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October 21st at 08:08 CET.
Questions can be sent in at
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Interim report
Q3: July - September 2024
Interim report Q3: July - September 2024
Short form report TEQ 2024 Q3
Teqnion Group is fighting on in a tough environment with sales increasing 12% but organically it's only up 2%. EBITA margin decreased to 10,9% (11,7%). The profit for the quarter is down by 8% and the earnings per share is down by 10%. Sad and bad! We're selling more but earning less. Frustrating in the moment but we'll push through. There is so much potential here that needs to be capitalized. This too shall pass. Of that we will ensure.
- Johan Steene, CEO and founder
2024 | 2023 | 2024 | 2023 | |||
Teqnion financial development, Msek | Q3 | Q3 | Δ% | YTD | YTD | Δ% |
FCF excluding acquisitions | 17,7 | 49,4 | -- | 31,8 | 36,9 | -- |
EPS (sek) | 1,59 | 1,78 | -10% | 4,83 | 5,61 | -14% |
Diluted EPS (sek) | 1,59 | 1,78 | -10% | 4,82 | 5,58 | -14% |
Profit for the period | 27,5 | 29,9 | -8% | 83,1 | 91,9 | -10% |
Profit before taxes | 34,1 | 37,8 | -10% | 100,1 | 114,9 | -13% |
EBITA | 41,5 | 39,8 | +4% | 124,5 | 127,3 | -2% |
EBITA margin (%) | 10,9 | 11,7 | -- | 10,7 | 11,8 | -- |
Net sales | 381,8 | 339,7 | +12% | 1 163,3 | 1 075,8 | +8% |
Net debt / EBITDA R12* | -- | -- | -- | 1,2 | 0,5 | +131% |
RoE R12 (%)* | -- | -- | -- | 20,4 | 28,5 | -- |
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se
Events during the quarter
- Avelair Ltd was acquired.
- UK Lanyard Makers Ltd was acquired.
Events after the quarter
- Nothing significant… just everyday grinding…
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 a vast spectrum 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.
2
* When calculations have been based on 12 months, they are only visualized in the YTD columns.
COMMENTS FROM THE CEO
Johan's thoughts
Hi Teqniåns,
This time, I'm writing to you from a McDonald's outside of Manchester, noting once again that we're in a recession affecting more parts of the industry than before. The coffee here is mostly like dirty water, and the Monopoly man has joined forces with Ronald McDonald, tempting us with prizes when you buy certain products. Fun, but my coffee doesn't qualify, so I'm left empty-handed anyway. We're coming out of a quarter where we've had a clear wake-up call at several levels in the organization, and a better sense of urgency than I've experienced in a very long time. The coffee is cold. It's time to heat things up.
In times of economic growth, it's easy to dismiss the potential for improvement by saying what we have is good enough. Things work decently because demand is high, without the sales organization needing to be particularly active. In such times, salespeople don't need to do much more than take orders and send quotes to fill the order books. A job that resembles the checkout counter at the McDonalds's more than an active, forward-looking business- building effort. In doing so, we easily lose pride in what we deliver and the courage to charge for its true value. Such an organization gradually loses the drive and competence to seek out and discover the customer value we should always deliver and constantly improve. We need to have the stamina to want to be our best even when things go smoothly, so we are resilient and stay ahead of our competitors when times are tough. Like now.
A tale of two cities
Roughly half of our profits from the quarter comes from our foreign companies, even though they account for less than a quarter of our subsidiaries. The domestic operations, with a few exceptions, are having a tougher time than in previous years, and although they're fighting hard, they're not delivering the same high results as before. We also have too many companies running at a loss. In normal times, if such times exist, we'd expect less than ten percent of our portfolio to have red figures, now it's around thirty percent. We haven't been near good enough. This is a snapshot from our long journey, highlighting that we have not been sufficiently effective in our leadership, despite seeing challenges accumulate over a long period. However, the current situation also reveals great potential for improvement, we're on it and we will consider all available means to get back to where we want to be.
Seduced by good times
The last time we were in a recession fifteen years ago, I clearly remember that it was all hands on deck. Less talk, fewer fantastic plans and visions, just more activity, on every level. I've failed to keep that sufficiently top of mind. I painfully acknowledge that it has now taken us too long to start real, effective measures. I'm ashamed and I apologize. Now we are at full alert and acting accordingly. Active sales efforts instead of order-taking, adjusting resources faster and reducing staff when we have less to do, and banning
inactivity, which is nothing but a horrifically naïve hope that problems will solve themselves. Streamlining procurement, pressure-testing suppliers, clear dialogues with partners and customers regarding credits and pricing. These are truly great times if you want to get better at your profession. Are you contributing or not? Can you measure the effects of your hard work at the end of the day? Do you want to be part of our journey where we believe greatness lies ahead?
Still at it
We want to own and acquire businesses that are easy to operate and understand. All companies will, sooner or later, run into problems, and no one on earth can avoid dealing with the most complex part of business-people. Everything else that comes with it, like the product portfolio, business model, customer value, scalability, market position, and supply chains, must therefore be comprehensible and easy to grasp. A manageable whole.
We believe there's a better chance of getting the desired cash flow from a business we understand in a conservative industry we feel comfortable with than from something that at first glance looks incredibly attractive and modern, but where it's harder to understand why. That's why we're cautious about what we acquire, and it drives us to meet a lot of companies. We value an acquisition in such a way that we can reasonably recover our investment through cash flows over five years. It often works out that way. So we keep going.
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 3 |
COMMENTS FROM THE CEO
Be acquiring
Over the summer, we've integrated our new friends and the company UKLM into Teqnion. This team really understands how to secure their right to exist in a competitive market by carving out their own little profitable niche. Perfect deliveries to customers who understand that value and are willing to pay for it. A textbook example of a cash flow machine. A team that is having fun while showing us how it is done. We are delighted that Kevin and Jennifer will continue to run the cash flow machine while teaching the next generation of leaders how to drive the vehicle.
Be hard working
Our normal approach is to lead as owners by supporting management teams with strategy work to achieve our established goals. This has always been our way which we're very proud of and believe in. That said, we are always striving to improve. In the current tougher economic climate, this softer, supportive style has, in some cases, where needed, temporarily shifted towards something more like a clean hockey tackle in the right direction. We will do everything necessary to get the train back on track. It's too easy in a thriving economy to fool yourself into thinking that an average company is running good enough. In a recession like now, flaws are exposed and painfully laid bare. Flaws that, of course, we should and could have fixed in times of better demand and resources. In these cases, we've broken one of the most important rules of capitalism: never be satisfied!
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!
We have not been good
enough!
Stand firm. Be brave. Keep it simple.
OUR SUBSIDIARIES
House of Teqnion
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 5 |
FINANCIAL OVERVIEW
Financial development for the group (1/2)
Profit before taxes, Msek
We are continuing to face macro | 161 |
headwind, but we are not hiding | 146 |
behind that fact. We can, we | |
138 |
should and we will be doing better to keep the long-term trend intact.
103
57 | ||||||||
36 | 36 | |||||||
22 | 13 | 17 | ||||||
10 | ||||||||
4 | 8 | |||||||
2 | 3 | |||||||
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
R12
Net sales, Msek
Several companies have failed to | 1 563 | ||||||
translate sales to results. This is not | |||||||
1 476 | |||||||
acceptable. | |||||||
1 325 | |||||||
920 | |||||||
659 | |||||||
580 | |||||||
296 | |||||||
176 | 179 | 197 | |||||
56 | 56 | 72 | 83 | 115 | |||
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 | |||||||
R12 |
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 6 |
FINANCIAL OVERVIEW
Financial development for the group (2/2)
Profit before taxes, Msek
45,5 | |||||||||||||||||||
34,636,9 | 36,6 | 40,2 41,1 | 37,8 | 41,3 | 40,4 | ||||||||||||||
34,1 | |||||||||||||||||||
25,0 | 27,3 | 25,3 26,7 | |||||||||||||||||
16,4 | 14,6 | 16,8 | |||||||||||||||||
8,8 | 9,2 | ||||||||||||||||||
20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 |
Q1 | Q2 | Q3 | Q4 |
Order backlog*, Msek
451 457 | 485 | 487 495 511 | 503 483 471 | 435 426 | |||||||||||||||
388 | |||||||||||||||||||
340 | 349 | ||||||||||||||||||
298 | |||||||||||||||||||
204 | 206 | 214 | 224 | ||||||||||||||||
20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 |
Q1 | Q2 | Q3 | Q4 |
Net sales per quarter, Msek
352 382 | 384 | 400 | 382 | 388 400 | |||||||||||||||
306 | 344 | 340 | 299 | ||||||||||||||||
287 | |||||||||||||||||||
240 | 219 | ||||||||||||||||||
193 | |||||||||||||||||||
155 162 | 161 | 151 | |||||||||||||||||
20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 |
Q1 | Q2 | Q3 | Q4 |
Parent company's cost as share of net sales, % | We expect to be | ||
able to | grow | ||
2,3 | significantly | with | |
current team. | |||
2,1 | 2,1 | ||
1,9 | 1,7 | ||||||||||||||||||
1,5 | 1,6 | 1,5 | |||||||||||||||||
1,4 | 1,4 | 1,4 | 1,3 | 1,3 | 1,4 | 1,3 | 1,3 | 1,3 | 1,3 | ||||||||||
1,0 | |||||||||||||||||||
20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 | 20 | 21 | 22 | 23 | 24 |
Q1 | Q2 | Q3 | Q4 |
* Order backlog can give a rough indication of future sales but is far from a perfect crystal ball. An increasing share of our high margin and high ROIC companies have very short backlogs.
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 7 |
FINANCIAL OVERVIEW
Wipeboard: New thoughts and insights will be presented here each quarter
Profit before taxes per quarter, Msek - follow-up from last quarter
2024 Q1 | 2024 Q2 | 2024 Q3 |
-4,0 | ||
-6,5 | -6,7 | |
Initiatives starting to give some effect but still far from acceptable levels. We will do whatever it takes. Hoping for better macro is not part of our strategy and philosophy.
Profit before taxes Q3, % of total Q3 earnings
Top 1/3 of companies Top 2/3 of companies | All companies |
137% |
112% |
100% |
We will (of course…) | Smaller additions to our | We feel physical pain when there |
are as many detractors as this. | ||
continue to acquire high | cashflow is welcomed as | |
Long-term robustness and short | ||
quality companies and | long as they are not | |
term acceptable performance is | ||
support them to | significant detractors of | |
what matters. There are no holy | ||
become even better. | resources and as long as | |
cows. | ||
ROIC is great. | ||
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FINANCIAL OVERVIEW
Business philosophy and financial targets
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), we'll 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 earth'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 create value for the society ensuring that we, in turn, capture a share 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. Our philosophy is a little like Jeet Kune Do, "Absorb what is useful, discard what is not, add what is uniquely your own."
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 prefer to sell custom lanyards that are indispensable to our customers' operations than trying to figure out the next sector rotation.*
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 justify our right of existence we need to create value for our customers and their customers. By loving sales and always focusing on enhancing customer value we can translate the move of physical products to sales with good margins. Following this principle nurtures a symbiotic relationship 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, it 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 is crucial. To acquire wonderful businesses can either create or destroy value, depending entirely on the size of the money pile you give up. Our focus is on the long-term, relying on the compounding effect of carefully allocating your capital - we serve as its stewards.
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 five 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 platform. Our journey will be long since we're going far, far away...
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-command
* By the way… our subsidiary UKLM are probably the best designer and provider of custom made mission critical lanyards.
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 9 |
FINANCIAL OVERVIEW
Follow-up of financial targets
1. STABILITY | 2. PROFITABILITY |
3. SHAREHOLDER VALUE
To never risk permanent loss of capital and ensure that we can grow sustainable we believe that we need a financial stability as a basis for everything that we do. This goal should always be in place.
Financial target 1: Net debt / EBITDA < 2,5
<2,5
1,21,2
We always work grittily with our profitability. Focus is to always strive for projects and acquisitions that will help us raise the bar.
Financial target 2: EBITA margin > 9%
11,5% | 11,0% | 11,6% |
10,7% |
9,3%
> 9%
When target 1. and 2. are in place we put our whole soul into creating long-term shareholder value through increasing the earnings per share. This is primarily achieved through acquiring new niche companies at good valuations.
Financial target 3: > Double EPS every five years*
7,54
6,846,76
4,95
2,73
0,70,7
- 0,1 | 2021 | 2022 | 2023 | 2020 | 2021 | 2022 | 2023 | 2024 R12 |
2020 | 2024 R12 |
EPS doubled
2020 | 2021 | 2022 | 2023 | 2024 R12 |
- The red line shows the level of EPS needed per year to double the EPS compared to 5 years ago.
Teqnion AB (publ) • Dalvägen 14 • 169 56 Solna • www.teqnion.se | 10 |