SP Group A/S (SPG) Earnings Call Transcript & Summary

Hi, and good afternoon. On behalf of Hans Christian Andersen Capital, I would like to welcome you all to this presentation of the report for Q2 and thus also first half 2026 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've promised to take us through the numbers and recent highlights. So a warm welcome to you.

Thank you.

Before I hand over, also a warm welcome to all those of you who signed up for today's presentation. You can, as usual, ask questions in the chat room below, and I'll make sure to publish them, and we will do a Q&A in the end of the presentation. And should you want to see the presentation again, it will be available afterwards on different platforms. With that, I will turn off my camera, and I revert for the Q&A. And for now, I'll leave it to you, Lars and Allan.

Thank you very much, Rasmus. And welcome to SP Group's presentation of the results of the first half year 2026. My name is Lars Bering, and I'm Chief Executive Officer of SP Group.

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

And together with our colleagues, Soren Ulstrup, we make up the Executive Board of the group. We will start with a short introduction of SP Group for those of you who might be listening in for the first time and then move on to a review of the first half year, where we have set records in several ways. Allan and I will be sharing the presentation today, and we will complement each other along the way. SP Group develops, manufactures and sell plastic solutions for a wide range of industries. Our focus is technical components, typically for single use in the healthcare sector or plastic components that are built into our customers' products and used for many years. In the first half of 2026, 76% of the revenue came from customer-specific sub-supplier tasks where the remaining 24% came from our own brands. We have a global setup with 35 factories around the world and more than 3,000 employees. Finally, we are focused on increasing the share of recycled plastics in our production. We have reached 18% of the raw materials that we are using, and we have a target of reaching 25% by 2030.

Yes. And as you can see on the right of the screen, our sales are spread across several product groups. 35% of the company revenue is generated within the Healthcare product group, a product group that includes medical devices, packaging as well as ergonomic products. A 29% is Cleantech, which is the second largest product group and covers products within renewable energy, energy production and insulation. Foodtech accounts for 14% and includes livestock housing, ventilation and measuring equipment, among other things. The remaining 22% of the products fall under the category Other, which comprises of maritime products, automotive and products for the defense industry. We will return to the development within the 4 categories on the following slides.

Yes. And SP Group is organized into a number of independent units, which own its customers and relationships and its technology. The light green units on the left-hand side is our own products, including Ergomat, SP Medical and MedicoPack. On the right, the sub-supply units from injection moulding at SP Moulding and composites and polyurethane from SP Tinby. The decentralized structure ensures proximity to customers, fast decisions and a very good day-to-day agility. And then we work deliberately on creating synergies across the group, particularly within procurement, knowledge sharing and cross-selling.

With the addition of OGM this week, our global presence has been extended to the U.K., and we are now present in 14 countries. Of the 14 countries, we currently have production in 10, production that spreads across 35 factories, as Lars also just mentioned. As you can see on the world map, the group sales are split with 10% in Asia, 16% in North and South America, 47% in Europe excluding Denmark, and the remaining part, 27% in Denmark. We have created a robust global platform where the international spreads provides a good basis for growth and reduces the dependencies on individual markets.

And then let's look at the highlights. First, the second quarter and then the first half. It has gone really well. The second quarter of 2026 was record strong. We had a revenue growth of 44.6%, of which the organic growth was 29.4%. We realized an EBITDA margin at 20.3% and an EBT margin of 12.4%. For the first half of 2026 as a whole, revenue rose 32.9%, of which organic growth accounted for 19.7% with an EBITDA margin of 20.3% and an EBT margin of 12.7%. We are seeing good growth coming from both our own products and from our customer-specific supplier task. The integration -- we have expanded our medical device production in Poland so that we can keep the pace with demand from our customers. The integration of Ide-Pro is proceeding as planned. It is the first time an acquired company in SP Group has interacted so quickly with virtually all companies in the group, which is very pleasing. And then we have just announced the acquisition of OGM Moulding in U.K., which strengthened our position in the British market. We are proud and pleased of the acquisition and look very much forward to welcoming OGM's management and talented employees into SP Group.

In connection with the acquisition of OGM, we upgraded our outlook for the full year '26. We now expect revenue growth in the level of 24% to 30%. We maintain our expectations on EBITDA margin of 19% to 21% and an EBT margin of 11% to 13%.

Sales of own products rose 21.6% to DKK 472 million in the first half of 2026, which is a new record. There was a strong progress in sales of components for livestock housing ventilation and in the ergonomics products from Ergomat, while the development were more flat for MedicoPack's packaging products and for our guide wires. For MedicoPack, it was a significant customer that has chosen to phase out a product and leave the market altogether. The sales of guide wires are characterized by a greater focus on high-margin products while the capacity being utilized in full. For the sub-supplier tasks, we have also seen a good growth. We had a strong growth in the first half of 2026. The development is, of course, significantly affected by the addition of Ide-Pro, but there was also a strong underlying growth in SP Group in general. We have sold sub-supplier tasks for DKK 1.478 billion, equivalent to a growth of 37%.

Developments in our product groups are shown on this slide. At the top, you see each of the product group's share of the revenue in the first half of '26 and examples of products in the individual categories. Below each product group, you can see the development in revenue where the first half of '25 is compared with the first half of '26. As the figures show, all 4 product groups developed positively in the first half of '26. Healthcare grew 18% to DKK 688 million, and as mentioned earlier, accounts for 35% of the revenue. In several respects, the categories, project-driven and timing can affect individual quarters. We have had a strong intake of customers and projects in the healthcare area and the pipeline in this area is very strong. The other product categories grew between 37% and 61%, Cleantech with 40%, Foodtech with 61% and Other with 37%, driven by a good combination of the acquisition of Ide-Pro and strong organic growth within the individual areas.

Yes. And then we come to OGM. The acquisition of OGM Moulding in the U.K. was announced Wednesday, August 19. And OGM has production in Oxford and in South Wales with 190 employees that are working with injection moulding and assembly. They have a modern production setup, serving customers within medical devices, diagnostics and safety equipment. And the company is characterized by very long-standing customer relationship where they're producing very complex products. And let me briefly go through the strategic rationale for the acquisition. First and foremost, it strengthens medical devices as a strategic growth area, one of SP's most important growth areas, and it supports also our One-Stop Shop strategy. Next, we gained box-build as a new competence, sourcing, testing and assembly of electronic and metal components into plastic boxes that are produced at OGM, delivered, tested, fully packaged to the customer as a finished product. At the same time, OGM gives us a bridgehead into the U.K., a well-established platform in a market where the group has not previously had production. This means local service for British customers at a time where many want production closer to their markets. The main factory in Oxford is close to the universities in Oxford, Cambridge and London, which gives access to a strong technology region with qualified labor and ongoing development projects. Finally, OGM's customers gain access to SP Group's global production setup, so OGM can follow the customers outside Great Britain when they're successful.

Yes. Well, let me briefly run through the transaction. The fixed part of the purchase price amounts to GBP 18 million, approximately DKK 158 million on a cash and debt-free basis, and the amount was paid at the completion mid this week. In addition, there's an earn-out of up to GBP 6 million, approximately DKK 53 million. For the seller to obtain this, OGM must meet certain earnings expectations in the calendar year '27 and '28. OGM expects to achieve an EBITDA of GBP 3.5 million to GBP 3.7 million in '27. And for its '25, '26 fiscal year, which ended end of May this year, OGM reported an EBITDA of approximately GBP 4.4 million. If the earn-out is realized in full, this corresponds to an enterprise value to EBITDA of approximately 4.8x. The acquisition is financed through an acquisition loan. And as a consequence, the net debt-to-EBITDA ratio measured as a net interest-bearing debt to EBITDA has increased by slightly more than 0.1x.

Yes. And as Allan mentioned, the EBITDA in the most recent financial year of OGM was GBP 4.4 million, and we expect GBP 3.5 million to GBP 3.7 million in 2027. This requires some explanation. OGM's major challenge in recent years has been to retain successful projects and tasks. The customers are large international medical and technology companies that also have a large demand outside the U.K. and would like to have production in areas like Eastern Europe, the United States or even in India. Some projects are scheduled to move away, and therefore, we expect the activity level to decline slightly. However, we also know that many exciting new projects are coming into OGM, which makes us believe in a solid positive development for the years ahead. Then we come to Poland. As we previously mentioned, we are working on an expansion in Poland for the medical device production, and it's very well underway. We are converting a 7,000 square meter building into medical device production with a focus on capacity, efficiency and a better use space. And we have finalized a new cleanroom of 1,700 square meters. It was completed on August 7, and it's already in use. On the picture on the right side, you can perhaps see some of the machines that are standing in the back, and they are now running production. This investment is very important in order to deliver on agreements already entered and on the same time, strengthen our position within the health care, where it enables us to meet rising demand.

Yes. Let's look a little bit more at the figures and the financial results for the second quarter of '26, where revenue, EBITDA, EBIT and EBT all developed positively. Revenue growth was 44.6% in the second quarter of '26, which equals to a total of DKK 984 million. The growth was both organic, 29.4% in the quarter and driven by acquisition, which contributed with 15.2%. It should be noted that the basis for comparison is a weak quarter of '25, which amplifies the growth percentage in Q2 '26. EBITDA rose 59.9% to DKK 200 million, equivalent to an EBITDA margin of 20.3%. EBIT increased 86.4% to DKK 140 million and EBT increased 91.9% to DKK 122 million. On the next slide, we will look more closely on development in the first half year of '26. And let's start with the revenue, which in the first half of '26 was DKK 1.950 billion and a growth of 32.9%. We touched briefly on the positive development by product areas early. The development that for the half year was also driven by organic growth and growth from acquisitions. We note with great satisfaction that organic growth has driven around 2/3 of the growth of 32.9% achieved in this period, precisely 19.7% organic growth in the first half. Growth from acquisition accounted for 13.2%, which also means that Ide-Pro is largely on plan. Looking at the development in operating earnings, EBITDA, we still see a positive trend with growth of 36.2% to DKK 397 million compared with the year before. The EBITDA margin came to 20.3% for this first half, which is within the range announced for the full year and better than the same period last year in '25. EBIT increased 45.4% to DKK 280 million. Profit before tax increased 50.3% in the first half to DKK 248 million with an EBT margin of 12.7%. On this screen, on this slide, at the top of the screen, you see the development in cash flows from operating activities. At the right, you have earnings per share. And at the bottom, you see development in net interest-bearing debt and equity. The strong results from operations also reflect -- is also reflected in the cash flows from operating activities, which is DKK 291 million in the first half of '26, an improvement of DKK 62 million compared with the same period last year. Earnings per share rose 55.1% to DKK 16.49. In '25, our net interest-bearing debt increased as a natural result of the acquisition of Ide-Pro end of '25. When we look at the first half, we reduced the debt as expected by DKK 119 million and end June, we had a debt of DKK 1.341 million. The net debt-to-EBITDA ratio measured as the net interest-bearing debt related to EBITDA has thereby been reduced to 1.9x against 2.4 at the end of '25. The equity increased DKK 91 million to DKK 1.9 billion. So we continue to have a solid capital base.

Yes. But then look -- let's look at a little longer period. SP Group has grown consistently since the financial crisis, both organically and through acquisitions. The average annual growth rate over this period has been 9.1% relative to the past 12 months revenue. We have completed more than 20 larger or smaller acquisitions, and we have taken an active part 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 central part of our growth strategy. Over the past 10 years, we have lifted the EBITDA margin from 14% in 2016 to 20.4% for the past 12 months, an improvement of 6.4%. EBITDA growth in the first half of 2026 was 36.2% and EBITDA now amounts for DKK 701 million measured over the past 12 months. The margin improvement has been achieved through a focus on 4 drivers. First, an increased share of own products, which is very important. Here, we are able to have a higher margin than we are on our sub-supplier tasks. Second, we have the increased production in Eastern Europe, which strengthens our competitiveness. And third, we have increased the automation in our production. Fourth, which is relatively new, we are focused on getting a larger share of the value chain where we take more processes in-house. As an example, we have now tool production with the acquisition of Ide-Pro, and we have increased opportunities to build finished products with the acquisition of OGM. And we expect that all 4 drivers will continue to contribute positively to margin development going forward. The same picture applies to the EBT margin, which has been lifted from 8% in 2016 to 12.5% for the past 12 months, an improvement of 4.5 percentage points. EBT growth in the first half of 2026 was 50.3%, even stronger than the EBITDA growth. And EBT amounts now for DKK 428 million measured on a 12-month rolling basis. The margin improvement was driven by the same 4 factors: increased share of own products, a larger share of the value chain, increased production in Eastern Europe and automation. And our ambition is clear. We want to be our customers' preferred supplier with a strong competitiveness and healthy earnings. That requires a good mix between sub-supplier tasks where we continuously improve our processes and our own products where we create innovation and we have higher margins.

But here, we have a combined overview of the financial ratios and key figures, several of which we have already touched on in the previous slides. As mentioned earlier, cash flow from operations was positive by DKK 291 million in the first half of '26 and contributed significantly to the change in cash, which in the first half of '26 was positive by DKK 54 million against a negative of DKK 25 million last year in the same period, an improvement of DKK 79 million. Our equity end of June was DKK 1.9 billion, and this equals to an equity ratio of 46% against the equity ratio end '25 of 45.3%. When we look at the outlook for '26, we have upgraded our outlook for the fiscal year '26 twice this summer. The first time was July 10. On the basis of the first half development, we lifted and narrowed the expectation for revenue growth to 22% to 28%. The second time was Wednesday this week when we upgraded again in connection with the acquisition of OGM. We therefore now expect revenue growth of 24% to 30%, equivalent to a revenue between DKK 3.6 billion to DKK 3.8 billion. Of this growth, 16% to 17% comes from acquisitions and the remainder is organic. The margin expectations are unchanged, an EBITDA margin of 19% to 21% and an EBT margin of 11% to 13%. The geopolitical tensions and the conflict in the Middle East still plays a role. Our growth in the first half has been strong -- very strong and primarily driven by new projects across a large part of our business. Our order horizon is not long, and there may be a minor element of stockpiling in Q2. We, therefore, take a cautious approach to guidance for the year of '26.

Yes. And then it is time to summarize. First half year of 2026 was record strong with revenue growth of 32.9%, of which 19.7% was organic growth. We are seeing a good growth in both our own products and in our sub-supply tasks. With the acquisition of OGM Moulding, we gained access to a new market, and we gained new customers in the United Kingdom. And we have upgraded the guidance twice. And now we expect, as Allan just said, a growth of -- in a level of 24% to 30% with unchanged margin expectations. The underlying business is very strong, and SP Group is ready for continuous growth. Thank you for your attention, and now we are ready for questions.

Thank you very much, Lars and Allan, and I will just rejoin here with sound and camera. And yes, let's jump into some of those questions that came during your presentation. I'll go a few slides back. We do have a question on the outlook. It says here. If we bridge from the H1 revenue of DKK 195 million to the guided full year range, the second half looks materially slower than the first, even with the OGM added. Is this guidance built on a genuine expectation of lower activity, or is there room in the range?