Year End Report 2024 Teqnion AB

OVERVIEW

Year-End Report 2024

TEQ Flash Year-End Report 2024

F. That is our grade for the quarter. The quarter's net sales are on par with 2023, thanks to acquired companies, but organic sales declined by nearly 6%. For the full year net sales are up 6% but down 3% organically. Our real problem is profitability. The quarter's EBITA is down 42% and the quarter's EBITA margin is at 6,3% (10,8%). For the full year 2024, we lost 12% of our beloved EBITA vs 2023, EBITA margin is down to 9,6% (11,6%) and even worse a 26% decrease in EPS. We are in the middle of fixing this, but it is a slow struggle. Before year end, we refinanced our bank agreement with better terms and have a credit line that will sustain our acquisition pipeline for the coming three years. Onward.

• Johan Steene, CEO and founder

Events during the quarter

• Nothing significant… just everyday grinding.

Events after the quarter

• Midlands Special Fasteners Ltd was acquired.

The Board proposes that no dividend be distributed for the financial year 2024, based on the assessment that Teqnion can generate greater returns by retaining the cash.

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.

COMMENTS FROM THE CEO

Johan's thoughts

Hi Teqniåns,

The last quarter of the year generated our worst quarterly result since 2020. With such a miserable performance, we don't even deserve to compete in the game of capitalism, where we want to play at the top. During the quarter, we have continued to implement some major changes within the group to turn the trend right: merging two manufacturing units under one roof, making significant workforce reductions in three struggling companies, renegotiated supplier agreements and installed four new CEOs. CEO-coach Håkan has now temporarily reentered as site manager at the house factory, and I have also stepped in to focus more on struggling companies (the acquisition work will not be negatively affected, more on that below). Still, for 2024 our grade is F. We are out for revenge and we will continue to take action until we are where we need to be. The initiatives we've put in place are starting to gain traction and drive positive change, just not as quickly as an optimist might hope.

Our true assets

We are providing extra support to our subsidiary CEOs in these tough times. We must harness all the drive and experience within our employees, they are our greatest assets. Every one of our companies can be run profitably. It is the people working there who make that possible, or impossible. The minimum we ask for: do not lose money. Not all decisions we've made will turn out to be good, but change requires decisions, and we are changing.

Team Acquisition

Before the year ended, we renegotiated better terms with the bank and now have a financing agreement in place that should support our acquisition growth over the next three years. As I focus more on our existing companies, Daniel dedicates a larger portion of his time to acquisitions instead of other group activities, which have been well absorbed by, among others, Patrick, who manages international operations, and Jonathan, who oversees finance activities, both of whom joined the TEQ staff in 2024. Additionally, since the beginning of the year, we have introduced a new way of working within the acquisition team, consisting of Daniel, Jonathan, and me, with a clearer division of responsibilities, freeing up time for other tasks. This approach is much likely to generate a better flow of new high-quality companies into the group. The new structure makes us more efficient, and we will continue delivering on our financial targets.

As previously communicated, our acquisition pace has been aimed at around a handful of companies per year. Over the past three years, we have been around there, though on the south side of a full hand, with four acquisitions in one year, three the next, and another three last year. My sense now is that we will be on the north side of a handful going forward. Most of our near-term acquisitions will likely take place in the UK, where we have many ongoing discussions and even more in the pipeline.

The most reasonable scenario I see now is that, within a few years, Teqnion will have one Scandinavian division and an approximately equally sized division in the UK when it comes to the number of companies. Once that structure is established and proven, we will look to expand into additional geographies.

Rough climb.

COMMENTS FROM THE CEO

This too shall pass

Most of our acquisitions from the past four years have performed very well. There are a few problem areas, but overall, we see that our acquisition quality has improved as intended. Several of our early acquisitions are also performing, having their best year ever, but the overall results are dragged down by those that have truly underperformed, sadly primarily companies I acquired between 2018 and 2021. Fortunately, we are a brighter team now, and I am no longer driving the acquisition efforts alone. We're still on the way towards something fantastic. The fact that it took an unreasonably long time to address this downturn properly, as I wrote about in the last report, is something we deserve harsh criticism for.

To end on a little more positive note, a few weeks ago, we completed the acquisition of Midlands Special Fasteners Ltd. in Walsall, UK. It is a highly skilled team, and under Mitch's leadership, they are delivering the best fastening solutions for the most demanding applications while generating excellent cash flow.

We are a stubborn, growing company group with roughly 500 coworkers who are incredibly skilled at what they do. Our task as management is to motivate and guide them in the right direction towards the goal of creating more value. Value creating makes most people happy. And happy people create more value. We have taken significant measures to improve profitability, the wheels of change are turning but results are slow and the timeline remains uncertain. I ask for your patience. We will carry the lessons from this nosedive with us. I do not want to lose focus and end up this late to the trenches again.

Run far, be nice!

Johan Steene

CEO and founder

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

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Слава Україні!

Teqnion our subsidiaries

I want to say that we want to forget Q4 and last year, but we wont. We will take the pain and lessons with us.

Sales are up 6% from last year but

1 567

the harsh truth is that we have not been good enough, especially in

our Swedish companies. We are138 working hard to make things right.

103

119

we are still struggling in too many companies to turn this into profits.

See more on p.8.

1 476

1 325

920

57

36 36

56 56 72 83 115

659

580

296

176 179 197

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Profit before taxes, Msek

Order backlog*, Msek

Net sales per quarter, Msek

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

EBT margin

21,7%(%)

7,8%

Look right to see what can be achieved with the right people at the right place. Our role is to ensure that we find the right person and equip the person with

the right tools.

Rolling 3 month average

(Indexed)

Order usually

translate to sales within 12 months.

+ 115%

Chriistmasdip

The 3 big bleeding companies described in Q2 and Q3 (Hem1,

Grimstorp and Markis) had a bad Q4 mostly driven by

Grimstorp. Our CEO coach, Håkan (previous owner and CEO

of Grimstorp) is in operationally to right the ship.

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 special fasteners that hold together power generators rather than trying to figure out macro bets based on US president speeches.*

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

FINANCIAL OVERVIEW

Follow-up of financial targets

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

1,21,3

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%

> 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

6,84

5,58

4,95

2,73

0,70,7

EPS doubled

• The red line shows the level of EPS needed per year to double the EPS compared to 5 years ago.