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Netel Holding AB reported its first-quarter 2025 earnings, revealing a negative earnings per share (EPS) of 0.08 SEK, missing the market’s expectations. The company’s revenue for the quarter reached 694 million SEK, marking a 2.7% organic growth from the previous year. Following the earnings release, Netel’s stock price fell by 10.66%, closing at 11.26 SEK, reflecting investor concerns over the company’s performance and future outlook. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations, trading at just 0.5 times book value and a P/E ratio of 9.42x.
Key Takeaways
- Netel reported a negative EPS of 0.08 SEK, missing expectations.
- Revenue grew organically by 2.7% year-over-year to 694 million SEK.
- Stock price dropped by 10.66% after the earnings announcement.
- The company is focusing on expanding its presence in Norway and Sweden.
- Revised financial targets include an annual organic growth of 3-5%.
Company Performance
Netel’s overall performance in the first quarter of 2025 was mixed. While the company achieved a modest revenue growth of 2.7%, it struggled with profitability, reporting a negative EPS. The company has been focusing on expanding its geographical presence and implementing new digital tools to enhance operations. However, these efforts have yet to translate into improved financial outcomes.
Financial Highlights
- Revenue: 694 million SEK (2.7% organic growth from the previous year)
- Adjusted EBITDA: 20 million SEK (2.9% margin, slight increase from 2.8% last year)
- Earnings per share: Negative 0.08 SEK
- Cash flow: Negative 29 million SEK in Q1
- Net leverage: 3.0x, above the target of 2.5x
Market Reaction
Following the earnings release, Netel’s stock experienced a significant decline, dropping by 10.66% to a closing price of 11.26 SEK. This movement places the stock closer to its 52-week low of 8.61 SEK, indicating investor disappointment with the company’s current performance and outlook.
Outlook & Guidance
Netel has revised its financial targets, aiming for an annual organic growth of 3-5% and an adjusted EBITDA margin of 5-7%. The company expects gradual margin improvements and no additional earn-out payments in 2025. Despite challenges, Netel remains optimistic about growth in its telecom division and infrastructure services.
Executive Commentary
Konate, President and COO, emphasized the company’s commitment to strengthening its market position, stating, "We have a sharp team with a common clear goal to make Netel even stronger." He also noted, "We expect to see some growth even in infra services, but we see the same market situation in ’25 as we did ’24."
Risks and Challenges
- High net leverage: Currently at 3.0x, above the target of 2.5x.
- Competitive pressure: Intense competition in the infrastructure services market.
- Profitability concerns: Ongoing challenges in achieving positive earnings.
- Market conditions: Uncertain economic environment in primary markets.
- Operational adjustments: Impact of divesting Finnish operations on overall performance.
Q&A
During the earnings call, analysts focused on several key areas, including growth expectations across business verticals, the sustainability of the order backlog, and the profitability of the telecom division. Questions also addressed the strategic decision to divest Finnish operations and its implications for the company’s future.
Full transcript - Netel Holding AB (NETEL) Q1 2025:
Konate, President and COO, Netel: morning, and welcome to our presentation of our Q1 results. My name is, and I’m president and COO of Netel. With me today, I have Frederic Heleneus, our CFO. We see a financial development in line with our own expectation and normal seasonal variation for this first quarter. We show that we continue to deliver on our strategy to grow with new and existing customers and in new geographies.
We increased our sales organically by 2.7% in the quarter and had sales of 694,000,000. We have an adjusted EBITDA of 20,000,000 with a margin of 2.9% compared to 2.8 last year. Our growing order backlog reflects both on our position and the strong underlying markets. In the beginning of the year, we had strong tender season as many of our customers needs to start the product in spring time and before summer in order to be able to be done before winter. We continue to see many relevant requests from new and existing customers.
Our main markets are in Sweden and Norway, which together account for approximately 93% of our sales. And our growth markets in The UK and Germany together account for 7% our sales. Infra services decreased sales in the quarter by 11.3%, but compares to an unusually strong first quarter last year. We continue to see strong price competition in our market segments as players who normally target the housing market are looking for new customers and business. This has led to lower margins, but our business is growing with both new and existing customers while expanding our geographical presence.
We have already taken measures last year to optimize cost and resources and continue to develop the business for further profitable growth. In power, we grew 23.8% in the quarter as a result of our strong development in Norway, where we have gained new significant customers and broaden our geographical presence. The framework agreement with means that we are building a new organization in Mandal in South Of Norway. The framework agreement has a term of potentially four years and and lays the foundation for our investment in Agdeg. In telecom, we decreased our sales by 3.8%, and the court was largely affected by a higher proportion of products that were started up for future deliveries during this year.
Not least within the new expanded framework agreements with, among others, Teletoy in Sweden and Telenor in Norway. Profitability improved despite the high proportion of product starts. We see that the margin raising measures that we took last year in Norway will continue to have an effect during the year. All figures in this presentation are reported excluding our operations in Finland, which are reported separately as an asset held for sale according to our previous communication. Frederic will later on go through the numbers in more detail.
With our recently announced agreements, we have demonstrated our ability to deliver on our strategy of growing with existing and new customers. For example, municipality for our division in infra services. We have also expanded our geographical presence both in Norway and in Sweden with GlitreNet and Telet4, and have thereby strengthened our position in stable long term market segments. The first months of the year are affected by starting up products for future deliveries. The first quarter for us is therefore normally the weakest of the year in terms of sales, profitability, and cash flow.
The financial development in the quarter is thus in line with normal seasonal variations. In January, we announced our intention to sell the Finnish operations. The sales process is proceeding according to plan, and the goal is to complete the sale this year. By divesting the Finnish operation, we free up resources that can focus on our main markets in Sweden and Norway, as well as the growth markets we have in Germany and The UK. Our new digital tools and systems are now implemented, and the fine tuning of them has begun, which will continue throughout the year.
We see their potential and expect positive margin effects gradually during the year. Natel is not directly exposed to trade duties, but, of course, we are closely following developments regarding trade tariffs and assessed today that Natel will not be affected directly. We are currently protected by index clauses in our customer agreements. And in many of our projects, customers are responsible for the purchase and delivery of materials. Natel also has no operations in or sales to The United States.
Our services in critical infrastructure has a high priority for all the markets we operate in. Our business is a project driven in its nature. We have over time different type of projects, and most of our business is weather dependent, which leads to annual variations in outcome, as well as the growing share of recurring service contracts, and, of course, the market situation. Based on this, we have revised our financial targets to better reflect what we currently expect to deliver financially in the coming years. We now expect annual organic growth of three to 5% and then annual adjusted EBITDA margin of five to 7%.
The target for the capital structure remains unchanged and means that the net debt excluding lease liabilities in relation to adjusted EBITDA rolling twelve months shall be less than two and a half. Last year, we grew organically with about 3%, and we delivered a margin of 5.2%. But we were above our capital start structure target. Under 2024, we had a one off effect of earn outs for around 125,000,000, and we do not have any earn outs to be paid going forward. We believe that with our new strong order backlog and all the activities for improved margin and cash flow, we will be able to deliver on these new financial targets.
Our new financial targets are set to be seen as yearly achievements aligned with our strategy for profitable growth and enabling a more transparent view of our expectations for the business. We still expect step by step margin improvement going forward. Now before handing over to Fredrik for more detailed comments on the financial performance, I will give more details on some of the agreements we have recently signed. We are very pleased with the trust placed a company owned by municipality that we have signed a new framework agreement. The agreement includes, among other things, the expansion and modernization of water sewage network in Siktuna.
Siktuna is located in the northern part of Stockholm County and has undertaken several initiatives in the water sewage sector to improve and modernize infrastructure, including the expansion of the water sewage network. It is a three year agreement with an option for two years expansion. Sigtuna municipality is yet another new customer and a new geographic area for us. And in power, we have our power company in Norway, where we have signed two key agreements with in Norway. Owns and maintains the the electricity grid in Agder, Buskgrid, and Hardland, which are placed in in Southern Norway, and it has about 320,000 customers.
The first contract is a framework agreement, which includes planning, ground, and construction work as well as high voltage installations. As a result of the agreement, we established a new organization in Mandal, South Of Norway. The framework agreement has a potential during our four years and lays the foundation for our expansion in. We also signed an agreement with to expand the transformer station in, Southwest Of Oslo. This agreement has a value of approximately 50,000,000.
As part of the the project, we will plan and execute ground and construction work as well as high voltage installations. And in telecom, we have Telet four, who is one of Sweden’s leading telecommunications operators, delivering broadband and communication services to millions of households and businesses. We have signed a new two year framework, which is more comprehensive than our previous contract. This new agreement covers both the larger your geographical area and more services. As part of the agreement, we are responsible for the installation, service, and maintenance of Teletor’s broadband in Sweden.
We are responsible for installation from Skoome to Upland. And in terms of service maintenance, design that covers the countries of Stockholm, Upland, Westminster, and Sdjatland. The agreement runs for two years with the possibility of extension of an annual basis. Through this renewed collaboration, we have strengthened our long term relationship with Telet four and consolidated our position as a leading player in the construction and maintenance of broadband networks. So now it’s time to hand over to you, Fredrik, with a more detailed presentation of our financial performance.
Fredrik, CFO, Netel: Perfect. Thank you, Konate, and good morning, everyone. Looking at the financial performance in the first quarter, we, of course, first and foremost, note the evident seasonality where we generate slightly lower volumes and as a consequence, both lower margins and lower cash flows. The start of the year implies time to start new projects, and in our case, this time, new clients or regions. Still, we managed to utilize on the increased order backlog, reaching a growth of 2.7%, a growth mostly driven by power in Norway and telecom in Germany, where we continue to see positive contributions from new projects.
We delivered sales of 694,000,000 in the quarter compared to 676,000,000 last year, With a few interesting new contracts in combination with updated views on our existing contracts, we grew the order backlog from year end and remain above 4,000,000,000 here in quarter one. We continuously work with new interesting projects and and search for new interesting tenders. And with the existing order backlog, we estimate that we have around 2,000,000,000 for the remaining nine months of ’25. Looking at the profitability in the quarter, this graph on the slide clearly shows our seasonality pattern where q one is the weakest quarter of the year. As said, we tend to generate lower volumes as we use a lot of time in the beginning of the year to start new projects and and work with lower volume activities as we focus on the preparations in the projects to get ready to ramp up production during the coming seasons.
The adjusted EBITA, however, increased to SEK 20,000,000 or 2.9% with a few adjustments for restructurings and the process of divesting our Finnish operations. And telecom contributed with a positive margin here in Q1. We still expect to improve our position and profitability over time, yet Q1 is a low volume quarter where we have limited possibilities to perform within the higher profitability range. Again, we note a slight improvement compared to previous first quarters, and we continue to evaluate the effects from, for instance, the the better and more efficient solutions within telecom, our new organizational structure, and, new contracts throughout the entire year. The lower volumes in the first quarter implied a slightly negative earnings per share of 0.08.
Turning to the cash flow, we note that the cash flow in the first quarter is improved from last year, yet still negative with minus 29 millions. Finland was more or less neutral in the quarter, the cash flow from excluding discontinued operations was from from the discontinued operations was one minus 1,000,000. We are focusing a lot on seasonality today, but it is a very important characteristic for our business as we need to we need our capital when ramping up new projects and need to reach certain achievements before we are entitled to invoice or ultimately, generating cash flows. The quarter benefited from the timing of the inflows from invoices sent in December, and we believe the outcome to be in line with expectations for the start of the year. Yet as seen historically, we expect to improve our cash flows throughout the year as we finalize production and are able to benefit from the cash release towards the end of the project life cycle.
In addition, and as Gonet mentioned, we paid roughly SEK 125,000,000 in earn outs during ’24, payments that were scheduled for ’24, and obviously, we do not expect the same cash out here in ’25. We closed the quarter with around 10% net working capital in relation to sales, which we believe is within expected levels for our business and our first quarter. And it’s just a slight increase from year end as we start new projects and engage in activities in new areas and and start new partnerships with with interesting customers. We have, as we have said before, achieved improvements within our projects and and certainly increased the cash flow awareness across the group. But this will continue to be, you know, on our focus, and we will still have room for additional improvements and and thus strive for for the for our potential going forward.
Effectively, with the seasonality and the working capital need, we remain above our capital structure target on net leverage, being around three point o times in comparison to the target of 2.5. But we continue to have a solid liquidity. And with the yearly cash flow cycle, we do expect to improve the position towards the later part of the year. We have proven our ability to generate healthy cash flows in the past And with the limited outflows here in ’25, meaning the the new earn outs, our focus remains on improving our net debt position and decrease the leverage ratio towards our financial target here in the end of twenty five. As previously announced, we decided to initiate the process of divesting our Finnish operations with a goal of closing during ’25.
We are working swiftly with the process according to plan together with our set of chosen advisers. The business performance in Finland is in line with expectations and, once again, very much about the start and the start of the year and and seasonality in q one. Ramping up production and the relatively lower volumes impacted margin also in Finland, but we have a good position, and we are working closely with the management to further develop the business in Finland alongside the ongoing divestment process. The business in Finland generated sales of 34,000,000 with a slightly negative margin. If we turn and have a look at the divisions and looking at the performance across these three divisions in the first quarter, infra services, firstly, delivered sales of a hundred and 44,000,000 and decreased 11% against a good q one last year where we saw additional projects running over the year end.
Vice versa this year, we saw fewer projects continuing since last year and focused on the start for new projects. Profitability wise, infra services delivered a result in line with q one expectations or an EBITDA of 4,000,000 or 2.6%. In addition to the seasonal pattern, we still noticed a relatively higher competition within our markets and expect that to remain during ’25 with before we start to see improved possibilities as the housing market provides additional alternatives. We believe that we have a good, position and that we see good opportunities for infra services as well as we do for our, other divisions, and we continue to evaluate our new orders and tenders in order to contribute to the group’s improved financial performance. Within Power, we note a growth of 23.8% driven by Norway as we increase production towards new clients in new areas.
Power generated 252,000,000 in sales compared to 204,000,000 last year, and Norway continued to contribute with both our power service contracts as well as from projects. Sweden was roughly on par with last year, and the division delivered a decreased profitability with 7,000,000 in EBITA with a 2.8% margin. The margin is partially impacted by costs in relation to our expansion into new regions and with new clients and also due to the project mix and phase with fewer substation projects running at the same speed as we did last year. And those projects have historically been providing margins in the high range. As said before, power remains as a very interesting market.
We have had two profitable years for the divisions with good performances, and we continuously evaluate tenders and market possibilities trying to utilize on this momentum that we see in the underlying market for power. Lastly, we have telecom, where we delivered just below 300,000,000 in sales in the quarter with a with a single digit negative growth of approximately 4%. As we noted, the start for many new projects, for instance, with Telenor in Norway and with Tele2 in Sweden. With the multiyear framework agreements that we have, we have a good position in our order backlog, and we look forward to evaluate the progress as we get up to full speed in our production. Our growth markets in Germany and UK combined came in a few millions below last year, but we continue to work for new interesting volumes and evaluate tenders in addition to those already published.
The EBITDA for the division was 2,000,000 or 0.8% in the quarter. It is low, yet positive and improved. We were not satisfied with the margin for ’24. However, as we go on and increase the production now during the year, we continue to improve our new tools for efficiency within biggest service contracts we have in Norway. We’ll repeat our expectations for the stepwise improvements going forward.
Telecom is our biggest division with above 40% of sales, and we aim to leverage on our order backlog and new contracts in order to increase the profitability. And with that, for telecom, I believe that I can hand back over to you, Kwonet, for a few concluding concluding comments.
Konate, President and COO, Netel: Well, thank you, Fredrik, for this presentation. I will finalize today’s presentation with some concluding remarks on our growth strategy and how we can build a stronger Nattel going forward. Nattel celebrates twenty five years this year. We started our our operations in telecom and have, over the years, developed our business in power and infra services. Through both acquisitions and the ability to grow organically, we have managed to develop our business over the years.
Underlying this, we have strong megatrends of electrification, digitalization, and modernization of water and sewage system as a driving market forces for our business. We have successfully delivered on our strategy and continue to strengthen our position in our markets. Every day, I receive proof of the strength Nattel has in all our competent and motivated employees. We have a sharp team with a common clear goal to make Natel even stronger. This means that I’m confident in our ability to deliver on our financial targets and grow with profitability.
And with that, we open up for questions.
Conference Operator: To ask a question, please dial 5 on your telephone question comes from Karl Johan Bonnevier from DNB Markets. Please go ahead.
Karl Johan Bonnevier, Analyst, DNB Markets: Good morning, Sanath and Fredrik. A couple of questions, if I may. First, looking at the outlook you described for this this year, it sounds like you are seeing quite a broad based growth base anyway and maybe with a little lessening front, slightly more in Power and Telecom. Is that how you want to also perceive your view at the market for the moment?
Konate, President and COO, Netel: Yes. That’s correct, Carl Johan. We see a high growth for power during this year and both in telecom due to the both the contracts that we may won last year, the end of last year, of course, even the new ones this year. We expect to see see some growth even in infra services, but as we have said for for for some quarters now that we see the same market situation in ’25 as we did ’24 due to the competition for infra services. But we see a strong development for power and telecom.
Karl Johan Bonnevier, Analyst, DNB Markets: Do I understand your comments, Fredrik, right, on the order backlog that if it’s about SEK 2,000,000,000 to be delivered out of the order backlog that this looks very healthy? You have now started to have maybe slightly longer duration of the order backlog than than you have had historically.
Fredrik, CFO, Netel: Well well, first, I think I think that we have had several interesting multiyear framework agreements in the past as well. We do so now. And and, yes, you are correct. We we stated in our last call that we had roughly half of the order backlog for ’25. We basically repeat that comment now being a bit more precise saying that we have roughly SEK 2,000,000,000 in the backlog for the remaining nine months of ’25.
Karl Johan Bonnevier, Analyst, DNB Markets: And when you I think the updated financial targets, they make clear sense to me, so no question there really. But how do you see them being broken down by your business verticals and geographies? So I guess there’s quite a big mix difference between the different business areas. And could you really push these kind of targets also in the telecom area? Is that logical?
Or is it going to be, say, a mix making you end up in on these kind of financial targets?
Konate, President and COO, Netel: Well, it is a mix for us as a company as a whole, as the financial targets is is communicated now. And and as you can see in the numbers, of course, we have a journey to do with our division telecom in in in order to be more profitable and increase our margin there. So but in the end, we see and we are aiming all the activities we are doing is that all the divisions should deliver on our financial targets further on.
Karl Johan Bonnevier, Analyst, DNB Markets: Also for telecom, it would be logical to talk to about 5% to 7% margin. And I guess also there, it’s very much a different mix things for you if it’s a lot of fiber rollout and your historic level, obviously, been up there.
Konate, President and COO, Netel: Yeah. I would say we have we it’s a longer journey for us to reach for the telecom division than the other divisions. But we will see a step by step improvement for that division further on as well.
Karl Johan Bonnevier, Analyst, DNB Markets: Good to hear. And finally, looking at Finland, would you expect any what kind of financial consequences would you expect of, say, disposing of that? Is there any, say, more things needed to be cleaned out of your balance sheet on the finalization of a transaction? Or if it comes to closure instead, would it be, say, large cost related to it?
Fredrik, CFO, Netel: No. As we said in the fourth quarter, we believe that we have that we have made our assumption and and updated estimates on our finished operations in order to have a relevant target to to put out in the market, and and our focus now is is on the process. We will provide updates when we do have a good progress in that in that process, meaning a a closing of the transaction. What what we said before and what we still can sort of comment on is that we we try to be quite cautious in our financial estimates on on on the process and and believe that we have an interesting position now for the for the rest of the process of succeeding with the completion of the closing of that investment.
Karl Johan Bonnevier, Analyst, DNB Markets: Good to hear. And it looks like you have already stabilized the operation, to be fair. So I guess it’s more an interesting asset for somebody to look at than it might have been historically.
Konate, President and COO, Netel: That’s correct.
Conference Operator: More questions at this time. So I hand the conference back to the speakers for any closing comments.
Konate, President and COO, Netel: Thank you, everyone, for listening in, and we look forward to see you all for our presentation of quarter ’2 results in July. And wish you a good day.
Fredrik, CFO, Netel: Thank you, everyone. Bye bye.
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