Welcome to the Alimak Group Q3 2023 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Ole Kristian Jødahl and CFO Sylvain Grange. Please go ahead.
Thank you, and a warm welcome to this quarter three call for Alimak Group, then, 2023. And, as you heard, I'm Ole, and I always, as always, I have with me Sylvain. So if you move a page, and we look at, a short recap of the group. So diversified, really global industrial company, all across the world, organized in five customer-centric divisions that we will dive more into. And, as you see on the right-hand side here, you know, the key drivers for us, first of all, we are supported by global trends like urbanization, regionalization, health and safety, et cetera, which is giving us a good fundament for, base growth in this business. We do have a leading market position in the niches that we operate, but also a huge market out there to grow from.
We have this global footprint and a large installed base, which also means that we have a great base for our service and aftermarket business, which is very important to the group. We do have a strong balance sheet and cash conversion model. Turning page. Three and a half years ago, I came to this company, and we then launched what we called the New Heights program, and this was these three steps: establishing the base, setting the base structure, you know, how we want to run the group. Looking into number two, securing margin improvements, what areas and, you know, what should be the strategy for each of these divisions going forward. And then coming to phase three, where we could drive profitable growth.
We have done, of course, as you see here, and I would say successfully, the first and the second, and also gotten well off on the third. Deliver profitable growth in 2022, and now also continuing to deliver profitable growth in 2023. We also updated our financial targets. So if you move page, we delivered upon our first targets this summer already, and we updated the targets for the next 2-3 years. It's about the revenue growth, 6%-10%. Yeah, we have a base support from the market normally, but then it's driven by our activities, of course, product development, being close to our customers, truly focusing on each of these markets and securing organic growth, but also complementing with M&A going forward.
Then we have an EBITDA margin target of more than 18%, which we said we should achieve within 2-3 years, something we feel comfortable with. And that's, of course, supported by the growth that we believe that we will do, but also, of course, further, that we drive operational efficiencies. It's about synergies together with Tractel, which we have gotten off very well with, and also, of course, about improving facade access. We have a leverage target of 2.5, and I'm very happy to say that we are below and into this target now after Q3, and we have a dividend payout ratio of 40-60, something we have done over the last years. So if we turn page, and we move into the quarterly result.
So, of course, very pleased that we as a group now are delivering another very strong quarter and make another step up, both in profit and cash flow compared to the same quarter last year. And this is also the highest EBIT and cash flow quarter ever for the, for the group. So I think it's a proof that our strategy is working in this tough business climate, and we believe also strongly that we are taking market share in our business. The adjusted EBITDA margin we delivered is 16.1%, up from the 13.7% last year. And aggregated, which means, you know, if, as if Tractel would have been part of the group fully also last year, we are improving our EBITDA by 7% in the quarter, and we have a 15% improvement year-over-year, year-to-date.
So it means that not only have we managed, you know, the integration so far, but we are also becoming stronger together. We have outstanding cash flow from operations in the quarter, basically coming from a strong focus and that we're working intensely on this in all parts of the organization. And that has also, of course, been an important part in our target to deleverage and that we're now below the 2.5, at 2.47, if you look at running 12, including Tractel fully. So that's, yeah, another good quarter for us. So turning page, looking more into the details. Order intake was 1,678 million SEK, up 55% on last year, where 55% is coming from acquisitions and negative organic growth of 4%.
We saw strong organic growth in construction and wind, especially construction, very pleased with, of course. While what is pushing this down is facade access, where we are facing some delays in the board decisions due to the higher interest rates, but also, of course, because we are taking a tougher stance on what type of orders we take. Revenue was up, or was SEK 1,730 million, up 58%, 53% coming from acquisitions, up 1% organically, and basically driven by a strong organic growth in industrial and wind. Also, HSPS is doing well if you look at aggregated. EBITDA, adjusted, increased to SEK 279 million, up from SEK 150 million last year, and this margin of 16.1% versus 13.7%.
And, its main contributor is industrial wind and construction, and also very happy to see that we are delivering a margin increase now in Facade Access, so we start to get some traction of the activities we do. So moving into the divisions, turning page, and let's look at Facade Access. Order intake was 376 million SEK, up 9%, but then 55% is coming from acquisition, and it's down 48% organically. Service continued to contribute in a very positive way, but it's the, you know, what's pulling this down is the higher interest rates, and this is leading to that projects are, you know, more uncertain from an investment perspective, and that we see delays or with projects being put on hold, and this is basically something that we see in all geographies.
We also need to take into account that we compare with the strong quarter three last year, and the fact that we are, you know, since we are tougher and we have higher margin expectations, we have also stepped out of a couple of tenders to ensure we only take orders that we should take. Of course, we would have liked to see a stronger order intake, but we do have these natural variations, and we also feel very confident with what we are doing. We, we are a stronger company together with Tractel. We have a very wide offer now, and we will make sure we only take the orders that we should take, but we also see significant growth opportunities going forward.
Revenue was SEK 507 million in the quarter, up 56%, 68% coming from acquisition and -16% organically. We do have a solid order book here, so you know, this difference here is coming from timing of, of when we close or invoice, projects. EBITDA, strong with SEK 40 million, a margin of 7.8%, so the highest margin they have had in a very long time for this business and improving sequentially, which is, which is good. And, here we will continue to execute on our transformation program and, will continue to improve this business going forward. So turning page. So we see that the transformation program is well on the, on the way. We have, implemented the organizational structure, to drive this business.
We have a strong team here now, led by Philippe, the former CEO of Tractel. Commercial, we are more or less there, you know, on the driving terms and the securing that we take the contracts that we should. And then we are implementing how to drive the business and work with projects, and yeah, this is a thing which is in progress, of course, and will take some time until everything is set. We're also been working on go-to-market and how we can streamline and become better in working with our customers, and this business is also heavily driven by middlemen, you know, companies that are part of the frameworks , and we are now taking a stronger stance in this.
So we would like to be able to offer and be even a more complete partner, where we can work directly with our end customers. We are launching a new website in quarter one, so this is also a new step, you know, where all three brands, and we will also be able to display completely our new offer, which I'm saying we are becoming much stronger together. We can both take tall buildings, medium height buildings, lower buildings, inside, you know, outside, all different type of access solutions, and whether it's buildings or bridges, infrastructure, we will have an offer. So this means, again, you know, that we see nice growth opportunities, going forward.
And then we also have the strong focus on the aftermarket, where we see a potential for retrofitting, refurbishment, and also replacement of older machines. And of course, an important piece is also that we are working on CO2 reduction initiatives, both for us and to help our customers. Turning page, and some few examples. Here you see some of the buildings that we have done recently. The first one here is in Pakistan, where we are, you know, adding two machines to an existing tower, you know, to provide even more and better access to the full building. We have this medical site in Atlanta, where we are providing all different types of access solutions.
You see the complexity of the building, so that requires davit system, it requires lifelines, and we have this full assortment that we can provide and do that for sites like this. So good growth prospects, very solid growth prospects going forward. Turning the page and coming to construction. This I see many people have had concerns around that we should be too, you know, construction focused and that this should hit us hard. But again, we see, you know, that our model to, on how we work in construction is very resilient. And that also, you know, our presence with being a global provider is helping us.
So we deliver another very strong order intake in the quarter, even though there is a softer market out there, and specifically in the Nordic market, and also Scanclimber is still a business which is then being affected by this. So order intake was SEK 489 million, up 65%, 26% coming from acquisitions and 36% organic growth. We had strong rental and new equipment order intake, and major rental orders are basically in these markets where we operate, Australia, Canada, Tall Crane, France, Germany, and often we see more complex multi-story type of projects. Revenue was SEK 440 million, up 25%, where then 22% comes from acquisitions and 1% down organically. And overall, we see high activity and also on the rental side supporting us.
EBITDA at SEK 82 million, up from SEK 65 million, and a good solid margin of 18.7% versus 18.6% last year. Turning page. We have, of course, good, loyal customers that we are working well, very close with, and Sunbelt Rentals is one of them, important to us, and we have taken very nice, significant orders, both in UK and in US, for construction hoists and transport platforms with them. We do have now a high order backlog, going forward, which is, of course, important, to us and for, for this business, as we also continue to see a weak market in the residential area.
But as we have said, you know, we continue to work wide and we continue to work on infrastructure, energy, utility sectors, and we still expect that we are able to hold up a good solid business also going forward for the construction business. And this is driven by the business model, you know, so, and our strategy, where we both can sell new machines, we can buy back and refurbish and resell used machines, we rent out machines, and we have the service and the spare part business, and also now supported by the digitalization, so that we are becoming more intelligent and bringing a new type of offer and opportunity to our customers. And if you turn page, we see one more example of this, a new ad that we have done now.
It's this AliCalc, which is an online tool, where we then give this tool to our customers so they can calculate themselves how to tie in and fix our machines. So to make sure that this is done in the correct and safe way. And it's all digital, so it's all documented and available at any time. Turning page, and we move to Height Safety and Productivity Solutions. Order intake was SEK 351 million, all regions performing well, and we see particularly strong in the elevator, construction and energy segments. Revenue was SEK 326 million, and yeah, contributions from our equipment and service, as you know, it's also an important part here. EBITDA, SEK 51 million, a margin of 15.6%.
Here, maybe we have been not so good at communicating, and this is a new division of the group, so maybe not known to everyone that quarter three is typically a softer quarter. So last year it was 17.9. So that's the main reason why we see a softer margin in quarter three here, but also that we have done a management fee correction, which is affecting them or influencing them, HSPS negatively, while it's slightly positive than on the other divisions. So this is an internal type of allocation, so correction that we have done. But if you look at the overall business performance, you know, this is a business that is up 13% EBITDA level year-over-year, year-to-date, and it is at the same margin as last year.
So the business is performing well, growth margins, everything is there. It's just this internal cost allocation that we have done in the quarter. Turning page. We do have an increased focus and investment into product development, marketing and sales. Historically, it's been a very resilient, solid business for Tractel, and that we continue to see, but what we would like to do is also to accelerate the growth in this business, and that forces that we are doing more in these areas. We are preparing some geographical expansion. You know, we old Alimak were present in more countries than HSPS, so that allows us and make it easy for us to place some new salespeople on an HSPS side into, you know, countries where old Alimak have been, like Australia, for example.
So we will do things like this next year. We are increasing our web presence and using this as a lead generation tool, and we are launching several new products now before year end, and it's something that we continue to work on a lot on, of course, going forward. We have also done and are in the process of making some cost initiatives where we are merging offices and the and the driving synergies between, let's say, the old Alimak and the and the Tractel business, which has led to some changes in Singapore, China, and Spain, so forth. And then also here identifying CO₂ reduction initiatives so that we can both for our own footprint, but also help our customers become better in this area.
Turning page, and a couple of examples on the customer segments, final segments that we are working on. Fire and rescue is an important segment, has always been for this business, and we're doing even more because there is so much more we can do globally on this. So we are having a dedicated web page being developed now, and we see also then that even more focus on this helps us drive both sales and generate new customers for us. And it's also the same with elevators, always been a very important segment. We received a very nice order from a tier one elevator company, again this quarter, but we are also signing up new customers on the tier two level.
We work with all tier one ones, you know, but, but this is examples on how we are focusing to drive growth going forward. Turning page, and we come to industrial. Order intake was 328 million SEK, up 2%, 1% down organically. Continue to have a strong development in, in service and overall strong activity, both in Europe and APAC. Revenue was 331 million SEK, up 20%, 18% organically. And it's of course coming from both equipment and services. And also, you know, even though the order intake is a little bit lower, the book to bill in the quarter is still 99, so, so we are not eating on the order book here, and some small variations we need to expect to see.
We continue also here to see immense growth opportunities going forward in so many countries and places and segments that we are not really attending to today. So we have nice prospects in front of us. EBITDA increased to 73 million SEK, up from 50 million SEK last year, and delivering a margin of 21.9% versus 18.3%, and driven by good volumes and cost control. Turning page. We have a new EVP, Jens Holmberg, into this business with a strong industrial background coming from Sandvik and also with extensive manufacturing experience. So he is now driving the rack-and-pinion manufacturing, is also part of Jens's responsibility.
We had another strong quarter in the marine segment, both in North and Central Europe, with, again, nice orders for these gangway solutions that we have developed, which is then a solution for, for these, offshore supply ships, connecting and servicing offshore wind turbines. We also continue to work on our full range, and, focusing on these, ship-to-shore cranes, where we have lifts, and we have received some nice orders, both from a Chinese key customer of ours and also, from a German one. We also continue to drive, of course, our strategic agenda here, where we focus on the, on the product portfolio and, being close to our customers and expanding our, direct sales force in the different, markets. Turning page, and we come to the last division, wind.
And again, you know, a very strong quarter for the wind team, which proves that what we have done is the right thing. Staying close to our customers, understanding them, doing product development, focusing on cost and pricing, have put us into this preferred situation with our customers. So again, a strong quarter, order intake was 152 million SEK, up 24%, 16% organically. And we see robust equipment and service basically in all regions. Revenue was 169 million SEK, up 18%, plus 10% organically. And of course, this strong due to the very high order intake that we've had in quarter one and two. And also, we see that our service activities maintain at a high level in all markets.
EBITDA, 33 million SEK, up from 22 million SEK, a margin of 19.5%, up from the 16.6%. So, and it's coming from this activity that we are having, and of course, a good drop-through, when you have these volumes. Turning page. So the market continues to be attractive, but I think it's important to also note that it's nothing fundamentally in the market yet that has changed, you know? So there is a more positive sentiment, and things are happening, but the big, you know, waterfall in volumes and stuff is more expected to come in the 2-3 years, and forward. So, what we are delivering today is very much in our own hands and what we have done ourselves.
So focusing this on being the preferred partner and being proactive is continuing to deliver results. So some other activities, you know, we are launching, we are doing e-learning here with our customers, so we are launching a new model. We have launched a new Octopus lift for the wind industry in China, which is the biggest wind market in the world, where we also do have a solid presence... and quarter three is also with a lot with the exhibitions, and we are attending, of course, and driving this. So I think wind, you know, is also, if you remember the issues we had with wind and the way we have worked through and turned this around, it proves that our work is working.
We know what we are doing, and, this, I would say, is the same thing that we're now applying to, to facade access, even though it's in a specific facade access way, and, we feel convinced we will achieve the same thing there. Then I turn to, we turn page, and I turn to, Sylvain.
Thank you very much, Ole. Good morning to everybody. I will present here a summary of our key financial indicators. Order intake and revenue grow strongly, and most of the growth is inorganic. Organic revenue growth is slowing down in the quarter, but still positive at 1%. Book-to-bill ratio is 99% in the quarter and 100%, 109% on a year-to-date basis. So backlog remains very high, and this definitely brings comfort for the coming quarters. Adjusted EBITDA, which is 16.1%, and this is above the aggregated performance of Q3 2022, when we reached 15.7% of adjusted margin. So we are not only mechanically benefiting from the high EBITDA of Tractel, we are improving the operational performance and raising the combined margin. And this is happening in a more challenging macroeconomy today than in 2022.
So we take this as a clear sign of a successful Tractel integration. The cash flow generation has been outstanding in the quarter, as mentioned by Ole, and I will come back later with a few additional details. Next, please. We now come to the bottom part of the P&L. I would like to make one additional comment regarding the EBITDA performance improvement. We maintain our gross margin on a high level and SG&A costs keep being contained. So inflationary pressures have changed in nature, with a lower pressure on base metals, but a higher pressure on labor costs, and we carry on navigating through this in an effective way with a good level of margin.
IAC, items affecting comparability, include income from a earn-out adjustment, this is related to the Tall Crane Equipment acquisition, and a new grant obtained from the U.S. government regarding COVID-19. Finance net is mostly made of interest, and the quarterly interest charge reserves from the higher interest rates, partially compensated by the reduced RCF drawing. Finally, tax rate is consistent with what we have been experiencing since the Tractel acquisition and reflects the country profit distribution. Next, please. Result for the period was SEK 141 million, versus SEK 77 million in Q3 2022, and EPS was SEK 1.32, versus SEK 1.08 in the same quarter last year. No specific comment here. Next, please. I am very, very pleased with the quarterly cash flow generation.
We have been saying since the beginning of this year that we would be focusing highly on cash flows, and we are very pleased to present numbers consistent with both our external communication and our internal efforts. As mentioned by Ole, such a cash flow generation is unprecedented in Alimak's history, and this, to be absolutely transparent, reflects as well an element of working capital reversal from the prior period. So we can't expect this high level every quarter, but we can expect indeed, the focus and the effective working capital control to continue. Next, please. The high cash flow from operation imply a significant quarterly reduction in the debt, now down to SEK 3.4 billion. Combined with a growing EBITDA, this has led to a strong deleveraging in the quarter. Factoring rolling 12 months of Tractel EBITDA, we are now at 2.47.
This means we are already reaching our long-term financial target of less than 2.5. I said earlier, we will continue to pay special attention to the operating cash flows in the future in order to fund our capital allocation priorities, dividends, profitable growth, and M&A. M&A remains indeed on the list, and we will be looking at opportunities in a selective way, in particular, when it comes to the target valuation. Next, please. We now come to balance sheet. In the course of 2023, our balance sheet has been significantly strengthened via the successful SEK 2.5 billion rights issue in the first semester, and the high cash flow from operation in the course of the year.
By the end of September, the long-term borrowings consist of the EUR 300 million term loan, which matures in 2026, and we still have a 1-year extension option. The revolving credit facility matures in July next year, and the outstanding balance, which is less than SEK 400 million, is now classified in current liabilities. We are obviously working on implementing the new RCF in the coming weeks and months. That's it for me.
Thank you, Sylvain. And then we turn to the last page, the summary. So yeah, another good quarter for the group, and very happy that we are, of course, continuing to show this positive development of profitable growth and the, and the also the strength then in the New Heights program, you know, that we both have a organizational structure supporting this way of working and the, and that we are all working now in the same manner so that we can actually deliver a continuous solid development. The 2022 acquisitions have been integrated successfully, and of course, you know, the big one, Tractel, now we have three quarters in the bag, where not only we have not lost any value to Tractel, we have together lifted the group.
A bit year to date, if you look consolidated, is then up 15%. We have an outstanding cash flow from operations, and that, as Sylvain just talked about, very important to us, as we all know, also then since we made the big acquisition and brought in some debt, it was important to bring this back down again. And we show on top now that we have also managed that in a very short time frame, which opens up new opportunities for us, you know, but of course, we'll continue to deleverage while we at the same time are now more, you know, having our eyes more also on the smaller and medium-sized acquisitions that will complement the group.
So, we are well diversified, as we have talked about, you know, and both from a geographical perspective, from the fact that we work in multiple segments, we have a very solid aftermarket business that brings resilience. So, overall, a good model. So we will continue to execute on the New Heights program, of course, and what we have in mind is now to deliver on the financial and sustainability targets we talked about this summer, and we have set out to reach within the next coming years. So we will continue also to invest in sales, marketing, and product development to ensure that we drive the group forward. So thank you to all employees for another good quarter, and we turn page into the Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Hanne Lindbo from DNB. Please go ahead.
Good morning, everyone. My first question is on the organic order intake in Façade Access. So you talked about the project being put on hold or delayed. So my question is, would you expect this to continue or maybe even getting worse the coming quarters? And if also somehow you maybe can quantify how much of the order decline that comes from the weaker market.
Yeah. Hello, Hanne. Yes, you know, this, the negative order intake on Facade Access is mainly driven by a softer market and the impact of the interest rate, you know, which creates more uncertainty in investment decisions, which again leads to that projects are either put on hold or pushed forward. And that we don't expect that will fundamentally change in the next, you know, foreseeable future, because we still have that inflationary environment around us, and it's not really peaked or landed yet where it will end. So we expect that to continue. But at the same time, you know, we, we also are working on our program. We have a stronger offer.
We see that, you know, we are expanding our footprint, you know, and we are expanding the type of solutions we bring to market and where we can work. So that should help us going forward, like you have seen on the other divisions. If you take construction, for example, also a difficult market, but you see how we can still achieve growth by seeing the market, how it really is, you know, and working the way we should. So we will do that also on Facade Access. It's not a quick fix, as I've said many times, you know, this takes time because it's longer cycles, but you start to see that we are also doing it. You know, you start to see the results of the on the bottom line this quarter, and you will start to see results also on the on the order intake side from this. But fundamental-
Mm.
Market situation, I think, will remain for a while.
Yeah, great. And if we move over to the Facade Access margin, it seems like the legacy margin has improved, which is fun to see. But it also seems like the margin within Tractel in this division maybe has declined a bit. Could you just give me some color, what is happening here? What improvements have you seen, and have you seen somewhere it has declined?
No, it's not really. It's not declining. You know, the Tractel part is still performing very well. You, of course, you have a natural effect because it depends on how many projects you close and which phase they are in, so it's natural to have swings in this type of business. The typical situation is, for old Tractel, was, you know, that the more projects they closed in a month or in a quarter, the better the result were, you know, because they always had some contingencies that they could release because they had such good control over the projects. While it was the opposite of the old Alimak, you know, the more projects you closed, the worse it was because you had to write off, you know, do write-offs a little bit.
So, you will have mixed effects here, you know, and we see this business as one now going forward. We have put the organization together, we drive it as one, and we see it as one, and that's how it is, you know? We are happy to see that we are improving the margins sequentially, and that we are starting to be on this journey. So,
That's very, very clear. Just one question, 'cause I know you said that now in the legacy part, that you see no reason that you couldn't reach the similar types of margins as in the Tractel part. Is that now when you have come in a bit into the integration, is this still the case, that we can see 18%-20% EBIT margins here in a couple of years?
Absolutely, it's still clearly our target, but it's not something that happens overnight.
Yeah.
It needs to be, you know, steps, step up, you know, and, and a good solid work that we need to continue to do over time. But, we know that this is what, Tractel have done over a long, long time, so we know that that's achievable, and we see no reason why we should not, be able to do that. And, and of course, lifting the margins here is also a significant part of, taking the group up to the next, level.
Yeah. Yeah. Great, my last question is how should we view the margin within height safety going forward? I'm thinking about this management fee allocation.
Yeah.
How this will impact margins forward?
Yeah, that was also, you know, a retroactive type of adjustment, you know, which means that you need to look at the year to date and not the quarter, you know? And then you need to also, of course, learn the quarterly differences, and quarter three is typically a softer quarter from a profit perspective, as you can see, you know now. And,
Thanks.
But, you know, if you look at the overall profit for that division, year to date, it's up, what is it? 13%, if I recall correctly, on the EBITDA level, and it's also from a margin perspective, at the same level as last year, you know, so... And we are also investing in this division, you know, so, that's also important to note. We want to see more growth. We want to ensure that, that we, we, we increase the organic growth element here going forward. So, so we will increase, investment slowly and steadily. So that said, I don't expect that this is a division where we will see major margin increases, you know, it, it, but it should be stable, in this type of area where we see it now on a year to date, basis.
All right. That's great. That was all for me, so thank you very much.
Yeah, thank you, Hanne.
The next question comes from Johan Dahl from Danske Bank. Please go ahead.
Yeah, thank you. Good morning, everyone. Just a few questions, please. Just on that, you have had a very good sort of order intake over the last couple of years, I guess, in industrial, weakening slightly in Q3. Could you add some flavor to that, to what's going on in the industry? Perhaps some comments on certain segments and geographies, what you see is going on there.
Yeah. Hi, Johan. No, I think it's also here, you know, we have had, as you were pointing out, we have had a very strong order intake, and over a long, long time for industrial. Driven by the fact that we, for the first time, really put an industrial division in place. If you go back before I came, it was also something called industrial division, but it was no industrial division. It was no one focusing on that, you know, driving it. Now, we have a dedicated structure. So, you know, that meant in the beginning that the margin went down somewhat because we invested in it, you know? Still, we have huge needs to continue to invest and drive it.
But it needs to be driven, of course, you know, we have maybe a small, you know, gap here also that we had changes from EVP. The market is there. We still see huge growth opportunities, which is sitting in our hands. Of course, you know, reading about other industrial companies, the market also on the industrial side is a little bit softer, but I believe that we have so much in hand, so we can continue to drive. So, but it's maybe a little bit combination of both, but we feel very comfortable about this business going forward.
Thanks. Has there been any sort of reprioritization in Alimak in terms of, you know, growth versus cash flow? I mean, obviously, we're in a different sort of funding situation at the moment, and it's always, you know, either you go for growth or you have to sort of pull more for cash flow. We're seeing very good cash flow in the quarter. Is there any such discussion in the management, more reprioritization?
No, it's not. You know, we drive cash flow, that's important—very important to us. We have said a long time, we should have a strong cash conversion. We have not had cash conversion on the levels that we should have had, you know, in the previous, 2, 3, 4 quarters. So, that I'm happy to start to see that we're getting back to. So we see some sort of catch up effect of that in quarter three. But that said, you know, if you look into it, but that's not really cash flow. But if you look into Facade Access, of course, but that's valid, all our business. We make sure that we are taking orders which we make the right margins on.
That was something we will—we cleaned up in wind, something we are now working on Facade Access, and a philosophy and something we drive in all divisions. So we will not start to take—to turn it the other way. We'll—we will not start to take orders just to fill the order book, you know, we will make sure we take the right orders. Philippe or Sylvain, you may maybe want to add something? Yeah.
You know, so we work on both definitely growth and cash flow generation. And cash flow generation includes a special focus on working capital management, but of course, it's profitability and cost as well. And then, you know, we are aware that times are a bit more difficult, so we have to carry on being very considerate in terms of cost. But in a way that, you know, we are not impacting on our capacity to grow the business. So it's a challenge, you know, it's always more difficult when times are a bit more challenging, but we believe at least that we can achieve it.
Yeah, and maybe also there, you know, we are in a long-term strategy, so we are not making short-term decisions. We are driving the group forward for the long term, also.
All right, thanks. Just, just finally, just finally on the renegotiation of the RCF, when was that expiry, again? Can you say anything on progress on this renegotiation of the RCF? And, and also, if you could just help me out on the earnings per share. You, you talk about the 22% increase, I think, in the Q3 report last year, you, you reported 1.40-something SEK per share. Just, just how you calculated that would be nice to hear. Thanks.
Yeah, Sylvain.
So, on the first question, the RCF expires in July next year, and the progress for renewing the RCF is good. This is what I can say, we are very confident. On the EPS calculation, I'm not sure exactly what you refer to, but basically, you know, the EPS is calculated based on IFRS. So you know, which means, prior period EPSs are restated according to that standard. But you know, there is nothing... I mean, it's just a mechanical calculation based on the number of shares.
I'm thinking, Johan, maybe if you, you know, feel free to talk with Sylvain after the meeting, if there are something about, details here about the calculation you would like to-
Let's do that. Thanks so much.
Yep. Thank you.
The next question comes from Andreas Koski from BNP Paribas Exane. Please go ahead.
Good morning, Ole, good morning, Sylvain. It's Andreas Koski here. I have a few questions. The first one is on the large orders you received in construction. Is it possible for you to quantify those large orders and how that compares to large orders in previous quarters?
Yeah. Hi, Andreas. No, I don't really have that detailed or that we're disclosing, you know, but this business, all our business, I would say, is also to some extent driven by both smaller orders and some bigger orders. And that's why we—as I've been pointing to many, many times, you know, basically every quarter, there are variations between quarters for that reason, as you are alluding to, you know. So this is a quarter where we have also received some nice, bigger orders for construction, but so that supports that order intake, of course, but it's nothing fundamental. You know, that we see this, we have nice orders also everywhere, so it's not something specific that points out in this quarter versus the comparable quarter last year.
It's driven by our consistent, persistent, work, you know, with our customers, and then the timing of the different orders, we cannot always control. But, it's nothing that should point at a dramatic drop or, you know, but you see also backwards, that we have some natural swings.
Yep, understood.
Yeah.
And then, you talk about the higher interest rates impacting demand in Facade Access and that projects are postponed or-
Mm-hmm
or canceled even. Why should higher interest rates not have the same kind of impact for your construction business or your construction division?
It's a very intelligent question. It does have the same impact there. It's just that we are not at the same maturity level, I feel. You know, we have a very solid construction business now with a good, solid model, you know, where we do both rental, we sell new machines, we buy back used machines, refurbish them, sell them again, or put them in our own rental business, service after market, et cetera. You know, so we have something good going, we have been working on for a long time. On the Facade Access, we are not fully there, you know, so we need to get more of that same thing, then we will affect it. But also that some of these-...
Project, it's in, you know, the, it depends also a little bit geography, you know, where we are present. A strong element for us has been, you know, northwest of North America, and that's a softer region now for us, you know. So you also see some sort of geographical elements through that.
Understood. And then on facade access, and as I am pretty new to the company still, when do you normally come into the projects? Because we normally see long lead times here.
Yeah.
I am just thinking whether we are yet to see the worst in terms of demand for facade access. So when do you enter the project? Is that long after the planning stage has been taken place? Or when do you enter-
Yeah, from order intake to we really start, you know, average, maybe around two years.
Yeah.
Mm-hmm.
That I know. I mean, more, when do customers come to you? How long have they been working on their projects when they come to you?
Oh, yep.
Are you entering the customer projects at the beginning of when they start the project, or do they come to you after six months or so? Because I guess, and if that's the case, we could continue to see further weakness in facade access.
Yeah. We are in the projects in a very early phase because but it depends a little bit on what the projects also. But of course, bigger projects where you talk more significant access solution, BMUs, et cetera, they need us at an early stage because you need to design in the load, the weight, you know, and the reach, and the technicality of the solution while you're still doing the drawing of the building. So then we are in an early phase. Then you have more simpler buildings, you know, where you can actually come in at a much later stage. It's something they do towards the end. So it depends a little bit on the complexity of the, of the project, but more complex, the earlier we are part of it. Sylvain, you've also been there for a long time.
Yes, absolutely. But in this, in majority of projects, we are involved in the planning phase, Andreas.
Okay. Okay.
To make it simple.
Yeah.
So, so hopefully we have, we have started to see the worst of, of it. My last question is on HSPS, margin, yeah, cyclicality or seasonality. So Q3 is typically a weak margin quarter. Looking at your slides here in Q4 last year, the margin was 27%. I think that had something to do with the integration of Tractel, et cetera.
Yeah.
But should we expect, the Q4 margin being the strongest quarter, and then we have Q1 and Q2, at the lower rate, and then Q3 is the weakest quarter? Or how to think about, seasonality in Q4 for HSPS?
Yeah, Sylvain, he has known this for 15, 16 years, so he can take that. Yeah.
I think you are right to say, Andreas, that the 27% was a bit of, you know, an abnormal margin because it was only five weeks. But you look at the, you know, rolling 12 months performance or year to date performance, and this is where we should end, you know. So Q4 is not expected to be much above Q1, Q2, but Q3 is a bit below the others, to make it simple.
Okay. Thank you very much.
Mm-hmm. Thank you, Andreas.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
Yeah. Seems like we don't have more questions on the phone, but we do have some on the page here. Yeah. Question to Anders. According to this, I should also have-
The next question comes from Anders Idborg from Kepler Cheuvreux. Please go ahead.
Yes, hi, good morning, and that's Kepler Cheuvreux.
Yeah. Thanks.
Yeah, I just have a quick question on the wind business. It's another strong quarter there, and you mentioned that all regions performed well. If I'm not mistaken, I think the Chinese market is the largest one for you in this-
Yep
in this segment. Could you maybe give us some color on how that market is looking currently?
The China market in the world, you know, it's the biggest wind market in the world, China. Therefore, it's also, of course, of high importance to us, and it has always been an important part for Avanti. And Avanti do have manufacturing base in China, which means that we are in there together with our customers, you know, so we know that market well and have close ties with, with the customers. That had very tough times also, you know, a couple of years ago because the Chinese government took away wind subsidies , or support both for onshore and offshore turbines. 2021 was tough years, but it's more stabilized, and we have also there, you know, been working very closely with our customers.
They like us, they like our products, even though they have domestic suppliers, so we get a good, nice share of that business. So that's developing good for us now, even though it's not a fundamental type of subsidy program from the government driving that, you know? But we have built, and we are building a stronger position with our customers also there.
Perfect. Thank you. And could you maybe give some, how fragmented is the wind market in China currently? And would it be possible to maybe consolidate that over there? Or, how does it look for maybe foreign companies in that market?
Yeah. We are really the only foreign player, you know, in what we are doing. Else we have domestic competitors that we should start to consolidate and so forth. Of course, we are looking always at all opportunities and, you know, but is that it's very likely that we should start, you know, investing heavily in China with the current, you know, geopolitical situation, business, everything, you know, I doubt. I think it's more-
Yeah
about us making sure that we continue to do the right things with the assets and the stuff we have there. Mm-hmm.
Well, perfect. Well, that was everything for me on my side, so thank you for the answer.
Yeah. Thank you, Anders.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
So I start, we have, let's say we start in the bottom list here. That was the first question come, capital allocation. What is the split between growth CapEx and maintenance CapEx? How do you invest for growth? Can you elaborate on the cyclicality for the different divisions, the company? Yeah, well, it's many questions here. Maybe, Sylvain, you want to take this with capital allocation? Mm-hmm.
Yes, I do. We don't track growth CapEx versus maintenance CapEx, but you know, we do invest for growth in different ways, you know, in our plants, and then it goes beyond pure accounting CapEx. You know, when we mean investing for growth, that may mean as well investing in resources. So it's a variety of different actions.
Yeah. But yes, so of course, front end, it's about sales, it's about product development, marketing, lead generation. It's things I mentioned many times that we work on. In the factories, as you say, you know, we have no major programs going, but we constantly drive smaller investments to keep it up. And then we also, of course, take care of our sites when that's needed. But in relative terms, you know, a relatively CapEx light model, and that will continue. Cyclicality for the different divisions.
Yeah, a little bit challenging because they are all having their different cyclicality, but I think also what you have seen, you know, we believe there is a fundamental growth opportunity in all of them because we have, you know, widened the scope and we have dedicated focus in each of these industries. So that in that way, I'm also trying to take away some of that cyclicality, you know, that we are as an organization working on the growth opportunities. And as you see in construction, even though that's a segment which is under pressure globally, still we are growing nicely. So, yeah, I think it's something that we are having a good balance on from a group perspective.
Then we have the company and the construction in particular, had a tough period following the financial crisis. A better, more stable business now? Absolutely. You know, the group is completely different. Financial crisis, it was just Alimak, you know, that was here. So we had no Avanti, you had no Tractel, you had no Facade Access. And so you had old Alimak, which you could say in principle is the construction and the industry divisions, but they had one common sales force also back in those days, you know, and that meant that, that the business were focusing, mostly people, were focusing on construction. So the industry focus was not really there, I would argue.
Plus, the group was sitting with a very heavy rental organization globally, which put a lot of pressure on the group, which then was taken down or sold off, closed down, with exception of some few markets, which is something I'm very happy that we have today because it gives us an ability to be flexible in our way of working. But we will not go back to become a global rental company. That we will not do, but we will keep what we are having in that sense. Mm-hmm. Then, next question here: HSPS segment has negative investment of SEK 24 million. Did you sell some assets since this is negative? You have adjusted earn-out from Tall Crane. This implies the Tall Crane is delivering not as good as expected.
I will take the Tall Crane thing first, and then, yes, in a way, correct, since you are returning, or not, paying out some of the earn-out, the Tall Crane acquisition was having a two-step, earn-out, you know, so one step after one year and another step after the second year. But it's the market conditions that have put us in that situation. So I'm very happy with what we have done with Tall Crane, and this earn-out was also structured so that the multiple that we paid would be the same whether we delivered or met the earn-out or not. But of course, you know, the best would have been to deliver the earn-out because then the company would have grown more. But it has not.
We have taken a lot of orders now, so the outlook going forward is very strong, and we are happy with the performance, but it means that we are returning some of the money that were set aside for the earn-out. The investment of SEK 24, it's Sylvain.
Yeah, maybe we'll take this offline because I don't think we have. I mean, we have not sold any assets.
No.
Just to clarify, Tall Crane is part of the construction division, not the HSPS, so, you know, then-
No.
Maybe you send me your question offline.
Yeah, yeah. Then we have, what areas in the industry segment do you see greatest potential to improve your market position? Well, I'm not sure if I can point out a single segment, you know, but I know that we are selling, you know, well in some segments, and I know that we are selling much less in many, many segments. And I know also this varies heavily from geography to geography. So again, I'm coming back to the old setup. You know, when I got here, it was, it was something called industrial division, but it was no one really working on the industrial market. Now we do have a dedicated global structure. But you see many markets that we are not in, that we want to drive stronger. So, it's no clear answer to that.
You know, we both drive it from a geographical perspective, and we drive it from a segment perspective. And we are, you know, yeah, focusing on, on segment by segment, so I can't single out one of them or some few of them. We see solid growth potential, I would say, across the bar. And then, is the downturn in the economy making it easier or cheaper to acquire quality companies? It's a little bit too early to say because we haven't closed any deals, you know, but of course, with the deleveraging that opens up, and we do have a funnel, we work on the, on M&A. And it could very well be that, that at least multiples need to go down. That's a given, you know, because the pricing of companies are different now than compared to before.
You have a different return on investment. So absolutely, that needs to come down, and you could expect also that you would see more companies forced. But at the same time, you know, we don't want problem companies. We want solid companies, you know, companies that either add something to us from a margin, or product, or segment, or, you know. So they need to be contributing in a way. I don't want to take on a lot of issues and be faced with that. So but multiples needs to be right, of course, yeah. Sylvain, you maybe want to-
Yeah, I mean, I think it's likely to be cheaper, easier. I mean, sellers have to come to terms with the new multiples, and purchaser have to make sure they don't overpay. So, you know, that is still to be seen in the coming months. But, yeah, we are confident, we'll have some opportunities. And maybe I'd like to, in one minute, to come back to one of the questions regarding the resilience, and refer to the discussions we had in the capital market today. The resilience of the Alimak Group is coming from different angles. The share of the service revenue, which is deemed to be very stable, the exposure to some industries or cycles, which did not apply to Alimak during the financial crisis.
Typically, the wind division is exposed to cycles which have nothing to do with construction. And the book-to-bill patterns, you know, we have in certain divisions, a very short book-to-bill pattern, typically HSPS. But for some divisions, we have backlog of two years, around two years, like facade access. So if there was another financial crisis tomorrow, then it would take quite some time to hit hard our P&L. So just a quick reminder, and I will refer to the CMD material we shared a few months ago.
Yeah, very good point, Sylvain. So thank you. That was the last question we have on the list. So, with that, I thank you for the interest, good questions, and till next time. Thank you. Bye-bye.