction and industry and proven, strong earnings capacity, stable cash flows and growth potential. We also see continued opportunities to strengthen our existing companies through add-on acquisitions.

With initiated improvement programmes and anticipated favourable demand in our main markets, I look forward to the coming quarters with confidence.

Stockholm, February 2022

Magnus SöderlindPresident & CEO

For further information, please contact:Magnus Söderlind, President & CEO, Tel: +46 10 454 77 00Peter Schön, CFO, Tel: +46 70 339 89 99

This information is information that Bergman & Beving AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 7:45 a.m. CET on 9 February 2022.

Bergman & Beving consists of leading companies with niche products and brands for professional users in manufacturing and construction in northern Europe. The Group consists of about 20 operations in about 20 countries. Bergman & Beving is listed on Nasdaq Stockholm and has about 1,200 employees and generates revenue of approximately SEK 4.5 billion. Read more on the company’s website: www.bergmanbeving.com.

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