Ladies and gentlemen, welcome to the Green Landscaping Group audio cast teleconference for Q4 2021. For the first part of this call, all participants will be in listening only mode, and afterwards there will be a question and answer session. Today, I am pleased to present CEO Johan Nordström and CFO Carl-Fredrik Meijer. Please go ahead.
Thank you very much. As mentioned, welcome to our fourth quarter presentation. It's myself, Johan Nordström, and together with me here today we have our CFO, as mentioned, Carl-Fredrik Meijer. Let's start with the presentation and move into page two, please. As can be seen, we had a very strong quarter, where we reached SEK 957 million in the sales, representing a growth of 46%, so it was a fairly good growth, I would say. Profit-wise, EBITA, we came in at SEK 83.5 million, and that is also a significant improvement compared to previous year of 153%. Earnings per share in the quarter amounted to 0.61 SEK. That is also an increase of close to 50%. Cash flow, not that strong, really.
The reason being that we had very high activity in terms of sales, and that means that we have a high accounts receivable. In terms of leverage, that one went down to 2.4x , so that is moving in the right direction. Also in the quarter, we were joined by four great companies who were acquired and is now part of the group. Also we have, since the ending of the report, we have been increased by two additional companies. In total, we have grown by six companies. All in all, a strong development, in particular Norway and the newly acquired companies are moving in the right direction.
Also, as can be seen that the difficulties we have had in some of the entities in the Stockholm region are also improving, and those are the reasons behind the very strong performance of the group. Next slide, please. Taking a somewhat longer look, we're talking about the CAGR for the last three years in terms of sales. They were growing by 39%, so it's still a fairly high pace. The mainstay of the growth comes from acquired companies. That means that we reach a sales for the last 12 months of 3.1 billion SEK. Profit-wise, again, EBITA, we are growing quite rapidly by 135% for the last three years. That also meant that we reached 232 million SEK by the full year of 2021. Yeah, next slide, please.
Here we can see the organic part and also the acquired part that is behind the development of the company. Just a note on the organic growth there, that last year, if I recall correctly, we had about, I think it was - 5%. There is a seasonality in terms of how the winter and the weather conditions, and we are working outdoors. Of course, there is some dependency on the weather. But over time, as we can see here, the trend is moving in the right direction. Even if we have a variation over the quarters, the trend per se is that we're growing very nicely organically with the markets. In terms of acquired growth, that is 32.7%.
I have to say I'm very happy with the new companies coming in and also those who has been with the group for quite some time, that they are developing and moving in the right direction, meaning that our strategy of decentralization is effective and working for us. Next slide, please. Now we have a short presentation of the companies that came into the group during the quarter. Let's start by Reidar Håkonsen & Sønn AS. It's a Norwegian-based company founded back in 2008, led by three very skilled entrepreneurs that fits really nicely into the group. I would say the sweet spot. As can be mentioned, the company was not really the same, but we knew about the company. They knew about a particular Akershusgartneren
Of course, we had discussions with them over time. Eventually they became a part of the group, and we are quite happy to have them as a company inside the group. It's a good example of really a sweet spot company. Revenue-wise, SEK 170 million, 90 employees, and again, led by three, I believe, very skilled entrepreneurs. Next slide, please. Following the previous acquisition we did, we came to talk to Hermansen Maskin AS, also a Norwegian-based company. That is Oslo region and southwest of Oslo, where they're operating in. It's led by a gentleman by the name of Arvid Hermansen, who is a very skilled entrepreneur and, also fits very nicely into the group. Annual revenue of about SEK 75 million.
A great addition to the group, both geographically and as well as the type of work he's doing. Next slide, please. Now we are moving to Finland. Here we have Viherpojat Oy, and that is, I would say, a very stable company. It was founded back in 1992. It's led by a gentleman by the name of Anssi Koskela, who is also well-known by our colleagues in Finland, fits very well into the group as well. We are happy to see that we have a momentum going in Finland, and that we have a critical mass of companies coming into the group in the Helsinki area. It's a good addition to the group, and we do welcome those companies. Next slide, please.
In Q4, we acquired Markbygg Anläggning Väst AB, which was founded in 2000 by Stefan Lundh and a companion. It operates in Västra Götaland in Gothenburg, and it's based in Uddevalla. This is a company specializing in water and the sewage segment. We are very impressed by its bidding skills and operation skills, and this is a very good cultural fit with the other companies we have in the group. The annual sales is about SEK 280 million. They have 60 employees, and we closed the deal in 2022, in January 2022. We're quite excited about having Markbygg on board. Next slide, please. Another company acquired, a smaller one, is Utemiljö Skellefteå AB, which is the first acquisition in region north.
It was founded back in 2003 by Mats Boström and Rickard Lindberg. It operates in Skellefteå. This is a landscaping and winter services type of company. Six employees. A very welcome to the group. Next slide, please. Now we will give you example of some of the projects that we are doing to show you the breadth of services we provide. We do, as you know, thousands of projects each year, so this is only a small selection. This is the first one from winter and Christmas decorations, which seemed a long time ago now. This is an example of how we create value in our society. Many of our companies put up this type of lighting shows around the countries we operate in. Next slide, please.
This is an example of development of residential areas, and this is from our new company, Hermansen. It's in the southwest of Oslo, Sande. This is a bit more light construction work or light infrastructure, where we actually prepare the ground before the house is built. Then in the end, we do landscaping work. This is quite large contract, and it will continue for years. Next slide, please. The third example is a new ground maintenance agreement in the south of Sweden, Green Landscaping Malmö. It's for the housing company, municipal housing company in Dalby. This is a SEK 3 million contract, which will go on for six years.
This is kind of the backbone type of contract that we deliver in our ground maintenance business. Next slide, please. The fourth example is of a project delivered to the church, which is a large customer to the group. It's this type of one is an ash burial site in Falun, and this is delivered by Svensk Markservice AB. It's a bit of a smaller size type of or normal size project for us, SEK 1.5 million. Next slide, please. Looking at the order backlog, it has increased by 16% to just about SEK 5 billion. We had no large renewals in Q4, but the order backlog is strong anyways.
It's worth mentioning here that we have lately acquired more landscaping type of companies, which have an order book of three to six months normally. It will not grow in the same pace as when we acquire the maintenance companies with you know, three to five year long contracts. We see we are happy with the order backlogs we have at the moment. Next slide, please. Performance per segment. We saw strong growth in segments Mid, North, and Norway in the quarter. We had a positive margin development in region South, Stockholm, and Norway. I want to highlight three of these and comment on them. The first one is that we see a positive trend in region Stockholm. This is the second quarter where we see profitability increase.
We believe we consider that to be a trend and look forward to the future. The next one is that we had a very strong performance in Norway during the fourth quarter. This is. I mean, great companies are delivering great results. We did have some winter in Q4, which also improved sales and profitability. Looking at Region Mid was a very weak quarter, and it was partly or mainly impacted by restructuring costs in two months, which was a defensive acquisition we made back in 2020. That's why we see a negative margin development in this quarter in Region Mid.
The last two, we can also comment that we had somewhat higher M&A costs and some one-time costs for decentralizing our shared service center as well as creating new subsidiaries from old Green Landscaping and Svensk Markservice. Next slide, please. Looking at the financial position, as Johan mentioned, we had a cash flow of SEK 40 million, down from SEK 100 million last quarter. This was impacted negatively by higher net working capital as we have very high accounts receivables outstanding, which is driven by the strong revenue growth. We had cash flow from operations of SEK 174.5 million during the year. Leverage is 2.4, which creates room for acquisitions. Liquidity was good.
We secured a new financing facility of nearly SEK 2 billion to refinance the current debt or the older debt and to be able to facilitate further growth. Solidity was 28%. Next slide, please.
Okay. A few words on the financial targets here. We have four of them, and the first one is, of course, that we have a 10% growth target, including both organic as well as acquired growth. For the year of 2021, we achieved 46% growth, so we are clearly meeting that target in terms of profitability, and that's the one I think the most exciting one. There we have a target of 8%, and right now we are at 7.3% and increasing profit-wise.
We are getting closer to the 8% target, and that is very good. In terms of leverage, we did mention that one, so we are at 2.4x against a target of 2.5x. We are moving in the right direction there as well, and of course, as we should be as the profit is increasing. In terms of dividend, we have a target of 40% of the year's results. To date, we have not made any dividend, and we use the cash flow in order to improve the company and acquiring new businesses instead. For the year of 2021, there will not be any dividend. Next slide, please. This is just to sum it up, the fourth quarter.
We have mentioned, we are quite happy with the quarter where we saw significant growth in terms of revenue, profitability, and as well as earnings per share. Also, as I did mention that the EBITA margin increased by 3.6 units of a percent to 8.7% in the quarter alone, and that we actually made four acquisitions in the quarter, and that we have done additional two acquisitions after the end of the reporting period. All in all, I'm happy with both the quarter as well as the full year performance of the business and quite confident looking into the year of 2022. I believe that concludes the presentation part, and by that, I hand it over to the administrators in order to open up for the Q&A session. Thank you.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a brief pause while questions are being registered. Our first question comes from Dan Johansson with SEB. Please go ahead.
Thank you so much, moderator, and good morning to you, Johan and Fredrik. A few questions from my side. Maybe I'll start a bit on organic growth in the quarter, looks quite strong. Is it possible to quantify how much of that is due to slightly better weather or more snow compared to Q4 last year? How much is sort of an underlying development? What is sort of the boost from better weather this year compared to last year? And how does it also differ between the different markets? Norway, I guess you mentioned there was a boost. But anything in particular for Sweden, for example, compared to last year? Thank you.
As I did mention that we grew by 60% year over year, and I believe we had a -5% for the full year. As we mentioned previously, there is weather dependency, and the market as we see it is growing by 3%-4%. Our goal I would say is to grow organically with the market, and that means we should grow organically by 3%-4%. In the industry which we are in, if you seek to grow significantly faster organically than the market, the likelihood of the profitability coming down is a bit too high. That's why we like the strategy we have, where we are able to acquire or being joined by great entrepreneurs who have great companies. The market is stable.
As I mentioned, the year 2020 was, from a winter perspective, quite challenging and that impacted the financial performance for the full year of 2020, and now we are recovering. In terms of the weather conditions for the fourth quarter, it varies because we have operation both in all of Sweden, we have it in Finland, and we have it in Norway. I would say we had like a normal winter condition, nothing like what we had in 2020. In some cases it was up, in some cases it was lower than expectation. On the average, I would say it was a normal winter season for us in the fourth quarter.
Okay, great. Thanks.
If that answered your question, Johan, I'm sorry.
Yeah. It did. Basically a normal season as you consider it. It's not like a super good season in that respect. It's more like a-
No
Normal.
Exactly. I think that's the key point. It wasn't a bad weather for us, but it wasn't particularly good either. It was like a normal season.
Perfect. Thank you. Maybe a bit more detailed question on the restructuring costs related to Thormans in the region mid. Is it possible to specify the earnings impact for that from the region? Is it something like SEK 5 million or is it below, above that level?
Hi Dan Johansson. As you see, I mean, the gap versus last year is quite large, and the main part of this is related to Thormans.
Okay. Perfect. Maybe also a question on sick leave. We have some other companies, especially service companies, complaining about that. You didn't seem to have a high impact in this quarter. Do you perhaps see a higher impact in Q1 due to Omicron in January? Does it remain manageable here in the beginning of the first quarter?
We haven't seen that question, so we did make. I won't say thorough investigation of it, but we did look upon the data. We don't see that we had that greater impact, financial-wise on the sick leave. I believe it goes back to that we have a fairly stable business model. Same as we did have the logistic challenges from China, for instance, this spring or the spring of 2021. Right now we have inflation in fuel prices that are of course of great concern to us. What we saw happening with the logistic challenge in China as well as on the sick leave is that we have a fairly resilient business model.
There could be in the short timeframe some type of temporary impact, but in the long run it seems like the business model is resilient and we can recover our margins.
Sounds good. Perhaps touching a bit within that topic in terms of wage inflation, also inflation of fuels, how quick can you shift that out to customers? Do you have indexation in some of your larger contracts that you can manage-
Mm
that potential impact?
It's to some extent it requires quite some calculation in order to estimate what's going on. On the average, absolutely the mainstay of all our long-term contracts, there we have index clauses. There could be different index clauses in the different contracts. As a general rule, it takes into account salary increases as well as fuel prices and such, so it's a basket index that we are working with. If you have a very sharp increase, then the index should reflect that one, and subsequently you will see that in increased prices on those contracts. For the landscaping business, there we have short contracts. It's project-based, and you quote and are being awarded the contract.
That means that for the short timeframe, meaning business you already have quoted and then comes the cost increase, there we do have some difficulties in recovering. Beyond, let's say four to six months, then you calculate with the new prices and, when you are being awarded those contracts, they are in the contract. In the near-term future, there could be some impact, but historically, looking again upon what happened with the logistics cost increases in China, I believe we handled that in a very good way. I do not foresee any major negative impact due to interest or fuel prices.
Okay. Sounds like it's more of a timing issue, if anything then.
Yes. Correct.
Maybe final question, if I may, perhaps on the acquisition agenda now into the new year. You've done quite a lot of deals here, and you've done deals in all three countries, so you've utilized the full platform. Also done quite a lot in Sweden. Do you expect M&A to be rather spread across all countries also now in 2022, or do you have a bit more focus now perhaps on Finland, Norway to get a better scale there like you have in Sweden? Or what's your thought here into the new year?
Well, we are in three markets, and we are quite prudent in terms of what type of companies that should join the group. We are really trying hard to pick the very best entrepreneurs with the right culture that would blend in nicely to the group. I know that there are other companies out there who have a higher pace than we have. I'm quite confident that we are making the right choices in this area. Being able to do acquisitions in three markets have opened up the universe, so we can really work with the great companies. We are not forced to buy companies or defend our growth position, if you understand what I'm meaning here. That right now we are in Sweden, we're in Norway, we are in Finland.
We have a healthy pipeline in each one of those markets, and we can make sure, we're trying to make sure that we really go for the quality players here.
Perfect. Sounds encouraging. I think that was all for me for now, so I'll jump back into the line. Thank you so much for your answers to my questions.
Thank you, Dan.
Thank you.
Our next question comes from Fredrik Moregård with Pareto Securities. Please go ahead.
Thank you. Good morning, Johan. Good morning, Fredrik. You discussed the weather conditions in the fourth quarter to some extent, and I was just hoping you could give us some comments when it comes to the start of the first quarter here, also in comparison to last year, which was strong, but also sort of growing on a weak comp from the first quarter in 2020. It is sort of difficult to figure out what is sort of a normal quarter here when it comes to Q1. Maybe you can shed some light on what you think about the comparable from last year and what you're seeing on the weather conditions so far this year.
Yeah. Good morning, Fredrik. Thank you for the question. There are a couple of things going on here. That 2020 was, I would say, a very odd year when you look upon statistics. It's kind of one in every 10 or 20 years. In terms of the first quarter this year, of course, one can allude to say that it's somewhat warmer in this year compared to what it was in 2021, no question about it. It's not all about the snow, it's also about ice removal and that type of thing. It's still, I would say, fairly high activity in that area.
As we learned from what happened in 2020, that means that the landscaping companies should have a better readiness and be more prepared to be active in doing other work. Also we have, I would say, as you know, we have grown significantly, and we have on purpose grown with companies who are stronger and more resilient and have a less dependency on the winter situation in the first quarter. The landscaping businesses we have today are actually being favored because they can do the excavation work, they can do some construction work and such in the first quarter. That was by design, and from what I've learned so far, it's only mid-February here. It seems like that is working because they show signs of high activity.
While of course the service companies are to some extent suffering from the lack of winter. All in all, I see that part of the strategy is growing. Also, we have added, I would say, road maintenance companies, in particular in the Oslo region, which have high activity with or without snow because they are carrying out the service of the roads for the full year. All in all, our exposure for winter has been significantly reduced compared to the situation we had two years ago. We learned from what happened in the year of 2020 and acted accordingly. Again, the winter situation in the year of 2020 was quite abnormal while now it's. It could be good or bad, but it's not it. I don't foresee that having such a big impact. We have a less dependency on the weather today than we had two years ago.
All right. Thank you. When it comes to the winter business versus the landscaping companies that could benefit from a bit warmer weather, how do you see that impacting your mix when it comes to margins?
Good question. Again, I really don't have a good answer on that one. Because the landscaping business in terms of margins are more stable and more foreseeable business because there could be a high variation in how the winter contracts were written. That meant in some cases, when you had x amount of centimeters of snow and you had to remove the snow, that could be a very good contract, or in some cases, that was included. So it was a very bad contract because we had to take the cost for it. In terms of forecasting and stability, I think the situation is improving by the landscaping companies compared to the winter contracts that we had in the past for the service companies alone.
I mean, we do have this portfolio effect here which will even out the margins between. I mean, maybe the different segments will vary somewhat. What we see is that when one or two segments has a strong winter performance, we see that one or two of the other ones balance on the other side, so.
Yeah. We also have to keep in mind that we're close to 40 companies in the group right now. The portfolio theory again is working in our favor. We do expect much greater stability in terms of both revenue as well as in margin moving forward.
All right. That sounds healthy to me . When it comes to the balance sheet, you mentioned that you had some refinancing during the quarter, new credit facilities. Could you share some information on conditions when it comes to that? Any covenants, interest rates that are either improving or getting a bit higher? Any more information on that would be helpful.
Yes. We started the refunding process early this year and closed it in Q4. Yes, as we have grown into a larger group, we have been able to lower the interest rates somewhat. Yes, we do have covenants in the contract, which is similar to what we had earlier. We haven't disclosed the exact details of the contract in that respect, but there's a healthy and good headroom to covenants being breached.
Okay. Perfect.
I mean, the main reason for refinancing, except the old contract reaching its end date, was to increase the facility to be able to kind of support our acquisition strategy going forward.
All right. Thank you. Just lastly, when it comes to management turnover, maybe not just isolated to the fourth quarter, but over the past year or so, what have you seen in the group when it comes to management turnover, and how have you been able to handle that, when it comes to succession planning and so on?
As I mentioned, we have a decentralized business model, meaning that each one of our companies is led by their own CEOs, and we have a board of directors. This is just like normal business for us that each and every year there will be a few replacements. Some will move into retirement, some resign, and some perhaps are more successful elsewhere. Each one of the boards are working actively on the succession planning for the subsidiaries, and it's not a great concern from that perspective. I think we have a process that is working.
To some extent, it's a risk, but I believe we have probably had four or five replacements on the CEO level on the subsidiary level for during the year 2021. I would say the average outcome of that one looks good. One, two perhaps wasn't that good, but the remaining was very good. We also have to redo it if we are not happy with the performance. It's a normal course of business, I would say, given that we have this business model.
All right. Thank you very much.
Excellent. Thank you.
As a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question comes from Johan Dahl with Danske Bank. Please go ahead.
Thanks. Good morning. Just a question on comparing sort of the order book growth compared to revenue growth. You talked about, you know, going more into landscaping. My question is basically in terms of the risk in the operations, how big is the shift there in terms of going from sort of order book, good visibility to shorter order books, and also from sort of public procurement contracts more to private sector, smaller contracts? Can you just describe the shift in your business there and if it has an impact on how you sort of procure vehicles, you know, make leases for new vehicles, et cetera?
Thank you for the question. First of all, we haven't seen a shift in the mix between private and public. The shift is still somewhere around 2/3 public sector and 1/3 private.
Yes. Yeah, Johan, just to clarify that one, that even though you do landscaping services, that could still be to the public sector.
In terms of the mix, there is a shift in terms of companies with the multi-year contracts. Right and having you know kind of one month to 12 or 24 months type of contracts. I don't have the exact numbers, but I'd say that impacts the order book. The order book in terms of our revenue, annual revenue is smaller than before.
Yeah.
Do you think visibility obviously has thus decreased, but does it impact how you sort of operate the business, or do you leave that in totally decentralized manner to the local company?
No, no. It's still decentralized, and operated by our CEOs in the companies. Also, it's worth mentioning that even though we have a three to six months backlog in these type of companies, we have long-standing customer relationships, and the customers tends to be budget driven. There's no shift in that sense.
Just also on Norway, how sustainable is that margin? You know, you talk about a lot of snow, et cetera, in the fourth quarter, but just looking at the full year, you know, and going forward, are there any other things we should be aware of in Norway?
Perhaps you misunderstood me that there was a lot of snow in the fourth quarter. That was not really what I was referring to to begin with. There is a variation on profit margins in the different geographical areas in Norway. Our understanding and belief is that the profit levels will have in each one of the companies because they do vary in Norway as well. Even though they are average higher than what we have in Sweden, but for each one of the individual companies, we believe that the profit level is sustainable.
Thanks. Okay. Thank you.
At this time, we have no further questions. I will now hand back to the speakers for a final remark.
Okay. Thank you very much for calling in, and thank you very much for the questions. I believe that concludes today's presentation from Green Landscaping. Thank you very much, everybody.
Thank you.