Teqnion AB (publ) ($TEQ)

Good morning, everyone, and welcome to Teqnion 2026 Q1 Report. Thank you all for joining us today. And we will, during the next hour or so, try to give you as much information as possible for you to understand your business better. We will, as always, be alternating between Q&A e-mail questions and the questions that you can ask live, which you can see in the bar in Teams. Before we jump into the Q&A, I would like to say a few words. First of all, I would like to acknowledge that the last couple of years have been challenging for everyone owning Teqnion, mainly for 2 reasons: financials and lawsuit. So let me just unpack that a little bit to provide you with a little bit more insight of how we think about this and where we are. So starting with the financial results. While we have made a profit and have had positive cash flow for every year since the financial crisis, the levels during the 2024 and 2025 period have, of course, been lower than what we want and what you would expect. During especially 2025, we implemented different strategies. We introduced new processes, systems and more importantly, we found better operators. And I believe the financial results during the last 3 quarters have reflected those efforts. I would also like to give some insight on the 3 pieces of the business that we have been speaking a little bit about the acquisition, the part that works and the part that needs fixing. When it comes to the acquisition, during the first quarter, we have, in total, added 3 new businesses in the group. We have, during the last year or so, acquired roughly 10 companies, which is a record high. The quantity is, of course, less important. The quality is what matters. And what you have probably seen in the numbers, this group of companies have significantly lifted the average of our group. While we don't give any forecast, I would like to say that the pipeline looks very healthy and maybe better than ever. The part that works, the companies that tracks along and are growing as we want them to, there's really not much to say about them. They're just chugging along, and that's how it should be. Hopefully, you'll hear more about that in the future. And lastly, the part that doesn't work, the part that we don't really like. I'm happy to say that this part has been shrinking rapidly. And you can probably see the numbers, especially looking at TEQ Nord, where you see the margins have been expanding significantly. A year ago, Johan, I and some colleagues, we had to multitask like madmen. Those days are gone. We never want to go back there again. The second challenge that I -- yes, thank you, the second challenge that I would just like to talk a little bit about, the lawsuit, the lawsuit in Ireland. We will, of course, continue to follow the directions of the court, which means that we will not be spreading information or lies as certain other parties might be doing. Our truth can be found in sworn affidavits verified by data, verified by third parties and can be read by interested parties in the papers held by the Irish court. Fundamentally, the dispute is between Teqnion AB, Johan and me and the vendors of an Irish company that represents roughly 2% of our revenue today. We acquired a business in 2022 based on certain warranties and the vendors' representation of the company, which, among other things, involved that they held appropriate certifications to run the business and, of course, the financials. During the course of the last couple of years, we uncovered that certain representation of the company was materially different from what was warranted. And this, again, has been verified by several third parties. This, together with other irregularities, which you can read about in the court papers, resulted that we were advised to ask the Court of Ireland to wind down the defunct entity. The court agreed and appointed provisional liquidators to run the business, which they are still doing today. Due to this, we have chosen to seek damage. The process will probably be long. We have the facts. We believe in the truth. We will -- we believe that the truth will prevail, and we believe in the Irish court system. There will be misinformation along the way in order to set pressure on us personally and on your company but the truth will prevail. Before handing over to my friend, Johan, I would like to just quote my second biggest hero in life, lose money for the firm, and I will be understanding, lose a shred of reputation for the firm, and I will be ruthless. Johan, please.

Thank you. This is Daniel Zhang, my friend and Deputy CEO of this company, Teqnion. My name is Johan Steene. I'm the CEO. I was a part of this since the beginning, 2006. This is my 20th year. It feels fantastic. Just a little bit about the report that was released this morning. The Teqnion that you see today is a better and more sound company than a year ago, thankfully, after all the hard work that the colleagues here have put in. And the operating profits and the cash flow is pointing in the right direction. From my heart, I feel there's so much more to do, and we're targeting that, of course. We have reorganized the way we have the group now into 2 different business areas. We have Teqnion Nord, and we have Teqnion Väst. Both entities are performing better than before. And it's -- I see it as a fundamental base for sustainable growth and scalability going forward to have us organized in this manner. We have an acquisition engine that is performing really well. The main component of that engine stands beside me. But a new thing, which is really encouraging and fun is that our companies actually has started to do their own small acquisitions like bolt-on acquisitions. And that's also a little bit described in the report. They're sort of building small mini groups by themselves. It's fantastic. We also have a new larger credit facility with our bank, which is really, really good, and we feel that we can continue at our acquisition pace as we have informed you before, and we see no way why we should reconsider that pace. Operationally, in the subsidiaries, we see no major setbacks this quarter. We haven't seen any exceptional good things happening either. It's just normal business going on, normal grinding. I also mentioned in the report that the organic sales is down a few percentage, but that is largely by our own design. I would like to say we have stopped -- willingly stopped doing some bad business, which has been unprofitable. And what we're chasing is, of course, revenue and cash flow, and we see that our strategy is working. Yes, once again, I feel like we are in the beginning of building something really, really fun and hopefully much, much bigger. So let's jump into the Q&A session.

The first question is [ Christoffer ] that sent this in through e-mail. He writes, does the EPS target really make sense when the FX effect has such a huge impact on the financial items? Your thoughts on that would be appreciated.

Yes. Maybe I shouldn't write so much about accounting effects. But now I felt like doing it because it looks strange in the figures. Over time, it won't matter. I think EPS is a very good KPI to measure us by, and we are aiming to double it every 5 years. Yes.

Yes. I think so too. I mean for a single quarter or maybe even a couple of quarters, the effect can be quite strange.

And especially when you compare it to the quarter a year ago, I mean. So...

Yes, exactly. I think that the tricky thing is, of course, that we have 3 financial targets on 3 different measures. And they, of course, all measure different things. Sometimes we get the question like which single metric is the most important. And I think that is a tricky thing, right, because there is not really one that rules them all. EPS is, in my view, over the long term, something that tells a story about if we're doing worse or better. But if we would exchange that to something else, there will be other problems as well. So I think it's really -- it's maybe a boring answer, but for all investors and owners of this business, yes, that one is very important, but also keep an eye on everything else, which we try to explain as transparently as we can in either your letter or somewhere else.

Yes.

Good. The next question comes from [ Aryan ] over e-mail. Do you have a strict requirement for founders to stay on for a long period or for a strong #2 to already be in place before acquiring? When external replacement is inevitable, I can't say the word, is needed, how does Teqnion ensure that the new CEO can replicate that essential founders dedication and rebuild those fragile customers and staff relationships?

Nice. Well, the normal way when we are acquiring a company is that we keep the seller, which is normally the founder or at least an operational important figure in that company. We keep them onboard for normally 3 years, and that is incentivized by earn-outs normally. During that period, hopefully, we can show that individual that it's fun to work with us and that we together can continue running the business towards the future better and better. And hopefully, that person will stay on for longer and at least in some role in the company, if it's an operative role or if it's on the board or something similar like that, we just love to keep the entrepreneurs or the founders, sellers onboard as long as possible, hopefully, for the rest of their lives. That's how we see the business we're building. It's doing it for the long term and just keep them as ambassadors and found like a good foundation for culture and reputation in absolutely the majority of cases that, that is the best way. Then we, of course, understand if some individuals want to retire and do other things in life, at least maybe parts of their family want them for themselves for a while. And then we try to find a way to make that happen. But yes, so we incentivize them at least during the 3 years that we have the SPA running. And then hopefully, we have incentivized them by its fund to work and build companies, so they will stay on after that as well. And if they stay on as a CEO, for example, of a subsidiary after that, they fall into the normal incentivized program that other CEOs have in this group.

Yes. I think another way of answering it is maybe that we can't really find people that can replace them and make them better, at least not in the short term. So it's kind of funny when you see maybe some of the discussions that we're having with vendors because the vendors for a good reason, are sometimes concerned or scared that we might let them go during the period and part ways with their baby. And in that way, they wouldn't be able to make all of their earn-out, et cetera. And for us, that is our biggest scare as well that keeps us up at night. If we buy a company, what happens if someone leaves after 3 months because that is really, really difficult for us. So of course, when we look for a company, if the person wants to stay on and is willing to be operational and also have maybe a Crown Prince, Crown Princess or something along those ways, for us, that is worth more.

Definitely. And also, it's funny that they normally think that they want to retire. And they also have calculated it in the income statement that we have room for hiring someone to replace them and we say, yes, we cannot replace them with one individual. You're not one head. You are several heads. So we have to replace it with several people because you do so many things that you don't think about.

Yes.

No, it's a difficult thing. I mean finding and buying companies it might be tough if you not practice a lot. Daniel has practiced a lot. He's very good at it. But recruiting the right type of individuals that has all the drive, passion and skills to run a company like this, that is the big key in order to get this to scale in a good way.

Yes. Nobody asked this, but you have to explain your shirt. I feel that someone is wondering, but.

It's a very nice shirt I have a seagull here. No, I received this from our friends at HT Servo when we acquired that company, and it's so good because I haven't had a U.K. team to share for, but I have 2 sons that share for other teams. They have the individual teams that they share with us. So now we have 3 different teams to argue and fight about in our family. I also have my name.

'25 as in 2025. Good. Next question comes from [ George ], e-mail. Are you starting to feel an economic rebound in Sweden after a few years of slump? Are the weak subs starting to show clear signs of recovery on the order book and shop floor? What structural changes have you -- I think maybe we will take one at a time.

I think we have to take -- otherwise, we just forget or at least I do. I wouldn't say that we've seen an upturn in the demand for our stuff, not a clear trend shift anyway. But the big thing that we have managed to do is that we have removed a lot of bad business that reflects in the numbers. And also, we sort of found new ways to be more active in the sales process, seeking new businesses instead of just waiting for them. So simple things that is fundamentally to run a profitable company. We have tried to implement as much in as many cases as possible during the last year and continue doing so. But I haven't seen a big change in demand. But of course, you all are familiar with what's happening in the world and what has been happening in the world. And it's very volatile and it's very -- sometimes very fragile, and we have to live in that world. We can't do nothing about it. So we just have to be better than before.

Yes. And I think also every single company that we have bought have been profitable before we bought them. And I mean, to different extents, of course. And what you have seen during the last few years, of course, the macro was against us. But as we've been saying a few times already, it's not really that we're blaming because we know that it's internal reasons why we've had this downturn. We didn't have the systems, processes in place. We didn't have the right operators in place, and we have remedied a lot of that. So this is probably not the right way to say it. But when you screw something up, you can also unscrew it, and that's what you're seeing in the last few years. And for the ones that are interested to look at subsidiary annual reports, of course, the numbers are not exactly what we see because the costs are allocated in different ways. But if you look at that and make your own analysis, you would see that certain companies that are in sectors that should have a lot of tailwind have not been doing that well. And certain companies that should be, in theory, doing worse due to the macro, they're actually doing really great. And that is fully due to how it's been run. Good. Next from [ George ] is what structural changes have you implemented on the loss-making subs, so as they don't return to the current situation in a few years' time, what other outcomes could be expected after this improvement? You want to start?

Yes, I love the question. There's no warranties that it can't happen again. You said you can't unscrew it. You can screw it again. We don't plan to do that. But there's always -- what we're doing is that we're presenting a lot of figures to you 4 times a year, the financials of the operating business that we're trying to run here. Everything is made and done by human beings and human beings take decisions and make actions or not. And that affects, of course -- it ripples down into the financial figures sooner or later. And you can never be certain. What you need to do is that you feel you need to build a strong foundation with regards to how you make up your plans, your strategies, how you process every aspect of running a business and make sure that you have the right foundations or the right, what we call, the fences that you're not allowed to jump over for each subsidiary. They have the freedom to operate within their fences and reset the fences for them. And that is by ownership directives. We tell them what we see would be possible to harvest out of a specific subsidiary over a 3-year period, and then we help them with the strategy to achieve that. And then they are -- they have the mandate and they have the responsibility to execute on the actions necessary in order to reach those targets and goals. If we can fail, yes, definitely. If we can make it right again, yes, definitely. Is it -- is the risk of failing smaller if you have the right foundation and the right structures in place? Yes, definitely. So now we put a lot of those structures and processes in place in order for us to make it harder to fail, but it's still -- it's always possible to fail.

Yes.

Sorry for the defensive, I think it was very defensive.

But I think it's the right -- I mean we -- some of the companies will have downturn again, but very hopefully for other reasons. Someone said something the other day that I thought about said once it a coincidence, twice their choice. I mean things will happen. We'll make new mistakes, but we will do everything we can to not make the same mistake again. You wrote a little bit about that in the report as well. But now when we have scaled over the last, let's say, 5 years, we've gone from 15 companies in 1 country to 40 companies in different geographies. And now we have implemented having 2 business areas run by Dave Barton and Martin Lagerberg. And that creates a better -- yes, we do feel that we have better control, but it creates more decentralization because these people know more. Johan doesn't need to be the bottleneck for all the things that need to happen. Another question here is that how does the measures compare to the measures implemented to the mid-, high-margin subs? It's an interesting question, and it differs a lot. The -- to make it short and simplified, I mean, if the companies are performing roughly in line with what we together believe it should, and we together think that we're doing the right things, the CEO are doing the right things. Sometimes the financials can be bad. But if the CEO are doing the right things and we don't have any better ideas, then we're just going that direction. But what Johan and I spoke about was basically what do we do, how can we help the turnaround companies. For the ones that are, let's say, mid-high margins, they usually have the drive to do things on their own and just be better. We don't come in and say, now you have to do this, now you have to do that. We spread ideas. Some of the ideas stick. Some of the ideas are good. Some of the ideas are bad.

Yes, some of the ideas you have to spread many, many times.

Yes, exactly. And we don't -- for the ones that are performing, then it's really decentralized. We don't force ideas upon people. There are absolute ideas here in Solna that we feel that why can't I do this. But in order to keep the spirit of decentralization and the ownership of the business, we don't do that. We have this sourcing office that's just as an example. A lot of our companies could do more through that. But we don't force that upon them. We want them to feel that they want to. Let's take a live Q&A question. We have [ Prakal Goyal ], who is writing a tax rate was notably high this quarter. Could you explain the main reason for the tax rate? Based on the current geographic mix, what should investors assume as a reasonable steady-state tax going forward? I think...

I mean, please correct me if I'm wrong, but the company tax is approximately 20% in Sweden, it's 25% in the U.K. So there you have it, then you can look at how much earnings we get from the different business area and do a calculation. But just to try to answer the question really rough is that if you look at where we pay the taxes, we pay the majority of the taxes in the subsidiaries and the tax authorities look at how much earnings that company has. And we have had more or less double the earnings than the comparable quarter, which means that we paid comparably double the taxes. That's how I see the answer to that question.

Yes. Good. Then we have a technical question here from [ Prakal ] as well. He's writing on the P&L. I understand that part of the FX volatility is showing up in the financial income, but the interest income expenses have also increased sharply year-on-year, 4x despite only a moderate increase in debt. Could you break down what is included for this quarter? And I think just to keep it quite short, I don't want to do an accounting lesson. I'm not qualified for that either. But when we have a positive FX effect, it lands in the financial income. And when we have a negative financial effect, it lands in the financial expense. The other financial costs are the interest on our different loans. But you also have earn-out discounting effect. So there are a few different things at play, which Johan and I spoke about this earlier. I think that if we have made up the accounting rules, it would look different. Maybe not better, but it would look different because you have some effects here that are the discounting on earn-outs, that is not a real cost. But basically, when we have earn-outs, we have to discount that back to present value and that adds a frictional cost to it. So when we buy companies and more earn-outs, that one goes up because IFRS. Next question from [ Prakal ]. Margins have remained very strong for the last 3 quarters, even though organic growth has been weak, helped in part by mix and stronger profitability in the U.K. businesses. If margins remain at these levels next quarter as well, the comparison base will become harder unless organic growth improves meaningfully. How are you thinking about the balance between sustaining margin and reaccelerating organic growth over the next few quarters?

A relevant question. I just to lay out the foundation, we are chasing organically earnings growth. That's what we're chasing, which normally means that we also have to increase revenue growth, but not on the cost of losing the margins. So we are in the process of increasing sales and increasing margins, and that's our target.

Yes. I mean we have been in a situation. If you look at the 2 different business areas that we have, we have Teqnion Väst, which is still very new, as you can see in the numbers. Previous to last year, we basically had one company that was a big, big, big chunk of the profit and the profitability. And they have -- we really think that they can continue on these high levels, but it's not a level that we expect other companies to get to. If you look at other serial acquirers, if you are performing at, let's call it, 20% EBITA, 25% or something like that, it's close to best-in-class. And the Teqnion Väst number will probably, over time, more and more converge into that direction. If you look at Teqnion Nord, it's a little bit of a different story for 2 reasons. One, the business quality, the mix of the companies, it's a little bit of a lower quality due to legacy reasons. So I wouldn't really believe that they can reach up to the same level when it comes to profitability and return as Teqnion Väst, at least not in the short, medium term. And much of the rebound that you have seen is exactly what Johan has been saying. We have removed unprofitable revenue and through that, got a minus, minus equals plus, so we get more profit. But we are probably in a stage where we have more of a stable foundation. There's still more to be done at individual entity levels, but we are absolutely at a stage where soon or now, and that's what we're doing is to increase the organic revenue growth in order to get more profit as well.

Yes.

Good. Next up, we have another question here from [ George ] on e-mail. He's writing 3 questions. Could you please provide a short update on how you are seeing things in this quarter, I guess? Maybe we answered that in the beginning or we talk through.

Yes, maybe a little bit. But just to recap that, I see that we see the effects of all the adjustments we've done to the group and to operations and to processes. That feels good, but it's still -- I mean, it's still frustrating that I see that there's a lot of more things to adjust and make better. But no really good things have happened, no really bad things has happened during the quarter. We have just pushed everything a little bit further and continue doing so.

Yes. What has surprised you the most when it comes to improvements?

I would like to say that the time needed surprised me. But emotionally, yes, intellectually, no. I mean you know turning something like this around takes time, many, many people that needs to understand the importance and the relevance of actually changing behavior, changing how to do things. And yes, it takes time to turn -- let's call it, culture again, to turn a culture around. It takes a lot of effort and a lot of time, and there's no shortcut there.

I think also just to provide some context, even though, of course, most people know this, on -- starting maybe on the cost side, there is a significant lag of costs when it comes to Sweden, but also to a very high extent to the U.K. when we downsize companies and unfortunately, sometimes need to part ways with people, it takes sometimes 3 months, 6 months, 9 months, sometimes even longer to actually get the costs out of the income statement. So even though the action has been taken, it doesn't show until much later. There are also looking at maybe on the gross profit side of things, there are a lot of contracts where in theory, of course, you would say in excel, let's just remove these products and we'll be -- look good. But you have -- if you have entered certain contracts, it's way more complicated than that. In certain cases, you just cannot and you need to renegotiate. That might take months and you won't see the effect in maybe a year.

Or more.

Or more. And in certain cases, you're just stuck with that, which is, of course, unfortunate. But there are -- there is a natural stickiness in our group, maybe not on -- in every single subsidiary, but there is a natural stickiness and that goes in both directions. Which is also why before 2024, there were things that we felt that we were doing in the subsidiaries, which were not great, but the number is still ticking up. And yes, so we just have to ensure that we move in the right direction all the time and the financials will follow. What brings you happiness when thinking about Teqnion's future?

Definitely, the feeling that we have still a very, very long way to go and a much bigger company to build together with fantastic friends. It's a fantastic place to be in an environment where everyone tries to be their best and just pushing. Yes, it warms my heart to have this opportunity to be here.

I think for me, I would say exactly the same thing, but also for the last couple of years, it has felt that we needed to focus a lot on fixing things and getting back to some kind of normality. And while it is -- when you see the fruits of that, yes, it makes me us happy. But it's not -- at least for me personality-wise, getting back to where you are is not what drives me, winning drives me, getting back to where you are is just back to the starting point.

And hopefully, there's big adventures ahead. I mean we are in 2 geographies now. I mean, hopefully, we will be in many more in a few years.

Yes.

And...

We sit in Jasper, we have Belfast.

You're right. Yes. But I mean, there's so much possibilities and there's so much adventure ahead of us, and I'm just looking forward to that journey.

Yes. We have a question here on e-mail from [ KP ]. Regarding the discontinued operations, could you please provide some further insight? Specifically, do this represent entire subsidiaries or only specific parts of those companies? Additionally, if this is a sector-specific issue, should we be concerned about our exposure to other companies within the same sector?

Well, we have closed a couple of subsidiaries that was reported last year. But we have also, of course, stopped doing businesses in other subsidiaries that are still there and where they have a foundation that we believe in will be stronger in the future, but where they have some part of the business that needed to be exited. If we're exposed, yes, I mean, the housing industry, we downsized quite a bit there. Both companies are still around and demand for wooden houses in Sweden is maybe somewhat a little bit better than a couple of years ago, but still is a very, very demanding market. We are definitely aiming to make those companies better, and we will see in the future how that will turn out in the long run, but it's a very volatile business and hopefully, I would say. But what I believe is the housing business at least here will always be a very volatile business.

Yes. But I think that -- again, going back to what we spoke a little bit about before, yes, our housing sector with 2 companies, they are performing at the bottom when it comes to profitability, no doubt. But if you would rank all of our companies based on sector, it wouldn't really correlate perfectly with how you would like or how you think you would look. As an example, we have for defense companies, depending on how you count them, 2 of them are at the absolute top when it comes to profitability and growth. 2 are absolutely not. And I mean, yes, there might be different micro, macro reasons for that to happen, but it's mostly about how the companies have been run and how we have been supporting them. Absolutely. So I wouldn't think too much about sector. All of our companies should be able to at all circumstances make some kind of profit. Will it look like that in the reality? Probably not, but they should.

And the third part of the group, as you described in the introduction, is supposed to be really, really same and small, the underperforming companies. And we're definitely going to monitor that and take actions to make sure that, that happens in the future.

Yes. We also got a few questions over the e-mail because it seems like the chat function or a Q&A function maybe doesn't work perfectly. Sorry for that. We have [ Mahesh ], sorry for the pronunciation. He says, Daniel, you mentioned that the acquisition pipeline looks healthy. Do you refer more to the U.K. companies or also Nordic? Any plans to go further in the EU?

Do you have any plans?

I would say yes to all of those questions. U.K. is where we have most of our cases, and I would expect that most of our acquisitions will come from there. Do we look more at Sweden and the Nordics? Yes. And I would say that the biggest reason is that since Martin started, we feel that there is more capacity to absorb companies now in the Nordics. So yes, I'll say that we're back in the Nordics. Are we -- do we have plans to go further in the EU? Yes. We're not really rushing. We feel that there's so much more to do, especially in the U.K., but also in the Nordics. But we are carefully looking for a third leg, so to say.

Yes.

How is the M&A pipeline in terms of deals and valuations? Do you feel the need to go outside of the U.K.? When it comes to deals and valuations, we continue with the same way. I think it's fair. We have a valuation method where we try to get our money back in roughly 5 years. Looking at our numbers, it looks like we're hitting that target. Then, of course, as you've seen for some of the companies, it goes faster and for certain companies, it takes longer. And maybe for one company, as we know about now, the -- maybe we won't get our return, depending on how things go. But we try to keep that valuation because it makes it fair. All of the entrepreneurs coming into our group know that, yes, they get different amounts of money, but we value all of the companies in the same way and it makes life just easier. It makes it easier to speak with advisers and such. Everyone knows where we're standing. And...

Yes. That's a very important and good point.

Good. [ Ramon ] is wondering, would you consider reporting performance per cohort, either annual or longer period of businesses acquired such as we can monitor the improving quality of acquisition process, i.e., return on capital per cohort? I would say that the short answer is no. We don't plan to do that. We might do it on a discretionary basis. I think we've done it once or maybe twice where we've shown a little bit more how the different cohorts are doing. And I mean, the -- I understand the question, but a bet on Teqnion is basically a bet on that we can both buy companies that overall increases the margins, the returns and cash flows and a bet on that we can make the companies that we have acquired better and better over time. And those will be reflected in the total figures. And I understand that it would be fun to look a little bit deeper under the hood, but there are various reasons, competition, et cetera, that makes us hesitant on that.

Yes.

We have a question from [ Alvin ]. I have a few questions regarding the recent results. Regarding Teqnion Nord, what is the average EBITA margin for the segment? I think we have that on Nord...

It is 11.6%, in that vicinity, I think.

Yes. It's more or less a double compared to the last quarter in Sweden. During that period, we acquired 2 new businesses, but of course, the group consists of roughly 25 companies. So it's not that, that is tilting the numbers. What is tilting the numbers is most part that we're losing less money and that the lowest performing companies are starting to make a little bit more money and then the rest chunks along.

Yes.

Same person. How much autonomy the subsidiaries have in acquiring new companies? And to what extent is Daniel involved in the process? How do you ensure these acquisitions are aligned with the organizational targets and M&A criteria?

Short answer is they are not allowed to do any acquisitions without our knowledge or without our approval, which means that Daniel and others are involved in evaluating the project and normally also helping along the way.

Yes. It's -- we will, hopefully, one day get to a situation where certain subsidiaries or maybe business units leaders or whatever we call them, can do smaller ones and then we sign off from Solna. But at the moment, the difference is basically that if we take the compressed air group, we have a very, very good CEO, entrepreneur vendor of Avelair, Dave, who is running that. And together with him, we have identified certain companies that would be fun and great to have in the group. And then, of course, it's much easier to run the due diligence because he's been in the business for decades, he knows the market, he knows the suppliers, he knows the reputation of companies and he have more of the direct contact with the vendors, while I do more of the less fun administrative pieces. What have been your primary lessons following the headwinds from the lawsuit and the organizational changes of the past? I think it's 2 different questions.

Yes, definitely. I mean I think we covered most of it. I don't really know how to answer it in another way.

One thing it's not maybe a lesson or a surprise, but it's interesting to talk about when we have subsidiaries and if you see the subsidiary as a house, in certain loss-making companies, you just feel that there is so much negative things happening. And it's like having a house where it's just leaking from different places in the roof. And you try to do everything you can. You try to help out and put duct tape on some place, you try to exchange the roof on some other places, but it just leaks in new places and you kind of feel that life is unfair and you're so unlucky. In certain situations, because you asked about the organization challenges, you changed I was going to say the janitor, but the knight of the house, the owner of the house, the CEO of the house. And suddenly, it just stops raining. There is just no dripping anymore and everything gets fixed. It's not a new lesson, but it's one that is interesting to ponder upon and remember.

And I think we can talk about this for a very long time. I mean, okay, your housing analogy, but also it's like a relationship, right, because it's human beings coming back to it all the time. And emotions, something learned from the lawsuit, yes, you get emotional because you feel that someone is hacking away on your legacy, right? And that affects me, I can be truly honest with that. I've been doing this for a very, very long time. And would hopefully do it for much, much longer. And the reputation and legacy is something that I'm very proud of. Same thing goes with subsidiaries that don't perform in a way that should be possible. I mean, it's a culture that needs to be fixed. It's human beings, the relationship between those human beings that needs to be better in order to get things to run smoothly. Every business is made between 2 individuals, at least the businesses that we are performing, and that is built on trust and relationships. And that's a very, very important asset. And that's something that we try to constantly build on and protect.

Yes. One interesting concept, our speaker is [ Morris Tilter ], who, as you know, is shareholders at the AGM chooses to will become one of our Board members. When it comes to mistakes, I've never heard this concept before speaking with him. He said that, yes, I understand your frustration, Daniel. I understand that you want to kick yourself and that you wanted to do better. But think also about it as a DCF, not saying that it's good to make mistakes. But when you have a DCF, you have cash out today, most often. And the question is, what is the net present value of future things by investing the cash flow today. And he told me, you can think similarly about making mistakes. Do you learn from it or not? If you don't learn from it, it was just a cost. Nothing good happened from it. But given that the investment of the mistake has been made, you can't do anything about it. But what are the future learnings? And is the net present value of your mistake positive or negative? And I guess building on what Johan said, the jury is out, but we have learned a lot, and I truly believe that it will make us stronger and better as a group. We have a few questions here from [ David Vervaco ]. It's several pieces. I'll take one at a time. Nord EBITA margin went from 5% to 11.6% year-on-year. How much of that is, a, the structural pruning of loss-making activities now complete; b, mix shift from acquisitions like MITAB, Edurus; and c, underlying operational improvement at existing base, which of these continue into Q2, Q4 and which was 1 quarter step? We spoke a little bit about this before. The majority here is that we're making less losses and that the companies that were performing close to 0% are now a little bit higher than that. And of course, that gives a nice swing, and we believe that, that is structural and that it will continue. MITAB, Edurus, yes, it added. But if you look at the numbers for those companies, they're not huge. They're absolutely adding to the group, but it's a smaller portion. And the underlying rest of the business, they are growing, but of course, with smaller percentages, that is not explaining the full piece there. So which of this continued to Q2, Q4 and which was quarter step. I mean, we don't give guidance, but we believe that the changes we made are structural and will continue in the future. Next up, you flagged last year's Väst result was supported by a rather favorable business that should not be considered standard. Can you quantify that roughly? And help us to think about the normalized Väst margin looks like over the next 4 quarters as comps get harder? Again, we don't really give guidance, and I know it's not really that you're looking for. But going back to what we talked about, we don't know which businesses that we will buy. We have our pipeline. We hope for some of them, and we'll find new ones that we didn't know existed. So it's difficult to say exactly where we will end up. But I think looking at the more mature companies that are out there that have several hundred companies, the ones that are best-in-class, they probably have EBIT margins of, let's call it, 20%, 25%. And I think, of course, over the long term, we want to win. We don't want to be good enough, but it's probably closer to those regions. You also mentioned...

Even if you have to stretch out the time line quite a bit, of course.

Yes.

Yes, yes. I agree with everything.

You mentioned 5 companies contributed roughly minus 7% to organic growth. Is that cleanup substantially complete? Or should we expect a similar drag from discontinued activities in Q2, Q4? At what point does reported organic revenue converge with underlying organic? Yes. You know that we don't talk about quarters. And is the pruning complete? I don't think that the complete is a word that really exists in our vocabulary. I mean there's always more to be done. Of course, you get to an intersection where there is less to prune and more to grow and then you get net positive instead. Are we at that point? Let's see. Are we getting closer to that point? Yes, absolutely. But there will be things that we learn along the way in certain subsidiaries where certain projects, product portfolios or whatever were less favorable than we thought. And in that case, we will not hesitate together with the CEO, cut that because in the end, it's about making money and profit. Do we think that organic top line growth is important? Yes, over time, of course, that is driving the growth. But we only want to grow if that increases our profit. So we use the bottom line to drive our top line. And in certain cases, shrinking is the right way to grow bottom line, then we do that. That's what we're doing now. In certain cases, in a more stable environment, we will drive top line -- sorry, we will drive bottom line by driving top line. Next question there from [ David ] is saying, you expanded the credit facility from SEK 575 million to SEK 1 billion. What does your pipeline look like over the next 12 months in terms of number of actionable targets and average quality size recent cohort has prospect changed? So most of those, we won't disclose. We have a very good pipeline, and I think that you will just have to see what comes up. And the reason why we don't talk about it is that we have a few things. When you look at the pipeline, the closer to the bottom you get, then, of course, we get more transparency, but we also have a lot of discussions that feels very promising, but we don't know if that's going to happen this year, in 3 years, in 5 years, in 8 years or never.

13 years.

Yes, 13 years could happen. MITAB that we bought last year, that was a discussion that came to fruition over roughly 5 years. We thought every year that this year is the year. We had to wait until 2025. But it's very much a numbers game. Next up there, we have the free cash flow question. It was only plus 7% despite EBITA increasing 106%. The question is long, but maybe we can talk about the free cash flow.

Yes, we would have loved to see more of that, but it's -- at the end of the quarter, we had some quite good sales, which is now in the working capital segment, which means that it should convert into cash going forward. So it's a positive thing. I mean we rather have it as cash in the bank, but it's actually sold, things that are sold and locked up in receivables and in stock.

Yes. I'm going to say something, but only if you promise to not extrapolate it. You can't write, so it's difficult to promise anything. But looking at the quarter, we have a lot of fluctuation month-to-month. We collect all of the data on a monthly basis. We look at it. And it's, to be honest, quite a bit of noise in that because our companies are still rather few and some of the companies are rather big. So depending on what happens on 1 or 2 companies, it can tilt a monthly report quite a bit. But January was, in our terms, okay-ish. February was rather good. March was really good, if you think about the 3 quarters in the month. And exactly as Johan said, when you sell...

Month in the quarter.

Sorry, yes. Then, of course, you get a lot of receivables that gets tied up.

Did everyone promise to not -- I think the voice was great but I didn't hear that.

Buyers beware. Next up, we have Avelair is building a compressed air-mini group via Cambs and now Powerair. Wallmek is expanding into U.K. Is this bolt-on on the subsidiary approach and deliberate strategy shift or opportunistic? Does it change how you think about M&A? My thinking is this, yes, it's deliberate. It doesn't happen by chance. If you look at the theory of things, Teqnion as a business model, we want to be sector agnostic. It means that we're in different niches. It means that if we do our jobs right, then the company would be doing well in all different economical circumstances and all different strange shocks that the world can get. But of course, when you look at academia, when you diversify for every new company that you add, the return in risk mitigation becomes more marginal and you get diminishing returns of risk. So yes, we could add companies horizontally forever. It will add companies that are great, that are making good cash flow and good profits and it will reduce our risk a little bit. And I think that during Johan's time during my last 5, 6 years, our focus has been close to 100% building horizontal platforms to mitigate risk to have enough small legs to stand on. We are at a place where we feel that adding more companies will absolutely add more cash flow. It will add more strength and it will reduce our risk, but less compared to before. So when we find good opportunities, and I should put it differently, we have identified certain companies and certain verticals where we want to double down. Wallmek is one the compressed air group is another, then we add companies vertically. So instead of 100% horizontal acquisitions, maybe we're at, I don't know, 80-20 or something like that. So yes, it probably will happen a little bit more in the future, but absolutely not a full switch. Good. Maybe we have time for one more question. You flagged Iran and rising energy prices, which subsidiaries are most exposed on the input cost side? And what measures have you initiated? You've been heavily weighted towards U.K. acquisitions, 7 out of 10. Should we expect the mix to continue or rebalance?

At least good questions. But regarding the war with Iran, we just took it up as a potential risk. And I mean, it's not specific to Teqnion or to Teqnion companies. It's just that it's the energy prices and the limitation of accessible crude oil in the world is less, which means that it's going to drive inflation, which means that we have to take measures. And the measures is, of course, to increase prices and not be the last in the line when people start doing that.

Yes. There are -- we try to encourage all of the companies to, of course, push out prices as much as they can to their customers when possible. Many of them have pricing power and can do that. And then, of course, in the other direction towards suppliers as well. But looking at the macro view, looking only at Teqnion and not what's happening in the world, we have certain companies that will be affected in a negative way, of course. But we also have companies that will be affected in the other direction. As mentioned, we have a few defense companies and of course, more turbulence in the world, more uncertainty, fortunately, unfortunately, will increase the demand for their products. We have companies that -- we have one company that is within Merridale, which are making cost saving solutions for diesel. When oil prices are up, demand goes up because you can save more. So again, if we do our jobs right on the portfolio side, the external shock of what's happening in Iran might not be that big. All right. It's 11:08 in Sweden, which means that it's lunch time at Solna. Do you want to end with some closing remarks?

I would like to thank you all very much for taking part in this Q&A session. And hopefully, we see each other again in July.

Or in the afternoon, if you come to our AGM.

Yes, we have an AGM tonight -- this afternoon. Yes. Correct. Correct. See you there or the next time on Teams will probably be in July when we release the Q2 report. Thank you very much for today.

Thank you. Bye-bye.