Welcome, everyone, to this conference call regarding the third quarter result here at Fasadgruppen. In the room, we have, well, myself, Magnus Blomberg, and we have our CFO, Casper Tamm, and of course, our CEO, Martin Jacobsson. With that being said, I hand over to you, Martin.
Thank you, Magnus. Good morning, everyone, also from me. Very glad to present the Q3 results for you today. Let's dive into the highlights. We saw an organic growth of 2.2% in the third quarter, actually the first time with an organic growth since Q2 2023. The organic growth was actually mainly driven by strong Danish entities. I will get back to that. In the quarter, we also saw an Adjusted EBITDA of SEK 136 million compared to roughly SEK 93 million a year ago, corresponding to a margin of 9.9% compared to 7.7% a year ago. I would say that this is a confirmation that we are on the right path. If we take a look on the order backlog, we also saw a total order backlog of SEK 4.1 billion, which means a more or less flat organic development.
We are still affected from delays from the Building Safety Regulator, which I've mentioned before, affecting our subsidiary Clearline in England. On the net debt to Adjusted EBITDA pro forma level, we came in at 3.76x . We received a covenant here from our banks, which we believe we have a strong dialogue with, which is then this waiver value for Q3. After Q3, we also announced a divestment of Alnova. We'll get back to that. Moving into the sales, there was a total increase of roughly 15%. As I mentioned here, we saw an organic increase where the Danish entities, as I mentioned, were very, very strong. We also saw positive numbers in our Finnish and Swedish entities, but softer in the Norwegian market.
I would also like to say that it's still a continued low activity within new build floors in all our markets. In the total solutions segment, we saw sales of roughly SEK 731 million compared to SEK 751 million a year ago, meaning it's down roughly 3%. Moving on to the specialist solutions, we saw sales increasing up to SEK 508 million compared to SEK 452 million a year ago, roughly up 13%. For Clearline, we saw sales of roughly SEK 142 million. These sales are also impacted by the BSR.
Can we move on, please?
On the Adjusted EBITDA level, as I mentioned, we saw strong figures here, an increase compared to last year. It's also on the similar pattern, as I mentioned, Sweden, Denmark, and Finland are all on the right path, whereas we see the Norwegian entities and markets challenging.
Moving on to the segments, we saw that the total solution segment came in at an Adjusted EBITDA level of roughly SEK 51 million compared to SEK 78 million a year ago, meaning a drop in the margin from 10.4% down to 6.9%. On the specialist solution side, we saw an increase from SEK 28 million last year up to roughly SEK 61 million this year, corresponding to a margin of almost 12% compared to 6% a year ago. Very glad to see this development. Regarding Clearline, we saw an Adjusted EBITDA level of SEK 47 million in the quarter, corresponding to a margin of roughly 33%. However, we estimate that the BSR effects have had a significant impact for us on Clearline in the area of roughly SEK 20 million-SEK 30 million on the Adjusted EBITDA level.
We saw some adjustments in the quarter of roughly SEK 13.4 million, which is mainly related to earnout revisions. Just noteworthy is here, if you take a look on the top right table, we see an increase of roughly 53% on the Adjusted EBITDA from the rolling 12 months compared to 2024. The margin going up from 5.7% up to 8.1% on a rolling 12-month basis here as you see per Q3. Glad to see that development. Moving on to the order backlog, we saw a more or less flat organic development, as I mentioned here initially. That also corresponds to, as I mentioned, the SEK 4.1 billion in total order backlog. If you take a look at the geographies, we saw a strong organic order backlog growth in the Swedish entities. That is actually for the third consecutive quarter.
The other geographies, excluding England, because that's not included in the organic comparisons, they were a bit softer. On the total solution side, we saw a decrease from SEK 1.8 billion down to roughly SEK 1.6 billion. On the specialist solution side, we saw an increase from roughly SEK 1 billion up to SEK 1.1 billion. We are very glad to see that Clearline's order backlog is at an all-time high level of roughly SEK 1.3 billion at the end of Q3. Moving on to our cash flow, following the seasonal pattern, we came in at an operating cash flow of SEK 148 million in Q3 here compared to SEK 126 million a year ago. That corresponds to a cash conversion level of roughly 93% compared to 109% a year ago. I would say that this continues to be on a strong level.
If you take a look at the networking capital, we still see positive numbers there, however, a bit lower than last year. Moving on to the financial capacity and net debt. We saw here that the average interest rate level is down somewhat for the first nine months, down to 5.8% compared to 6% a year ago. Remember here, we have interest rate periods of one to three months. As I mentioned initially, the net debt to Adjusted EBITDA pro forma came in at 3.76x. We still, as I mentioned, also have a continued constructive dialogue with our banks.
Can we move on, please?
On the divestment of Alnova, we are optimizing our portfolio structure here in the segment specialist solutions. We have seen that we could not really extract all the synergies as we wanted. Remember, we acquired this company back in 2022.
After a strategic review, we deemed this as the best solution going forward. We see that this is a limited impact on the cash flow. However, there will be a write-down of goodwill. We have an earnout structure in place, which we have linked to the coming years. This strengthens our financial position, which will improve the important covenant, which we mentioned here by roughly somewhere between 0.15x-0.2x . The expected close of this divestment is here in December. We also want to reaffirm these priorities that we've mentioned here since the capital markets day last year. Still focus on profitability and taking leverage down. Just as a reflection for the first nine months here on the profitability side, we came in on an Adjusted EBITDA level of SEK 345 million with an 8.7% margin. We can compare that to the same period last year.
For the first nine months of 2024, we came in on an Adjusted EBITDA level of SEK 194 million. That is an increase of roughly SEK 150 million. The margin last year was roughly 5.5%. That is also an increase of roughly 3.2 percentage points. Some concluding remarks before we open up for questions. We saw organic growth for the first time since Q2 2023. Very, very glad to see that we are on a positive trend here. We see also that we are still affected by the delays of the Building Safety Regulator. We are not alone in this. You could say this is a massive problem in England. We know that the regulators are doing a lot to improve the situation.
We are still maintaining, as I tried to say here, a close bank dialogue and have been doing so for quite some time, which is very positive to see that we have strong bank dialogues. We could say that the focus is still on profitability improvements and deleveraging. We are also, with our new kind of management method, optimizing the portfolio structure. Alnova is an example of that. I feel that in general, we are on the right path. With that said, we open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Max Bacco from SEB. Please go ahead.
Good morning. Thank you for taking the questions. Basically, two questions from my side. If we could start with Clearline and BSR, do you have any comments on the impact going ahead? Do you see any improvements already in the end of 2025, or is it something more that will gradually appear in 2026? What's your thought on that?
Good morning, Max.
Yes.
The BSR situation is, of course, a special one. It's hard to tell exactly when this situation will be resolved. I don't think it will be kind of an explosion where they just hand out, let's say, permits. I recognize that this is, as I mentioned, a massive problem in England. I would be surprised if there wouldn't be improvements already in 2026 because it's so high on the agenda on the government side in England. We could say that also from our side, what we've seen in the last couple of months here is that there's an improved dialogue. There's more response in general from the BSR than it has been in, let's say, the first half of the year. That's actually some improvements that we've seen, at least, that the dialogue is there, more or less, which was not there in the first half year, so to speak. We've seen some improvements on that side. Remember, I also mentioned that in the last call here that on the last of June, they came out with this official statement regarding how they are hiring new inspectors and moving on with this fast track, which hopefully can be positive for players as us. Remember also that they've mentioned that their priority is on the renovation side.
You need these kind of approvals both for new build and renovation. They mentioned that renovation, which is the only place where we are affected in England, is a top priority. We are at the top of the queue, you could say, which is also positive in that instance.
Okay. Understood. On to the next question. Nice to see some positive impact from the divestment of Alnova on the leverage. On that topic, what's your expectations here on Q4? I mean, Q4 tends to be a very strong cash flow quarter due to networking capital. Do you expect to see the same seasonality this year as well? What's your thought on the leverage given that covenants decreased quite drastically in Q4?
Yeah. There is nothing that is saying that Q4 should not be in a similar pattern as it has been in the last couple of years here. That is positive on that side. Thoughts on leverage? Yes, of course. I mean, usually, as you say, as you mentioned, Q4 usually has strong cash flow. We have a strong bank dialogue. We have been very, let's say, understanding for these times. As we see it, there will be in the future as well. I think that sums it up pretty well.
Okay. Understood. That was all from me at the moment. Thank you.
Thank you, Max.
The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.
Good morning, guys. I hope you are well. Thank you for taking my questions. Some, which have already been asked by Max. Maybe I begin on something that hasn't been answered. I'm wondering a little bit more about the portfolio that you currently possess, given that you've now divested Alnova. Can you give some comment on the rest of the portfolio? Would you be willing to be continued sellers if the price is right, if you feel that your strategic fit is perhaps not 100%? How would you say your general feeling is towards that?
Yeah. My general feeling is that we have a strong portfolio. Absolutely. This Alnova case was maybe a bit of a special case in that instance. We shouldn't expect any divestments, if that's the question in that regard, going forward. Of course, we are also looking into the optimization of the portfolio structure, as always, if we put it like that. We shouldn't expect any massive divestments or anything like that. That's not the case.
Yeah. Okay. Perfect. Very clear. Then we've touched upon it, of course. I mean, given that the world is an ever-changing place, or should I say, and given how the development was in Q4 last year when there was a lot of project standstills, I guess, in December, which kind of impacted the earnings for Legacy Fasadgruppen. Given there's still quite a tight bandwidth towards the covenant level in Q4, how forgiving would you say that the banks are? I mean, they were willing to amend the covenant here in Q3. Would you expect them to be as lenient in Q4 if any external shocks or any other currently unforeseen reasons kind of impact earnings in Q4? If we pretend it's the same as what happened in Q4 last year, could you give some comment on how we should actually view the kind of covenants, given that my feeling is that the banks have been quite lenient so far?
Yeah. I wish I could read the minds of the banks, Elvin, but unfortunately, I cannot. I can just state that they have been lenient, as yourself saying. We have constructive dialogue going forward as well. I think that sums it up pretty well in that regard. Of course, Q4 last year was mainly connected to the Swedish entities, if you put it like the weak result in that regard. As we mentioned here, we're seeing very positive numbers on the, say, organic order backlog in Sweden. We see an organic growth in Sweden. I think we mentioned that earlier in the year, but there are a lot of things pointing that we've seen the worst from the Swedish market in that regard. Of course, we're very humble regarding the situation. As some of the more senior entrepreneurs in this constellation put it, 2024, the last time we had that kind of market was, as they see it, in the beginning of the 1990s. That puts some perspective on things. I would say that we are coming out of that with a strong Fasadgruppen is an achievement in my world.
Okay. Perfect. Very clear. I think that was all for me. I'll get back in the queue.
Thank you, Elvin.
The next question comes from Linus Alentun from Nordea. Please go ahead.
Hi, and good morning, Martin and Casper. Just a quick couple of questions here from me. The organic positive print here seems to be primarily driven by Sweden. What are your expectations for organic growth in Q4, especially given the flat organic order backlog here in the quarter?
Good morning, Linus. Actually, I would say that it's mainly due to the Danish entities, as I mentioned here initially, that they were very strong in the quarter. We've mentioned that some quarters now where we've seen positive numbers for Denmark. We've also said this throughout the years that the organic order backlog is, of course, one part of the puzzle. For a lot of our entities, the lead time from an order to sales can be quite quick. It doesn't have to mean that that's the truth. Just looking at the organic order backlog, what the organic growth will be in, let's say, the coming quarters or so.
There's more to it than that. Unfortunately, we can't predict the future. What we can state is also that we've seen the organic growth been in a positive trend for some time now. We've seen some improvements throughout the year. I think we spoke about that at the capital markets day as well last year, that things would be tending to, without stating any, let's say, estimates for the future, but things would be heading towards maybe a weaker first half year and then a stronger second half year. That's maybe in those terms that we mentioned the market. Hopefully, that gives some pointers for you for the Q4 estimates.
Yeah. Yeah, of course. Thanks. Just continuing on the Q4, given the slow new build market, or rather the smaller new build share of the sales, can we expect a stronger seasonal pattern here in Q4 as well?
Yes. We could say that new build was weak last year as well. Of course, in general, what's a good thing about new build is that it usually is more projects during the wintertime. Often maybe you have a moving-in date in the spring or something like that. There is full steam ahead on those projects even during wintertime, which could be beneficial for, let's say, maintaining the seasonal effects. Renovation is more seasonal in that regard, where it's often then due in the warmer months.
That's one thing when you have, especially in the, let's say, you have to remember here that it's a bit different between where you are in the world. I mean, if you're in the north of Sweden, then of course there's more seasonality, winter effects than southern England. With that said, new build is often stronger during the winter months. I wouldn't put it like that. It's a stronger effect this year because new build was weak already Q4 last year, if you put it like that. I would also say that the organization maybe adapted a bit better compared to, especially then back to the Swedish situation in 2024, where we've learned from that situation, so to speak, into this year. Hopefully, that answers your question.
Yeah. Yeah. Super. Thanks. It does. Just one last thing here. On the write-down related to the Alnova divestment, do you have any, or regarding the size, can you say anything about that?
I mean, closing has not been done yet, so it's too soon to say anything about that. But we can get back to you regarding that after the close.
Okay. Super. Thanks for taking my questions.
Thank you, Linus.
The next question comes from Max Bacco from SEB. Please go ahead.
Yes. Hi. Yes, one more from my side. On the topic of seasonality, could you remind us how we should think about Clearline and their Q4? If I remember correctly, their seasonality should be less pronounced. If we compare Q4 to Q3, any major difference normally?
Not really. Just remember that they have larger projects. I would say that in this instance, the BSR effect is more present than the seasonality effects in that regard. I would not say that the wintertime is affecting Clearline that much in that regard. Remember here that what is usually in play, why winter is important or why it affects kind of our systems, is that especially render and mortar are water-based in their essence. If you combine those during the wrong, let's say, wrong temperatures, it could be a serious effect on, let's say, the facade. That is one of the main reasons why you do not do render or mortar and bricks during wintertime. If you take an instance, for instance, Clearline then, though the main kind of facades that they are working on is not, let's say, water-based or render or bricks. Of course, they can do that as well, and they are doing it.
I would say in general, that's not the most kind of facades that they are working on. Yeah, I think, of course, then it's a bit colder in December in England than it is in August or September, of course. That's still the case. I wouldn't put it like that there's any significant impact in an ordinary market, which BSR is affecting that compared to Q4 to Q3.
Okay. Perfect. Understood. Thank you.
Thanks, Max.
There are no more phone questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
All right. All right. Moving on to the written questions here. We have a question for you, Martin. Do you see any signs of earlier mentioned extra works reappearing again in existing contracts?
It's a good question. I would say that the amount of extra work has always been, let's say, more or less the same. The facades are still in as bad shape as it was five or 10 or 15 years ago, if you put it like that. I mean, we follow also, let's say, bankruptcy statistics and stuff like that. It is, in that regard, some, let's say, unfortunate news in that way. Positive for us because there's a bit of some improvements. I am talking mainly about the Swedish market regarding that situation. We could say, in summary, seeing some positive signs, yes, in that regard.
Thank you. Moving on. We see a strong recovery in specialist solutions. Do we see the segment as fully recovered?
I wouldn't say that, no. There are still subsidiaries that are having a tough time in specialist solutions. We are pleased to see the improvement, but we are not content.
Thank you. Regarding Clearline, cladding companies are going bankrupt because of the huge delays. What is your average permit delay right now?
That is a good question. Remember here, the BSR mentioned that the time from when you send the application until you get an approval should be eight weeks for renovation cases and twelve weeks for new build. We have seen in some instances 60+ weeks for our renovation cases. Our average, I would say, is still around maybe 30-40 weeks. It varies a lot. If you are just taking an average, I would put it like that.
Great. Thank you for that. Another question here is the difference in sales and profitability development between total solutions and the specialist solutions related to the stage of the cycle in any way? Or is it more related to the company specifics?
Yeah. So regarding, if we put it like this, the total solutions are, we will write that also in the report here. But total solutions are affected by the Norwegian entities a lot. If you compare, let's say, the Norwegian and Swedish entities, the Norwegian entities are a bit larger, and a lot of them are within the total solutions segment. In that regard, I would say that it's more market-specific in that instance because we've been quite clear around that. The Norwegian market is weaker this year than, for instance, last year. I would say that that is more the answer to regarding total solutions. I think that answers the question.
Yeah. Yeah. Thank you for that. Of course, we have some questions regarding the net debt. The focus is supposed to be 100% on deleveraging, but the net debt is now higher than in Q4 compared to last year. There was no meaningful reduction since Q2 despite the cash flows. Could you elaborate?
Okay. The debt is now higher than in Q4 2024, and there was no meaningful reduction since Q2 despite the cash flows. Of course, it is a top priority for us, but it is also a balancing act between continuing to improve the profitability side. In deleveraging, you have both the net debt on the top, but you also have the profitability in the bottom. You can work with both sides, so to speak, to deleverage. I think what we're doing is a balancing act between both of them. Remember here that the cash flow is usually seasonally affected. I think we've been quite clear around that as well, that Q4 is absolutely the strongest cash flow quarter usually. It's nothing unusual that it was, as we mentioned, a weak cash flow in Q1 because we saw there was plenty of products ramping up. We mentioned that also during Q1. That is also affecting the net debt situation. If you just compare to Q4 2024, we saw a weaker Q1, but then we've seen strong cash flows, I would put it, in Q2 and Q3 leading up to Q4 now. That's the balancing act leading up to the deleveraging priority.
Another or a follow-up question, how is the deleveraging plan looking like? For example, or let's put it like this, how will Fasadgruppen Group lower the net debt going forward?
Yes. It is connected, as I've tried to say here, towards the cash flow. Fasadgruppen Group is a profitable company. I think that's step one. In that instance, of course, as the cash pours into the company, especially then in Q4, as it usually does, it will assist in the deleveraging. Of course, we've been a very acquisitive company throughout the years. As one can see, there's been very few acquisitions throughout the year. That's also one factor on how to handle the leverage situation in that regard. One could also see that interest rates are going down, meaning at the end of the day, there's more cash left for shareholders. Ultimately, also the net debt to EBITDA will improve.
Another question on the topic. You are mentioning a more restrained acquisition agenda. Why is that prioritized now we are on the topic?
Yeah. It is connected to, of course, the leverage situation. I think that sums it up pretty well.
Yeah. Back to Clearline, will Clearline U.K. cash reserve be enough, or do you need some injection of capital? Is the ownership structure a problem? Do you see it like that, or? If U.K. Clearline's cash reserve is enough?
Yeah. Okay. I would put it like this, yes. We do not see any need to inject capital there. I think extremely strong profitability at Clearline and strong cash flows. The ownership structure, I would not say that it is a problem. It is actually a very strong structure in my world where we are in this together. Remember that if you take the excellent team at Clearline and pull them together, they're actually the second largest owner in Fasadgruppen. We are in this together.
We have a question regarding the new owners, the Houser Group. Could you elaborate on this?
Of course, I'm glad to see new shareholders, as always. I just got the news as everyone else on this Friday. We got a very pleasant correspondence from them. They are, as they mentioned, impressed by what we have done so far and are eager to join this journey together with us. That's basically what I know. We replied, and hopefully, we can have a strong dialogue going forward. I'm very glad to see that entry by the Houser brothers.
Great. No more questions for now. Yeah, with that being said, I hand over the word back to you, Martin, for some final remarks.
Okay. Thank you, Magnus. A lot of questions. We like that. Good dialogue, hopefully. I'm very glad to see this Q3 report out. I'm looking forward to hearing from you again here when we present the Q4 report back in February of 2026. Until then, have a great time.