Sdiptech AB (publ) publishes interim report for the second quarter (April – June) 2019

Press release
23 July 2019, 08:00

Sdiptech AB (publ) publishes interim report for the second quarter (April – June) 2019
The report will be available on the company's website: www.sdiptech.com

STRONGER MARGINS AND ORGANIC PROFIT GROWTH

SECOND QUARTER 2019

• Net sales increased by 18.8 percent to SEK 448.7 million (377.8). The organic growth in the Water & Energy and Special Infrastructure Solutions business areas totalled +17% during the quarter, while it was -11 percent in Property Technical Services. For the Group overall, the organic sales growth was +1 percent.
• Operating profit EBITA* increased by 42.4 percent to SEK 62.8 million (44.1), corresponding to an EBITA* margin of 14.0 percent (11.7). The stronger margins, particularly in Water & Energy and acquired units with higher profit margins contributed to the earnings trend.
• Profit after acquisitions costs and financial items increased by 59 percent and amounted to SEK 59.4 million (39.5).
• Earnings before tax increased by 59 percent and amounted to SEK 54.7 million (34.5).
• Earnings after tax for the Group, including discontinued operations, amounted to SEK 47.7 million (29.7), of which SEK 46.8 million (28.7) was attributable to the Parent Company’s shareholders.
• Cash flow from current operations amounted to SEK 63.0 million (5.7).
• On 31 May 2019 Sdiptech acquired all the shares in Cryptify AB.
• Earnings per ordinary share, less minority interests and dividends on preference shares, was SEK 1.43 (0.83).

FIRST SIX MONTHS 2019

• Net sales increased by 21.6 percent to SEK 870.9 million (715.9). The organic growth in the Water & Energy and Special Infrastructure Solutions business areas totalled +15 percent during the first half of 2019, while it was -10 percent in Property Technical Services. For the Group overall, the organic sales growth was 0 percent.
• Operating profit EBITA* increased by 46.1 percent to SEK 114.5 million (78.4).
• Profit after acquisition costs and financial items increased by 48 percent and amounted to SEK 91.2 million (61.6).
• Profit after financial items for remaining operations increased by 40.2 percent to SEK 81.2 million (57.9).
• Earnings after tax for the Group, including discontinued operations, amounted to SEK 68.0 million (121.6) of which SEK 0 million (77.0) was attributable to discontinued operations and SEK 66.1 million (76.8) was attributable to the Parent Company’s shareholders.
• Earnings per ordinary share, less minority interests and dividends on preference shares, amounted to SEK 1.95 (1.21).
• Cash flow from current operations amounted to SEK 120.6 million (12.1).
• During the period, Sdiptech AB completed three acquisitions; RedSpeed International Limited, Water Treatment Products Limited and Cryptify AB.

COMMENTS BY THE CEO:

The organic profit growth was 8 percent during the first half of 2019. The profit growth through acquisitions was 38 percent during the same period, which is in line with our overall goal to increase the Group’s earnings through organic growth as well as acquisitions. Meanwhile, the EBITA margin* during the first half of 2019 rose by 2.1 percentage points to 13.1 percent (11.0 percent).

There were mainly two underlying reasons for the organic profit growth and the stronger margin. Firstly, our business areas with higher margins, i.e. Water & Energy and Special Infrastructure Solutions, showed good organic growth in net sales of 15 percent in total during the first half of 2019. Secondly, we deliberately directed the Swedish elevator operations, which are found in Property Technical Services, towards more niche-focused but profitable business transactions and these operations displayed higher profits and lower net sales according to plan compared to the previous year.

THE SECOND QUARTER 
I can confirm that the continuation of 2019 was as good as the start of the year. Net sales in the second quarter increased by 19 percent, EBITA* increased by 42 percent and profit after tax increased by 74 percent. Cash flow from operating activities was good at SEK 63 million (6) during the quarter, after a strong performance and decrease in working capital. The market situation was generally good within the business areas with strong organic growth in most areas.

Our businesses with higher operating margins in the Water & Energy and Special Infrastructure Solutions business areas, showed good organic growth in net sales of +17 percent in total. The market situation in the business areas is good thanks to a long-term willingness among public and private customers to invest in this infrastructure. A gradual introduction of more stringent environmental regulations, greater improvements in efficiency and security and general undercapacity in systems is driving the willingness to invest.

Our business area with a lower operating margin, Property Technical Services, displayed lower net sales than the previous year, equivalent to -11 percent. There were two reasons for this. Firstly, in our elevator operations, we have concentrated on fewer but more profitable customers and net sales were consequently at lower levels, while conversely, profits were higher compared to the previous year. Secondly, our shell completion operations reported significantly lower demand, which was expected and in line with the first quarter. During the first half of the previous year, unusually large housing projects were completed which contributed to a negative development this year.

ACQUISITIONS
So far this year, three acquisitions were carried out; in the first quarter, two acquisitions were completed of well-managed product companies in the UK and during the second quarter, the Swedish company Cryptify AB was acquired.

Cryptify develops software products for secure mobile communication. The customers are primarily found in Sweden and the UK in the government and defense segments with so-called restricted security classification, where the need for secure communication is growing.

OUTLOOK
Our business model is working well and during the first half of 2019, we increased our profit before financial items (EBIT) by 48 percent after positive contributions from acquisitions and organic profit growth.

Our development work, which in Water & Energy and Special Infrastructure Solutions was focused on sales growth and in the elevator operations was focused on strengthening profitability, is having the desired effect and contributing to both organic growth and to stronger margins.

For Sdiptech the market correction in the housing sector in Stockholm is primarily restricted to shell completion, where we also expect some slowdown in the next quarter but not to the same extent as in the first half of 2019. The market situation for the Group is otherwise good. Our view on future periods remains unchanged with good opportunities for continued profit growth. 

In the past year, we have built up our own acquisition team, which will replace the external team that is now being gradually phased out. This phase-out will be completed before year-end and when this happens our acquisition costs will fall significantly.

By way of conclusion, I want to convey a big thank you to all of our dedicated employees for a continued good start to 2019. I also want to welcome on board the new shareholders that have joined Sdiptech.

Jakob Holm
President and CEO

For additional information, please contact:

Jakob Holm, CEO, +46 761 61 21 91, jakob.holm@sdiptech.com

Bengt Lejdström, CFO, +46 702 74 22 00, bengt.lejdstrom@sdiptech.com

Sdiptech's common share of series B share is traded under the short name SDIP B with ISIN code SE0003756758. Sdiptech AB's preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Sdiptech AB's Certified Adviser at Nasdaq First North Stockholm is Erik Penser Bank, +468-463 83 00, certifiedadviser@penser.se. Further information is available on the company's website: www.sdiptech.com 

Sdiptech AB is a technology group with a primary focus on infrastructure segments critical to well-functioning societies and to welfare, e.g. water & sanitation, power & energy, transportation, energy efficiency and air climate. As part of our offering in urban areas, we also provide niched technical services for buildings and real-estate such as renovation of elevators and roofs. The company has approximately SEK 1,500 million in sales and is based in Stockholm.

Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The company is based in Stockholm. The information was provided by the above contact person for publication 23 July 2019 at 08:00 CEST.

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• ENG Sdiptech delårsrapport Q2 2019