Boreo Oyj · OMXHEX:BOREO
Boreo Oyj — Investor Day (September 2022)
67 slides from Boreo Oyj's investor day presentation, Sep 27, 2022
Slide 1: Building a long-term successful company
Building a long-term successful company Capital Markets Day | Helsinki | September 27, 2022
Slide 2: Disclaimer
DISCLAIMER The following information contains, or may be deemed to contain, “forward-looking statements” that reflect the current views of Boreo Plc (“Boreo”). These statements relate to expected future events or Boreo’s expected future financial performance, including, but not limited to, strategic
Slide 3: Today's Boreo team
Tomi sundberg Mari katara Aku rumpunen Kari nerg Jesse petäjä Richard karlsson Janne silvennoinen SVP, development & SVP, Group HR CFO CEO SVP, M&A SVP, HEAD OF HEAVY SVP, HEAD OF TECHNICAL Head of Electronics BA MACHINES BA TRADE BA Today’s boreo team 3
Slide 4: Agenda
AGENDA • Focus on building a long-term successful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 5: From proof of concept to continued long-term value creation
From proof of concept to continued long-term value creation 5
Slide 6: Basic concept intact, enhanced focus on long-term value creation
Basic concept intact, enhanced focus on long-term value creation PURPOSE The Place to Grow and Prosper PURPOSE The Place to Grow and Prosper BUSINESS We create long-term value by owning and acquiring great companies MODEL ACQUISITIONS Development PEOPLE & CULTURE STRATEGY We create growth via We ena
Slide 7: We have successfully created a solid foundation
We have successfully created a solid foundation Phase 1 | 2020-H1/2022 Phase 2 | H2/2022 and beyond Building the foundation Focused long-term value creation Sales (m€) and operational ebit (%) Sales (m€) and operational ebit (%) 140m€ (5,4%) 122m€ R12 (6,0%) months 72m€ (Q2/22) 37m€ (5,4%) (3,9%) 20
Slide 8: Key lessons learned paving the way for future
Key lessons learned paving the way for future 1 2 capital allocation approach Accountability & managerial responsibility discipline & hurdle rates Decentralization Organic & inorganic growth Simplification 2.0 Measure what drives shareholder value Value proposition to companies Earnings & cash flow
Slide 9: Boreo in brief
Boreo in brief 9
Slide 10: Our business model
Our business model We own and acquire Great entrepreneurial companies with strong profits and cash flows Ultimate objective is We enable earnings growth by Shareholder Supporting & value creation coaching our companies & in the long-term developing people we Re-invest capital with attractive returns
Slide 11: Great entrepreneurial companies in three sectors
Great entrepreneurial companies in three sectors Electronics Technical trade Heavy machines 60M€ 2021 Sales ~130 Professionals 50M€ 2021 Sales ~90 Professionals 35M€ 2021 Sales ~50 Professionals (illustrative) (illustrative) (illustrative) Markets 7 1 Market 3 Markets Other operations 5m€ 2021 Sales
Slide 12: Strong industry focus with growth opportunities in all sectors
Strong industry focus with growth opportunities In all sectors Electronics Technical trade Heavy machines Sub-sector 1 Sub-sector 2 Sub-sector 3 Sub-sector 1 Sub-sector 2 Sub-sector 3 Sub-sector 1 Sub-sector 2 Sub-sector 3 # # # # # # # # # # # # # # # # # # # # # # # # # # # • Long-standing history
Slide 13: Finnish presence as a source of competitive advantage
Finnish presence as a source of competitive advantage Net Sales by region, 2021 Personnel by (continued operations) region, 2022 198 122 m€ Finland 44 Sweden 59 Baltics 5 Note: Net Sales excluding Poland and USA acquired as part of SSN in 6/2022 Poland 13
Slide 14: Dedicated board and management with significant ownership
Dedicated board and management with significant ownership Simon Hallqvist, Camilla Grönholm, Jouni grönroos, Ralf Holmlund, Michaela von Juhani mykkänen, Chairman chair of Remco chair of audit board member Wendt, board board member committee member Board of 1,540 shares 456 shares 229 shares Directo
Slide 15: Core team in place to drive growth
Core team in place to drive growth Business area organisation Business Area level organisation • BA Heads and Business Controllers Electronics Technical trade Heavy machines supporting & coaching company MDs • Responsible for driving M&A in the BAs Tomi sundberg Janne Silvennoinen Richard Karlsson •
Slide 16: Successful transformation to a Finnish compounder pioneer
Successful transformation to a finnish compounder pioneer in 2019-2022 16
Slide 17: 13 acquisitions, failed Sievi Capital merger & exit from Russia
2022 Q3 Q4 Q3 Q1 Q2 Q2 2020 Q1 Q1 Q3 13 acquisitions, failed sievi Capital merger & exit from russia 2021 17
Slide 18: Acquired companies have improved the group's financial profile
Acquired companies with strong financial characteristics have improved the group’s financial profile Operational ebit, m€1) 12 10 operational ebit at c. 1o% for companies 8 acquired since Q4/20 6 4 operational ebit at c. 6% for companies part 2 of the group before q4/202) 0 GROUP PLATFORM COSTS2) -2
Slide 19: Performance of the 'pre-Boreo era' businesses
Performance of the ‘pre-boreo era’ businesses demonstrate our ability to be a good owner Operational ebit, m€ and % 7 7% 6.2 % 5.9 % 5.7 % 6 6% 5 4.4 % 5% 4 4% 3.0 % 3 5.7 6.1 5.8 3% 1.7 % 2 3.8 2% 0.9 % 1 2.5 1% 1.4 0.7 0 0% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 * Pro Forma figure
Slide 20: Investments made to build platform & support continued growth
investments made to build platform & support continued growth Reorganizations in 2020 Organic growth opportunities Increasing focus on esg Improving cost competitiveness Enabling group companies to grow Roadmap & resources in build-up • Group platform, YE, Machinery and • Build up of Campus Vantaa a
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Slide 22: Agenda
AGENDA • Focus on building a long-term succesSful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 23: Strong historical financial performance
Strong historical financial performance TRACK-RECORD OF STRONG GROWTH WITH solid MARGIN development NET SALES (m€), R12 1) oper. EBIT (m€) and (%), R12 1) Net debt / Ebitda 2) 5.8 % 5.8 % 5.9 % 5.4 % 5.4 % 4.1 % 4.5 % 4.7 % 2.7 % 2.5 % 2.6 X 2.5 X 2.6 x 2.5 X 1.6 x 140 7.2 7.5 130 7.0 122 6.0 102 5.
Slide 24: Portfolio of electronic component value-add distributors
Portfolio of electronic component value-add distributors Business area overview Net SaleS (m€) & Operational EBIT margin (%) 1) Comprises of technical distributor businesses which represent a diversified portfolio of proven third-party suppliers of quality technology solutions for defined industries
Slide 25: Finnish technical trade businesses with strong financial profile
Finnish technical trade businesses with strong financial profile Business area overview Net Sales (m€) & Operational EBIT margin (%) 1) Comprises of technical trade businesses which represent a wide range of renowned 8.5 % 9.1 % 9.6 % 9.6 % suppliers in the fields of power, metal machining and const
Slide 26: Investments in growth of Putzmeister and Sany
Investments in growth of putzmeister and sany in 3 countries Business area overview Net Sales (m€) & Operational EBIT margin (%) 1) Comprises of the Putzmeister and Sany dealerships offering concrete & stationery pumps, 8.4 % mortar machines, processing and transportation equipment as well as earth
Slide 27: Cost efficiency trend reflects scalability of the business model
cost efficiency trend reflect scalability of the business model Direct cost ratio, m€ (R12) Indirect cost ratio, m€ (r12) 20.1 % 21.0 % 19.9 % 20.4 % 20.2 % 75.9 % 77.6 % 77.6 % 77.6 % 76.2 % 75.5 % 75.0 % 75.0 % 74.8 % 74.8 % 18.8 % 19.0 % 18.4 % 18.6 % 18.8 % 104.8 26.3 91.5 97.2 24.2 22.5 72.1 76
Slide 28: Free cash flow impacted by investments into working capital
Free cash flow impacted by the investments into working capital Cash Flow Profile, m€ (r12) 12.3 13.1 13.4 10.4 11.1 7.8 8.6 4.6 1.3 8.4 8.6 6.9 7.1 7.6 6.1 4.8 -2.4 -4.8 -5.1 -5.7 -6.4 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Oper. Net CF excl. ∆ NWC ∆ NWC Oper. EBITDA Q2/2022 adjust
Slide 29: Financial leverage kept intact despite acquisitions
financial leverage kept intact despite of acquisitions Net Debt / EBITDA ratio1), ICR2) AND Ebitda profile2) 50 8 40 37.9 35.9 34.6 32.8 6 30 26.1 26.7 22.4 21.2 4 17.7 19.8 20 2.5x 2.6x 2.5x 2.6x 2.5x 2.0x 1.6x 2 10 13.0 12.3 13.0 10.9 9.3 8.8 10.3 0 0 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 202
Slide 30: Solid financing structure and debt maturity profile
Solid Financing structure and debt maturity profile provide good foundation for growth debt maturity structure, m€ Financing structure, m€ 70 60 10.0 10€m Term loan facility 13% 50 10.0 40 35€m 20.0 Acquisition loan facility 30 47% (undrawn) 20€m 20 27% Hybrid 10 23.5 2.0 4.5 5.0 0 2022 2023 2024 20
Slide 31: Future focus on earnings growth with attractive returns on capital
Future focus on Earnings growth with attractive returns on capital 31
Slide 32: Drivers of shareholder value creation
Drivers of shareholder value creation • Value accretive M&A Disciplined Capital allocation • Organic growth initiatives • share buybacks & dividends • Improve profitability – scalability of group cost base Strong operative performance • Pricing and cost efficiency • Ensure good cash generation Stabl
Slide 33: Our priorities in capital allocation
Our priorities in capital allocation Acquisitions & organic growth investments Free Cash flow before investments Debt service dividends 33
Slide 34: Target to improve return on capital employed & returns to shareholders
Target to improve return on capital employed & returns to shareholders through an updated playbook Return on capital employed (Roce) Return on equity (ROE) 80 14 % 25 50% 13.2 % M€ 12.4 % 12.1 % M€ 70 11.1 % 24 45% 12 % 71 10.6 % 20 40% 60 9.7 % 63 10 % 33% 19 35% 50 54 28% 29% 15 30% 49 8% 26% 40 4
Slide 35: How do we intend to improve capital efficiency?
How do we intend to improve capital efficiency? Return on wc% Electronics Return on wc% Optimize and streamline >15% Technical trade 10.6% working capital and cash flow Return on wc% Execute M&A with accretive returns Heavy machines Improve profitability Return on wc% Roce% of underlying business Ro
Slide 36: Proven track-record of creating earnings growth
Proven track-record of creating earnings growth 2020-H1/2022 H2/2022 and beyond Our track to deliver How to reach 15% growth operational ebit, m€ (%) operational ebit, m€ (%) ~10% Inorganic growth ~5% Organic growth 7.5m€ Disciplined capital allocation (5.4%) Performance management 7.2m€ R12 (5.9%)
Slide 37: From current to updated strategic financial targets
From current to updated Strategic financial targets 20% 15% minimum annual average minimum annual average sales growth during the Updated strategic financial operational strategy period targets to better reflect EBIT growth shareholder value creation 8% 15% minimum operational Increased focus on ear
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Slide 39: Agenda
AGENDA • Focus on building a long-term succeSSful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 40: Successful execution of acquisition strategy
Successful execution of acquisition strategy Attractive value proposition to entrepreneurs 1 supportive long-term owner combined with entrepreneurial autonomy Ownership and Governance model allowing for effective capital allocation 2 Sme-market characterised by attractive valuations Solid Track reco
Slide 41: Track record of disciplined capital allocation
Track record of Disciplined capital allocation 12 acquisitions since q2/2020 Total allocated Enterprise value excl. Earn outs ~30.9m€ - 4.0x EV/EBITDA targeted earn-outs of ~4.8m€ - 0.6x EV/EBITDA 5.7x 3.9x 4.2x 2.8x 4.0x 4.1x 6 463 6 500 4 840 4 450 4 000 3 929 4.2x 2.4x 340 399 Q3/2020 Q4/2020 Q1/
Slide 42: Our acquisition criteria
Our Acquisition criteria Boreo looks for asset light industrial businesses with strong cash generation, proven track record and a management fit with boreo culture Industrial characteristics financial characteristics organisational characteristics investment characteristics B2b high Cash conversion
Slide 43: Types of acquisitions we do
types of acquisitions we do Add-on acquisitions Platform acquisitions ADD-ONS TO ADD-ONS TO NEW BUSINESS AREAS COMPANIES BUSINESS AREAS • Geographical or product offering expansion • No integration to existing Business Areas • Vertical and horizontal expansion in the value-chain • Sufficient scale e
Slide 44: Development of M&A capabilities to ensure proprietary deal flow
Development of M&A capabilities to ensure proprietary deal flow 1 2 3 Further Standardisation Continued development Increased Proprietary sourcing ▪ Deal evaluation processes ▪ Supporting and coaching of business area ▪ Creation of Business Area and Business and business unit leaders in acquisitions
Slide 45: Q&A
Q&A 45
Slide 46: Agenda
AGENDA • Focus on building a long-term succesSful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 47: What we provide to & expect from our companies
What we provide to & expect from our companies? We provide (’Toolkit’) We support • A stable long-term owner • Strategic planning • • Investments • Support in finance Support in HR Independent • Business development • People development • Support in marketing boreo companies Balance P&L sheet We enc
Slide 48: Decentralized operating structure
Decentralized operating structure Group key responsibilities • Capital allocation process and decisions • Setting KPIs, targets and standards for governance Group level Group functions • Design and development of operating structure and key functions (M&A, finance, HR, ESG) • Financing Business area
Slide 49: Non-bureaucratic governance structure for our companies
We provide for our companies a non-bureaucratic governance structure BoD meeting 1 Year end review BoD meeting 3 Budgeting and strategy aligning Dec Nov Jan Oct Feb Autumn Offsite Winter Offsite – Sep Mar – key personnel key personnel Aug Apr Jul May Jun Boreo Leadership Programme meetings ’Boreo Co
Slide 50: Focus initiatives through which we drive growth
Focus initiatives through which we drive growth 1 2 3 Game plan concept Kpi visibility Increased focus on cost efficiency S A T M R ’Game plan concept’ Simple, efficient and standardized Measuring shareholder value drivers Starting in Q2/22 • Common view • From business specific KPIs to • Procuremen
Slide 51: Companies continue to develop with us
Companies continue to develop with us Operational ebit of companies part of the group before Q4/201), m€ and % VALUE PROPOSITION 7 7% • Non-bureaucratic management model 6.2 % 5.9 % 5.7 % • Support with strategy concept, KPI’s 6 6% and procurement 5 4.4 % 5% • Simple organisation in Boreo • High lev
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Slide 53: Agenda
AGENDA • Focus on building a long-term successful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 54: People & culture strategy
people & culture strategy Goal Value for shareholders Boreo grows and prospers Companies grow and prosper People grow and prosper © Boreo Oyj 54
Slide 55: Strategic focus areas
Strategic focus areas Leadership HR Digitalization Development & & compliance Talent Management Performance Management & Incentivization 55
Slide 56: What have we done in practice?
WHAT HAVE WE DONE IN PRACTICE? BUILDING THE PLATFORM First steps in strategy execution First steps in Launch of Matching New policies New management PERSONNEL hr technology share plan AND in place team SURVEY development Personnel share issue 2020 2021 2022 New short-term Launch of people & HEAD OF
Slide 57: People & culture strategy: Leadership program
people & culture strategy Leadership program Continuous program for key employees of Boreo Inspiration & networking Forum for Building key benchmarking, capabilities for sharing of best business practices and development learning from each other 57
Slide 58: People & culture strategy: Boreo Academy 2022
people & culture strategy BOREO ACADEMY 2022 58
Slide 59: Successful launch of Matching share plan 6/2022
Successful launch of Matching share plan 6/2022 ownership structure, july 29, 2022 Preato Capital AB • Significant amount of key employees with skin-in- the-game 20.6% • Personnel share issue over-subscribed (40 000 Management 8.3% new shares) • 24 key employees subscribed for the shares 71.1% Other
Slide 60: What kind of leaders are we looking for?
people & culture strategy Focusing on Creating WHAT KIND OF LEADERS Shareholder value Showing DOWN-TO- EARTH attitude ARE WE LOOKING FOR? and promoting and at the same time entrepreneurial ability to think big mindset Committing to Taking responsibility continuous and being committed DEVELOPment and
Slide 61: Q&A
Q&A 61
Slide 62: Agenda
AGENDA • Focus on building a long-term succeSsful company Kari Nerg, CEO • Updated strategic targets to better reflect shareholder value creation Aku Rumpunen, CFO • Acquisitions as a tool to create value Jesse Petäjä, SVP, M&A • Value proposition for our companies Tomi Sundberg, SVP, Development •
Slide 63: We will continue to focus on long-term value creation
We will continue to focus on long-term value creation Phase 1 | 2020-H1/2022 Phase 2 | H2/2022 and beyond Building the foundation Focused long-term value creation Sales (m€) and operational ebit (%) Sales (m€) and operational ebit (%) 140m€ (5,4%) 122m€ R12 (6,0%) months 72m€ (Q2/22) 37m€ (5,4%) (3,
Slide 64: Business model in practice: case heavy machines
Business model in practice | case heavy machines Add-on acquisitions to expand business area • Leveraging of Swedish management resources to Sharing best practices grow via add-on to Business Area with sister companies • Floby Nya Bilverkstad acquisition in Q3/21 • Synergies in sourcing and other ar
Slide 65: Key investment highlights
Key investment highlights focus on earnings growth with attractive returns on capital 1. Proven business model & track-record to execute the strategy 2. Excellent team with skin-in-the-game steering the ship 3. The Finnish market opportunity 4. Growth opportunity in all three business areas 5. Resil
Slide 66: Q&A
Q&A 66
Slide 67: The place to grow and prosper
THE PLACE TO GROW AND PROSPER BORES