As communicated earlier, we have had a business strategy review in the Alimak Group, and today I'm presenting the outcome of this and our way forward. With me, I have Tobias, our CFO. The Alimak Group has a strong foundation. The Alimak Group has a leading market position with a unique knowhow and expertise within vertical access solutions for professional use. A global footprint, and a large installed base of around 70,000 units around the world, and a leading position within the aftermarket. We are present in a vast number of segments, and with our strong aftermarket presence, we are in a unique position to help our customers from a full asset lifecycle perspective, optimizing total cost of ownership. We have a portfolio of strong leading brands globally known for safety and reliability.
We are supported by some megatrends like urbanization, more high-rises, governmental regulations within safety, digitalization, high demands on sustainability and productivity, of which a group like ours, with our size, global reach, and solidity, are well-positioned to capitalize on. We have a strong financial position with a solid balance sheet and cash conversion, which puts us in a position to invest strategically. In sum, a great company with a lot of value creation and potential forward. Next page. Yes. Our financial targets were set in February 2017, and as I've said earlier, I note that some targets we have delivered upon and some not. This has, of course, formed an important input into our strategy work. Next page, please. Another input into our strategy work was the four focus areas I brought with me. Customer focus, a truly customer-driven company, ensuring all decisions are being influenced by customer needs.
Technology leadership, setting the agenda in the industry from the perspectives of innovation, productivity, digitalization, and sustainability. Goes both in our offering to our customers, also internally in our own development. Delivering shareholder value, delivering on our commitments, focus on the figures, profit before growth, also organic growth and continuous improvements. Last, people and culture. Attract, develop, and retain the best people, having a culture where we all live our core values and where people can blossom. To have the best people blossom, I do believe a well functioning organization is vital. An organization with clear responsibilities, accountability, and a mandate to act. Digitalization and sustainability should be our fundamental enablers and cross through all strategic initiatives. Next page, please. We are now introducing the New Heights program. A program in three steps to take us to new heights that will run through to 2025.
We are currently in step one, reviewing and tuning to have the foundation right. Step two will be focusing on getting up to speed with implementation of our strategies and where profit before growth is vital. Step three will be to drive strong, profitable growth where we deliver on our financial targets over the business cycle. What are we doing now? We are updating the group vision and core values. We are setting a new customer-centric organization with full accountability and mandate to act. We are accelerating innovation, digitalization, and setting a customer-centric value proposition. We are establishing a people and culture function to secure excellence in developing our most important asset. We are setting profit before growth, securing margin improvements. We will be back to all of this during the presentation. Next page, please.
When reviewing the strategy, the first thing you look at is the vision, and we noted that it was not used that much within the group. We also felt a little bit limited by having the word vertical in it. In addition, a lot of people still talk about us as the Bygghissbolaget, or in English, the construction hoist company. We decided to update the vision. The new vision is moving people, material, and businesses safely to New Heights. We shift focus on vertical access to smart solutions for people and material access and flow. We also highlight our ambition to help our customers excel. New Heights is a clear signal of constant improvements, both for our customers and ourselves, but also our core knowledge of providing access and flow safely at heights.
We open up for the possibility to review new verticals that would fit the group. Next page, please. With the reorganization that we are making, we also reviewed our core values to ensure they were supporting and strengthening our new structure. We will also now have a strong focus on people and culture, and an excellent way to kickstart that work is actually to update the core values. We want to have a culture where people take ownership, and we now also get an organizational structure that fully support that. That we constantly move forward. We challenge the limits, as we want to go to New Heights, and we realize that the most efficient way is to do that in a well-diversified team. Next page, please. We have decided to reorganize to have four customer-centric divisions with full responsibility and accountability and a mandate to act for its own business.
Adding up these four divisions will form the group result. It will be supported by some carefully selected corporate functions, and each division will be fully responsible for the full value proposition through the entire asset life cycle. The division will know the customer needs best, so they develop our products and solutions, our aftermarket offering and commercial models. They produce, market, and take to market. They are responsible for P&L, balance sheet, and cash flow. Today, the organization has four business areas with seven business units, all reporting into me, and 4% from the group sales coming from the former aftersales, being then spare parts and services. Construction consist of then the old construction business unit and the rental business unit. They will own the rack and pinion technology and thereby also the group's rack and pinion manufacturing, supporting and selling rack and pinion products to the other divisions.
It's a similar then set up for the other divisions. Industrial will account for approximately 25% of the group, where 11% is coming from original equipment sales and 13% coming from the former aftersales. Their core competence will be traction technology. Wind will be around 20% of the group, where 16% is coming from original equipment sales and 4% from the aftersales, and their core competence will be design to cost. While BMU will be around 25% of the group, 19% coming from original equipment and 6% from the aftersales. Core competence will be around project management and customer-specific projects. As for service delivery, that will not be split up. This consists today of teams in each market today, and they will remain like this. A local team per country, managed by one division, supporting delivery of services to the other divisions.
You also see the EBITDA per division, and I'm convinced that we can lift our profit in all of the divisions, even though it's obvious that in some areas, we have a too low EBITDA, and it will require more focus going forward. This level of detail will be available in future reporting. Next page, please. We will have these five support functions. That means, first of all, that the COO or the operation role in the former organization is taken out. We will have finance and technology as before. We have added one function around strategy and M&A. We will have a people and culture function to take care of our most important asset. We will have a group support function to support and drive common processes and system support for our local service delivery teams to continue the very good work ongoing in that area.
Next page, please. To be a leader, we must secure we develop and deliver the most value to our customers. We are low in R&D spending compared to industrial peers, even though it has been doubled over the last years. We report around 2%, but in this, it is also included engineering, so maybe it is more correct to say 1%. I would argue that some relevant comparable peers have around 3.5%, and you would find up to 10% for fully technology driven and leading industrial companies. The question is, of course, not only how much money you spend, but how you spend the money. That we should do more is clear. Our investments will be increased.
Continue to drive connectivity and digitalization, which is now ongoing through our IoT Hub that has grown out of the 2019 acquisition made of Dataline in Borås. I believe that all our products and solutions forward will be connected and digitalized. Having divisions responsible for both the original equipment sales and services will allow us to develop the full value proposition from a customer perspective. Next page, please. Our people are the most important asset and thereby must be a strategic focus. We have therefore created this function to secure excellence in this area. We want to attract, retain, and develop exceptional people. We want a high-performing, inspirational culture, and we want people to blossom. Next page, please. Creating four strong independent divisions means they will take care of most themselves.
Still, there are, of course, several areas where the group will play an important and vital role in value creation for our stakeholders. Within digitalization, sustainability, and corporate culture and people, as already highlighted, that divisions can leverage our global footprint and utilize a common back-office setup. That together with all divisions, we have the widest technology base and portfolio in the industry that will be leveraged across the divisions. We will benefit from having a common global service delivery organization and capability, and of course, the strong financial backing we can provide to all the divisions. Next page, please. Then I invite Tobias on stage, so he will take us through how we now will make the first solid step in improving our margins. Tobias?
Thank you, Ole. As Ole mentioned, a key priority for us is to improve the profitability in the existing business. With the measures that we now are putting in place, we have a targeted annual savings of SEK 60 million, full effect from end of first half 2021. These measures that we're now putting in place are affecting production, selling, and administration functions with a net reductions of 120 employees, 5% of the workforce. Out of that, around 80 people are within production, mainly within the Construction and BMU businesses. For Construction, the reductions are mainly made in the Skellefteå plant, whilst for BMU, we will, amongst others, transfer the assembly facility in the Netherlands to Spain. The annual run rate of these cost reductions is about SEK 33 million.
The new organizations with the four divisions, supported by the lean corporate functions, will allow us to have less overlapping roles within selling and administration. The effect of this is a planned decrease of around 40 people throughout organizations globally. The annual savings of this is around SEK 27 million. We also strive to further improve the working capital management, and one area specifically is to improve the inventory turnover rate. As a step in this direction, we will take one-off provision of SEK 12 million, a majority within the after-sales business relating to spare parts with a low turnover. R&D functions, as Ole mentioned, is a key priority for us and will not be directly impacted by the program. Instead, our focus here is to making sure the investments are correctly allocated, developing new functions and products.
All these measures combined will lead to non-recurring cost of SEK 60 million, of which SEK 35 will be taken in the Q3 and the remaining SEK 25 in Q4. With targeted annual savings of SEK 60 million, we will improve our profitability significantly and move in the directions towards our financial targets.
Thank you, Tobias. Next page, please. We have now presented how we will establish the base and which will be implemented during Q4. We will also kick off the strategy development for the divisions and corporate functions now in the beginning of Q4. Beginning next year, we will finalize the strategies and present them in a Capital Markets Day during the first half of 2021. We will start implementing our strategies where we keep our financial targets, we set profit before growth and make the group ready for future profitable growth. The margin improvements will be initiated now with full targeted effect from second half of 2021. Next page, please.
As a base for the future value creation for the group and the divisions, when they now start their work developing their strategies, this will be our steering wheel or pinion wheel, if you like. Customer obsession is the core of everything we do. Technology leadership, operational excellence, and people development, all in a world where digitalization and sustainability influence all we do. Finally, next page. Yes, I'm very happy to present the new group leadership team with some changes. Tobias will continue as the CFO, and also Charlotte will continue as the CTO. We have a new face in the team with Matilda Wernhoff. She will be head of then strategy and M&A. She has been in the group for the last four years, working mostly with M&A.
We are in a recruitment process for head of people and culture, and we have hired Cecilia Westerholm Beer as an interim support. Patrik Sundqvist, who has been interim Head of Group After Sales, will be Head of Service Delivery. José Maria and Mark will continue to manage Wind and BMU, respectively, as before. As for Construction, Henrik Teiwik will leave the group and David Batson will resume the role as Head of Construction Division. He has been the Managing Director of our operations in Australia for the last four years and have a deep knowledge of construction and rental. Finally, Fredrik Betts, currently Head of General Industry and Oil and Gas, will move out of the leadership team and take on the role as Global Head of Sales within Industrial Division. We have started the recruitment process for a new Head of Industrial Division.
Patrik Sundqvist will, in addition to his role as Chief Service Delivery Officer, act as Interim. With that, I say thank you, and we move to the Q&A session. Maybe Tobias, you will join me up here again? Yep.
Our first question comes from the line of Johan Dahl at Danske Bank. Please go ahead. Your line is open.
Good morning. Ole, it seems that this reorganization, one of the main changes that you're making is integrating the services operations into the Industrial verticals. Can you just talk about the purpose of having this global organization, I guess, was to get that global reach and coordination advantages. Can you just talk about what main advantages you see with this new setup that you're proposing and what you aim to achieve through that and what the main challenges will be in doing that?
Yeah, I think first of all, we had a relatively, the way I saw it, complex matrix, with both the countries reporting into me and also divisions. Therefore, I wanted to simplify the structure so you get a more clear line throughout the organization with, as I've said several times, the responsibility and accountability and this mandate to act, so that you have a clear line through the organization with this. That was the main purpose. I wanted to have a customer-driven organization that leads us to the way we do it, that it will be these four divisions. I also strongly believe that those that knows the customer segment the best, those that works with the Construction segment, they are also the ones that would know the best what type of solutions and products that we should develop for that segment.
Therefore, I believe in that they own, should own, the full value proposition and thereby also the aftermarket offering and take that to market. We will, from a group perspective, follow and separate very clearly what is OE sales and what is aftermarket sales. We have full control over that and that we know that we are developing both parts like we should. Yeah, I think these were the three main areas that was behind this new structure.
What sort of challenge do you see that a unit that generates half of group earnings is not having its own P&L in that sense, but rather included in the vertical. Is that something that creates concern on your behalf?
I would not say concern, it's something that I've been very mindful about, of course. It's a very important part for the Group. Also I know that you don't have the service business if you don't also have the OEM business. We service our OEM products. It's important that we see this together. They are actually feeding each other both ways. That's why I think still that actually getting this with the people that knows that market the best is the right decision. It will be kept, as I said, a separate focus and in most cases, a separate team. This also varies a little bit from segment to segment because it depends on the take to market. In some segments, OE and aftermarket sales are more deconnected. It's different customers and it's different sales. While in other segments, it's the same thing.
You take the whole package to the customer in one go. It's the same customer that buys it. This is also an important part that we understand this and really can leverage on this. I'm convinced that this will allow us to gain even more speed, else I wouldn't have done it.
Just before I get back in line, can you just confirm that you're reiterating group financial targets? Secondly, these cost out actions that you announced yesterday, in your view, is that what's needed to take you to that group margin target in a couple of years' time? Also, have you looked at potential write-downs, and is it fair to assume that, given that you're not announcing anything now, that's where we will be? Finally, what's happening to Rental? Thanks.
The last question first, of course, I cannot comment upon anything related to the current business environment. We are not changing any financial targets as it is now. The financial measures that we are now taking, it is to help us lift profit for the group. Definitely, yes. I don't recall if you had even one more question.
Rental division or business area will be part of.
Yeah
Construction division going forward.
Yeah. If that was your question regarding Rental, definitely so. Rental will be part of the Construction division because in principle, that's the same market.
Okay.
Okay.
Back in line. Thank you.
Thank you.
Thank you. Our next question comes from the line of Kenneth Johansson of Carnegie. Please go ahead, your line is open.
Yeah, thank you. Maybe I ask the same question in a slightly different way. If you work as a service technician at Alimak, I got the impression that before you were trained to service equipment coming from the Alimak brand, but maybe also from the BMU brands or the Wind brands so that you could service many different equipment. How will the daily work, or what changes will a service technician working for Alimak experience in this new organization, please?
Yeah, it's a very good question because this is important to understand. That's actually not changing at all. What we are changing with the service side is that each of these divisions will be responsible for developing and taking forward the value proposition and do the take to market. The service delivery, so for the service technicians, they will still be part of the same one team in each market. They will be scheduled and managed in the same way as before and support all divisions in that local market. No change for the service delivery organization in that sense.
Okay, it's more a phase of services rather than performing the services that will change going forward.
Absolutely.
Okay, excellent.
Yeah.
Also on the manufacturing side, you have a number of plants over the world. Those plants, they will belong to the divisions as well. Is that correct?
Correct. Today. Yep. Sorry.
Yeah. Great. You don't see any synergies to produce maybe products of one brand in a plant for another brand or something like that you miss with this organization, or how's your thinking there?
Yeah. Of course, it might be areas that you could maybe take out some more costs. Again, I do not long-term believe in that last synergy or cost element is what will take us forward. I more believe in that we should have an organization set up for value creation and growth, and not be controlled and steered by cost synergies. We will, of course, drive whatever we can of cost developments and potential, but this will also be between divisions. They will also need to find their way, but they own the results, so they will own also this decision, not something that I'm enforcing across the board at the group. Remember, today the factories are reporting to me in principle, all of them, and then they are not owned by the business, which I think is not the right way. I think they should be owned.
Now, Construction will own the rack-and-pinion factories around the world and be responsible for make or buy footprint and how we develop that. The Industrial will be for the traction part, et cetera.
Okay. Finally, the margins on the BMU side are fairly low. Do you believe those or the EBIT margins there are in line with other industrial peers, or do you see an opportunity to rapidly increase margins on the BMU side?
The margin on the BMU side is way too low, and that will, of course, now this is highlighted and we see the whole thing, and we will work dedicated and hard together with the BMU team to lift this. As I said, profit before growth. That's something not only valid for the group, but also for each division.
Okay. Thank you.
Thank you.
Thank you. We have a third question from Johan Dahl of Danske Bank . Please go ahead. Your line is open.
I read your comment there on innovation, and I read it as a need to increase investment. Can you try to just quantify that? Will the cost savings that you're announcing be enough to offset that increase in R&D spend? If you could elaborate on that.
I'm not ready to give any figures on this for now. We will now move into a phase where we will develop the detailed strategies for each of the divisions and also these corporate functions, including people and culture, innovation, digitalization, et cetera. That's something we will come back to in more detail in the Capital Markets Day. Other than what I said, that I think we are too low, and that I think in the future, all our products and solutions will be digitalized and connected in some way. We have a way to go. We are, I think, have started and a lot of very good work is ongoing in that area, and that we need to continue to fuel and invest in.
Okay. Tobias, can you possibly reiterate those tangible actions to realize the cost savings? It was a really bad line. You talked about some measures that would lead to these cost savings.
Okay. Yeah. As mentioned, we're doing mainly within production and selling and administration. In terms of production, we're reducing the workforce with about 80 people, mainly within the Construction and BMU businesses. For Construction, it's a reduction in Skellefteå. For BMU, amongst others, we will transfer the assembly facility from Netherlands to Spain, also other actions. In terms of selling and admin, making sure that we don't have overlapping roles and responsibilities when setting this new organization in place. That is around 40 people, with the estimated savings of SEK 27 million. For production, the estimated annual savings is SEK 33 million, where we will have the full effect by the end of first half 2021, onwards.
I would like to thank you for participating and for the interest, also thank you, Tobias, for joining me here. Yeah, have a nice day. Thank you. Bye-bye.
Bye.