Rejlers AB (publ) (REJLB) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Multiconsult Rejlers Merger of Equals Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Viktor Svensson. Please go ahead.

Thank you very much and to everyone connected, we say very welcome to today's presentation of a proposal of a merger of equals between Rejlers and Multiconsult. We will start with a short introduction of the 5 speakers available, and I will start with myself, Viktor Svensson, CEO of Rejlers. 24 years in this industry, I started my career in technical consulting, and I was 27 years old and started in the group management team of [indiscernible]. I were 15 years with OF during a period of time when we transformed the company in terms of growth, profitability and employer brand. I ended my career at AF as a divisional head in late 2017. Then I started as the CEO of Rajlers in February 2018 with a very clear target of turning the company around in terms of growth, profitability and employer brand. I've been here now for 8.5 happy and speedy years, and we have had a good start, if you can call 8.5 years a start. I have a very strong devotion to this industry because it's all of our people and to get a warm and winning culture on board and looking very much forward to this fantastic merger. I'm handing over now to my future colleague, Kristin.

Hello. I am Kristin Augestad, and I'm really excited to be here today. I am the Interim CEO and I'm also Executive Vice President for Norway. And I've been with Multiconsult for almost 30 years. And I've been a member of the executive management team for several years, where I've also been responsible for our architecture segment. And together with Viktor and I here today, we also have...

I'm Anna Jennehov, I'm CFO of Rejlers. I've been the CFO for Viktor since almost 8 years ago. I love the journey looking forward to, hopefully, next journey and I have a background as CFO for listed consultancy companies for more than 20 years. And I hand over to...

Rikard Appelgren. I'm the Chairman of Multiconsult group and I have, well, almost 40 years of working experience in this industry, mainly 18 years in WSP, which I left like 10 years ago, and I joined the Board of Multiconsult 8 years ago. And this -- what's happening today has been the thought for a long time, and I'm very excited about the common future with the Rejlers family and to put a new very big and stable company on the Nordics front.

Yes. And the Peter Rejler, I have been in this business for 60 years. That's how old I am. So I was born into it. And I've been the CEO of the company, and I'm now the Chairman of Rejlers.

All right. So first, a brief summary of Multiconsult. We are more than 4,000 employees in the group working on projects, spanning more than 45 countries. And we participate in approximately 15,000 projects each year for more than 5,500 [indiscernible] And through this, we have delivered profitable growth based on a robust business model with a diverse portfolio and strong professional environment that can affect our clients with their challenges across business areas and geographies.

Yes. And on the Rejlers' side, I think that this slide is showing that we've had simultaneously nice and successful rights during the last couple of years. At Rajlers we have been focusing a lot in the past 8 years on leadership, operational excellence, employer brand and to have a stretched strategy. We have doubled the size of the company with a solid mix of organic and M&A growth. Largest acquisitions has been Nest Engineering Consulting in 2019 and Eurocom 2023. Our EBITA is up 7x or actually 10x if you go with the actual results, giving a development from EBITDA at SEK 37 million in 2017 to SEK 370 million last year. Still the 1 thing that I'm most happy about with the development of Rajlers so far is the employer brand. Today, we are in a naturally strong recruiting position in all markets, and our organic outlook is stronger than ever. All right. Moving on in the presentation. This is the first early summary slide of what we're proposing today. And let me be very honest and maybe even a bit emotional with this starting picture. As I said, after literally living in the tech consulting landscape for 24 years now and monitoring all and every competitor every quarter, I want to call the proposed merger of Multiconsult and Rajlers, the perfect match. I honestly can't see a better match in the Nordics currently. I'm basing that on a lot of bullets, but mostly on culture, on size and the geographical fit. I've learned to know Multiconsult over the last year, and I can see that we share a lot of the core values. Core values of a strong portion of humanity, empathy, but combined also with a strong winners instinct, which is my favorite combination. And we will protect this going forward. The size of the companies are almost the same and also the journey that we have behind us. Thirdly is the geographical fit, which I think is unique when it comes to a merger of this portion because I think we all know monitoring this industry that the hardest part when launching a big merger is when you have 50 to 100 offices in the same cities all over the place, where you have built up the leadership on 1 side of the main street of the city and on the other side of the street, you have a similar office building a strong leadership. And you're supposed to choose the new leaders of that very 50 in 50 to 100 places. That is big obstacle. That's a big challenge. In this case, that problem or hurdle is very -- in very few places. That is a unique thing with what we're proposing today. This is very much our business as usual but with a great twist. We will jointly create a company that will be much more of an institution standing tall in a complex and fast-changing world, with a total of SEK 11.7 billion in total sales, EBITDA, SEK 795 million and some 8,000 highly skilled engineers. I'm very excited. Kristin?

And just to state what Viktor just said. In short, we are a really, really strong. And this merger brings together 2 highly complementary organizations with strong control it, deep technical expertise and complementary geographic focus. We will be preserving the strength of both companies while creating a stronger Nordic platform for future growth. The combined company will benefit from balanced leadership, a dual listing in in Stockholm and Oslo and also and the support of 2 committed long-term owners, Multiconsult and Rejlers. On today's agenda, we will take you through the strategic rationale behind this proposed merger recall, give you some figures for the combined group and merger parameters and indicated questions. And at the end, we will have a Q&A session.

Great. We're moving on. And this slide is very much about to try summarizing a few key benefits of today's proposal. I think 1 very important element that we've seen together during our early work with our proposal today is that we are forming a top 3 player in the Nordics when it comes to energy industry. That's where we landed when we really dig into each and everyone's business here. And looking into the fundamental needs of energy and industry in the Nordics for the coming 5 to 10 years, that's a very good place to be. We might even say that in a couple of years, we will be #1 in industry. We are projecting massive investments in nuclear, in defense and in energy in the Nordics for the 5 to 10 coming years. So we will have a very interesting position. Secondly, we are emphasizing the employer brand because if there is anything I've learned from 24 years in this business, it's the importance of a shining employer brand. That is a top 3 priority for a company like ours. And with the joint story we're having on the table, I'm sure we can build a shining employer brand together in the Nordics. Thirdly, we will be a top 5 player in our industry in the Nordics. And you can say whatever you want, but size matters in this business. If you want to be a contender for the biggest future projects in society, in the industry and energy, you need to be in the top. Both of our companies, we've been on the border line of getting there, but not really. But with this merger, we will be a top 5 player and a natural contender for the biggest projects in the Nordics. Fourthly, we have rated, of course, IT and AI, the million dollar question for every industry globally. What we can see is that there is not 1 employee in Multiconsult or Rejlers who's not using AI today in making our clients more efficient, but we need to invest more we need to evaluate our business model and so forth. And together, we will be stronger here. I'm very impressed with what we can see what Multiconsult have done and where you are in this space at the moment as well. I want to say that. Finally, of course, we see great synergies. When you merge 2 similar companies on this side, stock listed and we have identified cost synergies in between SEK 100 million and SEK 120 million that will be gradually taken during a period of 3 years. It's mainly within IT coordination, but it's also within procurement and in very obvious areas that you will not need 2 management teams -- group management teams. You will not need 2 Board of Directors. You will not need 2 annual reports, 2 sustainability reporting. So I'm not worried about this level. We have a very sophisticated program on picking those SEK 100 million to SEK 120 million over a 3-year period. Thank you for that and moving to the next slide. This slide is what I just talked about as the priority 3 for us, getting the position of being the fifth biggest player in the Nordics and getting up there, seeing a natural contender for the biggest project is a clear position that we both are striving for and getting now. And there is a clear value in this. There has been frustration in both sides or not really being seen as a top 5 player. We can also see that the new company have a strong foundation in 4 areas of what I've talked about industry and energy. And when we say industry, we include DFM, infrastructure, buildings and also within water treatment, where multi console is impressively strong and rails have intentionally grown fast over the last years. Moving on.

So this merger will enable us to create additional opportunities for complex and meaningful project work and enable stronger subject matter expertise and career opportunities for our employees. Viktor and I have led several times over the past months, and we share a common vision on how we want to develop this new group together. Sales is focused on many of the same things as new sequences on, building a culture where we put our class first, where we look after each other and where it's a competence, learning and knowledge sharing at the sector. And our combined culture will be built around technical expertise, learning and collaboration. Together, we can offer employees broader professional communities more development opportunities and an even stronger platform for attracting and retaining talent. This merger is, first and foremost, about creating greater value for our clients and our shareholders. We're bringing together complementary expertise and geographic reach we can offer broader services to more clients across the Nordics and Vian. We see clear opportunities in combining our Nordic capabilities on detail, on coastal and Arctic services on energy and on infrastructure projects. Collaboration between the architects from Multiconsult and the engineers from the whole group will enable earlier involvement in projects and potentially increase our market share. And by sharing expertise across countries, we can offer more holistic solutions and accelerate growth.

Super. This picture is mainly about to summarize a few basic facts saying that we see obvious benefits in coming together for joint investments in employees AI and in our new service offering. We will start with a strong balance sheet with a net debt of 2.1% and saying that -- it goes without saying, but M&A will not be our focus for the first 12 to 18 months. So the net debt will decrease alongside with integration. Thereafter, we will be back with M&A, an area where both companies have succeeded well during the last 5 years. We also see that we will be able to elevate our stock market story for the coming years, but that is naturally to prove, but we see immediate room for improvement in stock liquidity and broader European interest in our share that will be listed both in Stockholm and in Oslo. As I said, this is a perfect match to me and to us in the way that we will not have 50 to 100 offices to integrate and choose who is the local manager. Multiconsult is dominant in Norway and Rejlers is very strong in Sweden and in Finland. The geographical overlap is very gentle. But still, we have identified 3 clear organizational changes that will benefit each operation. Firstly, we will integrate Rejlers Norway with 250 highly skilled employees with Multiconsult Norway. It's evident that Rejlers Norway will gain from becoming part of a market-leading position with all the relevant framework agreements at hand. The employer brand position, Multiconsult have earned in Norway and a new network of 3,400 colleagues in Norway. Secondly, we see a clear upside of moving Multiconsult Swedish infra company of Ontario into rail of Sweden. The reason for this move is very much like the move in Norway that I just mentioned. Thirdly and finally, we are moving Multiconsult Poland with 400 skilled employees within infra and industry into our most international entity, Rejlers Finland, running a daily business with major assets and operations in the UAE and India. The international approach from our Finnish management will take the Polish operations into new context, I'm sure. I'm also happy with that these organizational changes have landed very well with all parties involved before today's launch.