Welcome to today's event, ABG Investor Days. My name is Stefan Knutsson. I'm an equity analyst here at ABG, covering the service sector. With me today, I have Sitowise, a Finnish consultancy company, and its CEO, Heikki Haasmaa. Welcome.
Thank you a lot, and, good afternoon. Yes, as, Stefan said, my name is Heikki Haasmaa. I've been now leading, Sitowise for a bit over one and a half years, and I'm happy to share the investment story about Sitowise. So firstly, we have, four business areas. Two of them are focusing on Finland, buildings business, and then infra business. We are seeking growth, especially from the digital solutions and also from, Sweden. Maybe good to also point out that our special competence and also differentiate the factor is digitality, which is basically built in, into our DNA, and, as said, we have already, well growing business there as well. We have a broad and diverse customer base.
Actually, half of our customers are from the public side, and then half from the private segment side. Of course, this is also bringing us a lot of resilience during these bit tougher market times. There are 2,200 experts at Sitowise, and we are present in Finland in 19 locations, and now also increasing in Sweden, actually in 11 locations in total. When we look at the Sitowise story in a bit more detail... Actually, our roots are already from the 1970s, but Sitowise was established in 2017. A couple of milestones during our roadmap: our digital solutions business was established in 2018, and then, in 2019, we entered Sweden.
Now, we have been completing already eight acquisitions in Sweden overall, and two of the acquisitions, BTB and TFIP, were basically the platform for our business in Sweden. And we got listed to the Helsinki Stock Exchange at the end of Q1 2021, and a big milestone was actually the end of last year when we exceeded EUR 200 million. And now we are continuing our path to grow fast. Along the way, we've of course established a strong, scalable platform, focused a lot on the innovation, being the industry disruptor in that sense, and sustainability has been built in, into our DNA. At the same time, also Voima, craft in Swedish, so that's our unique platform, what we have been building to manage the work of our experts.
So that's helping, especially with the efficiency and also then, profitability. When we look into a bit more details, so what our businesses are, starting from the buildings business. So we are leading player in Finland, especially focusing on the structural engineering, HVAC, and, also renovation business. But our differentiated factors and where we are really strong at are high-rise buildings, HVAC, as said, and also special services such as acoustics planning and fire safety solutions. Infrastructure, there we are having a very strong reputation in the market, leading player, focusing on the overall infra, mobility, and then water and environmental surveys, and now increasingly also in the energy sector.
Digital Solutions, there our special competence is the Geospatial Solutions, so location-based services for the built environment, and we have been growing there fast. We have tailor-made software design, but also, we are having products like a SaaS business nowadays, which is growing really fast, and that's coming with a good profitability overall. And in Sweden, as I said, we've been going well forward, increasing our business fast, and now already having like a comprehensive offering also here in the market. When we look at the performance during the last years, so we have a strong, steady growth profile. We have been growing fast, as can be seen, 13% in CAGR, and also having an industry-leading profitability.
Maybe good to mention here that, during the corona times, actually, we had a very high profitability in our business model. Of course, remote work and also low sick leaves basically helped us to get a very good margin. Now, lately, it's been a bit more or closer to the 10% level. Naturally, also, the market environment is a more tougher ones and also a bit more sick leaves lately. But what is making us attractive as an investment is that, compared to big peers, listed peers, we are having a strong growth, but also really strong profitability, and we want to maintain this position. From the client perspective, we can divide this basically into three parts.
So the first one is that, to succeed, we of course want to master the basics and be close to the customers. Our strong expertise is clearly valued. Secondly, we want our customers to succeed with their targets, and 97% of our clients would reselect us as a supplier. And then thirdly, we really want our customers to differentiate, and 53% of our clients see us as a pioneer, and NPS being at the 32 level, so pretty good. Overall, just to mention about the megatrends, these are clearly our friends because they are creating demand. So urbanization continues, renovation backlog is increasing, digitalization, there's a huge demand for data management solutions, AI, and then we are really strong at these ones, so they are providing us opportunities.
And then climate change, probably the biggest challenge of our lifetime, and providing continuous change in the operating environment, but also creating demand for our services. And naturally, now, the geopolitical situation overall, cybersecurity, increasingly important and creating demand. Then let's look at the more recent financial performance, dive more deeply to the Q3 and looking at our different business areas. First, I would like to highlight the really strong performance what we have had in our Infrastructure business and also in the Digital business. So in the Infrastructure, we have been clearly outperforming the market, and I'm really happy about that one. And Digital Solutions, our growth has been really good, both driven by the organic, but also, M&A driven growth.
In buildings, the market has been tougher, clearly in Finland, and that has been burdening the overall organic growth. However, now, lately, we also have done some cooperation negotiations and adapted our organization to this more tougher market, and now we have a good foundation going further. And of course, like a lean, agile organization, to capture the growth opportunities, what we see in this market segment as well. In Sweden, with the constant currencies, good growth overall, and we see that the Swedish market has been also a bit softening lately, still providing us good opportunities for further growth. Then, looking at the whole group level, so first, starting with the net sales. So, we had a -1% net sales growth, but with the constant currencies, it was 1% up.
And, then looking at the organic growth, so, 1% organic growth for the Q3 . However, when we exclude this buildings business, actually, our organic growth was 9%, where I'm really happy about. Then looking at the Adjusted EBITDA margin, so, this market softening bit in Sweden and clearly then in buildings business in Finland has been burdening our profitability lately. However, as said, we have strong actions going further, and we see that there are a lot of opportunities for further growth and also improving profitability. And I'll come back to this one soon. Order book is at a good level, and that's providing us a good outlook overall for the next year as well.
Then, looking at the cash flow, so first highlighting the Q3 , we had a negative cash flow. There were a little bit like a timing of payments, which related to this one, but also seasonality. So, Q3 typically is a lower quarter for us. However, on a year-to-date basis, we have a really strong cash flow and clearly above last year level, so it's in a good position. Net debt increased a bit and also the leverage. Of course, our goal is to be under 2.5 in the leverage, and typically, the leverage and also net debt declines towards the end of the year. And then summarizing overall the year-to-date performance, so highlighting a couple of factors here.
In the adjusted EBITDA, we are at 9.2%. But then what I want to highlight, our net sales has been growing fast compared to last year, and especially our operating profit has been increasing clearly. We are having a strong year in that sense. As I said, we've been and want to remain in the position where we have the industry-leading profitability. This is also built into our DNA, in our people's mindset and thinking. And in order to continue with the growth and also with the profitability, that we earlier this year launched our new strategy. So the left-hand side is really much about our culture. The purpose, what we have, we want to empower passionate experts to solve our clients' complex challenges and our values.
Then on the right-hand side, we see where we are going. And we want to be the forerunner in the industry, and that's why we've set an inspiring vision, so redefining smartness in cities. And we have three strategic pillars, how we are measuring the progress and how do we want to be known and continue to be also challenging the industry. So we want to be the most innovative, sustainable, and also efficient. We also have six focus areas, with how we develop our business. These are the enablers. The first three ones here on the top are something from where we'll be finding growth. First one is about creating new smart services.
I believe that there's room for also new kind of business models in the industry, and also providing more digital solutions with recurring revenue, and this is clearly a focus area for us. Then we'll continue to expand in Sweden, and thirdly, as we already have a strong basis for the digital business, to continue also to develop that as a business area. And we believe that this will be also further strengthening our profitability. And then we have three enablers. So we want to be the thought leader in sustainability and also focus increasing on sustainable services and being the most well-known and desired employer, and we have a strong basis for that one already. And then finding the smartest ways to work, and that means that we have been growing actually quite fast through the acquisitions.
We have had some different subcultures, and of course, there's then some further opportunity for us to find the unique Sitowise culture, and then further improving also efficiencies in the company. When we look at the M&As, we have three main principles there. Firstly, of course, they have to be completing our strategy. Financial profile has to be attractive, having, like, a better profitability than what we have, so that they would be strengthening our performance. And of course, cultural fit is a necessity. Otherwise, the integrations will be tough. We want to integrate all of the companies to do the Sitowise brand.
And then the long-term financial targets are the following: We want to have a 10% growth- per- year, aiming at 12% adjusted EBITDA, and then leverage being below 2.5, but at the same time, also paying dividends. We have also set two strategic goals for us. This complement all what I already said. The first one, to grow our recurring revenue business to 10%. And as we communicated earlier this year in our capital market day, we were at that time at level of 4%. We see a big potential here. And secondly, to double our sustainability services revenue to EUR 10 million. And then, when we look at our last 12 months' performance in the profitability, we are at 9.9%.
But our goal is the 12%, as said, and we have also defined clear steps for that one. That comes through organic growth, M&As, what I basically explained, and then, finding also further operational efficiencies, smartest ways of working. I just explained, sales, building the sales culture even stronger, and then, further focusing on some cost efficiencies, but really also using data, AI, as a tools to also find totally new ways of working in the whole industry. And then, little bit like, showing also what is our ambition overall for these different business areas, so for the coming years. So by 2025, we are first showing here that, what is our growth outlook, so, the buildings market being a bit tougher, so, the outlook is quite stable overall, and...
But then the other businesses, we see that they will be having good growth opportunities also during the next years. But then, what comes to the profitability, we already communicate also during the Q3 release, that actually in two of these businesses, namely Infra and Digital Solutions, we already on a year-to-date basis, are on the target level. And of course, these are then the strong foundation for us. And with Buildings and Sweden, then there's some work to be done still to get to this desired level, but we have good actions supporting them. So to summarize all of what I wanted to say today, is that we are leading player in a growing market overall, clear strategy, direction, and goals. We have broad service offering in Finland, Sweden, now increasingly broad client base overall.
Our strategic pillars are the most innovative, sustainable, efficient we are in our DNA, and also we feel that they are also the competitive advantage for us going further. We have a successful platform which is scalable and especially focusing on the digital side of our business will be strengthening our position going further. And we are having a good reputation as an attractive employer overall. So thank you. Thank you a lot.
Thank you, Heikki, for the presentation. I will just have a few questions. Starting off with the market, I mean, we have seen a weaker market within Buildings, obviously, this year, and the Swedish market is normalizing from a high level. But can you share a few words on what you assess for the market outlook in Infra and in your Digital Solutions space?
Yeah, yeah. So, Infra outlook is actually pretty stable overall. It's really much dependent on the public investments in Finland. We see that that's going to be... Or there's, like, a stable outlook overall. In digital business, the public segment, again, it's stable. In the private segment, we see a little bit like a downward trend in the overall demand. However, as I pointed out also earlier, we are clearly also able to create the market with the software as a service type of services. So, that's bringing us good, like, resilience and stability also going further. And then, as said, building markets being pretty weak, so, outlook is tougher for the next year as well.
How do you view... You're into the building market there. When do you think, you know, a recovery can start, in, in that business?
Like, unfortunately, it looks like next year will be overall a tough one, so it will be probably towards the end of the next year when the market starts to pick up earliest.
Yeah. Perfect. And you spoke about Infra being stable, but you also define it as one of your segments with the highest profitability. Can you share some more details to why it will be possible to achieve such a high EBITDA margin in that segment?
Yeah. We are a leading player in Infra. We have strong references, strong, strong reputation as an employer, really talented experts. Of course, there has been a lot of work done during the past years, really good leadership overall. But then also we've been pretty selective also with the cases. So we've gone only to these more higher-margin cases, and that's why we also have been able to keep the profitability on high levels.
Sounds promising. Then going on to the digital solution space, and your growing SaaS offering there, can you tell us a bit more about that part of the business, its growth potential, and also the margin profile of the business?
Yeah, yeah. So, yeah, we have had a, like, a clearly double-digit growth, as you also saw earlier, and we see that that will be continuing with the SaaS business. As I also stated, so, we want to... Our ambition is to grow from that current 4% recurring revenue to 10% by the end of 2025, and we have all the possibilities for that one. And that's coming through the pure digital business area, but also through different smart services, what I also mentioned. And of course, overall, the SaaS business is something that we believe that we can create the market, and it's having, like, a strong profitability overall, strengthening the, like, overall profitability of the whole company.
Okay, perfect. And then a bit more broader, because, you know, we're not expert on the Finnish market, but I know that the Swedish peers, Sweco and AFRY, also has, you know, a pretty large market share in the Finnish market. What type of other players do you usually meet in the assignments?
You mean, competitors or?
Yeah, competitors. Yeah.
So, those were the biggest, of course, in the markets, Sweco, Ramboll, AFRY being the biggest ones. Then we have local players such as A-Insinöörit and also Granlund, a bit smaller than us or half the size of us. So those are mainly the ones. Then, of course, we have this digital business as well. So then there we have some competitors such as Gofore, Solita, Innofactor, Vincit, more IT type of players.
Perfect. And then I just noticed that you have a relatively large part of your business on a fixed price, on fixed price. I suppose this has been a challenge with this high inflation rate. How do you manage the situation and to avoid, for example, that contracts yielding negative or too low profitability?
Yeah. Yeah, roughly 30% of our contracts have been fixed price type of models. However, of course, with the shorter assignments, they haven't been, in that sense, like an issue. We've already defined that for those purposes. But then for the longer ones, we have, of course, like, escalation clauses there and have been able to increase prices according to the different indexes. And then overall, of course, like, what comes to the forthcoming possible frame agreements, of course, we carefully, naturally, take into account the inflation, which has been high.
How often do you have the possibility to renegotiate? Is it yearly or?
It's yearly.
Yeah.
Normally yearly basis. Yes.
Okay, perfect. Then I would just like to round off by just addressing what will be your top priorities going into next years?
Yeah, it's pretty much about the digital business. So, we see that there's a huge opportunity for us, focusing on the recurring revenue. Then secondly, sustainability services. But of course, naturally managing the downturn in the buildings business and overall, probably the inflation still continues to be quite high. So, together with the pricing actions and also our cost containment actions, we believe that we are in a good position to also handle the inflation going further. And maybe still pointing out, of course, the customer being close to the customers, truly understand our customer needs, helping them to succeed will be helping, of course, our business as well.
Perfect. Then I would like to thank you, Heikki, for coming and presenting with us here today.
Thank you.