Right, then it was time for a CEO interview with Byggmästaren, which released its earnings report today. And with me I have CEO Thomas Bergström. Welcome to Inderes!

Thanks again.

I thought we could start from the top and look at the portfolio as such. It has once again been a quarter characterized by Green Landscaping and continued pressure on the share price. But if you were to summarize Byggmästaren's third quarter as a whole, what would that sound like?

It is very much a rerun of the second quarter. Even then we had a robust and stable performance in the unlisted portfolio, with good momentum in places and some write-ups in value. But then? The downward trend in Green's share continued during Q3, which weighed on the second part. I think we had 110 million down on the listed part and 70 million on the unlisted. So net 45–50 million in write-downs in total in the portfolio, which means we report 62.60 SEK, I believe, which is down 3% in net asset value per share. The same pattern as in Q2.

What is your general comment on the fact that a single holding like Green can drive so much of the decline in net asset value this year, as it actually has?

We have a strategy of working with a concentrated portfolio, and then it is clear that there can be periods where a single holding weighs on the upside and the downside. Now the decline has been substantial for quite a long time, and it is clear that we are very disappointed with that development and that you think about it a lot. But that is how it turned out.

And Green is currently trading below its 2018 IPO price. And you have been a major shareholder throughout this journey, both on the way up and the way down. What is your research into what went wrong in the case and what lessons do you take away as an owner?

That is the subject of a long, long interview. But I will zoom out a bit. First look at the facts. To begin with, since 2018 the company had a revenue of under 1 billion roughly and made perhaps 20–25 million in EBIT. Now we are running at close to 7 billion and 400 in EBIT, so revenue has grown seven times, earnings about 20 times. Particularly in recent years, the last eight to nine quarters, cash conversion has been poorer and debt is currently at a level that significantly exceeds the company's financial targets. The share peaked in August 2021 at 108 SEK and now we are talking 15–16 SEK, which is down 85%, very dramatic at both ends. We sold some shares, I believe, in the spring of 2022 at 83 SEK. Unfortunately missed the peak somewhat and freed up of around 130 million. Then we have reinvested about 20% of that portion on the way down and failed to nail the bottom either. And you have to reflect on that. But that is how it has been.

If I then look at what has happened? One could say that when the recession hit, say in the summer of 2022, with a rise in inflation and a complete halt in construction and significantly more competition even on the landscaping side and to some extent the maintenance side, then the governance model, the management philosophy that Green and others applied at that time was not fast enough to adapt to a new reality in a recession and in an environment where customers place different demands on execution, documentation, and other things. And that is essentially what has caused, I believe, the development to be as it has been. It has proved to require a change of board and a change of management to more quickly address the issue of the governance model and management philosophy.

To further simplify it a bit, Green in 2020, '21, '22, '23 has had a bit too much of, we think from an owner's perspective, an investment company approach almost to a portfolio of companies, where we now look at what the new management is doing and how the board is acting. Much more is moving towards much more of an integrated group. That does not mean that decision-making should not be decentralized, but how they are now driving the measures they have communicated towards increased coordination, increased transparency, increased use of data, information, internal communication, joint improvements, etc. That is a fairly major change and we fully support that development and believe it is the right one. It is the model needed in this reality, and in hindsight we should have started that a little earlier. That is pretty much the medium-term research.

Yes, you touched upon that. But you bought more shares in 2025 and 2026, now this year you have bought more at clearly higher levels. As you said, perhaps new investors or those interested in Byggmästaren? And what criteria govern when you increase your holding in holdings that go against you in terms of share price and also operationally, as you have done? And at what point do you reevaluate the entire thesis for the case?

If we start with the last part. The whole thesis for the case. It would take quite a big thing to reevaluate it. We want to be a major shareholder and influential owner in companies that we believe in long-term. We had faith in it long-term. We have faith in it long-term. Then it is more a matter of timing when you can adjust. We sold a little in the spring of '21-'22. Then we have increased a little along the way at too high levels. We look at when opportunities arise. Obviously we probably had the view then that the economy and the market could bounce back a little better than it did. It has been more protracted and we timed it wrong. That is how it is.

If we look at the share price development, it also feels clear that the market is starting to price in an increasing risk linked to indebtedness, and also cash flow, which has decreased significantly. How do you view the risk of a potential capital raising for Green? And would you be prepared to support the company if this scenario were to materialize?

We share your view that it is clear that the valuation of the share is a different matter from the operational development. It is obviously the case that confidence in the model and in the ability to return to the financial targets is not there, quite obviously. As it has been, the market has different opinions and that is what makes a market. Regarding indebtedness, the company has a target of 2.5 times EBITDA and today reported an adjusted 3.5. Clearly that is too high. The company also states that this affects the opportunity to do M&A and continue with its strategy, while stating that the absolute highest priority is to improve cash conversion and also assessing that it will improve. On the question of capital, that is a matter for the company's board and here you have to keep things separate, so to speak. The parts, should such a question arise. It is clear that we as owners, and the other owners, will have to look at it. Our model is to be long-term engaged in companies we believe in long-term and we are always prepared to support existing holdings. But look at it case by case. Then they will have to explain in that case when, why and what will it yield? Then we can look at it then.

You say that is a matter for the board. You yourself sit on the board and are also chairman. Does it become difficult to answer that question then? Just the fact that you are a major shareholder and chairman of the board right now.

Not difficult, but I need to keep things separate. Today I am here as an owner representative and last night I had a different role. And this afternoon I will once again have some other role. But I must keep my answers separate depending on the context. It is a matter for the company's board to prepare various issues linked to strategy and financing.

I or we have pretty much touched upon it, but it is also a question of, of the market's confidence in management then. What do you think Green needs to do to regain the market's confidence?

That is very easy: deliver results. It is no more complicated than that. Improve cash conversion and results. Show that the turnaround they reported today in Sweden, even if it is from still too low levels, is also visible in Norway. It is just results I am thinking of.

My final question linked to Green. It feels like we have answered it. But how do you view Green's role in Byggmästaren? In the portfolio and the weight we see today? It has gone down from perhaps 30% to 10% looking over a few years now. Anything you want to comment on?

It is the fourth largest holding in today's report. Safe Life and DPP are second. Cash and cash equivalents are third and Green is fourth, with a concentrated portfolio as we touched upon in the beginning. So both on the upside and the downside that is how it can go. Things happen and we have no other message today than that this has a long-term place in our portfolio.

I figured we could switch theme to Safe Life, which continues to make new acquisitions and grow, depending on how you look at it. You put together a summary of the acquisitions made during Q3, but technically speaking, the largest acquisition of Securemed falls outside of Q3 then. But correct me if I'm wrong, is this the largest acquisition that Safe Life has made? That's the first sub-question. Then you can tell us more about the deal as such and what they contribute operationally to Safe Life and their corporate building.

Very observant of you. If we take the first part first, technically that deal took place on October 1st. It was completed in the third quarter, and we've had a routine for a year now to quarterly announce what they have done, so that people have some visibility into it from your perspective. Now it's October 1st, so it's not included in the Q3 figures. It is one of the larger ones that have been completed, though the one in the US, which was the market entry there in the spring of '23, was larger. Medic's Aid, which is a large company in Holland operating throughout Europe, was probably possibly on par with this Securemed. But this is at least number two or number three.

A large acquisition, located in northern France, primarily active in first aid, but also selling AEDs and other workplace products, but mainly first aid, and is a good example of expansion into the identified adjacent verticals that we want to grow into now during these years. We come from AED defibrillators, primarily with surrounding products, but have also pointed out training and first aid as very logical adjacent verticals. This is definitely a major step into first aid, where the largest company in France has margins exceeding the Safe Life group, and so on, and an important acquisition.

I was going to get to whether it was margin-enhancing or margin-dilutive for the group. But then you answered the question.

How do you do that?

We've also spoken before. I believe it was most recently now in Q2 regarding the debt level. It's clear that it goes up as new acquisitions are made. But you also explained that part of that equation was that you've seen some increased working capital during the year. Now when investing a lot. Can you tell us a bit about how these factors have developed now in Q3 and if 2026 was characterized by heavy investments? What then becomes the story for 2027?

We had a board meeting this week so this is very current. The fact is that working capital remains at a somewhat high level even in Q3. When growing by 20% organically, as they did in Q3, you have quite a lot of accounts receivable and so on, but it's a bit higher than it should be. There is a clear plan for it to come down somewhat towards the turn of the year, and the focus for '27 is that—we referred to it this week as being more about productivity and operational leverage on the investments, not so much capex which is opex, during 2026—that they begin to show much more. Now we saw in Q3. It's hard to read from the outside, but now we saw the operational leverage on the margin in Q3. That's fun to see, but it also applies that it continues. Then I don't think you should count on 20% organic growth every quarter going forward, because there were some larger parts and so forth. Particularly in the US.

And I wanted to return a bit to this strong organic growth that you are mentioning now. Because if you look at the pro forma net sales reported in connection with last year's Q4 report, and then compare with what was reported now and look at how much sales you've actually bought or acquired in the new companies, I calculate Safe's organic growth to be in the low single digits. Do you have any comment on that observation?

Not other than that you are wrong, because the organic growth after nine months is of around 10%. Year over year nine. I remember we talked.

At the beginning of the year, that it was a bit sluggish in the US, but then it sounds like it has ramped up here now at the end of the year.

There has been stronger growth in Q3 than in Q2 and Q1 regarding the US. Partly because during the first half of the year in the US we completed an ERP system replacement. We have also in the US made a legal consolidation so that what previously was eight to ten companies in the US is now one legal entity. I believe there is some company to be integrated here in Q4, but otherwise Safe Life. The US is now, or soon, one company on a new ERP with a Salesforce, which takes time to get in place. And my view and our view is that now that is in place, we believe that the operational efficiency in such a system can be positive. And that's perhaps what we started to see in Q3.

I'm thinking for those investors who might be drawing parallels to Green, and perhaps are worried that Safe Life will end up in the same situation as Green. What is your comment on that part? And what does Safe Life do differently than Green has done? If you've shared any internal lessons learned or similar.

There is always a lot to learn and you can never predict the future. But I would say that these are two very different industries, but also how we approach what we are now doing in the industry, because it is fundamentally a distribution business, while Green is a service business, which are two quite different things. Then in Safe Life, in the earlier phase where we bought a lot of companies, we had a distributed model, but the last two years—and that's part of the buildup—is very much about bringing it together as a group: building a group management team, building regional management structures, lots of specialists, system replacements, a lot on procurement, a lot on compliance, cyber, very much more to pull this together. Then with continued acquisitions, that's a job that is never finished. But I would say that we are further along in bringing the group together than Green, which has now started doing this a while ago.

It might not be as likely that they would see any project write-downs or price pressure from other construction players entering the market in the same way as Green has done.

There is quite a big difference in business model and customer structure and setup.

That minimizes the risks at least. Let's jump over to DP Patterning, which officially inaugurated its new production facility in Norrköping at the end of September. What does this mean for the company's capacity and how many years of growth are there to reap there?

Very pleasing that we are in place there now. We have been for a while. It was actually last spring that we moved in there, winter even. And there we have built good capacity now. We are expanding and have built a number of machines and more are on the way, so I would say that there is. There is plenty of room capacity-wise to grow for quite a while longer. So that is not the limitation. And a very well-managed operation. Very successful inauguration. Great interest from local business, from politics, and from customers who were there. Suppliers. Partners. The company has now in a fairly short time grown from ten employees to nearly 50 by year-end. Building a really fine organization with a good culture and good systems, good processes, increasing customer interest, and extraordinarily financial, one must say, in Q3.

Well, you certainly can. You can't really complain about the performance year to date and LTM. But we have talked about the high customer concentration. I've probably said somewhere between 70–80%. It is very important for them to be able to attract new customers similar to the one they have. The large serial manufacturer, however. Also talking in the report about there being a number of different pilot projects. You can give a small update there on how things are going with these new sales dialogues. And also if the customer concentration has somehow decreased during the year with the increased sales.

It surprises me if I have said 70 to 80%. What we say is that the customer concentration is high. We have had the pleasure of building a very strong relationship with the customer and have had a nice development with that. And at the same time, top priority is of course to grow the customer base and decrease customer concentration. A lot has happened there in the last half year, the last nine months. I think that today there are probably around 30 pilot and development projects underway, which are also filtered based on inbound since it's about choosing the right projects. And all of those 30 will probably not go to series production, but we feel quite comfortable that a number of them will. Then at what size they will emerge and how quickly we can dilute the concentration remains to be seen. There are quite long lead times from starting something until you have finally convinced all engineers on both sides that this product fits into the customer's end product and customer's production. It can take anywhere from 6 to 24 months, but it's top priority and I feel great confidence about it for 2027. But 2027 will still be built on us getting better visibility into how the large customer's needs develop. Today right now we have slightly lower visibility further into '27. Therefore, in this report we have addressed the valuation discount further compared to previously.

I actually noticed that. But I'm thinking, if we look at the performance here and now, the margin is well above the margins they've said they will reach in three, four years. But what does it look like now when they've started a new production facility and that capacity needs to be filled? What does the margin look like during the scaling we can see in coming years? Do you see that the margin could come down? Because it doesn't feel like they should be around 45 now as it came in, or above 45.

Well, I don't think you can expect those kinds of margins in the long term. It's hard to say what, it will sort of calibrate itself. We have a unique technology that manufactures these products at a significantly lower cost than competing technology can. Chemistry, etching, and silver printing above all. Our method and our product are very competitive. How much of that gross margin we can retain and what we intend to invest to drive the market and revenue? That is something we think a lot about and that we will have to calibrate from time to time. Then I think we have good leverage on the operating cost base as soon as we get volume. Even if it is a lower gross margin than the large customer, I think it will be very interesting profitability in the long term as well.

Do you think the 2030 targeted is somewhat conservative?

I can't answer that, actually. Staffan has said that he has a targeted of 1 billion in revenue in 2030 and how we use this competitive advantage to drive revenue or alternatively margin. I think we will have to calibrate that continuously.

I understand. A final question specifically on DP Patterning. They have a very strong net cash position so they can manage on their own now, essentially. But do you see any scenario where they would need to raise new capital? And in that case, would you be prepared to help with financing?

Same answer as regarding Green. We own 76% of the company and are very excited. If they have such needs, we will of course look into it. Right now we do not see those needs where they are now, but rather it is a strong cash flow and will be able to finance that part. Opportunities could arise within various structural matters. Now we are looking at an investment program for 2027, how we will take the advice and development further. There are different paths to take there. Mainly organically. Situations could arise where one can acquire some expertise to improve one's position in the value chain and add things to the offering. Then one could imagine that there is a capital need and then we are of course prepared for that.

Exciting! We'll jump over to Netel and the merger with Netel. They completed a rights issue a while ago which was oversubscribed, whereupon the board also decided to proceed with an allocation issue. How do you interpret the outcome? First of all, and perhaps to new investors. How? What will your ownership stake and your role be in the merged company?

The new share issue was part of the entire merger and the entire negotiation and an important request from our side, that they should strengthen their balance sheet. Before the merger. It was oversubscribed. Pleasing. It shows good interest and the completed merger is coming. Click here now at the beginning of November. Then Infria AB will be absorbed into Netel Holding. At the same time, it will be Infria's accounts that survive as the larger company. Q4 will be interesting reading when putting this together. We will own 12–13% and Martin will be CEO and has come quite far in the preparations regarding the organization. Day one, four segments, new business units and has started thinking about the hundred-day plan and everything that is going to happen now. I myself will probably. An extraordinary general meeting will be held, probably during the autumn, to become vice-chairman of the new board. We will be the largest shareholder on the cap table.

The share has fallen since the new share issue and Infria is traded today below the issue price adjusted for the exchange ratio. How do you view the market's assessment of the valuation of the merged company itself? And what do you think the company needs to prove in order to be re-valued?

That is very difficult to answer. I think the market is saying okay, let's see how this. When the companies are put together. Because they aren't yet. It has been a rather long process. So let's see what it looks like when everything has come together and when they have started showing a realization of the synergies they have talked about, and also that cash flow brings down debt somewhat and that a joint communication is achieved. And that is pretty logical to wait for that. Furthermore, neither Infria nor Netel are very liquid shares, but rather trading is very thin and interest perhaps thin. So we'll see.

Another observation I made was that prior to this merger, the stronger party had a slightly stronger balance sheet than Netel. I think it was this year. Last year you received a dividend from Infria. Is this something that one should not count on in the new merged group?

I think priority one. I think they have said that in their communication. Priority one is to come down a bit in debt, so that will be the top priority. Then it is probably so, and I think we have expectations of this, that when you have an adequate debt level. Then we believe that some cash flow can come out of this that can be distributed through dividend or buybacks, or invested in growth.

We are starting to move towards the end, but you have also for some time stated that you are looking for a fourth core holding to which you can provide expansion capital. If we assume that an acquisition could become relevant within six months. How do you think about the view on this acquisition while simultaneously taking into account the outflows you have every year in terms of management fee, dividend, buybacks, and so on?

It's a puzzle we are assembling and have to assemble, and I think I wrote today that we expect perhaps some further inflows in the coming six months. We ended the third quarter with 213 million in cash. But of course we have to assemble the puzzle and we are open, selectively, to new investments while at the same time. As I also stated in the earnings report, it's clear that we need to have preparedness for the existing portfolio. We have a buyback mandate for our own share and we can make new investments. So we have at least three parts of the toolbox on the table when we assemble that puzzle. We'll have.

To see. Yes, now I thought of another thing. How come you didn't do buybacks during the quarter given the cash and given the investment company discount we see of 24–25%?

So there are various restrictions for when you can do buybacks. We follow those restrictions. Now we have had a quiet period here for a month ahead of the earnings report. Today the opportunity opens up.

Exciting! In conclusion, is there anything else you want to highlight to the investors and something you think they should look out for in the coming quarters?

Continue to follow us. We are fully focused on the portfolio. We think we have exciting opportunities, but it's obvious that some of our holdings and also we have things to prove. I think we feel that way ourselves too.

Then I want to thank you so much, Thomas, for taking the time. And thank you to those who have watched. Thank you!