Fagerhult : Interim Report Q2 January-June 2023

2,107

Order intake, MSEK

Order intake was MSEK 2,107 (2,183), a decrease of -3.5% adjusted to -8.6% for currency effects of MSEK +121 and business closures of MSEK -9

2,147

Net sales, MSEK

Net sales were MSEK 2,147 (2,045), an increase of +5.0% adjusted to +0.4% for currency effects of MSEK +121 and business closures of MSEK -26

202

Operating profit, MSEK

Operating profit was MSEK 201.6 (186.5), an increase of +8.1% with an operating margin of 9.4 (9.1)%

119

Net profit, MSEK

Earnings after tax were MSEK 119.4 (131.1)

0.68

Earnings per share, SEK

Earnings per share were SEK 0.68 (0.74)

326

Operating cash flow, MSEK

Cash flow from operating activities was MSEK 326.1 (20.3)

The second quarter

With an overall net sales increase of 5.0% from 2,045 MSEK to 2,147 MSEK and an 8.1% operating profit increase from 187 MSEK to 202 MSEK, the Group continues to deliver strong operating results.

The net sales growth combined with a healthy development of the gross profit margin increased the operating margin to 9.4 (9.1)%.

The previously communicated pricing improvements continue to positively impact the result and we continue to invest in our strategic focus areas of innovation, sustainability and people where we make steady progress.

Externally, we are cautious as some markets demonstrate a high activity level and some remain with uncertainties. By covering many markets and geographies the Group's business model spreads individual market risks.

The supply of modern lighting solutions, which provide highly sustainable energy savings is one of our core strengths and this is especially important with the EU ban on fluorescent lamps later in the year.

In isolation, the order intake of 2,107 (2,183) MSEK for the quarter was robust, despite an -8.6% organic decline. The R12M order intake is 8,2 BSEK. The order backlog has grown in the period to 1,942 MSEK and remains healthy.

During the first half of 2022 the supply chain challenges provided a stimulus for the early placement of orders. As lead times have now returned to normal and so too order placement cycles, the comparables should be viewed carefully.

Net sales at 2,147 (2,045) MSEK for the quarter delivers +0.4% organic growth.

The operating profit for the quarter of 201.6 (186.5) MSEK delivers an operating margin of 9.4 (9.1)%.

The strong operating cash flow for the quarter of 326.1 (20.3) MSEK results from good profitability levels and a working capital reduction. Further working capital reductions are anticipated in coming quarters, easing the interest expense.

CEO comment

The second quarter; resilient results

The Group's results continue to show strong resilience.

The mega-trends remain positive and for these, the Group's lighting brands develop value propositions and business models to promote lighting solutions that offer

The addition of these skills and competences will help to further continue the growth and delivery of the short term results and long term strategy.

Innovation

Bodil Sonesson,

CEO and President

energy savings, carbon reduction and smart lighting.

The demand to reduce energy costs has never been so high and our solutions achieve this by up to 90%. During the quarter we significantly increase our success rate in winning refurbishment and retrofit projects, please refer to later pages. The ban on fluorescent lamps later in the year will increase this further.

As a result of external factors and the mix of private investment and public investment, new-build and refurbishment, the overall market activity remains mixed. Many of our brands perform well.

Our Q2 performance was resilient with annualised order intake and net sales both above 8 BSEK and positive gross and operating margin development compared to Q2 last year.

Rolling 12 month and quarterly order intake

Strategic focus areas; securing the long-term

People and culture

In recent months we have secured several key appointments in senior positions.

Innovation is not just about great luminaires, and so we continue to increase the funding and investment for our smart and sustainable lighting solutions.

At Organic Response we have embedded an AI Chatbot in our OR Customer Support Portal. The AI can answer 95% of the basic enquiries in more than 100 languages.

During the second quarter, WE-EF launched the new "AFL100" range of street and outdoor area lighting. This global range focusses on sustainability and night/nature sensitive lighting. "AFL100" offers increased connectivity, superior energy performance and outstanding optical control.

Sustainability

With additional resources and focus, our sustainability strategy continues to make strong progress. We have submitted our long term targets to the Science Based Targets initiative and these are currently being validated and we expect feedback during the summer. But we do not wait, in our operations we make significant investments for reducing our scope 1 and 2 carbon footprint.

Outlook; strengthening and well positioned

Looking internally, the Group's financial performance remains robust. We have improving margins and a healthy order backlog. The strategic focus is clear and we make steady progress on our activities.

Externally, our supply of sustainable solutions for the rapidly growing opportunity of renovation projects increases significantly. These projects provide even shorter payback periods as energy prices remain high.

We are well positioned for when the markets return to a more stable state.

4,286

Order intake, MSEK

Order intake was MSEK 4,286 (4,388), a decrease of -2.3% adjusted to -6.4% for currency effects of MSEK +210 and business closures of -29 MSEK

4,371

Net sales, MSEK

Net sales were MSEK 4,371 (3,917), an increase of +11.6% adjusted to +7.0% for currency effects of MSEK +214 and business closures of -35 MSEK

446

Operating profit, MSEK

Operating profit was MSEK 445.7 (359.8), an increase of +23.9% with an operating margin of 10.2 (9.2)%

277

Net profit, MSEK

Earnings after tax were MSEK 277.3 (250.6)

1.57

Earnings per share, SEK

Earnings per share were SEK 1.57 (1.42)

533

Operating cash flow, MSEK

Cash flow from operating activities was MSEK 532.5 ( negative 48.1)

January-June

During the first half year the Group delivered a strong set of results with net sales, operating profit, operating margin and cash flow all ahead of last year.

Order intake levels across the brands and business areas remains mixed and a little slower compared to the previously reported 'high early order placement period' in 2022.

The Group's half year order intake of 4,286 (4,388) MSEK shows a -2.3% decrease, decreasing to -6.4% when adjusting for currency effects of +210 MSEK and business closures of -29 MSEK.

The Group's half year net sales of 4,371 (3,917) MSEK show an +11.6% increase, decreasing to +7.0% when adjusting for currency effects of +214 MSEK and business closures of -35 MSEK.

The Group's operating profit for the half year of 446 (360) MSEK shows a continuing strong and resilient performance.

The operating margin for the half year increases 100 basis points from 9.2% to 10.2%. This should be capable of further development as a consequence of the Q4 2022 and Q1 2023 price revisions.

As we drive for a reduced net debt, the operating cash flow in the period was strongly positive at 533 (negative -48) MSEK with the variance coming from an 86 MSEK increase in operating profit and a significant 497 MSEK improvement in working capital compared to last year. We continue the focus here.

The increased financial items of 69.4 (25.2) MSEK arise from a net increase in interest expenses of 41.2 MSEK.

The tax expense in the period of 99.0 (84.0) MSEK results in a 26.3 (25.1)% tax rate.