Welcome to Instalco's Quarter Three Presentation 2022. Throughout the call, all participants will be in listen only mode. Afterwards, there will be a question and answer session. If you wish to ask a question, please press zero one on your telephone keypad. I will now hand over the word to CEO Robin Boheman. Please begin your meeting. Hello. Welcome everyone to Instalco's Q3 Presentation 2022. My name is Robin Boheman, and I'm the CEO of Instalco, and with me today, I have my CFO, Christina Kassberg, and also my head of IR, Fredrik Trahn, that will present today. Just to start off, real quickly, Instalco, most of you know us, but we're a leading installation company, within heating and plumbing, electricity, ventilation, cooling, and we also have a segment, regarding industry and technical consultants. We are a highly decentralized structure, supported by a smaller, central organization. We run this company through our 120 subsidiaries that are highly specialized local companies. We have roughly 5,500 employees, in the Nordics. Our motto is strong profitability with high margins over time. That was a brief what Instalco is. Looking at some key financials for the last twelve months, we have net sales of around SEK 11 billion, an order backlog at the moment of SEK 8.1 billion. EBITDA-wise, we're at SEK 850 million, which translates to an EBITDA margin of 7.6%. We have a cash flow of SEK 760 million, and we have in the last twelve months been able to acquire an annual sales of SEK 1.75 billion in turnover. That's basically Instalco in short. Going into Q3 highlights, we had net sales of almost SEK 2.8 billion, which is very high sales growth of little bit above 40%, which I think is the highest number we have delivered. This is also fueled by the organic growth of 7.8%. We managed, EBITDA-wise, to deliver SEK 201 million in EBITDA with an EBITDA margin of 7.2%. In spite of the somewhat challenging market situation, we deliver a strong profitability and a solid EBITDA level. We are seeing some slight lower margins than maybe was hoped for, primarily due to somewhat higher material prices and the challenging market situation in Finland. However, we are able to deliver 7.2%, which is also the highest margin in Q3 compared to all our competitors. We were able to deliver a new credit agreement. We'll come back to that a little bit later on. We had a strong performance in Sweden. Christina will touch upon that a little bit later. I will come back. Also, we managed to also increase our presence in Norway with some strong acquisitions, and we can see the demand for energy efficient solutions is still high. That was basically the highlights of Q3, and I will hand over to you, Christina, to go through the numbers a little bit more in detail. Thank you, Robin. Net sales development. In this slide, we see the growth in net sales with a comparison of Q3 present and prior year. Net sales were high during the quarter. They increased by 40.2% compared to last year, and amounted to SEK 2.8 billion. Our growth is driven by the dedicated entrepreneurship in our subsidiaries and our high rate of acquisitions. We are satisfied with our organic growth rate, which was 7.8%. Acquired growth is impressive at just over 30%, thanks to our successful M&A efforts. In this slide, we see the quarterly trend of EBITA in both millions and margin. We continue to deliver a high and stable profitability despite the market situation of rising inflation and high material prices. EBITA increased in absolute numbers by 17.6% and amounted to SEK 201 million, which corresponds to a margin of 7.2%. Historically, the third quarter is weaker, which has proven true this year as well. A main reason is the effect from summer vacation period. This slide shows the quarterly progression of the order backlog. There is a strong underlying demand for industry services, and there is a growing interest and demand for energy efficient and resource-saving installation services. Our order backlog grew by 25.6% and is at a record high level in absolute numbers once again this quarter. In total, SEK 8.2 billion, which corresponds to more than 70% of annual sales. This is a level we are quite comfortable with, and it offer us a good degree of flexibility when entering into new agreements. Our companies, they continue winning new business with both individually and in partnering projects, where several Instalco companies collaborate. Organically, the order backlog grew by 3.3%, and the order backlog of acquired companies contributed with growth of 20.9%, which is a clear confirmation of our strong acquisition growth. Now here over to a slide that summarizes segment Sweden in Q3. Segment Sweden has managed the challenging market very successfully with a high profitability and strong growth in absolute numbers during the quarter. The overall market situation is good even if the supply of installation project decreased somewhat. New construction and renovation in the private and public sector remains high at a high level. For new production, we have noticed somewhat of a dampening effect due to uncertainty about the interest rate situation. Construction investments in the industry remain at a high level, particularly in Northern Sweden, where major investment will be made in the years ahead. Overall, net sales increased by 35.4% to SEK 2.1 billion. Organic growth amounted to 10.3%, and acquired growth amounted to 25.1%. EBITDA was SEK 172 million, and the margin was 8.2%. Now for a summary of the Rest of Nordic segment. Rest of Nordic is overall delivering a strong trend in rising sales, EBITDA, and order backlog. The market in Norway remains stable in terms of both construction and renovation, and the demand for energy efficient installations is increasing in line with the rising energy prices. The market in Finland fell during the pandemic and has still not fully recovered. In Rest of Nordic, EBITDA margin is still below desired level, but we have a positive trend primarily explained by a stabilized market in Norway and a positive earnings effect from acquired companies. Overall, net sales increased by 57.3% to SEK 686 million. Organic growth fell by 0.9%, and the decline is primarily attributable to some of our Finnish companies. Acquired growth amounted to 49.2%. EBITDA was SEK 29 million, and the margin was 4.3%. In this slide, we summarize our performance in relation to our financial targets. First, a comment on capital structure. It is at a higher level compared with historical numbers, but well in line with our acquisition strategy. The pace of acquisitions is strong, which is reflected in the growth we are delivering. Over the short term, the increasing pace of acquisitions results in a somewhat higher level of indebtedness together with the decision of not using equity as payment method for our recent acquisitions. We are comfortable with the rate, and we are maintaining both a sound level of indebtedness and a strong balance sheet. All in all, over a business cycle, we are confident that we are delivering in line with our financial targets, and the Instalco model offers us the flexibility we need to cope with changing market conditions. By that, Robin, I hand it back over to you again. Thank you. If we look into, as I mentioned before, we entered into new credit agreement together with Danske Bank, SEB, and Svensk Exportkredit, totaling an amount of SEK 3.4 billion. As mentioned by Christina, this is also to help out with the increasing M&A activities that we have. This also gives us the opportunity to continue our growth strategy by acquiring the best-in-class companies. It also gives us some flexibility that we now have three banks instead of one. We're happy to be able to announce this to the market as well. If we go in a little bit and talk about our projects during the quarter, I think it is a nice example to take this quarter, for instance, the new assignment for LKAB. Two Instalco companies, MM-Mining and EPS Sweden, engaged by the mining company, LKAB, for new construction of two properties, in the industrial area, where the work is also on plumbing, but also on the construction, and also in the connection of heating and plumbing and district heating in their existing system. This is just increasing our partnership together with LKAB, so we're happy to continue to work with them in the future as well. Project is roughly about SEK 70 million-SEK 80 million. During the quarter, we of course also made some acquisitions, very pleased to see that we've been able to clear some white spots on the map and are now represented in Örnsköldsvik and also Western Värmland. In Norway, we were finally able to become multidisciplinary in Bergen, which is something we're working on for quite a while. Also in Oppdal, Trondheim, and Lillehammer, which is nice that we now can deliver a multidisciplinary offer to our customers in those regions. That's also one of the reasons. I mean, Instalco never acquires a company solely for the sake of acquisition. We rather see ourselves as kind of a safe harbor for quality companies, and we are selective on which one we choose, and we choose them carefully. We want the new companies to join the group and thrive and develop together with our existing companies. The companies that we acquire are led by entrepreneurs who genuinely decide to be part of Instalco and not just wanting to sell their company. They want to become a part of something larger. We can also look forward to some new acquisitions in the coming quarter because the pipeline continues to look strong. I will go over to the theme of this quarter and maybe not such a shock that this is the theme for this quarter. I mean, the soaring energy prices has been a hot topic during the quarter, and it feels very meaningful to be part of a company that can actually help us in this situation, and we can do it today. We can make a difference already today. I mean, each day, Instalco suggests new installation design saving energy savings solutions in all sorts of properties all around the Nordic region. Installing a modern system that is energy efficient is how we can contribute to better society. Energy efficiency, I think, is the key to lowering your energy bill, to be honest. There is a large and growing demand for this energy efficient and resource savings installation. Instalco is really well-positioned in society to make this transformation to a greener economy. I think it's also to our companies out there, they're doing a tremendous job in helping to make this shift possible. Just to give some examples, I mean, we're always striving to help our customers lowering their environmental impact and reducing their energy consumptions. Not only do we install, but we also design new systems and help our customers with their needs. I mean, it's all the way from installing solar panels, changing to LED lights, charging station, geothermal heating solutions, property automation, water and air cleaning systems, and so forth. We have a real big offering to our customers in this area. I'm giving some examples of this myself, I myself actually have been visiting lately. For instance, in Stockholm, we did an FTX installation for 2 properties where we were able to reduce energy consumption by 50%. This is just by utilizing the heat that we have in the buildings and reusing it, basically. There are a lot of things that you can do in apartments, in offices, and so forth, with not too big of an investment. Another project is, for instance, the geothermal heating project that VVS-Kraft installed in apartments in Stockholm, center of Stockholm, also reducing energy consumption by 40%. Last but not least, another example, solar panels, where our company Vallacom in Linköping installed the solar panels for 650 apartments in Linköping. Basically 5,200 sq m of roof that we're now been using to produce electricity for heating the apartments, but also for charging electric cars and so forth. These are just some examples. This is what Instalco does every day, and we're running a lot of projects in this area at the moment. As you can see, there is a widespread of different things that we can do to help society and help our customers reduce their energy consumptions and by that also reducing their energy bill. Because this is what we want to do. I mean, Instalco also stands for sustainable installation. I don't want to become too political here today, but I mean, the political environment at the moment, they're discussing like nuclear power plants or wind, and I think we can all agree on that we will probably need more electricity going forward, to make this change that we want to do. All those initiatives that are discussed now, they are 10, 15 years ahead. We need action now, and I think we can deliver that. We can help our customers and society now. We can help them with energy-saving systems. We can help them by reducing their use. We can help them by steering demand to times when energy supply is high, for instance, helping them with storage capacities, and so forth. We can even out the use, the consumption during a day or a month, et cetera. We can actually make a difference today, and that makes me very proud to be part of a company like that. That sums up the theme for this quarter, and I will go back a little bit just to sum up the Q3 presentation. I think we made a solid performance in a somewhat uncertain macro environment. I mean, we are showing once again that we're dealing with higher prices on material, and we can cope with that. We have a strong acquisition pipeline, and we have done some really good acquisitions, and we have a really high order backlog. I feel confident that the coming quarters we can continue to do our work and we can continue to grow our company and to make a better society as well. With that, I'd like to conclude this presentation, and I will open up for any questions. Thank you. If you wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from Karl Bokvist from ABG. Please go ahead. The line is now open. Thank you, good afternoon. My first one is just on one of the topics you have on the summary slide of course, the price versus cost, big topic the entire year. Given that it seems at least that this headwind maybe has intensified further, I would just want to, you know, understand or hear from you how you view it. Was it mainly that price increases made now in the early fall were not enough, or is it now more perhaps of, you know, calculations on projects leading to cost overruns, or how should one think about this prices or versus cost? Yeah, I think the overall thing is that we're constantly coping with the increased prices. I mean, a lot of projects are of course handled on a daily basis where projects are running out and then we can kind of sort of say quote for new projects. Of course, in the order book, we have some projects that are taken a year in advance and now are being produced, and those have a harder time delivering the margin that we want when you have a fixed price. When it comes to how kind of this will look forward, I mean, we constantly roll out these projects out of the order backlog and so to say fill in with new projects every day, and those new projects that we take, they are of course taken on the new price level, so to say. But of course, there is a problematic situation in the market today where you have fixed price projects and you've taken them to a different price level. So I mean, this is something that we will have to live with, and as I've said before in different Q presentations, this is something that we will be coping with for a while now. As I said, we continue to deliver. We deliver 7.2% margin this quarter even with this happening to us, so. Understood. As you mentioned, and also from looking at some of the larger competitors out there with reports, they, I mean, they all convey strong backlog development, so obvious positive for demand there. It seems like all of you have, you know, a significant working capital build-up here in Q3. Could you just help us understand if it's regular seasonality in Q3, or if you think that it's maybe something particularly related to Q3 that it seems like all of you larger players in the industry have had to deal with? Yeah. I think you've basically answered the question already. I think it is a little bit about the quarter. As you looked at maybe our Q3 last year, we had the same situation, and looking at Q3 the year before that, we also had a similar build-up. On our side, the overall working capital is also building up a little bit, slightly more. The reason for that is basically also that we've moved into a little bit also working more and more for the industry, which we believe in the long run is a good move to also sort of say be standing on more legs when it comes to your customer base. However, to be honest, the industry, they are not as good as paying and not as fast as paying as maybe construction companies in that sense. You will see a little bit build-up in working capital due to the shift in project mix. Understood. My final one is just on the M&A side. A very impressive margin of the acquired operations it seems, so implicitly 20%+ EBIT and even higher for the quarter in specifically. I'm just wondering here. Is there anything specific related to Q3, or is it, you know, should we extrapolate this high margin of acquired operations also for the remainder of the year? Yeah. I think you have to look at it a little bit more in the sense that we have acquired a few really profitable companies, and the Instalco model works in the same. We will typically look at a company over a longer period of time. I think if you just look at a specific year, the year that they sell their company, there is always the possibility that they will sort of, say, dress the bride a little bit, and you see a little bit higher margins coming into Instalco the last year. That is very typical, and we've seen it in so many of our 130 acquisitions that we've done. We are not expecting. Of course, we're hoping to keep that margin, otherwise. I mean, of course, we hope for it, but to be realistic. A few of these are maybe on a too high level to be, so to say, continuously on this level for a so to say longer period of time. Understood. That's all for me. Thank you. Thank you. The next question comes from Markus Almerud from Erik Penser Bank. Please go ahead. Your line is now open. Hi, Markus Almerud here from Erik Penser Bank. I'd like to dig a little bit more follow-up on the previous question about the price versus cost. We had the fixed price contract, which are kind of taken in a previous cost environment. I think it was a couple of quarters ago since we spoke about this, then you had a lot of them rolling over. You would if you could just explain how much of those are left? Is it the same project that were taken back then, or is it a new kind of phase of projects which also needs to be phased out? If you could just explain a little bit and then kind of bridge them for us. Yeah. I think it's a combination of both. If you see what I mean. Yeah. I think I understand you, Markus. I think it's a little bit of a combination of both. I mean, you will start a project, then you see that the you take, so to say, how it works is basically you calculate your projects according to the price that is today. You of course expect maybe some price increases or so forth, so you have a little bit of a, so to say, maybe a little bit headroom depending on the competition. Then you go into the project, and then you see that, once I start the project, the price is not really the same, so you try to then purchase as much as you can to a cheaper price. Sometimes you succeed, sometimes you don't, and you have to pay the higher price, so to say. What you're seeing now is also that we constantly are rolling out these projects, and depending on where they are, I mean, if it's 25% of the project is already done, of course, if we know that we're gonna make a loss, we take the loss immediately, and calculate for it. It's also, you know, according to how the projects, the further it goes, the more you know about the projects. In some projects, we'll take the write-off immediately if we can see it, but for some projects it's hard to see what's gonna happen a year from now. I think a few of these are projects that we already, so to say, had taken a little bit of a hit on, that we continue to take a little bit hit on, in the sense. There's also some projects that have been taken a year ago, for instance, at that price, and now we're starting, and now that they're starting, we're seeing that, okay, the calculation or the estimates that we had, we cannot kind of calculate with the same profit in these projects, and then we have to accordingly take down the profit in that sense. It's a combination of both. Mm-hmm. Because I mean, if you look at pricing and when you've seen big movements, there's been a couple of ways. I mean, there's continuous price increases, but I mean, in prices for you. But there's been a couple of big moves, and then you compensate for those. If you look at your order backlog, how much is kind of left of these projects which you were taking at lower prices? When should we expect for this kind of effect to fade out? A tough question there, Markus. Sorry, but we don't have an exact. I mean, we're running 6,000 projects at the moment, and to recalculate 6,000 projects is too much work, to be honest. We can only estimate, and that is what I tried to do. I mean, we are in those projects that we are, so we cannot kind of skip them. I mean, for us to kind of recalculate all those projects is not worthwhile, to be honest. We need to focus. Yeah on instead trying to do better purchasing. We need to look at timetables. We need to work on how many hours we use for projects. We need to focus on the operations instead. It's very hard for me to comment on how many percentage or how much it is, and how much this will affect going forward. The only thing that I can say is that we still have a few projects left. It will affect us. Unfortunately, due to inflation, we haven't seen the kind of price drop in material that we were hoping for. We were hoping for that, now that raw material has started to come down, that also prices would come down. Instead, prices have kept on this higher level, and also even in some cases increased a little bit more due to that, transportation has gone up, electricity has gone up. Unfortunately, we haven't seen the price drop that I think the whole installation industry is, we're hoping for. You would still characterize the price movement, the input price movement that you have, so the cost to be stable rather than slightly up overall on average? Sorry, Markus, I didn't get that question. Or- Once again. Are prices so your cost, your input cost prices, are they stable or would you say that they're a little up, a little down overall on average? They're a little up, I would say. Would you characterize them as stable? A little up. Okay. Yeah. Okay. But it's still- And then- It's still not the fluctuation that we saw a year ago where prices was fluctuating very much. I mean, now we see a more stable in that sense, we see a more stable call. It's easier to calculate, but they are still not kind of flat as they used to be. Easier to manage? It's easier to manage now than a year ago, yes. My second question is on the market. You say that the market overall is fairly okay, but you see less supplier projects, and then you see a bit of weakness in the consumer market. I lost the word, but you see what I mean, in the bostäder. Yeah. Okay. I understand. Yep. Housing. Housing. But at the same time, your organic growth is pretty good. So are you still not affected by this, or are you gaining market share, or just give us some color on the market and what you're seeing, and what you're seeing for your, I mean, for the installation projects overall coming in. I think, yeah. Maybe talk a little bit about Q2 as well. Yeah, yeah. I just try to break down the questions a little bit. I think the one thing that I think the biggest effect has been on the housing side that we've seen short term, like, we see some projects not starting, basically. Luckily in the Nordics it is the way that if a project has started, we will finalize it. It's not like in some parts of Europe where you kind of start the project and then you don't finish it. That's not the case in Nordics at least. Once we have started the project and so say the builder has started building, they will finalize it, and they need our help. In that sense, we are late cycled. When it comes to kind of houses and new builds, that's a very small part of our overall portfolio of offerings. We have been able to kind of move that over to energy efficiency projects and so forth instead. I think that we have not been such affected on top line. But like I said, margin-wise, we have been a little bit affected on kind of say these fixed price projects, and that we also see that the prices overall due to inflation and so forth, and there is some price pressure in that sense. This is something that we are used to coping with and as I said, I mean, this is just the proof, this 7.2% that we deliver is just the proof that we still are best in class when it comes to this and we will continue to be that. Do you think you're gaining market share, or do you feel that you're gaining market share? Oh, we are absolutely gaining market share. Okay. Okay. We can just look at the number of employees that we have that is increasing. Yeah. Okay. I think that was all for me. Thank you. The next question comes from Karl Bokvist from ABG. Please go ahead. Your line is now open. Thank you, good afternoon again here. Just the first one on more technical, perhaps more directed, you know, towards the financial side. The revaluations within the net financial line, is that related to interest payments or how we would call it, earn-out considerations? If they are, shouldn't they be included above the EBIT line, or do they relate to other financial instruments? It's actually a combination. First of all, mainly it's an outcome from the weaker Swedish krona compared with euro and the Norwegian krona. And it's mainly from our debts actually. Of course we also have effect from earn-outs that not has been paid out then of course, because it's valuation when it comes to the closing of the books at the end of the period. Understood. Thank you. Even more an operational one. You mentioned that technical consulting sees strong demand. Correct me if I'm wrong here, but it seems like TC is now on a kind of SEK 200 million rolling. It would be interesting to hear roughly, you know, at what kind of run rate you are in terms of employees and how this is progressing. We've talked about this before, but you know, profitability and cost. Sure. Like we said before, we had a really high growth in this segment in the last year basically. We had a really big increase and also in the beginning of this year. We are now consolidating that a little bit. We are roughly around 300 technical consultants today. I think we breached 300 recently. And as I've said before, I mean, the companies that have run 12, 15 months, they are profitable, and the ones that have shorter, so to say, that has not existed longer or a shorter period, they are not making money. This is all about utilization. Once you get utilization up and you kind of get your base up, they turn profitable quite quickly. There is a lot of costs involved in starting a company, and also there's a lot of cost in so to speak paying salaries for someone that has so to speak very low utilization rate. This is a little bit like a you know a hotel or a consultancy business in that sense. Like if you can fill your occupancy to a certain percentage, then everything above that is profitability. That's a little bit the same way we are with the technical consultants, that we don't have enough occupancy at the moment to be really profitable. We're getting there, small steps every month where we're coming closer to where we want to be, but it's still costing us a bit of money on the bottom line, so to speak. Understood. Yeah, that was just the follow-up really. You feel that the comments you've made before and also now with if they have existed or been within the firm for more than 12 months, they are now at the utilization where they contribute to profits? Yes. Okay. They're not able to. Thank you. Contribute so much so that they pay for the ones that are, so to say, new. Yeah. Yeah. Understood. Thanks. Thank you. There are no more questions from the telephone conference. I hand over the word back to the speakers. Yeah. We have one question from the webcast. Is it possible to comment on how large the price effect is on organic growth? Is it possible to comment on that or? No, like I said, I mean, we have 6,000 projects running at the moment, so I think recalculating all that to calculate how much is price increases, to be honest, I don't think it is valuable time to spend on doing that. What we can say is that we see that, as I mentioned before, number of employees in existing companies have risen a little bit, so that should mean that it's not only 100% price increases, that it actually is some real organic growth in it as well. But how much is unfortunately impossible to calculate. Okay. Yeah. If there was no. Yeah ... additional que- No further- No? No further questions, what I can see. Okay. We say thank you very much for listening to us today, and wish you a great day and see you out there. Yeah. Thank you very much.