CEO Comments
CEO Comments
Read Managing Director and CEO André Strömgren’s comments from Wall to Wall’s Year-to-end report.
MARKET STABILIZATION
The first quarter is seasonally softer for most of Wall to Wall Group’s operations. Overall, we are seeing signs of market stabilization, although broad-based growth has yet to take hold.
The Group’s main customer segments remain cautious but are generally in a stronger financial position today than before, as high fee-based costs and rising interest rates constrained their ability to
fully maintain their properties. The current market stabilization is expected to support previously postponed maintenance needs being addressed over the course of the year.
The pipe flushing operations, which include both emergency and preventive services, saw normal activity levels during the period and continue to show stable prospects. The energy-saving solutions segment is recovering from low levels, with growing interest particularly in duct sealing, which offers a cost-effective and environmentally smart alternative for ventilation system renovations. Activity in the pipe relining segment has been low, even when accounting for seasonal effects. However, it is important to note that pipe relining projects tend to lag naturally, as execution typically follows a period after contracts are initiated and signed. Several major agreements have been secured recently, including within flushing services, which in turn drives demand for pipe relining. Net sales were lower than last year, mainly due to low activity in pipe relining and the discontinuation of loss-making greenfield businesses. The Group’s lower gross margin compared to the previous year is primarily attributable to a handful of underperforming pipe relining units currently undergoing improvement measures, which are temporarily offsetting an underlying margin recovery. Overall, activity during the first quarter was lower than expected, but the stabilizing market provides a stronger foundation for improved performance over the remainder
of the year.
TRANSITION TOWARDS INCREASED COLLABORATION
AND LOWER INDIRECT COSTS
During the quarter, we identified and implemented further measures to improve internal collaboration and efficiency, and thereby significantly reducing the Group’s indirect costs. The target remains unchanged – indirect costs shall not exceed 20 percent of net sales. This is primarily being achieved through the consolidation of sales and project management functions, centralized and streamlined administration, and an optimized organizational structure, and is expected to be implemented without any negative impact on revenues.
Based on the current revenue level, the target implies reducing indirect costs to c. SEK 180 million on an annual basis, a level we expect to achieve during the year. Over the past twelve months, indirect costs amounted to SEK 212.4 million, representing a decrease of 10.6 percent compared to the corresponding period last year, and a decrease of 3.6 percent compared to the full year 2024, adjusted for currency effects and on a comparable basis. During the quarter, we made provisions for costs related to these initiatives. Additional provisions may be needed but are expected to remain limited. The work is ongoing and not yet complete, but we are making good progress.
MATERIAL COLLABORATION AND STANDARDIZED WAYS OF WORKING IN PIPE RELINING
The collaboration with Trelleborg Sealing Solutions is progressing as planned. Testing, production adaptation, and certification of a new material, with full certification expected within 18 months. At the same time, existing materials and working methods are being gradually phased into production. The transition to common materials and standardized working methods is expected to increase efficiency, lower installation costs, and strengthen collaboration across the relining units. This is expected to have a positive impact on the gross margin.
BUILDING A UNIFIED MARKET PRESENCE
We are now taking the final step in uniting the Group’s operations together under a single brand. This marks a shift in how we build customer relationships and position the Group in the market. Local brands may continue to be used where considered valuable, but the connection to Wall to Wall Group will be clearly visible. The transition is gradual throughout the year and aligned with joint sales initiatives that complement local sales.
Meanwhile, we have secured several key contracts – including a framework agreement with Region Skåne for flushing and relining services for the regions’s properties, a long-term framework agreement with Halmstad Energi och Miljö for flushing services, and two major relining projects in Denmark, one of which is the largest relining project that the Group has secured this year.
OUTLOOK
Overall, activity at the start of the year was below expectations. At the same time, we are seeing signs of market stabilization. The real estate sector is in a significantly stronger position today than before. Many necessary investments in planned maintenance have been deferred – not cancelled – which is expected to drive a recovery that will primarily benefit our pipe relining and energy-saving operations. Flushing services and offerings that address ongoing maintenance needs continue to perform well, and we see good opportunities for growth through new contracts and geographic expansion. In parallel, we are continuing to pursue an opportunistic acquisition agenda, focusing on flushing and energy-saving solutions.
In addition to a stabilizing market that is expected to strengthen revenue and ongoing cost measures that are reducing indirect costs, we also see opportunities to further strengthen our gross margin. Over the past twelve months, the gross margin amounted to 33.7 percent on a comparable basis. Through the recently initiated material partnership and the opportunities it creates for more efficient working methods we expect further margin improvement, beyond the stable trend we have already seen over an extended period.
In summary, a more stable market – together with a more scalable and cost-efficient organization with significantly lower indirect costs – is expected to significantly improve operating profit for the full year.
Andre Strömgren, CEO Wall to Wall Group
For full year-end report, see appendix.
Contacts
André Strömgren, CEO
+46 (0) 70 841 07 96
