Lagercrantz Group AB (publ) (LAGRB) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the Lagercrantz presentation of our year-end report. Me speaking is Jörgen Wigh, the CEO of the Group. And together with me here, I have our CFO as well, Peter Thysell. We're gathered here in the Stockholm office. It's a beautiful morning and it was great to also release our numbers here. So we will go over the presentation. As always, we have our presentation on our website so you can download it there if you'd like to watch. I will try to keep up where on what page we're covering along the way. But please download it from www.lagercrantz.com is our website. And there, it's been uploaded here since 30 minutes ago or so. So -- and we will cover the presentation. It usually takes around 40, 45 minutes or so. And we will go over it in 3 steps, really. First of all, we will give you all that are new to the group a little bit of an introduction. And after that, we will jump right into the year-end report. And after that, we will talk a little bit on what the key aspects of what is happening and how we see the future as well to some extent. You can -- we will gather our Q&A at the end of the session. But if you feel like you just have to sort of would like to jump in and you can also do so. [Operator Instructions] And then you can jump in and have -- if you have a question that you urgently want to ask at that specific time. Otherwise, we will gather that in the end of the session -- towards the end of the session. So we will -- mute everyone now. And we will jump right into Slide #2, which is an introduction to Lagercrantz Group and an overview. As you know, we are a Tech Group and we would like very much work in creating and building leading positions in niches. So we are some 65 companies in the Group currently. And that -- and we're expanding both organically and through M&A with some 5 to 8 companies per year that we acquired. The total revenues of the Group is some SEK 5.5 billion and we have close to 2,000 employees currently in the Group. You can see here to the right there, where we have our different companies. We are -- we have our headquarters in Stockholm, but otherwise, we are in the Nordics and in Northern Europe, and are building footholds also in other parts of the world with China, India and the U.S. as well. We work very decentralized in our Group, meaning that all companies are working under their own name, under their own brand name, addressing their specific niche, their specific market, their specific customers. And we would like -- and we would -- we are then try to be a good owner of these companies, building them for the future and challenging the local management, but it's driven through the local management of the different profit centers that we have throughout these geographies that we talked about. We have been on the Stockholm Stock Exchange since 2001. But now here also since the beginning of January here, this year, we are on the Large Cap as well. So we have been growing from Small Cap to Mid Cap to Large Cap throughout the years. Looking at Page #3, we are very proud to show that we have another good quarter behind us here, a very strong quarter. And you can see also that both the organic growth and the profits have picked up here in the last year or so from a trend that we had, it was upwards already long before that. And we had a very good steady growth of some 15% per year, but it's been much higher here in the last year or so due to very strong demand but also some recovery from the -- after the pandemic and now lately also with some really good acquisitions that we brought to the group as well. Some slightly bigger acquisitions we made in the last year is also adding to the numbers in a very good way here. But what is really, I think, above expectations is our very strong organic growth we had here in the last year or so. We have been driving our margins quite a lot earlier on and that has also hampered our top line growth. But since now a couple of years back, we have really been addressing the organic growth and have been successful in that here in the last [ for ] 6 quarters or so. So that's good to see on Page #3. Looking at the quarter, I mean the Q4 was a very strong -- we felt that the strong underlying demand was good in most markets, especially in the markets we're in then with the Nordics and Northern Europe. So it's very much of a broad-based improvement that we see from many parts of the Group. And we had some strong -- the revenue was then up 41% in Q4. And the organic part of that was 20%. So 20% organic growth. We are -- have been used to sort of a little bit better than inflation maybe, but not to the 20%. So this is a very strong number and the highest we've seen here for many, many years. So that's really great to see that all the work that we put in has had effect -- had an effect when it comes to sort of driving growth ambitions in our different subsidiaries and setting higher ambitions and getting the companies to grow. And then, of course, also a good underlying demand has helped us and also -- yes, good improvements also from restructuring when we made, especially within the division, International, a couple of years back has also paid off very well here along the way. And then we added some 17% through acquisitions and for -- and the currency exchange rates also improved the top line a little bit with 4%. What we also have, as a comment here is that the very proactive management we've seen with price adjustments in many of our companies. It is -- has been a tough quarter since so many of our raw material prices has gone up and we see struggling with lead times, struggling with getting supplies from suppliers, especially from Asia. And those shortages I think we've dealt with very well in our companies. We still have some dealing to do with that and still are struggling with that. But all in all, I think we have been very good in our local companies to address these issues and find other routes and a lot of creativity in order to compensate for that. However, we have had a need for an increased safety stock along the way as we will see. So I think that the cash flows was quite okay, but still some buildup of safety stocks and also some customer credits also built up in the quarter here, a little bit more than normally really, but still very strong cash flows, I would say. What we see ahead is, of course, I think we are concluding a very strong quarter and we feel that things are still continuing in a very good way. But of course, we're also very sort of looking into what's happening in the geopolitical turbulence that we see in Europe and the new wave of COVID-19 in Asia will probably also have some effect to what we're doing. And it's very difficult at present to really say what that will happen -- what that will have for effect for us. But still up until now, it's been a very strong underlying demand still and that has continued here also for the last period here, really. Looking a little bit more into the numbers for the fiscal year. As you all know by now, is that we're ending our fiscal year, end of March. So we are talking about our Q4 here, our fiscal year Q4, which is then January through March 2022, then -- and then the full year, which is ending in March then. And during the full 12 months, the net revenues then increased by 34%, up to the SEK 5.5 billion really from SEK 4.1 billion the year before. And organic revenue growth for the full 12 months was down, 16%, as opposed to the 20% we had here in the last quarter. The EBITA increased by 45% to SEK 895 million. And we've also released a number here, that organic EBITA growth was 29% and acquisitions stood for 14% in that number. And the EBITA margin was down, 16.3%, as opposed to the 15.1%. So the EBITA growth was very much coming from organically, which I think is great to see now that we have been pushing organic growth and it's paying off in a very good sense and that's also good to see. Profit after financial items grew by 48% and as those of you who have been with us, I mean we were at the SEK 502 million a year ago and then we launched the "Lagercrantz towards One billion" program and we said that we would reach the SEK 1 billion in 5 years. And now we had an excellent first year with SEK 741 million then, so we basically went halfway or so in the first year, which we feel, yes, it's been a very good achievement for the year we have behind us. We -- during the year, we concluded 7 acquisitions. And they bring some SEK 665 million in sales, some 18%. I think we have a target of some 10% on a normal year. So 18% is a very strong number for us. And it's 7 acquisitions and there are some of them that are slightly bigger. I will come back to them, but they are listed there as well. It's the CW Lundberg, Libra, AC Antennas, Geonor, GM Scientific, Westmatic and ARAS Security that -- especially CW Lundberg, Libra and Westmatic are a bit more sizable than the others and that is adding very good volumes and profits to the group as well. All in all, we had some profit after tax, which increased to the SEK 572 million then and the earnings per share increased by 47% to SEK 2.80 as opposed to the SEK 1.91 for last previous fiscal year. So a strong earnings per share growth. And that is maybe the most key metric for us. So we would like to sort of, yes, drive that as a key thing for us, more -- yes, more than just growing volume or sort of raising capital and things like that. We are more into driving earnings per share here with how we're driving things and generate our own cash flows along the way. That is sort of more the more normal thing what we're doing. The return on equity was at 28%. That is for the fiscal year an all-time high. The previous quarter, we had 29% so it's -- but it's still on a very good level at 28% and an all-time high for a fiscal year as opposed to 22%. The target for the group is 25%, to be seen over a business cycle. And the 28%, we're very proud of at the moment. The equity ratio was at 36% as opposed to the 40%. The larger acquisitions has affected this number. But still, it's on a very good level and we still have a lot of power, really, to make more acquisitions along the way. And last but not least, the Board of Directors yesterday decided to propose an increased dividend to SEK 1.30 as opposed to the SEK 1 last year per share, so 30% up in terms of dividends as well. Also, we feel is an important change from the way we drive the business. Looking then at Page #6, we look at the Q4 numbers. And you could see here that the trend is somewhat stronger in Q4 than the rest of the fiscal year. So we've had a very strong demand. We've also been managing to get some volumes invoiced during the quarter that has been in the backlog previously and that was also good to see here in February and March that, that happened as well. So net revenues was up then by 41% and the organic growth was 20% and the EBITA was up 38% and a very good EBITA margin. I mean the -- it's slightly lower than last year, yes, but still the mix and the currencies and all things sort of moving around quite a lot means that 16.8% is a very strong number as well. Sorry. Take a break there. Good. And the profit after financial items increased by 29% then and cash flow from operations was also strong in the last quarter. And as said already, we moved -- the share was moved from -- to the Large Cap as of January. Peter, maybe you could comment on the -- a little bit on the next one here, the outcome by division?

Of course, happy to do so. So as Jörgen mentioned previously, the improvement has been rather broad-based on both growth, but also on profitability improvement. So as you can see on the bottom, EBITA margins. The Electrify division has improved to 17.1%. Control division, won the rate for the year with 21.7% and TecSec has 19.1% and Niche Products and International, but Niche Products came from very, very high levels and were -- for some companies affected by the supply chain challenges. So a little bit lower margins in Q4. And International, some of the same. But on a Group level, we're about the same level as last year, which we are quite happy with.

Yes. We've had a number of quarters now with the 16%, 17% EBITA margins. And it was good to see now that all 5 divisions increased their EBITA as opposed to last year and have -- we saw some good growth in all parts of the business. And that's a very strong sort of indication that it's very broad-based, the demand and the improvement that we see all along -- all across the board really among our different businesses. We have some comments on Page 8 as well with the Electrify. Yes, the Electrify had a very good quarter, generally speaking. The electrification of the society is benefiting several of the companies. And we also saw some really good performance on Cue Dee. For those of you that have been with us for a long period of time, Cue Dee has had quite a lot of project-related business. And to some extent, that's still true, but it's also more broad-based now. They're working more with sort of the general -- sort of the transformation into the 5G infrastructure and that is one key thing driving their margins. So they're driving their business. And that's, especially here in the Nordics and Europe, where they are invoicing at the moment and that is more broad-based than the more project-related business they used to have. I also believe that within Electrify, we have a number of businesses here that are more sort of dependent up on metals, have metals as a key material that they use. And here, we've really worked with increasing prices in order to compensate since things have been moving so much. And that, I think they've been a tremendously good job being done around that in the Electrify division. Within the Control division, the EBITA increased by 37% and we see -- saw some significant improvements all across the board really from many profit centers. And it's also important to highlight that the Radonova business had a very strong season this year. They have a seasonality that is skewed towards the winter. And therefore, the Q3 -- our Q3 and Q4 are normally their strongest quarter and that was also true this year. So Radonova concluded a very strong year here. That is also affecting the margins and the numbers for the Control division. You see more of a seasonality there in that -- in those numbers. The TecSec division also had a very strong -- they increased their EBITA by 118%. And that was driven both organically through the R-Con, ISG Nordic, Idesco and Frictape businesses that reported a very strong organic growth. But then on top of that, we also concluded here in April last year, the CW Lundberg business that came into the Group and that, they have performed very well along the way. And here since January, we also have the ARAS Security business, which is also adding to the good -- very good performance from the TecSec division. Moving to Page 9. I have a few comments on Niche Products as well. Niche Products increased their EBITA by 36% and the margin was 18.3%. Here, we see improvements in demand and earnings across most businesses, especially Wapro and Dorotea Mekaniska, Kondator and PST stood for very strong improvements and good organic growth. Tormek, which is maybe the most important part of Niche Products, and the second biggest company within the total Lagercrantz, continued to perform very well. And a few others, ASEPT, did a good recovery as well. The Westmatic business, which was acquired in January, also had a very strong quarter adding to the numbers for Niche Products during the quarter. Last but not least, is the International division. They increased their EBITA by 24% and a strong development for many businesses and the majority, especially ACTE in Denmark, Norway and Sweden, the sort of -- our old legacy business, has managed component shortages very well. And also the acquisition of Libra and AC Antennas continued to perform well. Those were acquisitions done last summer, the Libra and the AC Antennas here in, I think it was August or so, that have came into the group in a very good way. So very good performance, I would say, across the board here. We still have a few companies to work with, but across the board, it's been a very strong quarter and a strong year that we're leaving behind us. So looking a little bit ahead, I think it's important to remind everyone around the "Lagercrantz towards One billion", I'm on Page 10 then. That was the program that we put together a year back, we put together that program and launched that platform where we would like to raise the bar a little bit, making sure that we grow in a nice and healthy way and reaching new heights with the Group. And the key themes in that program was that we would like to clarify the strategies and the financial goals. We would like to reorganize into 5 divisions with some clear growth ambitions in the different areas and segments where we're working. And we would like to increase the capacity within M&A as well and we would like to focus on sustainability and work a lot more with that than we have done, even though we have been doing that for a number of years already. But to push that even further here going forward was an important part of the "Lagercrantz toward One billion" program. And I have a few comments around that. Well, to start with, I think it's important to highlight that we -- on Page 11, you can see the financial goals that we're working with. I mean we would like to build a very strong portfolio companies all working in niches in B2B tech. And that is something that we are really sort of focused on doing. We don't move out of that scope. We would like to stay where we are in that aspect, but we are growing geographically instead. So can see also from the numbers that we have some increases in our export sales more than in general as well when you look at the numbers. We would, through this sort of program, continue our strong annual growth of some 15% plus per year and stated here as well that at least 1/3 of that should come organically and the rest through some 5 to 8 acquisitions per year. The return on equity should prove that we are very profitable, generating our own cash in order to mainly at least finance our acquisitions and that has been the 25% you can see there as well. These sort of financial targets have been with us for many, many years. And we have outperformed them over a long period of time as well and that is also very good to see, that we have some good ambitions and we are achieving them or overachieving them as well as in this last fiscal year. Looking at Page 12, we have the reorganization into the 5 divisions. I've been talking quite a lot around this and I won't dig very deep here. But it's important to understand that we are now addressing some markets that we feel are -- have better structural growth and we are sort of putting our focus to areas where we see good growth and good sustainability aspects of the sort of what's happening in the market as well. So the electrification is really covered through our Electrify division. The Control is control -- and measure and control, different types of things, which is also a very strong trend in society. The TecSec and the Niche Products and the International, you can also see there what the focuses are. But strong underlying growth areas is what we're looking for. And you could also see from our numbers that, that has picked up quite nicely here in the -- already in the first year. I think it's also sort of important for you guys to understand that looking at the organic growth part has been very important to us. I'm looking now at Page #13. I think it is important to understand that we have a very strong program for what we would like to do with the companies that we acquire. So we are working quite a lot with business plans. We are working quite a lot with making corrective actions, driving it through our Board work in our different subsidiaries. We are working with an MD conference where we meet all the MDs once a year and have been putting strong focus on growth there for the last few years. I think it's also very important to understand that we have our BIM program, which stands for business improvement modules, meaning that we can address some specific aspect of a company or driving a company. It might be sales work, it might be digitization, it might be exports, where we gather people that are interested in driving those things in their specific subsidiary and we try to highlight that and sort of push that when we work with sort of developing each of the subsidiaries that we have. This -- all these programs we've had for quite some years now. And I won't sort of go over them all, but it's important to understand that we have a well-thought-through program around this. And the stock turns is something that we are revitalizing right now since we feel that the stock has picked up somewhat. And therefore, we are pushing there a little bit harder with our companies right now. We are also pushing since a couple of years, the digitalization and also pricing as well. So it's a constant sort of strive for improvements in what we do with our businesses. And in order to see that, we also -- I also brought in the Page #14 here, which is the measure, compare and challenge. For those of you that have been with us, I mean we are also keen on doing some quite strong benchmarking between our companies. So we basically have our internal league of what's sort of how we rank the companies from the best to the worst. And here is that, the measure of return on sales. And if you have a return on sales of more than 10%, then we would like the company to focus on growth, maintaining profitability, while we are -- when we're moving further down, when we have lower return on sales, then we would like them to focus on profitability. And in order to highlight where we have our companies, I've also added the numbers over to the right there. Where we have above 20%, we have some 14 companies that are up there. We have, between 15% to 20%, we have 14 as well. And the 10% to 15%, it's 17. So you can see that we have -- I've had this slide a couple of previous presentations and it's good to see that, especially the 10% to 15%, has picked up quite nicely, with a lot more units up there. And it's been moving up all along. And I think in the last one that I -- a few years back I looked at, less than 5 -- 3% was some 7 or 8 units, while now we're down to 3 units. So you can see that it's -- our improvement is broad-based. You can see that we are pushing and that we are sort of improving the businesses along the way. And also, of course, also sort of downsizing or sort of closing even units that are not performing in the right direction here or might divest them as well. But it's good to see that we have a nice healthy portfolio of companies within the Group here that I hope that you can see that what I'm suggesting here with the Slide #14. The key thing for us has also been the aim for more of proprietary products. And we have that on Page 15. We have been monitoring and following that. And it's good to see that it picked up quite nicely here in the last year from the 65% to the 70%. And the aim for us is the 75%. We see that proprietary products brings us -- they work with higher gross margins. They work with higher net margins and they also are better at finding new customers abroad. So exports are more viable -- a more viable opportunity for companies that have a very -- their own products. And therefore, we have set as a strategic ambition to aim for more proprietary products. And since a few years back now, some 5 or 6 years back, as we were aiming for the 75% proprietary products and we're basically approaching that goal. And good to see that we moved here in the last year from 65% to 70%. So that's good as well. Last but not least is the acquisitions. Here we are at Page #16. And acquisitions, I mean that is a clear sort of strategic aim for us with having M&A resources and working with M&A. We would like to be very selective, though, so when we feel that the prices are not fully right, or we feel that the company is not sort of fully up to the standards or have the quality that we would like, so we try to be very selective as well. But we have a clear ambition of growing some 5 to 8 companies per year. And you can see here over to the right that since 2006, we've concluded some 62 acquisitions. And in the last -- here in the quarter, there was 2 of them, Westmatic and ARAS, as you can see there in 2022. And in the last fiscal year, it was 7 all in all. What we've done with acquisitions is also that we have pushed -- increased the push for doing this on a divisional level. So when building the new divisions, we have some increased resources there as well. So we will basically be able to run more acquisition processes simultaneously as we grow. So we have just put feet on the ground in the U.K. as well. So we will look into that market. We will look into Germany as well. And we have, as you can see here, also been more active in other parts of the Nordics. We used to be very Swedish, if we will look 10, 15 years back. But along the way, we have been more and more international, doing acquisitions in Finland, in Denmark, in Norway, in the Baltics, in Germany and in the U.K. as well and also in the -- yes, in Belgium and Holland as well. So it's great to see that the acquisitions are evolving in a very sort of sensible way, I would say, doing acquisitions with a strong focus and being very selective in what we do. Looking at Page #17, I'd also like to introduce the newcomers as well. We have the Westmatic business, which came in here by the end of sort of in the beginning of January. And that is a Swedish company with -- based in Arvika, in Varmland in Sweden, but they also have a production facility in Buffalo in Upstate New York in the U.S. And they are coming in very nicely. They are making environmentally-friendly automated washing systems for heavy-duty vehicles like buses, trains, trucks and construction equipment. And the way we work with sort of reusing water and taking care of things around an environmentally-friendly way of washing, that is something that we have been developing in Sweden for many years. And that is an export opportunity into other markets around the world that Westmatic is sort of working with. And they have set up feet on the ground also in Australia and in other parts of the world as well. So they're Sweden and in the U.S. at present, but also setting up some businesses since a year or so in Australia as well. Very promising and came in very nicely here in the first quarter of their journey together with us here at Lagercrantz within the Group. The other company I would like to introduce is the ARAS Security on Page 18. That is a Danish security company and system developer specializing in combined alarm and access control systems, with their own platform. And as you can see down to the right there, you can see very strong numbers over a number of years. And we have these type of businesses in Sweden as well with the ISG Nordic company that we already have. And the thinking here is that they will continue as separate companies, of course, but they will exchange some ideas and exchange some customers and exchange and work together on the 2 different markets in order to grow both businesses. So that's an ambition we have there. So a very strong, I think, an important acquisitions for the TecSec division. The Westmatic is within the Niche Products division, forgot to say. So to round off, I have my -- we have our financial overview here on Page 19. It's great to see that we concluded another very strong year. The net sales, as you can see, surpassed SEK 5 billion or almost SEK 5.5 billion, as you can see there. And you can see the EBITA margin picking up nicely every year. And you can see the EBT growth that -- where we have the clear goal of 15% per year. We have been there for quite many years of these, not all. We've had some hiccups a couple of years. But otherwise, we have been at the 15%. And here in the last year, it was 48%. So we concluded a very, very strong year here in the -- the best year ever really in the 2021 -- 21/22. You can also see the return on equity is at an all-time high at the 28%. And you can see the earnings per share and the earnings per share growth along the way, which we feel is also a very important metric for us to work with. So yes, thank you for that. And let's open up for questions. [Operator Instructions]

I can start here. Jörgen and Peter, it's Victor Hansen from Nordea Equity Research. So firstly, on input prices, we've seen quite volatile metal prices here in the last few months. And I'm wondering, do you see a risk here that your price hikes haven't been high enough or quick enough to fully mitigate it in the short term? And I think you mentioned in the report that it wasn't actually fully compensated in Q4. So what to think here in the very short term ahead?

It's a bit tricky to answer because things are very, very volatile and it's going both up and down, really. We've seen, for instance, the copper prices has been -- went down here a couple of weeks back. So it's also -- so it's not only up, but it's also, to some extent, down. The aluminum prices are also important to us and the steel prices are important to us. What we see, for instance, in Elpress, which is one of the key companies, is that they have been pushing quite a lot. And I think they have -- are fully compensated or almost. We are talking some sort of parts of a percentage point or so that we're talking in margins all in all. You can see that it's -- but the mix effect is usually much bigger than the price effect. So I think we have been compensating. Then we also have the sort of aspect of when prices are taking effect. So for instance, when you work with wholesalers, for instance, they have sort of price tariffs that allows us to change prices once every 6 months or so. But that is also changing now. So they're increasing their sort of how often they do it. They're moving from once every 6 months, then we see, 3 months. And on some other areas, there's also some day-to-day prices. So it is a very volatile market. But I think to the very most extent or if not fully, I -- yes, almost fully, I would say they have been compensating.

Yes. Understood. Then on M&A, yes, of course, I understand that it can be a bit lumpy, but I'm still wondering, is there any particular reason behind the lack of acquisitions since January?

Well, the simple answer is no. There is no particular reason. We try to be selective and we've had -- we run a number of acquisition processes and we are, at present, running a number of acquisition processes and it will happen. We concluded 2 here in the beginning of the quarter. We have been quite active here during last year and also sort of using some -- yes, I mean our equity ratio has gone from 40% to 36%, right? So it's also about finding the right things and being selective and that's what we have been doing. But the simple answer is no, we will continue to do acquisitions and we are running a number of processes at present.

SOunds good. And then if you could provide some color on the component side here, perhaps how much of your sourcing would you say comes from China, which is hurt by lockdowns as well now? And then perhaps what business areas have the highest sourcing exposure to this region would be very helpful.

It varies quite a lot depending what type of sort of components we're talking about. Many of the metals that we are sort of working with at Elpress or at Elkapsling and also at other, are from China. But they are sometimes also sold through wholesalers and other routes to -- in Europe as well. But it's coming from China to begin with. So that's affecting the market. But in generally speaking and also when we talk about semiconductors and more of electrical -- electronics-type suppliers, then it's more in the International division. So I think the more straightforward and simple answer is it might be more in the Electrify and it might be more in International as well, while the others are more locally sourced. How much is it, all in all? Well, I would assume it's -- yes, 20% or so, 20%, 25% or so is a rough estimate. I don't have the number, really.

Yes. That's helpful. And then finally, very interesting with an update on return on sales here. Could you possibly mention which business areas have the highest share of units below 6% and 10%?

Generally speaking, I think it's the distribution-related type companies have a higher proportion, that they have less CapEx as well. So it's also justified. They still have a good sort of return on capital or return on investment. But in terms of ROS, they are slightly below the average of the Group, while the top performers are usually product companies. And then we have a few that are even above 30%. But generally speaking, I think it's in the International division and where we have more of distribution-related businesses. And we have a couple within Control as well.

So just going back to the price increases. As you say, we are starting to see that some input prices are starting to come down. So I was just wondering how sustainable do you think your price increases are? If the input prices are coming down, do you think you will have to lower your prices again? Or will you be able to keep them?

I think we're all -- I think in an inflational environment, I think most prices will be kept at a quite high level, I would say. But of course, if the raw material prices comes down sustainably. And to a large extent, of course, customers will put pressure on that. I think it's important to understand that I think the pricing power comes from us working in niches and being very specialized in what we're doing. But of course, we also have some competition. I mean it's still so that customers might find alternatives if we don't sort of -- and -- but when the price raises are up, then it's affecting all suppliers, right? So it's -- then the prices go up. And if the prices come down again, well, of course, there will be a price pressure as well. Yes. I think the margins that we have in the Group, I think we at least plan for have them sustainably at a good level, at the very good level that we have them, yes, at least.

Yes, perfect. Perfect. And then, as you say, you have increased inventories that are safety stock. Do you have any feelings if your customers has done that as well, which has supported sales in this quarter or do you know anything about that?

I don't think that there's a dramatic effect around that, no. I think the supply chain has filled up and we have some orders that is also -- but I think the underlying demand has also been good. So I think it will sort of move on from here. It will be some -- still some -- it will be a lot of struggle still. But I think along the way, it will -- we will muddle through this, sort of -- and find a new balance later on, I would say. It's not like I see that will be a dramatic drop. I don't see that happening, really.

It's Adrian here, I'm in from ABG. I just had a few questions from my end. First of all, is it possible for you to give some sort of indication on the split between pricing and volumes in the organic growth for this quarter?

Yes. Working the way we do, I mean we have a lot of mix effects as well. So it's a bit difficult to sort of do that. But from a rough estimate, I think we have concluded that about half of the organic growth of 20%, half of that is probably price.

Okay. And as for the margins in Niche Products and especially International, which were a bit softer for the quarter, can you sort of -- I mean you mentioned supply chain issues, but are there any other reasons behind why this was the case for the quarter?

No, those are the reasons, really. It's -- again, it's a lot of mix. So for instance, we have -- in Germany, we have a very strong performing unit in International. And they had a little bit of a slower quarter this quarter. So that's affecting those numbers, but it's still on a very good level. And Niche Products, Niche Products, they have made some acquisitions a couple of years back. And those we are working with, they're not up to a level when it comes to performance. They are doing some integration work in a couple of units there that is also affecting the numbers within the Niche Products division. While others are doing it greatly, where I would say, the Westmatic came in very nicely. The Tormek continued to do it very well. The Wapro did it very, very well on a total. So it's still on a very good level, but still not all units are really up to speed.

Okay. And the final one from my end, just on the current trading. So far in Q1, would you say that demand has been on par with Q4 levels?

Yes. Yes, it's continued in a good way. We -- I mean we also had in April, we saw some effect from the Easter that we normally do. So that is sort of affecting the numbers a little bit in April. But otherwise, it's been continuing in a good way here during -- since January and onwards.

But of course, we are meeting tougher and tougher comparables. So that you, of course, have to keep in mind as well.

This is Rasmus with Handelsbanken Equity Research. I'm standing in for Anna today. There are a couple of reports in the sector as you might be aware. I was coming back to the question on price. Is this price effect -- is that increasing as we roll forward given the situation during the first -- or the fourth quarter here? Or is it roughly stable, do you think?

I think the turmoil really continues, but it -- and all in all, I think it's on a sort of, generally speaking, at the same level as it was in Q1 -- or sorry -- yes. Yes. Calendar Q1, it's continued throughout the spring here.

Yes, yes. So we'll continue to see sort of price increases to offset the raw materials that we saw during the last quarter taking effect going forward as well, cool. And then the second question, just an observation on your SG&A cost. You've really managed to get them down from a couple of percentage points going back a few years. Is that sustainable? Or is it -- I mean it's a changing mix, of course, of companies, but it's also the fact that a lot of SG&A was sort of held back during the pandemic. To what extent do you think that the kind of levels we see now are sustainable going forward?

I think they will -- to some small extent, I think they will pick up. I think the traveling and sort of visiting fairs and doing a lot of outdoor sales work, that has been limited also during this -- it's been affected also during this quarter. The pandemic in January and February, I mean people were sick and people were not out to customers at that point. But now it's picking up. So I think we will see some effect on the SG&A that is -- but not dramatically, I don't think either, I would say.

[ Marcus ] of Hansabank here. A couple of questions left. First one is just on the receivables, you see a pretty big pickup in the quarter from last quarter. I just wanted to check that, that is just temporary, there's nothing strange there. That's my first question.

No. It's -- we've had a good invoicing and that is affecting that number. And especially in February and March, it was a strong invoicing and that's affecting that number. But it's nothing strange, no.

Okay. Perfect. Then continuing on the pricing, but a bit different question. Are you -- I would assume that at some point in time, as prices keep coming up, you will have an impact on demand as well. So just curious to hear whether you are discussing with new customers, are we still not at that level? Or are you starting to see some hesitation in discussions, et cetera, because price levels are coming up?

I wouldn't -- I don't hear very much about that at present, and I haven't during the spring, really. But I think it's inevitable that when we see consumers pushing back towards and becoming more price sensitive, that is affecting the suppliers or those making consumer goods. And that will have an effect also on business-to-business in a later stage. So it's -- I think it's inevitable that you'll get there at some point, but we're not there yet, no.

Okay. Okay. Yes, I had another question...

And I think it's also important to understand -- I mean it's -- the sort of -- the price raises are quite significant. I mean we're talking 15%, 20%, 30% -- 30%, 40% even sometimes. And that's -- and when you do that once, it might work, but when you do it twice, you get much more resistance, right?

Yes, yes. Okay. And then my follow-up question is just on the M&A. Just curious to hear that. You listed on one of the slides that you are increasing the M&A capabilities. Is -- are you increasing that further from where we stand now? Or is this tied to the Lagercrantz one billion strategy that you -- or target that you launched a year ago?

Yes, it is -- it was launched a year ago. Now we have -- yes, we have made some changes and are working with it in a different way. We are increasing our resources somewhat, but most of the people have now been hired and most of the changes have been done. And that means that we are sort of, yes, working in a new way and that we're approaching sort of where we would like to be. We've put some feet on the ground in the U.K. here lately and then that -- that was the one key aspect of it. But other than that, it's been -- we have been building resources in the divisions a little bit and to do more acquisitions and to get them sort of warmed up and that's where we are at the moment.

But you have a [indiscernible] team now and that's kind of -- this is something that has been gradually going on throughout the year. So we should expect in terms of feet on the ground, we've seen kind of a gradual ramp-up. And as you say, I mean you have a bigger capability now in terms of man-hours working on the ground that you had 3 and 6 months ago?

Yes, that's true.

Fredrik Nilsson from Redeye here. One question about the return on sales graph. I mean despite the very strong numbers on the Group level, you still have about 10% of the units that are performing on a quite low level on margins. I mean are there any initiatives going on? Or what's the reason behind that?

Well, the 10 units, they have never been that few. So it's -- we are gradually moving in the right direction. But of course, there are things going on. We have some restructuring program going in 2 or 3 of the units and we have one that is -- yes, we took some extraordinary write-offs as well on -- in one of the companies. So that's also in order to change the direction of the company, moving from one type of player in the market to another type of player, change in strategy really. So definitely, we are working on all of the companies and especially those that are not performing up to standards.

Okay. And also on M&A, have you seen any changes in the multiples of the companies that you're looking at and perhaps a slight decrease in competition, considering the tougher market conditions in a listed environment, at least?

Yes. To some extent, I think that's been gradually happening for a couple of years now, that we see some -- since money have been very cheap and interest rates have been very low. Of course, there are some increased competition along the way and that's also to some extent driving the margins -- multiples. But we are not talking significant, I don't think. It's maybe moving from 5 to 6 or 6 to 7 or 7 to 8. That is where basically where we -- EBIT margins -- multiples. That's usually where we sort of work.

Okay. Okay. But you haven't seen any trend shift recently considering the more tough environment with rising interest rates, for example, that might reduce the competition somewhat compared to earlier?

I think that might happen later on. But up until now, I haven't seen that, no. I think we're all getting accustomed to a new environment when it comes to interest rates and inflation rates. So I think it will take some time before you see that in multiples really. Someone else? Some final question? Someone more to ask questions? Okay. Good. Well, let's round off then. Peter and I are available here for some one-to-ones over the phone, if you like. So give us a call. You know where to find this. And I think that our phone number is on the web page and you can call us if you would like to have some additional questions put to us. But other than that, thank you very much for listening in and looking forward to hearing -- talking to you soon again. Thank you. Bye-bye.