Good morning, everyone. Warmly welcome to follow the webcast presentation of Relais Group Interim Report, July-September 2024. My name is Arni Ekholm. I'm the CEO of the company. And today, as usual, together with me, our CFO, Thomas Ekström.
Morning.
We'll go through the presentation today. Before kicking off into the presentation, a few words. Of course, again, I would like to thank our teams for the very good result in Quarter Three and our customers and other stakeholders. It's been a pleasure again to see the fantastic result. It's been really, again, an outstanding quarter, and we will have a look a bit later on the details of the quarter. As usual, you have the chance to make questions, and that, for you, those of you following this presentation live, you can push the Ask a Question button, and then at the end of the presentation, we will then entertain the questions, and please be active, and that's why we are here, so make tough questions as well.
Before having a crack at the Quarter Three and the first nine months, I just want to recap Relais as a company and Relais as an investment. Why is Relais a good investment? And what do we do? And why do we do what we do? So summing up Relais Group as an investment, we are an active consolidator or a compounder with a clear focus on the vehicle aftermarket. So we are a so-called sector-focused consolidator or compounder. And not only do we compound and allocate capital, we also allocate competence. So we know this market very well, which gives us a good chance to grow profitably and find good acquisition targets, as we do not focus on other types of markets. And the vehicle aftermarket is a good market as such. It's more defensive. It's less cyclical than the sales of new vehicles or used vehicles.
We have, as a company, a track record of successful M&A in a highly fragmented industry and market with significant acquisition opportunities moving forward. I will recap also later our M&A strategy and the outlook on the M&A side and what we have done in the past. The fragmented market gives us further possibilities to find compelling targets and interesting targets to acquire. The market is large. We are currently mostly focused on the Nordic markets, but we are not, let's say, strange to other adjacent markets for the Nordic markets when we are looking at the target companies. The markets are resilient, as I said. We can see it during the last couple of two or three years when the times have been fairly tough and the sales of the new vehicles have plummeted. The current vehicles are used more, and they need spare parts and repair.
So that is what is supporting the aftermarket in economically tough times. What we have created is a platform. It's a platform of over EUR 300 million turnover, a profitable platform with 20 companies, 1,200 people. And there's a strong platform we can build on this for further organic growth and also acquired growth. What we have been able to demonstrate is a consistent, strong, and profitable organic revenue growth with a cash-generative business model. So this cash generation is very important for a company like us who is allocating capital. So we can also use the cash we have. We can use our shares. And then, of course, money, borrowed money financing to acquire new businesses. Then the governance model or operating model that we have is decentralized. We foster the local entrepreneurship.
We want the companies to be independent, and we want to let their values and culture prosper. And we have, of course, shared values from the group as well that we make sure that everybody follows locally. Then Relais Group's shareholder value creation has been substantial. We went into the Helsinki First North Growth Market exactly five years ago in October 2019. Had you invested EUR 1 at that time, it would now be worth EUR 2.11, which is 111% total shareholder return, including the dividends during the last five years. So we are outperforming the Helsinki 25 GI index with over three times. And this success of also the past acquisitions has created a strong foundation to generate further M&A opportunities and then to create further value for the shareholders. Then a short look at how the group is consisted and what we consist of.
Basically, you can divide the business areas into two bigger entities, technical wholesale and products, which stand for two-thirds of the total business. And one-third is coming from a commercial vehicle repair and maintenance business. Overall, we estimate that roughly 75% of our total business is somehow or directly related to commercial vehicles. And there's also a reason for it because the market dynamics and the growth potential is bigger on the commercial vehicle side than solely on the passenger car side. And then looking deeper into the technical wholesale and products division or the business area, you can also divide that into two larger groups: spare parts, wholesale, and then lighting and equipment. The spare parts we serve all makes and all models and all types of vehicles from excavators to passenger cars. And there are also a big focus on the commercial vehicles.
Lighting and equipment is a very potential growth area where we have a strong part of the business is coming from own brands, which is very important from a value creation point of view. And then we are at the moment the largest independent vehicle repair and commercial vehicle repair and maintenance chain with over almost 40 workshops in Finland and Sweden totally and growing. Looking at the M&A track record I was referring to in the beginning, you can see that we have done roughly 20 acquisitions with an accelerating pace during the last years. And the platform is really outstanding already, over EUR 300 million turnover. And of course, we intend to continue doing good acquisitions also in the future. And let me explain later of our acquisition strategy. We are also very good at onboarding the companies. And we avoid using the word integration.
I mean, we do, of course, integrate the companies, but not in a very hard way. So we don't have to spend a lot of time in installing the common ERP for everybody and spend a lot of time in internal processes because the companies we acquire are already at a good level. And then we take measures to develop them even further. So this is a very fast growth, but also, bear in mind, a very profitable growth we have been able to produce during the last even 10 years. How does the platform I was talking about look like? And how do we intend to grow in the future? We are already now a leading consolidator in the North European vehicle aftermarket with a focus on the commercial vehicles. And this is a scalable platform.
So we have the competence, and we can develop the companies we acquire so that they grow faster. Then that produces also faster organic growth than the market on average. So this kind of growth pyramid is underpinned by organic growth. We buy the companies, we develop them, and then they start to perform better than they would be doing alone, let's say, as single companies. So we have been able to perform above the market when it comes to the growth. For a company very much focused on wholesale, pricing is very important. I mean, the way you buy and the way you sell, I'm just 1% gross profit difference makes a lot with EUR 300 million turnover. We have a diversified customer base. We have thousands of customers. The market is fragmented. We are not dangerously reliant on any single customer, let alone a supplier.
We have still a potential to expand the product and service offerings. The proliferation of electric vehicles opens a very interesting possibility with new parts and components with higher unit price. We can also add new vehicle types, I mean, even deeper into off-highway sector or two-wheel sector. We are not yet covering exactly all the vehicles. There are still some good potential to expand that. The next step above the organic growth is the operational excellence. That's the kind of mindset of continuous improvement we have and the culture we have in the company. We do a lot of benchmarking between the companies. We are actively developing the companies. Everybody from the group management team are participating operationally in running the companies as board members or chairmen of these group company boards.
We continuously enhance the operations, whether it be, let's say, procurement efficiency. We put together the procurement volumes and then negotiate better terms or then just do, let's say, small improvements every day in the way we operate. We can compare how does the workshop chain work in Finland and Sweden. We can learn from each other and do small changes every day, which then pay off at the profit level. Working capital optimization is very important for a company like us. Thomas will show you some metrics regarding how efficient we are in working capital. If you are a wholesaler or even as a repair business, you need to be sure that you can serve your customers in a good way.
I mean, there's always a trade-off between how much capital you tie in the stock or in the warehouse and how much, let's say, service level can you achieve with that inventory. So it's a balancing act. And of course, we have a lot of metrics that we use for the companies to benchmark and get efficiencies from there. How do we intend to grow then forward, looking forward on the acquisition side? There are kind of two levels of growth opportunities. There are bolt-on or add-on acquisition opportunities in the existing business areas. We can also expand geographically, even within the geography that we are operating. We have some countries where we are not yet having the footprint that we would probably desire in some of the business areas. We are also looking at gaining critical competence in some business areas by targeted acquisitions.
We can get critical competence on some technologies. We can add new products and services without going too much into detail of what type of companies we might be looking at, but they would be within the vehicle aftermarket, or then we could acquire companies that are focused on, let's say, agricultural, forestry, or mining type of vehicles to also expand our footprint there, then the platform we have offers also the possibility to open new platforms or new legs to stand on. We can find and we have analyzed new business areas within the vehicle aftermarket that could be interesting, and there are, of course, also transformational M&A in existing business areas, I mean, bigger acquisitions that really then move the tectonic plates in this business that we are looking at.
Good.
Then, talking about quarter three and the first nine months of this year, what happened and how did it go? Quarter three marked the seventh consecutive quarter with EBITDA growth. So we are very happy that we continue growing and we do it in a profitable way, which is also good for the shareholders. Just summing up, I do not intend to take Thomas's show here, but there are some highlights I want to make. Yeah, we grew 7% net sales, and I will dig deeper into that. EBITDA grew with 6%. The earnings per share, which I'm really happy for, grew from 24 to 26. And looking at the rolling 12 months level, we hit 1 EUR per share after quarter three or at quarter three.
Looking at the 12-month rolling level, we are above the EUR 300 million, let's say, mark on turnover and roughly EUR 34 million on EBITDA, which is a growth of 18%. This really, the year has been so far very good. Of course, we hope that to continue and accelerate during the last quarter of this year. Just picking a couple of points I want to make here. I mentioned the growth on net sales and EBITDA. What is also very interesting and positive is the gross margin. I mean, the gross profit percentage that grew from almost 46% to 48%. What's behind that? I mean, it's a high gross profit. It comes as it's a kind of, it's a mixture of two different things. It's a product of two different things.
It's the change of the business mix where the repair and maintenance business is by nature has a high gross margin percentage as what we sell is basically labor and spare parts, so you would find that in the repair business, the gross profit is high, but then the EBITDA is slightly lower than on the wholesale business, but what was especially positive from an organic growth and profit growth point of view was that the gross margin also grew in our wholesale business, i.e., the spare parts and equipment, so that was a good kind of a combination. It's not only coming from the business mix, then on the segment level, this time Finland was kind of leading the growth with 10%, out of which organic was 3%, and let's look at the business areas and product groups. In the coming slides, you can see what's behind the growth.
The Scandinavian markets, the growth was 4% coming entirely from organic growth. There was no acquisition-related growth during the quarter three in the Scandinavian markets. Looking further on the business areas, if we start with technical wholesale and products, it was very stable. As I communicated in connection with the quarter two results, I said that our, let's say, base cases were looking at the market roughly in line with the last year. This is quite exactly what has happened. That was pretty much in line with last year, 1% growth, all organic there. One thing to notice is that the lighting product season, the vehicle lighting product season, which is important to us, traditionally starting somewhere mid-quarter three and then continuing all the way up to mid-quarter one, started a couple of weeks later. I guess it's related partially to the very warm autumn.
Kind of a summer seemed to be extended, but then of course the darkness comes, whether we like it or not. But there was a kind of, let's say, the customers were not yet thinking about the coming season. The good side of this is that this was temporary. We see it already in quarter four that the market has more than normalized from last year. So it looks very positive from that perspective. So it was a partial delay of shipments from that perspective. Then further on the business areas, repair and maintenance, very heavy growth, 19%, out of which organic was 9%. So it's great to see there was a hefty organic growth, especially robust in Finland where Raskone, our group company, the biggest independent commercial vehicle repair shop chain in Finland, managed to increase its market share and capacity utilization compared to last year.
It's very important to have a high capacity utilization. When you have, let's say, over 300 mechanics and almost 20 workshops, you need to make sure that there's enough work for everybody and customers coming. So let's say my take is that we have continued to take market shares from the, let's say, vehicle manufacturer run chains in Finland, which is positive for us as an independent aftermarket company. What is also playing into this growth is the acquisition of E. Aalqvist, a fantastic company, great team, super good performance during the times that they have now joined us. So I still want to wish the team warmly welcome and highly specialized on trailers and also doing truck repair, good amount of key customers, and it's really, really contributing positively to the results.
So it was a perfect match, and there's still runway and potential to grow that company together with Raskone. Then a few slides before letting also then Thomas talk, and I will talk about the acquisitions more. I won't dwell too long on these, but just to see how the business is divided. It's a busy chart, but you can see the kind of sales by segment. We have geographical segments that we report, which consist of Scandinavia and Finland and Baltics. And here you can see it's fairly stable. I mean, it's maybe for some who haven't followed us so long, might be a surprise that actually a bigger part of our business comes from outside Finland. So the Finnish and Baltic part, which is Estonia mostly, is now 45% of the total revenue of the company during the first nine months of this year.
And Scandinavia, i.e., mostly Sweden at the time, is 55%. We do also have companies in Denmark and Norway, as you will have noticed. Then the business area, I was going through the technical wholesale and products and repair and maintenance. And yeah, as I stated already in the beginning, it's two-thirds and one-thirds. It's very stable. It hasn't changed too much on this one. So it's constant. And also a very good growth on both. On the first nine months, you can see that the workshop business has grown 12% during the first nine months. And the wholesale, technical wholesale and products has grown 15%. So there was a heavy growth in the first two quarters on the technical wholesale, less so in quarter three, where then the workshop business grew relatively faster. Then finally, some facts about the product group, which might be interesting to see.
There's repair and maintenance is a product group as well in our reporting. So that's the 33%. If you look at the quarter one, quarter three on the far right, spare parts is very stable. It's 30% all the way through either quarter or the first nine months, both last year and this year. And then you can see there's a slight change in the balance of equipment and lighting percentually in between the last year's nine months and this year's nine months, where the relative weight of lighting has reduced to 18%, but then in absolute terms is flat. So we have sold about EUR 40 million worth of lighting for the first nine months, and then the main season is kicking off now in quarter four. So it's very stable.
Why the equipment business has grown is mostly coming from the workshop equipment business we acquired in Norway last year. Then a couple of slides of acquisitions, which is a very important part of what we do and who we are. What we have done and do constantly, we scan the market for good acquisition opportunities. And we have a huge network. We know a lot of people. We are sector-focused, which, as I said, gives us a good possibility to find the right companies. We are quite picky. We want to find the companies that are in good shape. They have a good management team, good growth potential, and also solid track record of profitability.
We are not looking for, let's say, distressed companies. It would be highly unlikely that we would engage in a kind of a turnaround process with a company that is not in good shape. We have continuously a number of discussions and dialogues with different parties. There's a bunch of very interesting targets in the market that have a good strategic fit with us. It's very important that the companies we acquire, unless it's a totally new platform, they have a good strategic fit with us and culturally and entrepreneurship, that the team fits together with us. What we have done this year so far, two acquisitions in the heavy commercial vehicle repair and maintenance business. That's been the kind of a part where we have focused this time so far.
Looking a bit more detailed in the so-called funnel or pipeline, we have identified, let's say, we monitor the whole Nordic market and slightly also outside the Nordic market, roughly 550 companies that we have monitored and analyzed. We evaluate the pipeline all the time. And let's say the number is constantly growing. I mean, if we and if and when we start to look at other adjacent geographies like Poland or Germany or, let's say, UK, then these numbers would, of course, explode. So so far we have been focused on the Nordic markets. We have identified about 170 acquisition candidates that would have a good fit with us that could be potentially actionable.
Then we have in the funnels getting, of course, more narrow when you get more into the good strategic fit, about 50 priority targets that we are actively engaging and communicating and starting to reach and trying to reach. Of course, it's not always the same 50 because some of them fall away if they don't want to sell. You can't force anybody to sell. And then, let's say, the most active dialogue then with about at any given time, we strive to have between 10-20 companies to have an engagement in real kind of deep discussions with this type of companies. And then they mature into the decision when the time is right. I mean, you can never tell exactly when these acquisitions materialize. But historically, we have completed an average of three to four acquisitions per year. Then a very short outlook.
As you know, we do not give a numeric guidance. Just looking at the market at the moment, as I said, the market is a stable market, and we see signs of, let's say, if there was a delayment of demand on certain product groups, it's certainly not the case now, so it looks very stable, and again, reiterating a few facts about the vehicle aftermarket, it's defensive by nature, and compared to many other businesses, it's a sector with less cyclicality. Our inventory and resource situation is good. I mean, we do not have a lack of products or we do not have a lack or critical lack of mechanics. We can, of course, always hire more people, but the situation is good. I mean, we can meet the demands from the customers looking forward for the rest of this year with our products and services.
Then just to reiterate our long-term target now, it's valid to the end of 2025 still, which is reaching a pro forma, meaning a run rate comparable EBITDA of EUR 50 million. That includes the latest 12-month run rate comparable EBITDA of acquired businesses as well. So without further deep dive on the businesses, then I'll let Thomas to take over the show, please.
Thank you, Arni. Yes. About the financial, we start looking at the long-term development of net sales and EBITDA. And as Arni said, net sales improved by 7% and EBITDA improved by 9%. And if you look at the quarter development a bit further back, you see that we have been growing kind of from the comparison quarter now since the third quarter of 2022. So really kind of robust development also in the long term here.
And that's, I guess, the visible here in this slide. And then we go deeper into the components of the profitability. Gross profit has continued and also gross margin has continued to development really well. We see that we have had almost a 2.5% gross margin increase in the quarter three compared to last year. And also on cumulative levels, we see that more than one percentage point increase in the gross margin. So really healthy development here. And then the key components behind this is strong organic net sales growth, of course. And then we have had acquisitions in repair and maintenance and also good development overall in the existing kind of commercial vehicle repair and maintenance business, which has kind of increased the weight of the high margin repair and maintenance business in here in the gross margin.
But not to forget the technical wholesale and products, we have there also managed to increase the gross margins across the board. So I guess most of the components here of the gross margin look good. And let's keep in mind also that the price increases we have made in technical wholesale and products driven by inflation and increased sourcing prices. That's also kind of supported the development here on the gross margin side. And then keep in mind the improved gross margin. When we look at the operating expenses, we see that that has been flat almost on cumulative level. So these are the reasons also behind why the profitability has improved. That's the scalability. Exactly. Yeah. So there are also good improvements. Then we turn a bit to the balance sheet side and cash flow, looking at net working capital.
The key metrics here are, of course, the inventory and net working capital turnover. As in the previous quarters, we have managed to keep those stable. Even though we have a lot more inventories and higher net working capital driven by acquisitions, still the turnover has kind of kept on good level. Here, let's remember also when looking at the high increase in inventories that we had a one- to two-week delay in shipments relating to the lighting season, as Arni said. That's also showing here in the inventory level. But that's not a worrying sign. That's being fixed now in October, as Arni said, due to the good sales development in October. Turning to cash flow development, as before also during this financial year, the driver behind the improved cash flow from operations has been the improved profitability.
And then the kind of slightly negative development in net working capital in euro terms has slowed that improvement a bit. But that's the big picture there. Then the other components of cash flow, no big changes in cash flow from investing activities, a bit less acquisitions of shares than last year, but otherwise quite normal flat development. And then looking into financing activities, there is no kind of big changes there. Payments of dividends in the spring. And then the amortization of loans and the kind of raising of loans, they kind of eliminate each other. So basic normal development here also. Here you see net debt. We had approximately EUR 95 million of long-term loans from financial institutions. Flat development there. Lease liability is also flat at EUR 60 plus million. The cash position is a bit lower than last year, but not much.
The key takeaway in this slide is that the leverage has really reduced now due to the improved LTM EBITDA. Very good development here. Looking at how much we have dry powder to use into future acquisitions, they are flat also now from the last quarter at EUR 12.5 million. Not too much, but still we have room for some near-term acquisitions. Net financial items in the P&L. We have before discussed a lot about, and you have seen that we have had a negative FX development burdening the financial items. This is now stabilizing because the krona has stopped weakening. You see a positive development here in Q3. Still you have a slight negative impact coming from the kind of first half of the year that we have some negative development still in the cumulative numbers.
But all in all, this is kind of slowing down. Then looking at the net interest expenses, even though the overall interest rate level has come down, we still have in our books at the moment higher net interest expenses. That will change the next time that our floating rate loans will kind of have the new Euribor and STIBOR rates, which is at the end of December. So in that sense, if the current level of the interest rates will remain, the kind of first half of 2024 will have lower interest rates. Some balance sheet items, no big changes. We see that total assets has increased mostly due to acquisitions, but also due to somewhat increased inventories and net working capital. Otherwise, flat development in or bit positive development in net gearing and also equity ratio.
Good, perhaps to point out that also the total equity has increased despite paying out dividends. So here also we see the profitability kicking in. Finally, really good return measures. We have a new metric we have now introduced into the interim report, which is return on net working capital. And this is measured as LTM EBITDA compared to rolling 12-month average net working capital. And we see that that's over 51%, a really good improvement from 46% in the comparison period. Also, return on capital employed has increased by a quarter and return on equity even more. So really, really key, good development in the key metrics here. That's it. Events after the review period.
Yeah, maybe if you want to.
Yeah, sure. We announced on 1st of October that we have completed the acquisition or our subsidiary STS had completed this acquisition of Team Verkstad AB.
So that's now a subsidiary of the group starting from the 1st of October. And also, as announced on May 8th, we started a share buyback program back then, and that has now ended on the 5th of November. The result was that we purchased almost 72,000 shares at an average price of EUR 1,394. And as said also before, these proceeds and these shares will be cancelled according to the normal process stated in the Finnish Limited Liability Companies Act.
Correct.
Yes.
Right. Then it's the time for tough questions and some good answers, I hope. So Heikki, if you have online questions there, we are happy to answer.
Yes, we have quite a few questions. Let's start with Joni Sandvall from Nordea.
Tax rate was again relatively high. Should we expect, similar to last year, that Q4 tax rate is close to zero?
Thanks, Joni, for a good question. We knew that was coming, and Thomas has the answer directly.
Yeah. As you compare the tax rate to the same period last year, you see that the tax rate has been then about the same. The reason here is that in the end of the year, we take in the group contributions only. We don't take in the impacts of those in the earlier quarters. So the answer is that no, for the full year, the tax rate will be approximately at 22%. So there's no change. It's just that we book the impact of group contributions only in Q4. This will now be changed in 2025, where we take in the estimated impact of group contributions already for every quarter. Yeah.
Good.
Joni continues. Do you want to add something? No. No. Proposed?
Equipment sales declined some 9% year over year.
Was there a specific reason or is the market softer?
Equipment for us consists of a very myriad of different types of equipment. So what plays into this is partially, I would say, winter-related equipment because of the warm autumn. Traditionally, at the end of quarter three, the trade customers start to stockpile certain types of equipment, whether it would be cabin heaters or inverters or battery boosters. So I mean, if you have still a summer weather in September, that reduces it. The other equipment sales are fairly flattish. The Norwegian market has been, let's say, slower than usual on the workshop equipment, although that has recovered. So the pipeline looks absolutely all-time high at the moment. But they didn't contribute, let's say, positively during quarter three, the workshop equipment part.
Good.
Then, have you been able to increase revenues from larger fleet customers in repair and maintenance during Q3?
Yes. Let's say this is a 30,000 feet answer. Yes, that's correct. We have been able, both in Finland and Sweden, the sales have grown more on the fleet customers, both on the trailer side, which is the Swedish business, mostly predominantly trailers, and then the truck side in Finland. So that's correct.
Good. Then a couple more from Joni.
Could you give any indication of how much lighting sales were shifted due to the late start of the season compared to the last year?
Shooting from the hip, maybe a couple of million EUR. I mean, that's a very shooting from the hip. I mean, it's about one or two weeks' sales. It's just kind of different rhythmics of when do the customers order. Roughly there.
I mean, this might be a higher number as well because we have a lot of new products coming. The launch is then usually at the end of quarter three or start of quarter four. But it's not insignificant.
And the last one from Joni.
Your organic growth was at 4%. How volumes developed during the quarter? Have you seen any changes in the competitive environment?
The volumes, it's not really super easy to follow volumes when you have 200,000 SKUs. So it's a kind of a mixture of different types of products. But I would, since it's a very generalistic answer here, I would say most of the organic growth probably comes from the value growth. The effect of the price increase is though less than it was in the early part of the year. So there might be some volume increase in some product groups.
But in the big whole, I would say it's mostly coming from value increase as the purchase prices had also been kind of inflated already in the past. Competitive environment, no changes, to be honest. I mean, this was a very stable quarter. Nothing really new or exciting to tell about all the competitive situation.
Then a couple of questions from Petri Gostowski at Inderes.
You saw significant growth in repair and maintenance business even when excluding acquisitions. Can you give some rough breakdown on volume and price growth for organic growth?
Yeah, it's not too much price increases, actually. I mean, what plays in here is very much the capacity utilization. How many hours can we charge? How full is the capacity utilization in the workshop? So it's not like we have increased the hourly prices or spare parts prices anymore this year.
I think they are more, let's say, last year's kind of effect. Of course, it plays into this year. So it's more related to having more vehicles to repair and serve organically. So meaning that we have gained market share. So that is absolutely the biggest contributor in the organic growth, which both in Finland and in Sweden, but mostly in Finland this time. So it means that we had more work to do in the workshops, more cars coming in.
Another one from Petter. Maybe you touched upon this one already. Do you see more room to improve capacity utilization in the repair and maintenance business from the current level? How close are you to the full potential here?
We are not yet at the full potential, but we are on a very high level. There's still room to grow, especially in some months.
It's not always evenly divided, so to say. And then we have done a couple of new openings in Sweden, new facilities where, of course, the capacity utilization is not yet on the level that is on a more established workshop that has the clientele. So I would say there's a few percentage points to still increase, but it's not like we could increase 20%. Then it would require, let's say, then we get new capacity by buying add-on workshops into the chain. So not yet at the maximum, but there's still room to grow, but it's not like 20% or anything like that. But the network can grow. So that's then the capacity is not constant. It grows as well.
Super. Then three questions from Ville. In your view, how quickly will a decrease in interest rates impact your interest expenses?
Yeah, as Thomas said, basically the interest rate changes come with a delay since it's always fixed for six months. So whatever now is the level, end of this December will immediately be reflected in the first half year interest rate expenses.
Exactly.
Yeah. So that means that since it's always delayed with about six months, you will not have seen the positive effect yet because it will come in 2025.
Good. And then Ville continues. How do you view the state of the acquisition market in terms of valuations?
It's fairly stable. I mean, we haven't seen any more huge changes this year. The fact is that a good company basically is always worth the kind of market level. I mean, you don't get great companies at a great discount, but neither is the market overheated. I think the market is picking up.
There was, if I'm looking back two, three, four years ago, the valuation expectations were quite high. Then the economic times became what they became, and the valuation expectations came down a bit, but there's a big, I would say, polarization where the good companies always know the value of the company, so I mean, you can't expect to find any huge discounts. I mean, we are aiming at finding good companies with a, let's say, of course, this is very size dependent, so it's not a carved in stone rule. We try to get the average somewhere between six to seven times EBITDA. But then again, for smaller companies, it can be four to five, and in very occasional, I would say rare situations where there's an imminent synergy potential or huge growth potential, it can be north of seven as well.
But it varies very much from market to company. Long answer, sorry for that, Ville.
And the last one from Ville. How do you view your financial flexibility regarding larger acquisition targets?
Yeah, I think we have a good toolkit to use. I mean, if we would look at transformational or larger acquisitions, then of course, as you saw, the kind of the flexibility in the current setup would not allow huge acquisitions. But then we can use our share. There is equity or equity-like financing and also some senior financing that can be expanded. So let's say I'm not worried about finding good financing solutions to help us in doing even big acquisitions.
Good. Then the last question at the moment comes from Tommi Saarinen, Inderes.
What have the levels of salary increases been and what kind of pressures are there on personnel expenses looking forward?
I wouldn't nail any percentage for next year, but if you think that we have 1,200 people out of which 500 at least are mechanics who are collectively bargained in Finland and Sweden, then you have logistic personnel. I would say maybe 80% of our people are somehow included in collective bargaining agreements in the Nordic countries. So whatever happens on the collective bargaining agreements is reflected on our salary levels. I can't predict where the negotiations with the trade unions are going next year. Maybe Thomas, you have from the top of your mind, but I would say typically the salary increases would be like between 2%-3%. But I mean, don't kill me if I'm saying the wrong number here because I mean, something like that.
Yes.
Yeah.
That's all at the moment.
Okay. Thank you, Heikki, for helping us with the questions.
Thanks for the audience, for following. And stay tuned then for more news from our side and then at the latest in the quarter four results in mid-February. Thanks for following and have a good rest of the year.
Thank you.
Thank you.