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

Welcome to Lagercrantz Group Q4 Report 2024, '25. [Operator Instructions] Now I will hand the conference over to CEO, Jorgen Wigh; and CFO, Peter Thysell. Please go ahead.

Thank you, and welcome, everyone, to Lagercrantz year-end report for '24, '25. We released our numbers this morning. and we will conduct an ordinary, that we have done, session here for, yes, 45 minutes to an hour-or-so given -- and taking questions at the end. So -- and we usually start with a short introduction, go over to the numbers, what we released this morning, and then talk a little bit of how we see the future and a couple of pointers that we would like for you to have as well along the way. So -- and together with me here is Peter as well, our CFO, right next to me, and we will do this together along the way here. So for those that are new to the group, well, we are -- we usually start with this oversight of the group where we could see that we are viewing ourselves as a tech group with leading position in fancy niches. That's what we're trying to build. We are one of those serial acquirers that are on the stock market, and we work without an exit horizon. So we continuously build our group. We have the Nordic -- Northern Europe as our marketplace where we have most of our companies. But along the way, we have acquired quite a lot of companies with proprietary products that are also along the way doing some exports. And you can see all over to the right here on the slide where we have our hubs all over the world. Our scope is that we are working within B2B tech, mostly hardware, where we find different type of companies that we can add to the group, usually very niche-oriented with -- working in expansion niches, building leading positioning and expansion niches, what we trying to do with our different companies. We have grown over the years. And so we always need to update these numbers. We have now exceeded SEK 9 billion in terms of revenues, and we are 3,100 employees as of the end of March. So we are continuously growing the group, both organically and through acquisitions. We are firm believers in decentralization, working with management by objectives on all of our 80-some -- 80 profit centers in these 5 divisions that you can see here on the top, where you also can see our profit centers or our companies, as we view them here, the number that we have in the different divisions and where we are also present with each of the divisions, you can see up there, the number of countries we're in with each of them. Yes, M&A is a very central part of our business model. We work continuously. We've been making some 8 to 12 acquisitions per year. So that's a really important part, and 2/3 of our growth to come through acquisitions along the way is the ambition that we have. And we have been a part of the Bergman & Beving Group & up until 2001. But since then, we have been separately listed on the Stockholm Stock Exchange currently on the large cap. So that's a brief introduction. I think we were very happy with the last quarter and year-end here, satisfied with reaching a higher growth rate than we had early on -- earlier in the year. And we had posted another good quarter then. And you can see here that we have this trajectory and the graph over where we have been doing all the way since 2005 and '06, and we have continuously been grown since then and have had a higher growth pace here in the last couple of years, 2 to 3 years, and we continued that with also yet another strong year, another strong quarter. It's actually the 15th consecutive year of improved earnings per share that we posted here, and that is, of course, very satisfying to be able to say that. So we've been working hard also this year. We have, along the way, put the ambition that we will grow the business. We set -- when we surpassed the SEK 500 million, we said we will go for SEK 1 billion. And since then, we've surpassed the SEK 1 billion in terms of profits. And now, our ambition is towards the SEK 2 billion, growing with some 15% per year, meaning that we will double our profits every 5 years is sort of the overarching ambition that we have and what we've been doing also for many years. So in words of business conditions, we felt that the market situation continued to be stable and somewhat better during the last -- the fourth quarter compared to the same period the previous year and along the way here. We still saw that demand continued to vary across companies and segments, but we saw, especially in Electrify and Niche Products that had a stronger growth and remaining some weaker customer or order intake primarily from the construction sector that we have in the -- especially in the TecSec division, but also to some extent in the others. And especially in the Control division also has some of that. We saw that order intake for comparative unit was in line with -- or slightly above invoiced sales. So we see -- we've seen a gradual improvement in the order intake and also in the market commissions along the way. Even though it's not moving very fast, it's still in the right direction. Of course, the recent increased geopolitical uncertainty with the trade barriers being introduced is, of course, bringing some uncertainty. But so far, we have not seen any significant impact on our demand, on our -- how we run business. We have some 5% of our group sales is directly into the U.S., and of course, that's a limited number, even though there is much of sort of indirect effects that might happen if that is becoming more of a reality. But so far, it looks like it's -- yes, it's sobering up a little bit on what -- and things are moving along there as well. So hopefully, that will continue in that in a good direction. You can see down to the below here, we also had a stronger proprietary products of 78%. That has gradually been growing. That is a strategic ambition for us, and that we also continue to do here in the last year or so. And we also can see the net revenues by geographic market. We have an ambition to become more international along the way. And you can see that we are bringing new countries and volumes outside the Nordics is gradually growing. And that is, of course, a good sign for the long term for us as well. And then we will move into the numbers, and I will hand over to you, Peter, then.

Thank you, Jorgen. It's my pleasure to go through the numbers, and we had overall a strong end to another successful year for Lagercrantz. In Q4, we saw the net revenues increase by 16%, and we saw most 11% from acquisitions, but an improved organic growth of 5% in the quarter and insignificant currency effects. The EBITA increased by 24%. That is a continuing improvement throughout the year quarter by quarter. The EBITA margin remained at a good level of 17.8%. The 18.1% we had last year was a very high level, so that was a tough comparable. The cash flow from operations was SEK 342 million. And also there, we had a very, very high -- or tough comparable, affected by some unrealized currency effects and unrealized revaluation of earn-outs in both periods. That is very positive numbers in Q4 last year and some negative numbers -- noncash numbers, that is, in Q4 this year. Continuing the profit after financial items increased by 23% to some SEK 368 million, and that we had some help towards the end from some positive currency translation effects in Q4. The profit after tax increased by 28% to SEK 307 million. During the quarter, we completed 4 acquisitions, adding some SEK 370 million in annual net sales. So the acquisition -- or the market for acquisitions is still positive. If we sum up the year, it was another successful year for Lagercrantz where we increased net revenues by 16%. And in the full year, we had a little bit higher contributions from acquisitions, 14%. But as you can see here, the organic growth was 2%. If you remember, in the beginning of the year, we had some 2% or 3% negative in the first quarter and -- but it has gradually improved throughout the year. The EBITA increased by 16%, and the EBITA margin is still on a very, very high -- or good level, the 17.5% compared to 17.6% last year, which was a very good improvement from the year before. Cash flow from operations is still on a good level, similar to last year. And the profit after financial items and after tax increased by 16%. And earnings per share improved to SEK 4.93 per share. The return on equity was 28%. And the equity ratio, similar level as last year at 34%. Profit over working capital improved by 2% units to 79%. And in the full financial year, we completed 7 acquisitions that corresponds to roughly 10% of the net sales for the group in the previous year. And the Board proposes an increased dividend by 16% to SEK 2.2 per share. If we look in the outcome by division. In the fourth quarter, the Electrify division stands out with very good both acquired and organic growth and the EBITA growing by some 52%. Also the Niche Products, Control and International division had a good performance in EBITA, while the TecSec division was still struggling with the weaker construction market. And I think you plan to go through that development, Jorgen.

Yes, some comments by division. Looking at some highlights from the -- by division then. Electrify is running very well and smoothly at the moment, doing it very well with both organically and through acquisitions. And revenues increased by 31% here in the last quarter and a good EBITA margin of 17%, up some -- yes, a bit here from last year, as you can see here in the top. I think for Electrify, most of those business, both the electrification market and also the infrastructure remained favorable and did very well. And we saw that also in some of the companies doing an all-time high in terms of profits, which was Elpress, Tykoflex and Nordic Road Safety. So those performed very well. And also Elkapsling, Swedwire, EFC, Enkom Active and also newly acquired Mastsystem noted some good demand and positive earnings development during the quarter. That was -- so it was a very sort of, on a broad base, a good quarter for the Electrify division. The Control division also grew some 16% in the quarter and -- but are still struggling organically, with some of the sort of more construction-related businesses still having a tough market. The EBITA margin was up to 17.9%, which is a good number. And we also have some seasonality, as you know, in the Control division. Especially, Radonova, it's a strong quarter for them, but on a good level also compared to a strong quarter last year. But -- and we can also see that some of the companies did it very well in terms of Precimeter and CP Cases in the U.K. did it very well. And we also see that -- but again, some of the more construction-related companies, especially the smaller ones, are dealing with tougher market conditions. And here in the quarter, we also closed the He-Man was acquired in the U.K. will add some numbers and some volumes to the Control division as we move forward. They were not with us for the full year. They came in during the quarter. Another -- the division that is maybe struggling the most is probably the TecSec division. Their revenues were up with only 6% then. Still on a positive side and good, but not living up to expectations when it comes to some of the companies more in the construction-related companies. But we saw a favorable market situation on other side. So it actually was a decent fourth quarter. And especially, ARAS, Idesco, Fireco, Frictape had -- and PCP also are the biggest company within that division had a good quarter. So doing it very well on a broad base. But still, some companies around construction is more struggling with the R-Con, the CW Lundberg, Door & Joinery and ISG Nordic continued to be affected by the mark -- by the weak business situation in the market. So a bit struggling in the TecSec division. The Niche Products division, on the other hand, had a very strong quarter. The revenues were up 26% and the EBITA margin at 22.1%, which is at a very good level and above the 20%, which has been we've become accustomed to when it comes to the Niche Products division. The earliest improvement was noticed on the broad front. And especially, a couple of companies with the ASEPT building their business in the U.S., doing it very well there, but also the SIB and Sajas in Finland and Sweden are doing it very well for us. And we also noted that Tormek, which is a very important company for the Niche Products division, also posted a strong result in line with previous year, which was also -- which was a record year last year. Also waterproof noted a stronger market. Here, we also now would like to highlight that Prido, which was acquired in the spring of 2024, posted a record year for the full year, a very strong sort of new company within the Niche Products division along the way. And gladly, we also closed the VLT business acquisition in the Netherlands coming in here now as of, yes, January, right, was it?

February.

February adding some -- another EUR 20 million into the -- and a strong group in especially the Netherlands and also in the U.K. So that will also add to the numbers going forward within the Niche Products division. The International division, last but not least, they posted revenues actually declining, the only one that had declining revenues in the quarter, but only 1% then. So -- and the EBITA was a little bit -- yes, basically on the same level as last year then with an EBITA margin of 17.6%. Here we are, yes, trying to grow the business both organically, but also looking at some interesting M&A opportunities going forward. So -- and what has been good here in the International division is really what we've built in terms of the marine cluster, and especially the Libra company in Norway had an excellent year for us. And also DP Seals in the U.K. and NST in Denmark also posted a very -- so a lot of things going in the right direction in International division, but expecting more in terms of M&A going forward. And last but not least, some -- International has some exposure to the German market. And as you all know, Germany is struggling a bit. And therefore, we also see -- and we've seen that in some of the companies that we have in Germany. Most of them are within the International division also affecting those numbers. So that was sort of where we are with all the divisions. And on an annual base, we also provide you with some return on working capital, which is our key metrics in terms of profitability internally. And we would like to highlight some of the things in the different divisions. So once a year, we provide you with these numbers, and you can see how that's evolved over time. A very stable and good development. You could see that -- and we are all struggling to get above the 45% in our businesses. And you can see that we have a very strong portfolio and very profitable businesses, providing both good margins and good profitability. And that is, of course, also then resulting in good cash flows coming out of the business that is fueling our M&A growth going forward. But the 79% is a really good number, and you see -- you can see here that we've been on that level for a number of years now. So it's -- we have some calendar effects when you look at especially the TecSec division. So we have a couple of skewed numbers here when it comes to M&A coming in during the year, and that affect these numbers a little bit. So here, we have some calendar effects and M&A effects. But overall, on a very good level, I think, with the 79%, something that we feel proud about. We also provide you with -- yes, and going forward then, I mean, we feel strongly that we have a very strong business concept. I write about that in my CEO words in the report. I think we have a very strong concept, a very strong business idea for Lagercrantz. And we posted as we -- as I say there, it is the 15th consecutive year with improved earnings per share. And I think we have a very strong concept going forward as well, building this very strong portfolio companies along the way and trying to establish companies that have market-leading positions in their niches and having a group of those type of companies. And our overarching ambition is then to grow EBT or profits by 15% per year. And as we've said, at least 1/3 of that should come organically and the rest through 8 to 12 acquisitions per year, so 2/3 out of acquisitions. And here in the last year, where we've seen a slower growth in the market, we have compensated the slower growth in the market with more M&A and then resulting in the 16% for the year in terms of EBT growth. The return on equity should exceed 25%. So we should do this in a very profitable way, taking cash flows out of the sort of existing business and using that for M&A and, through that, getting a good return on capital employed and also in return on equity that exceeds -- well exceeds 25%. And as you saw from the numbers, initially, it was 28% here for the full year. So we have surpassed that also in the year that we've just posted. We're building then the 5 divisions. We set up this structure some 4 years ago with the new 5 divisions, and we will continue building that and get the Lagercrantz towards the SEK 2 billion. We feel that we are -- we have positioned our divisions in the direction of where we see underlying structural growth with sustainability sort of themes, the green transition, safety and security-type products, water treatment within the Niche Products division, as an example, and other areas where we see sort of investments and demand for sustainability, and those type of products that we try to work within our companies and building them, positioning segments with sustainable structural growth is our ambition over time. And here, we also think one key thing to know about this is our strategic ambition to grow with proprietary products. And as you can see here, we have gradually -- this is the sort of brown area here. You can see over some number of years that we have continuously grow the share of proprietary products within the group. And we started out with having almost none, and then we made the Elpress acquisition in 2006. And since then, we have gradually been growing and set that as a clear target for us to grow with proprietary products. We see proprietary products as companies that have a very -- have their own products, of course, but also have some stronger margins and also greater opportunities for exports and also through that and better opportunities for organic growth as we go forward. And we are currently at the 78%, you can see there, but the aim in our SEK 2 billion program is to get to the 85%. And we should do that in the coming, yes, 3 to 4 years or something like that. We'll probably -- I think it's reasonable to see that we will get there. Another highlight that we do along the way is usually that we continue our focus on value add. We are very keen on getting companies that are strong and have a pricing power in the market. And therefore, we also measure the focus on value add and the gross margins along the way. And you can see that we posted yet another year at a very high level. It's not growing this year, but it's basically on the same level as it was the year before. There are some mix effects, of course, in this when we acquire companies. That also affect -- skew these numbers a little bit, but along the way, we would like to see it go up as we -- and of course, a percentage point here is very important when it comes to making money and having great margins and getting the cash flow out of the businesses. So that's also a highlight for you guys. Last but not least, we will just go over the acquisitions. I think we have, along the way, built our resources and built our capabilities in terms of doing M&A in a very professional way. I think we have been doing this for many, many years. But still, along the way, we have gradually refined how we do this. And here, since a couple of years back, we have raised the bar for ourselves, trying to make 8 to 12 acquisitions per year. That is a reference to really make the 10% sort of -- or 2/3 of the growth should come from M&A, and that we are -- we have been at that level or above that level here in the last year or so. So we will continue doing acquisitions. I think we have a very established acquisition process and gross list to -- for integration, I mean, an M&A sort of database where we fill it up with opportunities. And we are working with this throughout the whole group from all the company, but also on a divisional level and more so over time. So we were occupied in making good acquisitions along the way. And of course, it's also a highlight that I think we are financing our M&A operations through cash flows from the existing business. And here, during the fiscal year '24, '25, we made some 7 acquisitions and SEK 825 million. So we are basically at the 10%. We made some acquisitions just at the end of last year, so looking a little bit further back, it was actually a bit higher than this, but still on a good level. We -- you can see over to the right, acquisitions, we -- and I try to make -- we try to make a data sheet for all the acquisitions that we're making, so you can follow what we're doing and see what type of companies we're getting into the group. And I'd just like to highlight a couple of the bigger ones that we posted here during this fiscal year, and we will start with the CP Cases, which is on the next slide, please. Yes, the CP Cases is a company in the U.K. with also operations in Delaware, in Frankfurt, in Delaware in the U.S. and -- so especially 2 sites, making these type of cases, protective cases and racks uses -- used for mission-critical equipment. It might be for commercial use or for health care use. Or it might be for -- but most of it for military applications. So it's a very strong company, and you can see all down to the right here,that has been growing, and it's also been doing well in terms of EBITA and EBITA margin. And those are the companies that we like to bring to our group, niche-oriented, very specialized in what they're doing and performing well over time. And this company, we acquired here last summer, and it's been doing well for us along the way. So it's a very good company that we brought to the group. Another one that we also concluded here is another U.K. company, It's the Principal Doorsets Company. It's an innovative manufacturer of bespoke fire doors in the U.K., especially fire doors, with some sales of GBP 9 million with good profitability. And it's located on the West Coast or -- yes, Southwest in Devon in the U.K. And you can see all the way to the right there again of the size and also the EBITA margin. We're very keen on finding these companies that are very niche oriented and also have a proven track record of profitability over some time before we acquire them, that we feel that it can be stable and good companies that we can get to grow a bit, but keeping them at a very profitable level after we've acquired them. And they are part of the TecSec division as of July 2024. So that's a company we acquired during the year. We'll go to the next one. Another one, this is slightly bigger in terms of profits and also in EBITA margin. It's very good here. The company of Mastsystem. It's a Finnish company that we acquired and have a sales of some EUR 15 million and doing it very well and have a good -- great start to the group as well, located in -- so on the East side of Finland and part of the Electrify division as of December 2024. So it's been with us for 4 months basically since year-end here. We take the next one, which is the newly acquired Van Leeuwen Test Group, making service robust equipment and testing -- for testing heavy vehicles, including brake testers and integrated software. A company located in the Netherlands, but also have 50%-or-so of their business in the U.K. Also some -- with some EUR 20 million in profit -- sorry, in sales and an EBITA of around EUR 4 million. So it's a highly profitable company with an EBITA margin of close to 20%. So these are exactly the type of companies we're looking for. So we had -- off to a very good start for the group with some really good order intake here lately, which has been -- so it looks promising going forward with that company as well. We'll take the next one. Yes, that was the ones I'd like to highlight here today. So thank you all for listening in. It's been -- we usually round up with a financial overview where you could see that we posted yet another good year. Now sales above SEK 9 million. You could see the EBITA at 1.5 almost, or 17.5% EBITA margin. You can see EBT. We would like to grow that by 15%, and we have been doing that for the last 4 years, at least. But over a long period of time, it's been in that neighborhood or above that threshold of the 15% growth per year. Return on equity, the bank share or the target there is the 25%. And you can see where we've been over the many years that we have here in this trajectory. And the earnings per share and earnings per share growth is also sort of hand-in-hand then with, yes, the growth of EBT, of course. And the dividend, then we -- the suggesting here was SEK 2.20 and a dividend growth of 16% here that we could fill in there. But you can see how the trajectory there has been as well. So a good trajectory for many years and another good year for us. And with that, I think we'll round up and open up for Q&A. So please -- I don't know how we do that, but...

[Operator Instructions] The next question comes from Zino Engdalen Ricciuti from Handelsbanken.

Yes. Just starting off on the demand side, which seems to then be holding up relatively well, given the global uncertainty. I'm wondering if you could give some flavor on if you -- what kind of, so to say, growth when you look at CapEx versus -- or OpEx-related, so to say, products that you're selling. I think we talked a bit about project orders coming back a bit in the last quarter. Are you seeing that in this quarter as well?

You mean the split between OpEx related and CapEx related products, is that sort of...

From the demand market side.

Most of what we're doing is more OpEx related, I think, in terms of -- I mean, some -- most of our products are mission critical or important for our customers. So that's -- and they usually go into some type of investment. But it's not sort of CapEx related products that we're selling. It's not very expensive products or very high price per item, most of what we're selling. I think what we saw in the sort of -- I think we've seen the willingness to invest coming back maybe in the last 6 to 9 months. I think we were in for a bit of a hiccup when it came to Easter and when the trade barriers and the tariffs were launched in the U.S. Then everyone had a bit of a hiccup there for a few weeks. And we saw also that some of our customers hesitated for a while there. But I think then it's been coming back again. So it was a bit of a hiccup that lasted for only a couple of weeks. And I don't think it's that sort of connected either. But of course, everyone was a bit sort of reluctant or, yes, postponed their decision making just for a while there to see what was going to -- actually going on -- going to happen. I think long term, it will have an effect if there is some significant trade barriers being introduced. But I think that most of what's happening is talking in other direction at the moment, that we will need to find ways to work with international trade going forward and that with -- things will, yes, not become as dramatic as they were there for a couple of weeks.

Okay. Very, very good. And just a question on the profitability side. In the quarter, gross margin looks solid. But looking at the admin cost on the SG&A side in relation to sales, comparing that with last year, it looks a bit higher. Is there anything special to highlight there?

I think we've highlighted in the report that we're doing a couple of things here. I mean, we are -- we had some extraordinary items in terms of that we made a reservation for a claim that we've had in one of our companies. That happens from time to time, but that is usually coming in there. And we also had a couple of acquisition costs related to stamp duty when we acquire some of the bigger companies. So we had a couple of issues. They are not significant, I wouldn't say, but we have at least, sort of, if you're down to that level of detail, then those things might affect that number.

[indiscernible].

Yes. And while you're mentioning just that warranty claims, if there is possibility to give any color on that and which segment it's related to.

No, there is no big thing really. It's a claim that -- we are dealing with claims sometimes in our companies when we are providing proprietary products that is sort of part of the business model, and that happens from time to time. It's not that significant, but it's still something we made a reservation for some SEK 8 million-or-so or SEK 10 million, whatever, somewhere there.

Okay. And the last question for me. If we're just looking on the profit by working capital, that's the slide that you highlighted, of course, it's very strong at 79%. But Electrify seems to continue to be a bit behind on that front. Do you see that there is anything that can be done in that segment to bring it closer to the rest of the group?

Yes. I mean, we are working with those issues company by company. I think structurally that Electrify is having a little bit more manufacturing, a little bit more of their own in-house manufacturing. And that is, of course, in the long run, tying up some inventory. I think we are working with that in all our companies. And I think there is more to do with the Electrify division as well. We are dealing -- working with sort of metal-related sort of manufacturing, and we normally buy those sort of raw materials from Far East or China or other markets. There are also some transport or lead time issues related to that. So I think that Electrify has a bit of a different model that is, to some extent, a little bit hard to improve very -- much better. But still, we're working with it. And some improvement, we should see there as well. But to see -- I think given the business they're running, I think the SEK 66 million that they're posted here is actually very good for them.

The next question comes from Max Bacco from SEB.

Yes. I don't have much of a voice today, so I will limit myself to just one question, and it's a bit more high level. And I think you touched upon this during the presentation, Jorgen, that looking at the relative acquisition pace here during the last 4 years, it has been slightly higher than your historical average, especially if we go back to 2021 and 2022. Now when a couple of years have passed, have you noticed any consequences from this, I mean, related to performance post acquisition or something similar? Or is it just business as usual, despite a slightly higher acquisition pace recently?

I think when we analyze that ourselves, of course, there are some differences along the way. I think most of them are positive. I think we have been able to work more with M&A in the different divisions. We have gradually improved our pipeline, and we feel that we have more and better opportunities to look at higher quality. I think another trend -- or another sort of observation is also that we've been able to acquire and look at slightly bigger companies. And I think that has to do with that. We have become more of a player, that we are more sort of relevant in the market. And we also feel that we are being more and more appreciated by sellers of companies or they feel that our module is actually working very well for them. And therefore, we are an attractive buyer. And that has sort of improved our pipeline, I would say, over the years. I think in terms of post acquisition sort of development, I think also that we've seen a number of cases where we have actually been doing -- we've been able to push the growth and the margins in the businesses that we have acquired. So given -- comparing to maybe 5 years ago or 10 years ago, I think that's also improved along the way. We see a number of, sort of what we call, success cases. I think that Prido is more -- maybe the most recent one. We also see NRS has been very good for us. We've seen sort of Tykoflex is another one, more of the ones that are more recent and has been very -- doing very well for us post our acquisition. So I think we've seen a gradual improvement.

The next question comes from Karl Bokvist from ABG Sundal Collier.

First one is on working capital. When you continue to grow now over the past few years and shifted even more towards proprietary products, I'm just curious if you have a sense of kind of this year and future years normalized working capital levels based on how the current group looks and how you expect it to look if you continue to shift towards even more proprietary products.

We have not done that type of simulation lately, so I don't know really what -- I don't see a reason why it would change very much. I think that what you've seen in the last couple of years has been sort of where we probably will be. With 78% already being proprietary, I think that will -- I think we have some time lag in terms of still that we have some inventory levels that we'd like to bring down. That is a key sort of strategic objective for us in the couple of years, and that might improve the ratio a little bit. But yes -- and then we also have the calendar effects, right? When we acquire a company, we get the working capital in us from day 1, right, the full amount, while we're getting the profits and the sales gradually over a year, right? So it's a bit of a calendar or a bit of an M&A effect there as well that you also need to take into account when you look at sort of quarterly figures. So a couple of those things you need to bring into your equation there. But otherwise, I think from a general standpoint, I can't see that it will be a dramatic change either way in terms of the working capital ratio as a percentage of sales. Or I don't know how you do your modeling there, but that might be one way of doing it.

Understood. And then the second one is just on a little bit as a follow-up to your order intake comment here. And there, when we think about activity in the order book and lead times in divisions such as Control, TecSec and International, where the organic sales has been a bit slow lately, how long do you think it can take before you see or are already seeing improving orders, which would therefore also translate into improving sales?

Yes. I think our order book generally, it varies -- first, let's say, it varies quite a lot between the companies. So we have companies living sort of from day to day, basically, but we also have others that have a very long lead time. On average, we usually have 3 to 4 months -- yes, 4 to 5 months of order book -- of sales in the order book on a group level. So that's basically the visibility that we, generally speaking, have. I think what we've seen is that some of the sort of orders -- or when orders come in -- or when we grow in our order books, usually, some of those orders are a bit sort of, yes, further out normally. So it takes a while before they sort of -- before it materializes in sales. And it's not a huge difference between the divisions. It's basically the same pattern on a divisional level as we have on the group level there when it comes to the 4 to 5 months.

The next question comes from Christian Binder from Redeye.

And to start off, you already discussed it a little bit, but if I understand it correctly, your M&A prospects remain quite unchanged and positive. But could you elaborate in any way, when it comes to the recent uncertainty, has that made sellers more cautious? Or haven't you noticed any effect yet?

Sorry, you need to repeat that. I didn't hear you quite well there. Can you please maybe...

Sorry. It was about M&A. When it comes to the recent uncertainty around tariffs, et cetera, if I understand correctly, you mentioned that your M&A prospects remain unchanged. But have you noticed sellers becoming more cautious in any way and they want to wait until the uncertainty has resolved? Or haven't you noticed any such change?

I think everyone sort of in business is, of course, concerned and have sort of a view on tariffs and what they will mean. And of course, some processes might be delayed. But I also feel that some processes might be speed up. So -- but from a general perspective, I think the hiccup that we had there for a couple of weeks in the -- around Easter, right, I think those hiccups, they passed, right? So it's -- now it's back to where we used to be. And you can see that from the stock market and everything, right? It's normalizing again. And -- so I don't think it will -- I don't think we've seen any sort of real sort of major changes here related to that, that sellers might be more concerned or more reluctant to close deals. That, we haven't seen. I think if the tariffs -- the war -- the tariff war there or whatever trade war continues for a long period of time, then it might have an effect. But so far, no, none, basically.

All right. Perfect. And then my second question is around the subsidiaries exposed to construction. Do you think there's anything operationally that they can do to over time tackle weaker market? So do you think these cycles are just part of being exposed to that market, so to speak?

Yes. I think that, of course, we deal with in the different companies. Of course, we try to find other opportunities. What we normally have done already is that we have downsized or sort of adjusted costs in the companies. But before the market comes back, it might take another sort of couple of quarters or whatever. We'll see. It's gradually been improving -- we've been seeing some improvements, but still on a very low level. And of course, these companies try to find other opportunities. It might be in other sectors or finding other sort of agencies or suppliers that provide other stuff because some of these companies are also more sort of distribution based. So they can probably enter into other areas if that's necessary. But it's a bit of a struggle, and it takes some time. But we -- of course, we try to find other opportunities if the original market is a bit slow.

The next question comes from Jakob Marken from Danske Bank.

Yes. So 2 questions on the cash flow. So first of all, on the adjustment side, I mean, Peter touched upon it a little in the presentation, but I'm just wondering if we can get some more details. What's the big drivers here? Can you give us the magnitude of that? Because SEK 160 million in delta year-over-year here is quite big. So what's the big drivers? And how much are the big things?

So as I mentioned, there are some unrealized effects in the adjustments for items not included in the cash flow. So literally, what it means is things that has affected the P&L positively in -- or negatively in the previous year and positively in this quarter but are not realized. So they are not affected -- or included in the cash flow. So we had some effects that negatively affected the fourth quarter last year. And then we have to adjust for those here. That is included in the SEK 194 million. And vice versa, in the fourth quarter this year, we had some negative effects. So if you can see the full year numbers, we have between SEK 100 million or SEK 120 million in a sort of normal quarter, and it's mainly 2 things. It's currency effects and also revaluation of earn-outs related to our acquisitions. And I believe they are of equal size. So those are the 2 main explanatory factors.

Okay. But wasn't earn-outs positive last year as well?

Yes, it's a combination of those.

I don't think everyone follows this. So maybe we could take this...

Yes. We can talk a little bit more offline. But it's unrealized effects that we have to adjust for in the cash flow.

Yes. Okay. We can take this offline. And then just a quick one on the working capital. So release, even though a good organic growth, is there anything we should have in mind there to the -- coming to the next quarter?

The free, Jakob, cash flows in terms of working capital in the quarter, is that what you're referring to? Or...

Yes, exactly, with 5% organic growth. It's just -- is this something we should bear in mind?

Yes. It varies over the quarters. It's a bit of how it adds up at that exact date, right? So it's hard really to -- but there is nothing structural that you should be aware of for the next quarter. There is nothing that we're aware of, that you should take into account or so. But these numbers vary a little bit over time. And I think you need to look at it from a -- yes, for more than a quarter to really understand the cash generation for a company like Lagercrantz.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. I just had one question here on one of the slides you presented. It sort of looks like we have seen an increase in sort of companies that are sort of underperforming in terms of ROS, where the number of companies that are in the red and the yellow area has sort of doubled from last year. I was just wondering if you could comment anything on that.

Yes. I decided not to comment on it because it's not significant. It's a couple of smaller companies that have added to that number. Looking at the volumes there, it's reasonable. So I think we will always struggle. I think we -- I mean, we have -- it's fair to say also, I mean, the year that we have behind us is sort of, yes, organically, we have been going -- we have been struggling with the markets in some areas. And we've had a couple of a few companies that are struggling in the -- given the market conditions. But it looks good on the total because we have compensated quite a lot with M&A instead. So actually, I think we will see some of those companies bounce back, some of the companies that we're really working with, and we are also -- we have closed 1 or 2 businesses during the year. So we are actually -- we are dealing with them, but -- and it will pick up and get better along the way. But I don't think, from an overall perspective, it's not significant.

Yes. Okay. That's clear. And then just one comment here also on the strong organic growth here in Electrify and Niche Products. Would you say that this is mainly driven by the easy comps and also support from Easter, so this is more volume driven? Or are you also seeing sort of a significant portion of price increases also coming through?

I don't think price has been very important here in this quarter. So it's mostly other effects. I think that we see some markets that are growing for us. We see the infrastructure market growing. We see some investments in electrification taking -- coming to -- is growing, coming to a new level. And we also see some of the companies doing a better job in their exports. So it's actually a number of things. But I don't think it's very price driven at this point in time. We have been doing most of that already before, and we will continue doing it. But it's not like we've had a hefty price increases here in this last quarter -- in the last 6 months.

Yes. Okay. Perfect. And then just -- sorry, the last one here. I mean, you comment on the warranty cost, and it sounds like it's sort of the regulatory business, et cetera. But still, I mean, you highlighted and it sticks out. I was just wondering if it's -- if you can say anything, if it's related to one specific product category or is it for one specific customer and also if we should expect any of this sort of going forward in this sort of magnitude?

No, I don't. It's a reservation we made for a worst-case scenario in a specific -- it's a number -- it's one company. It's -- and it's -- but it's multiple customers. So it's a product generation that we need to fix, and that might cost us that amount of money. So it's the worst case sort of type scenario that we have there. And when we do this type of businesses, it's part of the business, but it was a little bit more significant this time. And therefore, we decided to put it out in the report.

[Operator Instructions]

Yes. We have a written question here as well. How should investors think about group's long-term EBITA margin? During the last 10 years, you improved from 10% to 17.5%. I think -- that is a question I get sometimes -- or we get some times. And of course, we have the ambition to have the EBITA margin at a very high level going forward as well. And I think what really is sort of to that end, it is important to highlight. I think we have a very much stronger portfolio of companies now. It's not that we have significant sort of one-offs or various good trend in a specific company, providing a lot of good profits for us. It's very broad based. So I think we have the group at this EBITA margin level going forward or that we try to improve it even a little bit further. I think what might sort of change the thing is really what type of acquisitions we find. So if we find companies like Mastsystem, for instance, having almost a 40% EBITA margin, of course, that will improve the -- or bring up the margin for the full group and especially for the division Electrify, which is part of. So that's sort of a structural change over time. But otherwise, I think a good level at the 17.5%. Of course, we have the ambitions to eventually get to the 20%. So we're pushing that. But that's sort of -- yes, that's part of running the business every day here. There was another question here. Let's see what's...

Number of M&A. And they concluded that we did 5 M&A in the calendar year 2024. And will volumes increase as total business grows? That is the M&A model.

Yes. When we grow, I think one key question is, of course, how we will scale M&A, because if we say that we're going to grow 10% of ourselves every year, I think that's a good ambition, and that's where we basically are and should be and as the base and the company then grow. So the group grows, of course, the 10% means more volume along the way. And we've said that we would probably do a little bit more -- it would be -- will you do bigger acquisitions? Or will you do more of acquisitions? And I think most will be more of acquisitions. I think we still have our sweet spot where we find the acquisitions, but -- in terms of size, but we will also then try to also improve and gradually also make slightly bigger acquisitions along the way. But most of it will come from more acquisitions. So the number of acquisitions will need to raise along the way. And therefore, we've also set the bar for ourselves higher. So we should acquire some 8 to 12 businesses per year in order to bring in at least the 10% that we talked about. But of course, as we grow the number of acquisitions will need to increase for us to keep up and have the growth pace that we're having. But given that we're doing this in a decentralized fashion, we're having many people involved, I think we have a better pipeline and more opportunities to look at right now than we've ever had. So it's -- we are managing that growth -- sort of, yes, growth challenge very well, I would say. Peter, I hope that gives some flavor to your written question here. Okay. Thank you, everyone. Thank you for listening in, and thank you for following us and being part of our journey. And I hope to talk to you soon. And of course, Peter and I are available here during the day if you have some additional sort of discussions you would like to have or details you would like to discuss. So thank you, everyone, for listening in, and have a good day.