Interim report January March 2025 Teqnion AB

Interim report Q1: January - March 2025

Short form report TEQ 2025 Q1

We're battling hard to improve Teqnion in weaker markets. EPS landed on 2,13 SEK (1,23) for the quarter and is up 73% compared to last year. Profit after tax ended at 36,5 MSEK (21,1), up 73% largely due to FX effects, EBITA margin decreased to 8,1% (9,5%) while net sales got to 406,3 MSEK (381,8) which is up 6% but down by 2,7% organically. We're making solid progress toward strengthening our group, but there's still a long road ahead.

• Johan Steene, CEO and founder

Events during the quarter

• Midlands Special Fasteners Ltd was acquired.
• Awarded2U Ltd was acquired.
• Merridale Ltd was acquired.
• Thermasolutions International Ltd was acquired.
• Edurus Gravstenar AB was acquired.

Events after the quarter

• Mitab i Forsbacka AB was acquired.

About Teqnion

Teqnion AB is an industrial group that acquires stable niche companies with good cash flows to develop and own with an eternal horizon. The subsidiaries are managed decentralized with support from the parent company. We operate in the majority of industries with leading products, which gives us good resistance to economic fluctuations as well as solid industrial know- how. For us, it is central to focus on profitability and long- term sustainable business relationships.

The company's shares, TEQ is listed on

Nasdaq First North Growth Market.

COMMENTS FROM THE CEO

Johan's thoughts

Hi Teqniåns,

Five years into the twenty twenties the world's trajectory seems to have been drawn by Captain Jack Sparrow, swimming in rum. It's certain that this decade won't go down as the sequel to the Roaring Twenties. It's much less jazz and champagne and much more chaos and conflict. This period will be defined by major shifts and if current trends hold, turbulence is far from over. We tie ourselves tight to the sturdiest mast with reason, knowledge and science and let misinformation, propaganda and noise drift past. There's always a way... Jack finally escaped Davy Jones' locker. There is no shortcut past hard work in order to reach success. We're on it.

Currency volatility

At first glance, this quarter's results may seem solid, but a closer look at the numbers reveals that we're still working hard to stabilize parts of our underlying operations. We are still far from where we should be even though we are starting to move in the right direction. A significant portion of the reported earnings is driven by a strengthened Swedish krona, which has positively impacted the profits, though we've also faced temporarily high costs due to restructuring projects including the scrapping of inventory and write- downs on equipment. The krona's strengthening in a financially volatile climate, triggered by the new leadership in Washington DC, has caused significant fluctuations in our balance sheet, given our exposure to euro and sterling positions. As we have grown, these currency fluctuations have grown, and you should get used to the fact that they will continue to have a bigger impact on our financials than in previous years. Additionally, we've made quite big product purchases in the U.S. this quarter and resold all of it in dollars, but the currency lost quite some value between purchase and sale, resulting in an uncomfortably thin margin when converted back to SEK in the accounts.

Actions for Improvement

Several of our major industrial customers in Sweden continue to report weak demand and are assigning us less work. Across many markets, we're seeing uncertainty and hesitation. Still, we're actively seeking new customers and working hard to maintain volumes with healthy margins. We've also been reminded of some timeless truths, like the importance of the right person in the right place. Our largest housing factory is now showing black figures again for the first time in far too long, since our executive coach Håkan stepped in as factory manager.

The effects of us pushing a more proactive sales process, which I mentioned in a previous letter, are beginning to show. Several formerly rather passive order-taking business units now have stronger order intakes thanks to more active outreach. Our focus is now on maintaining that energy, producing efficiently, and building on that momentum. The strengthened free cash flow in the quarter demonstrates the early effects of our ongoing actions towards improved operational efficiency and financial discipline. While it's encouraging, we see plenty of potential for continued improvements. We've also recruited three new subsidiary CEOs and one interim CEO. Looking ahead, we'll present further changes aimed at making us more profitable, more efficient, and much more resilient in a (unnecessarily) volatile world. Our goal remains to at least double our earnings per share over the next five years and we are determined to surpass that target. We will win.

Full Throttle

Acquisition activity has been lively by our standards since the start of the year, with four new companies in the UK and two in Sweden, where the latest deal closed early in q2.

Onward, no matter the climate.

We've built strong relationships with several promising entrepreneurs, and the pipeline of acquisition candidates looks good. Over a full year, we still aim to acquire a handful of companies, so the handful added this past quarter should not be extrapolated forward. Our group now includes ten companies based in the UK, and we expect more to come. TEQ-UK is now generating more profit than the entire Teqnion group did six years ago when listed. That's why we've started to set up a TEQ-UK office, which we hope will be operational by fall. Our UK colleagues deserve closer support than what can be offered from our Swedish HQ.

This quarter's new additions to our group are a fun, strong and diverse mix:

• MSF (UK), already mentioned in the year-end report;
• Awarded2U (UK), a provider of bespoke awards for corporate galas and ceremonies;
• Merridale (UK), a leading manufacturer of commercial fueling equipment with full fuel management systems and fleet software;
• Thermasolutions (UK), a specialist in high-quality refrigeration energy saving products for supermarkets, hotels, and restaurants;
• Edurus (SWE), which supplies tombstones, stone figurines, and engraving services to funeral homes;
• Mitab (SWE), a full-service provider of crematories.

(Please read some more about their contribution on p. 9, Whipeboard.)

Our ongoing improvement projects continue across the group, but we're not in the business of investing in operations with weak returns even when they're running close to optimal or that they need Leo Messi in order to achieve that.

The temporary costs tied to major restructuring efforts are easier to bear when we know they're part of reshaping the business into something fundamentally better.

As I've said before, there are some companies in our portfolio that, with hindsight, we wouldn't acquire today. That in no way diminishes the value they brought at the time. We're on a long journey. As we advance, so too must our group companies, guided by the same driving mentality that has brought us this far. Our ambition has always been and remains, to acquire and hold companies forever. But conditions evolve. We're constantly learning and refining our acquisition strategy, while also recognizing when a business drains too much cash or delivers too little return to justify continued ownership within the growing Teqnion ecosystem. Our guiding principle is to do what's best for the group, and thus, for our shareholders. We will do whatever it takes to make the group stronger and as mentioned in our last Q&A that may mean divesting businesses that fall short of our return requirements or closing operations that lack vitality, while preserving and integrating strong units into sister companies.

Last but not least, on a personal note, I remain grumpy that our transformation journey isn't moving fast enough. We're sitting on enormous potential that is not being realized at the pace I know is possible. The improvement work continues, and no one is resting until we can show stronger returns and much healthier cash flows.

Run far, be nice

Johan Steene

CEO and founder

Teqnion our subsidiaries

Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se

Слава Україні!

Stand firm. Be brave. Keep it simple.

See more on p.9 for our break

down of EBT för Q1.

161

18,4

9,2

Order backlog*, MSEK

162

Parent company's cost as share of net sales, %

Comment

Liquidity and debt

Our net debt increased in Q1 2025 due to five acquisitions during the quarter, there is still good headroom to our financial target Net debt / EBITDA < 2.5. During Q4 2024 we refinanced our bank agreement with better terms and have a credit line that will sustain our acquisition pipeline for the coming three years.

All Thermasolutions' products are well tested in own R&D lab.

Bridge to true underlying 2025 Q1 EBT, MSEK

EBT of the acquired companies in 2025 Q1, MSEK

50

45

40

35

47

8

6

5,6

• 3 companies had 2 months of impact

5and 2 companies had 1 month of impact in Q1.

• The average EBT effect per month and company in the quarter was ~700 TSEK.

30

25

20

15

29

-5

-21

4

3

(please don't extrapolate)

10

5

0

• Mitab was acquired in April and had

1

0,0

0

Teqnion is always in movement. We always start from people and relationship building when targeting profitable business in well- defined industry niches. The mission is to invest our money today so that we have even more money tomorrow. It is a simple goal that is easy to measure. We keep to what we understand and what is tangible. We don't try to predict how the world will change - we are not smart enough for that. We focus on what will not change including human behavior. We acquire good and specialized companies that are driven by grounded coworkers. During the journey we try to have fun and develop our methods and strengthen our team. If we run astray (which we will continue to do), roll up our sleeves , learn something and continue moving forward.

Our sustainability plan is that Teqnion always should grow. Sustainability for us means that we of course need to take care of the environment and our globe's finite resources at the same time that we shall grow our profits over time. With good profits we can make the right decisions and continuously strengthen our relations with colleagues, customers and suppliers. Teqnion shall always continuously create value for the society so that we can capture part of that value. No mater in which direction and intensity the macro winds are blowing, we move forward.

Teqnion wants to go far. We are only in the beginning of our journey. It is therefore that we guard our culture ferociously. Our leadership team is ridiculously loyal to the company. We are a small team with experience, winner instinct and a never say die attitude.

SURVIVAL ABOVE ANYTHING ELSE. ALWAYS.

As individuals we are always prepared that anything can go south at any moment. This means that we never take risks that we cannot afford to lose. Even if the upside potential in Excel shows an off-the chart RoIC, we would rather sell high-quality tombstones to loved ones rather than make bets on the tariff circus .*

We ensure that we can always be part of the game, no matter the times. In essence: we will never put us in a debt situation that would hinder us from being in the driver's seat.

CREATE VALUE AND CAPTURE VALUE

In order for Teqnion and our subsidiaries to have a clear right of existence we need to create value for our customers and their customers. By loving sales and always focus on customer value we can translate the move of physical products to sales with good margins. By always focusing on customer value creation, a symbiosis is created between us, customers, suppliers and the society where value is created and shared. That is sustainability. Our simple way of measuring our right to exist is our operating margin. Why would we exist if no one wants to pay for our products, services and solutions? We never want to grow for the sake of growing. We only like our topline to go up if it is driven by profit expansion. Teqnion is the anti thesis of Silicon Valley's hyper growth philosophy and our mantra is "if they come - we build". The focus on profitability motivates us to really focus on each krona in expense. As the old Swedish saying goes: "varje sparad krona är en tjänad krona".

CREATE SHAREHOLDER VALUE.

When we have stability and earn good money, which is a state we do what we can to always be in - then we focus wholeheartedly on growing the earnings per share, which is the measure that over time most clearly drives the share price.

In practice, in means that we acquire further profitable industrial product companies with great people, low business risk and wonderful cash flow - at a fair price. The last piece in important. To acquire wonderful business can be both value creating or value destructive, depending entirely on the size of the money pile you give up. We focus on the long-term and leans on the compounding effect of our capital by effectively allocating your capital - we are stewards of it.

We don't work with forecasts or annual targets because we never want to be in a situation we will be forced to make a deal for the sake of making a deal - that creates shortermism. We prefer a time horizon of 5 years in which we want to have doubled our earnings per share. Our ambition is higher and our true time horizon is much longer. We have just left the staring line. Our journey will be long.

This page has been written with the hope to clarify what we prioritize for Teqnion. We invite all on the same wavelength along for our grand adventure.

/TEQ-team