Welcome to Coor's Q3 presentation for 2025. During the questions and answers session, participants are able to ask questions by dialing #KEY-5 on their telephone keypad. Now, I will hand the conference over to President and CEO Ola Klingenborg and CFO and IR Director Andreas Engdahl. Please go ahead.
Hello everyone, welcome and thanks for listening in to the Coor Q3 report. I will start by giving you an update on some of the events during the third quarter and talk about some of the market conditions. I will then hand over to Andreas to present some more details around financials before we summarize some of the key takeaways for the quarter and have a Q&A session. At the end of the presentation, I will also share a little bit of news regarding a CFO interim solution that we identified as Andreas departs now during the fourth quarter. A brief summary of the events during the third quarter, starting with market conditions. We continue to see a high level of activity in the third quarter, and we see a little bit varying outcomes depending on our different geographies.
One of the key success factors for us is the ability to extend existing customer contracts, which is why customer satisfaction is one of our most important KPIs. This quarter, we got our annual customer survey, which was conducted during the autumn, and I'm pleased to say that our results remain strong at 72, which is an improvement from last year's 70 and above our target. That's good news. In Sweden, we have extended a couple of important contracts with Alstom and Vasakronan, and we continue to win new contracts in the Norwegian market with some good successes there. Both Avenue and Skage Eigendom were signed during the quarter. We continue to see challenges in our Danish operation, which affects our commercial ability there.
We have a couple of new expanded contracts in the quarter, but also a few contract losses, and some earlier contract losses are concluded in the fourth quarter and early next year. The net effect of these changes in the portfolio are net negative, and the value of our contracts that will be concluded in the next two quarters is approximately SEK 300 million in the Danish market. To further strengthen our operational focus, I've decided to expand the executive management team, and our three Swedish divisions will now join the executive management team, giving the heads of divisions an expanded mandate and clearer responsibility for the coordination and governance of the support functions. We enable, by this, more efficient and integrated management of the Swedish business segment. This will also flatten the organizational structure, which I think will allow for quicker decision-making and increased operational control.
In 2025, we've also taken a lot of measures to restore the level of working capital, and I'm pleased to see that that has resulted in significant improvements in cash conversion. This quarter, it's 96% compared to 57% for the full year 2024. As commented in the previous quarter, we continue to prioritize long-term efforts to further strengthen our ability to deliver attractive services with high operational efficiency and profitability. We've started preparations for the Capital Markets Day early next year, where we will provide an update on our progress and share plans for Coor's future. Handing over to Andreas, take a look at the numbers.
Thank you, Ola. We start with an overview of the business KPIs. In the third quarter, organic growth is 4%, and that comes, as in the previous quarter, primarily from high variable volumes in Norway. The EBITDA margin for Q3 is 4.5%. That is an improvement compared with last year; that ended at 4.1%. Cash conversion, that is an LTM number, ended at 96%, as Ola commented on here just a minute ago. A strong number that is above our target of staying above 90%. Leverage, also an LTM number, at 2.7, a decrease from the previous quarter. On the P&L, net sales ended at SEK 3 billion; that is 2% up compared to last year, where organic growth was 4% and FX negative 2%. Adjusted EBITDA amounted to SEK 134 million, which gives us a margin in the quarter of 4.5%.
Both EBITDA and margins are an improvement compared to last year. At the end of the second quarter this year, the previously announced changes in the central staff organization were completed, and effects of these changes are now becoming visible in the P&L. We see a lower cost for central group functions and also a positive impact on cost for central functions in the countries. Items affecting comparability during the quarter amounted to SEK 21 million, and mainly come from restructuring costs related to changes in the Swedish management structure that Ola just commented on, and consultancy costs related to strategic review to define the plans for Coor's future to be presented at the Capital Markets Day early next year. Net income is SEK 43 million, and adjusted net income when adding back amortization amounts to SEK 57 million. That is an improvement with 81% compared with last year.
On the LTM numbers, we see that net sales remain close to SEK 12.4 billion. The LTM adjusted EBITDA level is SEK 548 million with a margin of 4.4%. Looking at Q3 country by country, and we start with Sweden. We have organic growth of negative 2% in the quarter, mainly a result of ended contracts. In the face of a weaker economy, we also see somewhat lower demand for variable volume, primarily in our conference service. Adjusted EBITDA and margins are somewhat lower compared with the previous year. We see positive effects from organizational changes implemented earlier this year, while ended contracts have a negative impact. The cleaning operation improved their profitability. Last year, high resource consumption had a negative impact, but the action plan that was implemented last fall to improve efficiency in resource planning has improved profitability back to expected levels.
With lower demand for variable volumes, we also have a negative impact on profitability. Conference service has a relatively high share of fixed costs, which has a strong impact on profitability as volume changes. If we then move over to Denmark, organic growth of 2% in the quarter, that comes primarily from indexations. Adjusted EBITDA and margins are relatively stable compared with the previous year. As Ola mentioned earlier, we continue to see challenges in our Danish operations that also affect our commercial ability. Recent changes in the portfolio are net negative, and we have contracts of some 300 million SEK per year that will be concluded in the coming two quarters. In August, Peter Hassbeck took over as CEO of the Danish operation, and he is now evaluating appropriate measures going forward to ensure an improved commercial impact in the Danish market.
In Norway, we see another strong quarter with organic growth of 22% coming from unusually high variable volumes related to maintenance stops in the energy sector. These maintenance stops occur annually. The scope and timing in the year varies from year to year. This year, around half of the organic growth we see in the quarter comes from above normal levels. Adjusted EBITDA for the quarter amounted to 29 million SEK, and margin was 4.6%. The strong improvement compared to last year is driven by the high variable volumes. We have signed several new contracts in Norway the past few quarters. A majority of them will be started in the coming quarters, thus having a limited impact here in the third quarter. Last among the countries, Finland, organic growth of 3% in the quarter and a slight improvement in margins compared with last year.
Moving on to cash flow and balance sheet. During last year, we saw an increase of working capital as a result of changes in the contract portfolio and year-end balance sheet effects, and to a certain extent due to way of working. We have taken a number of measures to reduce the level of working capital in 2025. In the last 12 months' period, working capital has been reduced by 77 million SEK compared with a build-up of working capital of 88 million SEK in the 12 months before that. With that, our net working capital position has been restored to a normal level of negative 7.7% as a percentage of LTM net sales. As a result of improved net working capital, our key metric, LTM cash conversion, also improves in the quarter to 96%.
That is an improvement with close to 40% compared with the full year 2024, a level above our target of staying above 90%. Finally, leverage, that is on the bottom right of the slide, decreased to 2.7% as a result of a strong cash flow. With that, I hand it over back to you all to sum it up.
All right, so summarizing the quarter, I think we see another stable quarter with some positive signs, so happy to see that. I think the cash conversion deserves to be highlighted since the improvement is quite significant. We see a market with a lot of activity, and we see a little bit different outcomes in our different regions. The strengthening of the Executive Management Team with more operational focus, I think, is something that we've been working quite a bit on. I think that's the key takeaways from the third quarter. We've also worked to find a replacement for Andreas Engdahl, who's been with Coor for a long time, and we're still in the recruitment process. In the meantime, we've decided to engage in an interim service, and we have appointed Daniel Wanholt, acting CFO from the 1st of November, having a handover period with Andreas during about a month.
Daniel has a very significant experience in the Swedish market and has been the CFO of Ambea for many years, and most recently CFO of Consolis, who is a little bit closer to our market. I think also at Ambea, there is a lot of resemblance to our business. The recruitment of a permanent replacement is ongoing at the same time. In the meantime, Daniel will hold the share as CFO until we find a permanent replacement. I think that concludes our presentation.
If you wish to ask a question, please dial #KEY-5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #KEY-6 on your telephone keypad. The next question comes from Simon Johnson from ABG Sundal Collier. Please go ahead.
Thank you, and good morning, Ola and Andreas. Maybe first, I wonder if you could please explain a bit more about the growth in Norway. You specified, for example, that half of the organic growth came from above-average variable volumes. I'm wondering about the other half. Was that sort of mainly related to new clients, or is it also that other clients, specifically in the oil and gas industry, drove that sales as well? How should we view that? Thanks.
Good morning, Simon. No, the growth is fully related to variable volumes in the energy sector. Half of it is extraordinary levels that we typically don't see, and the other half is a high activity year, basically. It's all related to the same sector.
Okay, thanks for that clarification. I also wonder about, also in Norway, the public sector. This is something where we have seen positive development with the public sector starting to outsource from a lower level recently. Can you share anything about how that is progressing?
Hello, Simon. Good morning. As you say, I think the public sector in Norway is quite a significant opportunity for us. In the quarter, we won Avenue, which is kind of semi-public sector, I guess. We see a lot of activity in the Norwegian municipalities where they, in many cases, for the first time, do outsourcing. We have dialogue with many of them. I think it is a good opportunity, but it's also not a process that happens overnight. It is definitely an opportunity as we see lower outsourcing levels in Norway, public sector, compared to other Scandinavian markets.
I see. Maybe as a follow-up on that, do you think that the current activity you're seeing is something that you think could be enough to move the needle for your Norway operations in the coming one or two years, or is this more longer term than that?
No, I think it's both. I think we can see that it will move the needle for Norway, and we think that it's also a longer-term game because if we look at the total markets in the other Scandinavian markets, there is significant growth to be had for the outsourcing sector for probably a long time to come. Now, we obviously have a good momentum in Norway and have won quite a few contracts there in the last couple of quarters. Both in the public and the private sector, we see good momentum.
All right, great. Thanks for that. That's all for me.
The next question comes from Karl-Johan Bonnevier from DNB Carnegie. Please go ahead.
Yes, good morning, Ola and Andreas. A lot of moving parts here today, obviously. Just to continue on Norway first and to bridge the gap on group level from the Danish headwind you said, how much do you think the Norwegian contracts and the momentum you have seen that will bridge that gap?
I mean, I think we normally don't disclose the exact revenues of different contracts, but I think it's basically on a similar type of level. From a group perspective, those might kind of outweigh each other. However, the Norwegians at the same time have a quite significant variable volume in the quarter. You have to do that math, I guess. I think that the lost contracts in Denmark and the won contracts in Norway are on similar type levels.
Excellent. On group level, we should say that the fixed volumes or the contracted volumes are stable at the moment. If anything, Sweden and particularly Norway is bridging the headwind you see in Denmark. Is that a good way of summing it?
Yeah.
Yes, it is.
It's correct.
When we look at the Danish challenges and the contract losses, could you give us some sort of granularity? Is it you've been wrong on pricing? Have you not been able to deliver the quality in this contract? Are there more contract-specific issues that have happened here?
I think there are some contract-specific issues, and some of them are just tenders, where there has been an intense price focus, where we have chosen not to do a race to the bottom on price. From a more general perspective, we do have challenges in the Danish operations of how we kind of keep operational efficiency in the delivery and how we keep control of all the activities going on in these large contracts. I think it's both of the things that you said, some contract-specific issues and some operationally related issues. I think those have also led to us maybe not focusing enough on our growth, which means that our incoming volumes have not been able to kind of compensate for the lost contracts.
Peter, who is the new CEO in Denmark, is obviously there to address some of these issues and has already begun to find a plan forward. One of the first measures was to find a new manager for one of our business units there that has been suffering the most compared to budget. We are taking action, but it's also, as you know, a long-term game where many of these contracts have been tendered in the recent year or even years. It is a long-term game, but I think Peter is up to the challenge and is hard at work to try to find a good way forward for the Danish business.
If you sum Denmark up, is it proper to say that maybe half of the challenge is an in-house challenge and half is a market challenge? How should we see it?
I think those two always interact with each other somehow. If you have a strong management with a good view forward, you can always overcome market challenges as well. I think if you want to put a % on it, it's probably not all wrong, your estimate there.
Excellent. Obviously, a lot of last year's problems and the focus in the efficiency programs were targeted to Sweden. You see good things coming through, obviously, in this report, but how do you feel the stability in the Swedish operation today compared maybe to when you took on the realm becoming the CEO of the company?
I would say that it is more stable. One of the key stability indicators for me is the ability to forecast correctly the different contracts and how they are coming out in a month or in a particular time period. I think we see an improved ability to forecast. I also see fewer contracts that swing up and down a lot in volume or particularly in profitability. There is a greater stability, I would say. There is a lot of work that has been done by the team in the Swedish market. Some of the variability that we have seen has also been due to system changes, etc., that was done last year. I think we see less of that in the year and also in the coming time period.
Excellent. Obviously, looking at the target that was put up before you came in, that you should get back to 5.5% margins in 2026, basically, and maybe having that pace when you now leave 2025. Is that still a logical kind of assumption given the challenges you see in Denmark and the development you see out there?
I think we are not indicating any change to that ambition at this point. We will revert with some more details around our targets, not only for the year, but also going forward during our Capital Markets Day in Q1. We have been doing quite a lot of analysis on what we can expect. We're not changing the 5.5% ambition, at least.
Excellent. Good move on free cash flow in the quarter, obviously. The balance sheet is strengthening up quite nicely. Obviously, we noticed that you haven't started the SEK 50 million share buyback program that was highlighted earlier. Is that something that now looks more logical given that you have reestablished your financial strength?
Yeah, I mean, the balance sheet is strengthening, and we are sort of getting to a place where that is becoming more relevant to sort of pick up now in a discussion with the board. In the end, it's a board decision, but we will have a dialogue with them around that here in the near-term future.
Excellent. Andreas, good luck with your new assignment. From my perspective, Daniel should be a very good interim solution as well. I know him from Ambea, where he obviously was a very keen share buybacker. Hopefully, I can get that started as well. Thank you very much, and all the best out there.
Thank you.
Thank you.
The next question comes from Raymond Kay from Nordea. Please go ahead.
Good morning, Ola and Andreas. Two questions from me. First, regarding the restructuring cost in Q3, $21 million. It's pretty much unchanged from Q2. How should we think about sort of extraordinary items and specifically restructuring costs going forward?
I think you should expect them to come down or decrease. We have had a number of restructuring initiatives here looking back a few quarters, and the large one was related to the downsizing we did earlier this year. Again, now in Q3, there are some management changes related to the changes in the Swedish organization that Ola Klingenborg commented on. Looking ahead, one should expect that to come down.
Great. Just looking at the IFM market more broadly, do you see an increased focus on price? Do you maybe see your strict margin discipline as a major reason or a strong reason for why maybe organic growth in Sweden and Denmark is where it's at?
I think we've had, as you say, a lot of focus on margins in the last couple of years. I think that has, on a kind of cultural and structural level, of course, changed and has dominated the focus of the business. I think I won't point to a particular deal perhaps that we lost due to that. I think as a structural and cultural view of how we operate our business, we have been more cautious. We have been very disciplined on margin. We have been risk-averse to take deals where there is a risk of diluting the margin. Perhaps that has gone a little bit as far as preventing us from growing in the way that we probably would have wanted. It's always a balance. In this type of business, getting the revenues is not particularly difficult. The difficult part is to maintain the margin.
It's always a balance that we struggle with. I think the losses in the Danish business have not very much to do with the margin focus, but rather on either internal operational challenges or very contract-specific events. As a more general observation, I think you are right.
Okay, got it. That was helpful. Great. That's all for me. Thank you very much, Andreas, and thank you for a nice collaboration. Wish you good luck on your future endeavors.
Thank you, Raymond.
The next question comes from Oliver Uusitalo from Aktiespararna . Please go ahead.
Good morning, guys. Hope you can hear me well. I have a few questions, mainly regarding the Norwegian market. This has obviously been an ace for you over the past few quarters. However, historically, we've seen volumes from the oil and gas sector to be quite low in the fourth quarter. Should we expect organic growth to normalize already from Q4?
Morning, Oliver. Yes, you should expect that. The maintenance period is coming to an end in Norway, as it often does here, as you say, in Q4. That is correct.
Okay, great. How do you think this will affect margins? Obviously, we've seen an uptick here over the past quarters. Do you think we'll be able to maintain the 4.5% level in the Norwegian market, or are we to expect that hit here?
I mean, the volumes have been a margin driver, but obviously, sort of reaching a new level, there is an ambition to keep them. One needs to keep in mind we're also starting up a lot of new contracts here in the coming quarters. That sort of could potentially also put some short-term pressure on margins. I mean, overall, I don't expect any sort of major shifts in the margin profile in Norway.
Great. Thank you for the clarification. I have a more broad question as well. Previously, over the years, we've seen that the economic downturn has driven the outsourcing of FM services. Over the past year, have you seen this pattern play out yet again, or do you see any shift here?
I think we touched upon that earlier, but I think many of the large corporate contracts that we have, I mean, they've been outsourced for quite some time. I think when we look at the big corporate segment, it's not as clear the trend that you indicate. If we look at the public sector, for the first time, talking about Norway again, I think we see some of the municipalities that are struggling financially, and they are for the first time looking at outsourcing. I think maybe not so much for the private segments as it is for the public, actually.
Okay, great. Thank you so much for your answers, and best of luck going forward, perhaps especially to you, Andreas. Thank you so much for this past few years.
Thank you, Oliver.
As a reminder, if you wish to ask a question, please dial #KEY-5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much for listening in to our Q3 report.