SP Group A/S ($SPG)

Hi, and good afternoon. On behalf of Hans Christian Andersen Capital, I'd like to welcome you all to this presentation of the Q1 2026 report from SP Group that was published yesterday. My name is Rasmus Kojborg, and I have the pleasure of welcoming CEO, Lars Bering; and CFO, Allan Jeppesen. They promised to take us through the numbers and recent highlights. So a warm welcome to the 2 of you. And before I hand over, I'd also like to give a warm welcome to all of those of you who signed up for today's presentation. As usual, you can ask questions during the presentation in the chat room on the lower right corner. And we are also recording this presentation and we'll publish it on different platforms afterwards. With that, I'll turn off my camera, and we're back for the Q&A. But for now, I'll leave it to you, Lars and Allan, please go ahead.

Thank you very much, Rasmus, and welcome, and thank you for joining SP Group's presentation of the interim report for Q1 2026. My name is Lars Bering, and I'm CEO of SP Group.

And I'm Allan Jeppesen, CFO of SP Group.

And together with Soren Ulstrup, we make up SP Group's Executive Board. And we will start today with a brief introduction of SP Group for you joining us for the first time, followed by a review of Q1 2026, where we have set nice records in several areas. Allan and I will be sharing the presentation today, and we will be supplementing each other along the way. SP Group develops and produce and sell plastic solutions for a wide range of industries. Our focus is technical components, typically single-use products for the health care sector or plastic components that is integrated into our customers' products and used for many years. In Q1 2026, 76% of our revenue came from sub-supplier work and 24% came from our own products. We have a global setup with 33 factories and almost 2,800 employees. And finally, we are focused on increasing the share of recycled plastic in our production. We have reached 18% and have a target to reach 25% in the year 2030.

And as you can see on the right side of the screen, our revenue is distributed across several product groups. 35% of the company revenue is generated within the product group health care. Health care is including medical devices, medical packaging as well as agronomic products. The second largest group -- product group is Cleantech, which covers products as renewable energy, energy reduction and insulation. The third is Foodtech, which has a share of 14% of our revenue. Within this product group, you find livestock housing ventilation systems and different measuring equipment or products to different measuring equipment. The remaining categories, the remaining products fall in under the category Other, which covers 22% of our revenue. Within this products group, you find furniture, you find special vehicle products and also products for the defense industry. We will return later on regarding the performance of each of these segments.

Yes. And SP Group is organized into a number of independent units, each owning the customer relationship and the technology and the products. The light green ones on the left-hand side is our proprietary products, which are products, niche products that are sold in our own brands. That includes the companies Ergomat, SP Medical, MedicoPack. With -- on the right side, we see the subcontracting companies, where we have SP Molding doing injection molding. We also have SP Tinby doing composites. With the acquisition of Ide-Pro, we have added new capabilities within EPP, EPS casting, light metal casting and toolmaking. The decentralized structure enables us to be close to the customers, have fast decision-making and agility in the day-to-day operations. And then we are actively working on create synergies across the group, especially on procurement, knowledge sharing and cost sales.

Here you see our global footprint. SP Group is present in 13 countries providing a strong global footprint where the international diversification creates a good foundation for growth and reduces the dependency on individual markets. Of the 13 countries, we are currently having manufacturing operations in 9 with, as Lars mentioned before, 33 factories. As shown on the world map, Asia is representing 10% of the group revenue, North, South America, 16%; Europe, 47%; and Denmark, 27%.

And then let's look at the highlights for the quarter. It has been a very strong quarter. Q1 was a record-breaking quarter with a revenue growth of 22.9%, of which organic growth accounted for 11.3%. We managed to reach an EBITDA margin of 20.4% and an EBT margin of 13%. Overall, the best quarter in our history.

Well, at the same time, we are confirming our full year '26 guidance. We still expect a revenue growth in the level of 15% to 23%, and EBITDA margin in the level of 19% to 21% and EBT margin of 11% to 13%. Later today, on this presentation, we will address the basis of our guidance, both in relation to the record result in Q1, but also the geopolitical challenges from the current situation in the Middle East.

Yes. And beyond the financial highlights, there are a number of important operational milestones, I think that is worth to highlight. There's been a solid growth in both our own products and in our subcontracting work. And we are well underway with the expansion of the medical production in Poland and the construction is progressing well. At the same time, the collaboration with the new team in Ide-Pro is paying off with a good start. On the picture on the right-hand side, you see our solar park -- solar park is now operational, is producing green, clean electricity for SP Group. All of this, we will explain more in details on the coming slides. Sales of our own products increased by 4.1% to DKK 235 million in Q1, which was a new record. There's a strong growth in sale of components for livestock ventilation, while the development in ergonomical products were flat. On the same time, MedicoPack packaging and the Guidewire sales declined a little bit. For MedicoPack, it was significantly impacted by a customer's decision to phase out a product and leave this market entirely. On the Guidewire sales, it reflected a focus on high-margin products. So we make sure that the capacity is used in the best possible way. Moving to subcontracting orders. Here, we saw a very strong development in Q1. Revenue from subcontracting increased by 30.5% to DKK 731 million. This was driven both by organic growth and contribution from Ide-Pro. The growth reflects high activity on all customer segments that Allan will tell more about a little later, but particularly strong growth in both Cleantech and Foodtech. We are pleased that many new customers have chosen SP Group to solve plastic tasks will help to grow in the future as well.

Well, the performance across our product groups is shown on this slide. At the top, you can find the share of the revenue on each of the product groups and also with examples of what is included in each of the groups. Below, you see the development, the revenue development within the 4 groups. It's a comparison of Q1 2025 with Q1 2026. As the figures show, all 4 product groups have delivered positive growth. And it is worth mentioning that this growth actually comes on the top of a record back in Q1 2025. The health care category is in several respects, project-driven and timing can impact individual quarters. We have seen a strong influx of new customers and projects in this segment, which we expect to materialize in the coming quarters. The pipeline in this area is actually and remains very strong. The remaining product categories have grown between 33% and 64% in Q1, a growth driven by a strong combination of the acquisition of Ide-Pro back in December '25 and a very solid organic growth across individual product groups.

Yes. And the expansion of a new clean room in Poland is well underway. We are building this inside the house. You can see on the picture here on the right-hand side. We are converting an existing building of 7,000 square meters into a building for medical production with a focus on capacity, efficiency and better space utilization. A new 1,700 square meter clean room is expected to be ready by end of Q2 2026. And this investment is very important for us to be able to deliver on existing agreements and new agreements that will start to give work here in the coming months. The integration of Ide-Pro is also on track. Ide-Pro became a part of SP Group just before New Year, and we are very busy introducing our teams to each other and to detailed plan all actions in the integration. Ide-Pro has production facilities in Skive and Glyngore in Denmark and as well as in Bangalore in India. And the company employs around 325 people. Their capabilities span injection molding, light metal casting and molding in EPP and EPS. The focus is on prototypes and low-volume production. Cross-selling is well underway. We are already seeing concrete examples of existing SP customers requesting Ide-Pro's capabilities and vice versa. And in addition, we are planning an expansion of the factory in India to support future growth. All in all, we are very pleased with the integration and how it's progressing.

Now let's take a closer look on the financial results of Q1 2026. all of which have developed positively during the last 3 months. The 4 metrics you see on the screen illustrates the performance within revenue, within the operating result, EBITDA, EBT and EBIT. If we look at the revenue, you will see that we have DKK 966 million realized actually in the first 3 months of 2026, which actually is a growth of 22.9%, placing us in the upper end of our full year revenue guidance. We touched briefly on the positive performance across the product segments earlier, growth that was both driven by organic and growth from acquisitions. We are very pleased to note that organic growth have accounted for approximately half of the total growth in Q1, to be more precise, actually 11.3%. Measured in local currencies, the growth was, in fact, 13.6%. This also confirms that the Ide-Pro is on track and contributes with 11.6% of the growth, which was anticipated and budgeted. Well, turning to the EBITDA, we again see a positive trend, where we are pleased to report a growth of 18.5% compared to Q1 last year. The EBITDA margin came in at 20.4%, which is within the guided range for the full year and actually [ 0.2% ] points ahead of the full year financial year '25. Earnings before tax for Q1 increased by 24.2% to DKK 125 million, another record high result. On this slide, you see development within the operating cash flows, earnings per share. And below those, you see the interest-bearing debt and the development in equity. The strong operating results also reflect -- is also reflected in the cash flow from operating activities, where we generated DKK 159 million in Q1, an improvement of DKK 28 million compared to Q1 last year. In '25, our interest-bearing debt increased as a natural consequence of the acquisition of Ide-Pro at the end of December '25. In Q1, we, as expected, has reduced our net interest-bearing debt, which at the end of March was DKK 1.388 billion. The leverage measured as net interest-bearing debt to EBITDA was at 2.2x end of March '26.

Yes. SP Group has grown consistently since the financial crisis, both organically and through acquisitions. The compound annual growth rate over the period is 8.9% based on the last 12 months. We have completed more than 20 major and minor acquisitions in the period and actively participated in the consolidation of the plastics industry. We are convinced that this approach, a combination of organic growth and strategic acquisitions will continue to be a part of our growth strategy. Over the past 10 years, we have improved our EBITDA margin from 14% in 2016 and now to 20%, an improvement of 6 percentage points. The margin improvement has been achieved through a sustained focus on 3 drivers. First, an increased share of our own products. These products are very important for us because it is niche plastic products that we are able to maintain a larger or higher margins on compared to our subcontracting work. Second, we have increased the production in Eastern Europe, which strengthened our competitiveness. And third, we have increased automization in our production. We expect that all 3 drivers will continue to contribute positively to the margin development going forward. The same picture applies to the EBT margin, which has been lifted from 8% in 2016 to 11.8% in the most recent 12 months. EBT growth in Q1 2026 was 24.2%, even stronger than our EBITDA growth. And overall seen the margin improvement has been driven over the years by the same 3 factors: increased share of own products, increased production in Eastern Europe and automization. And our ambition is very, very clear, we aim to be the best at producing plastics with a strong competitiveness and a healthy profitability. This requires a very good mix between the subcontracting orders, where we are continuously trying to improve our processes and then on the other hand, having our own products, where we create innovation and we are able to have higher margins.

Well, this slide provides an overview of the key financial figures, several of which we have already covered on the previous slides. We briefly touched on the cash flow from the operation, which has contributed positively to the change in our liquidity. Actually, we have had a change of plus DKK 27 million, which represents an improvement compared to last year of DKK 61 million. On equity, you can see that we end March was at DKK 1.865 billion, which is equal to an equity ratio of 45.5%. And that ratio is in line with the most recent quarter we have seen. The remaining key figures on the slide, you are more than welcome to address any questions to those on the Q&A later. Well, in addition to the strong financial performance and several positive highlights mentioned by Lars, we also held our Annual General Meeting, which took place yesterday. At the AGM, resolution were passed regarding the payment of dividends and a reduction of the share capital. The approved dividend amounts to DKK 4 per share, which is equal to an 8.7% of the net profit in '25. This is in line with the group capital allocation policy, which is between 15% to 25% A resolution was also passed to reduce the company's share capital by a nominal DKK 780,000 through the cancellation of a total of [ 390 shares ], which SP Group already holds in treasury. Following the reduction, the share capital will amount to a nominal of DKK 24.2 million. Historically, SP Group has conducted active share buyback programs on several occasions, and we have decided to continue this practice. We have initiated a new share buyback program, which will run from May 4 this year to end of December '26. The total buyback program amounts to DKK 40 million.

We cannot ignore the current situation in the Middle East. The conflict is leading to increasing raw material prices and increasing energy prices in general. And we are in very close dialogue with both customers and suppliers to navigate through the situation in the best possible way. The majority of our energy consumption is green electricity, which are -- where prices are fixed. And on the raw material side, we have been doing a big job trying to push back the increases and where the price increases are documented and will, here, we are passing them on to our customers. However, there's a certain delay on that because no one welcome a price increase and everyone tries to get rid of them initially. There's also a geopolitical uncertainty, and that is the reason why we are maintaining our guidance for 2026.

Well, as Lars mentioned, we are maintaining our '26 guidance, and it is important here to emphasize that we are doing so in light of the current geopolitical uncertainty in spite of it. Q1 was a record strong and came in at the high end of our expectation, but we are taking a cautious approach as the conflict in the Middle East continues to have the potential to impact both demand, commodity prices and supply chains. We expect a revenue growth in the level of 15% to 23%, driven by new products, new customers, growth within existing customers and also, of course, the contribution from the acquisition Ide-Pro. The EBITDA margin is expected in the range of 19% to 21% and the EBT margin in the range of 11% to 13%. We have had a strong start to '26 and the underlying business remains strong.

Yes. And then let me sum it all up. Q1 was a record-breaking quarter with revenue growth of 22.9% with strong organic growth of 11.3%. We are seeing growth in both our own products and our subcontracting work. The integration with Ide-Pro is in full swing with cross-selling and planning of capacity expansion in India. We are handling the rising of raw material prices resulting from the conflict in the Middle East. Increases are being passed on to customers on an ongoing base, and we maintain our guidance for 2026. We have initiated a new share buyback program for DKK 40 million and 390,000 shares will be canceled. The underlying business, as Allan said, is very strong. SP Group is ready for continued growth. Thank you for your attention. We are ready for questions.

Thank you, Lars and Allan, and I'll be joining here with the camera to do the Q&A session here. I think we'll move a little bit back on your slide to this overview slide. So there's a few questions related to this one. There is one first here, 22.9% growth, as we can see here on the slide as well and of those 11.3% organic. What gives you the confidence in the order book for the rest of the year? And could the upper end of the 15% to 23% range be in play?

We think, as Allan said a minute ago that there's a lot of uncertainty on how things will develop. We have had a very good Q1. We are having a good order book as we speak. However, prices are increasing. We are seeing some disturbance in supply, but not anything else that it is giving us trouble. But the picture is also blurry. It's difficult to guess what is going to happen in the second half of the year. And therefore, we are cautious to say that things will keep on being as nice as they are right now.

Good. And a question on the EBITDA margin. It's actually slipped to 20.4% from 21.1% despite the record top line, is that Ide-Pro dilution? Is it raw materials, the U.S. ramp-up or a combination of the 3?

Well, this is a question of product mix when you compare Q1 '25 to Q1 '26. If you make a comparison with the full year of '25 and not only Q1, as mentioned, we have actually had a growth of 0.2% points to 20.4%.

And exactly. And then a big part of it is that Ide-Pro is coming in with a lot of subcontracting work diluting the share of our own products a little bit and our own products has typically delivered higher margins. And therefore, it has changed a little bit.

Good. And also looking at sort of M&A, there's a question here, as we can also see on the slide here that your leverage is already down from 2.5 in '25 to now 2.2 at the end of the quarter. You're only 3, 4 months down the road with Ide-Pro, but is this level making you comfortable doing more M&A? And how is -- could you give a little brief on the M&A pipeline at the moment?

We are always looking for interesting M&A opportunities, and we have a list of candidates that could join the SP family over time. So this is continuously something that we work with. And for sure, we see that 2.2 is an okay area to be in to do more acquisitions. But on the other hand, we also like the fact that we were able to do the Ide-Pro acquisition and after the acquisition, not being more than 2.5. Having said that, if the right opportunity arises, I'm sure we are going to find a way to make it succeed without jeopardizing anything in the business.

Good. And also looking a bit on this slide, it's -- we can't see it directly. But if you look at the capital expenditures, you can see it from the report, and of course, it's part of the investing activities here. But in Q1 last year, it was DKK 58 million, and it's DKK 48 million in the last quarter here. I was just wondering, you're both ramping up on Atlanta, on Poland. And is this DKK 48 million level a run rate from here? Or do you think we should see CapEx go up in the coming quarters?

Well, we actually believe that we are at a level we're going to see the coming quarters. We have had very little exposure on currency, but we have had a positive impact in Q1 compared to Q1 2025, where we had a small negative impact from currency.

Good. And also looking at the U.S., Atlanta keeps ramping up with the new machines underway. Are you seeing customers actually shift volumes to the U.S. because of tariffs? And could you sort of give us a general update on the tariff situation?

On the tariff situation, then here, we are already in progress trying to get some of them back. But on the production side in Atlanta, we are very busy. Production is running 24/7 on the machines that we have. And we have a good plan for the rest of the year to put in many more machines in the plant, where we already have made agreements. Yes.

Good. And last question here, I'll just switch to this slide on the one the Middle East. You were flagging rising raw material prices and some delivery issue. Have you seen any effect on this in Q1 on your growth that sort of clients and your customers are pulling forward orders because they expect price hikes later on in the year. Have you seen any effect on that?

Overall see no, not in Q1. The flow from orders to raw material is typically some weeks. And with this happening in the Middle East in March, the impact here cannot, if any, have been very, very big. We have had a very good dialogue in March and also in April with both suppliers and customers in order to secure raw material and keep production high for the coming months. But of course, this could also have an impact later on if the situation does not resolve.

Very good. That will end today's presentation. Thank you very much, Lars and Allan, for joining us here today.

Thank you, and thank you to all of you who has been listening in.

Thank you very much, and have a nice day.