[Foreign language] ABG Investor Days. [Foreign language] Julia Sundvall [Foreign language] ABG. [Foreign language] Green Landscaping Group [Foreign language] CFO Marcus Holmström [Foreign language] Q&A. [Foreign language].
Thank you, Julia. And I will hold the presentation in English so everyone in the audience will follow. And good afternoon, everyone in the room, and thank you for everyone that is tuning in online. My name is Marcus Holmström. I'm the CFO of Green Landscaping Group and I've been with the company for a year. I started my professional career as an Auditor at Ernst & Young where I focused at global and publicly traded companies. And following my tenure at EY, I joined AFRY, a technical consultancy firm where I for nearly 10 years had several leading finance positions within that group. But since a year, as said, I've been the CFO of Green Landscaping Group. And that said about me, what is Green Landscaping all about? We are a company that provides services in our cities. Basically, we take care of all outdoor environments.
We divide our business into two service areas: ground maintenance and green space management. Examples of things we do within that field are snow removal, lawn mowing, amenities in the cities, and tree pruning. And when it comes to landscaping services, we plan, design, and execute on public spaces in our cities. Examples of that are playgrounds, public squares, and also parks in our cities. So we support the local communities to become better, greener, and more livable for the ones living in them. An investment in green means that you invest in a company that operates on a large market with structural growth. We have a fit-for-purpose business model built on an entrepreneurial spirit and a decentralized structure. And we boost our value creation with a proven M&A strategy. And I will take us through this in today's presentation.
When we see our market, we see it as very large. We estimate it to be SEK 370 billion in the six regions we are operating in. We're present in Sweden, Norway, Finland, Lithuania, Germany, and Switzerland. We have structural growth. When we look at it from a historical perspective, the market has grown 4% annually as a CAGR. Roughly 65% of our revenue comes from the public sector, which gives us good predictability and financial stability in our numbers. We have a low cyclicality in our business, meaning that we are not that affected by economic up and downturn. The contract portfolio includes maintenance contracts that can be up to four years plus options. We have good visibility on the future. The demand is also driven from megatrends such as urbanization, but also coping with effects from climate change.
An example of a project which we've done recently is that we have supported a city where they contacted us to plan and design the urban areas on how high of tree density we need to have in a certain area to actually lower the average temperature in the city, so we are part of the solution when it comes to climate change. Looking at our group from a historical point of view, we were founded back in 2009. At that point, we operated under a centralized structure. All subsidiaries had the same brand and we had a lot of joint processes. But we were struggling with profitability. Then our CEO, Johan Nordström, came in back in 2015 and we did a firm strategy review and decided that we need to do a significant shift. We need to be local. We need to be closer to the customer.
And therefore we went from the centralized approach to the decentralized approach. And we actually built down the centralized company and built separate units in each region. And this time we were operating single-handedly in Sweden. We also went public back in 2008. And from that, we've been able to drive margin improvement activities throughout the full portfolio. And we did our initial acquisition and then we started to broaden our regional scope and did our first acquisition in Norway back in 2020, followed by Finland, Lithuania, and our latest footprint that we established two years back is in Germany and Switzerland. And as you can see, we have been able to deliver significant growth in combination with margin enhancement activities. We have been operating around 8% margin during the past three years. I will come back to that in terms of commenting current trading.
But we saw two years back that now we have been able to deliver on significant growth, but we also need to give back something to our company. And when we then designed what we today call Green Business System, it is a composition of all learnings that we have within the group. What you see on the slide is basically all brands that our companies operate under within the group. So even if our company was founded back in 2009, we have subsidiaries within the group that are operating back from the 1950s. So we have a long heritage which we were very proud of. With the decentralized model, we also empower our locals and entrepreneurs to make the right decision in every day.
And for me, looking at all the brands, it represents 56 different, ambitious, well-educated, and knowledgeable entrepreneurs that are driving the agenda of the subsidiaries in everyday. With their authority, they are flexible and manage to address the needs of our customers in the everyday and is key for our success. And coming back to what I referred to in Green Business System, what we did a few years back and in the historical graph I showed on the slide before was that we created a playbook based on all knowledge that we possessed within the group and interviewed the most successful companies. What is the secret recipe for your success? And what we are today working with all the companies, irrespective of where they are in the profitability, is that we are offering them support to drive margin enhancement activities.
It's something that we from a group are not pushing on the entities, but offering. Most commonly, the companies are also asking for it when they actually join. We're very proud of that. We also have a proven M&A agenda. We have been able to combine organic and M&A growth during the past years. We have a firm approach where we are planning to reinvest our free cash flow into new businesses each year. Now we're aiming at SEK 8 million-SEK 100 million in acquired EBITDA per year. In the historical context, that represents roughly 8-10 companies when we refer to a sweet spot company where the net sales is at SEK 100 million and SEK 10 million in EBITDA. When we source for companies, we focus a lot on the financial stability of the company.
We actually have a list of 50 criteria that we go through in each company that we look at, and when it comes to financial stability, we like the companies that aren't growing too fast. We like stable growth. We want them to be profitable and that we see stability in the profitability level, and the second part of what we heavily investigate into is the corporate culture. Because what the entrepreneur represents is what they're going to represent in the green context, and they also need to coexist together with our other entrepreneurs in local clusters, so culture is super important and the motivation behind why the seller is selling to us. We want to acquire an entrepreneur that wants to be part of the journey and don't see green as an exit strategy.
So those are specific things that we focus around in the M&A process, which is an extensive list of criteria, as I referred to. And as I said, we're aiming at current cash flow. We're aiming at investing in companies representing SEK 8 million- SEK 100 million. And we pay roughly four to six times EBITDA multiple on our entities. When it comes to the owner side of green, we are very happy that we have long-term stable owners in the list. When we look at how much the board of directors together with management holds, it's roughly 50% of the total shares outstanding in the company. And it's now Salén and family together with Byggmästare Anders J. Ahlström that holds roughly 36%. And then management, including then the entrepreneurs of the subsidiaries, own roughly 15%. So we're very proud of having that engaged discussion with our owners.
That was about Green a bit in a larger context and the investment story behind us. We have now taking us through three quarters this year and looking at where we're standing in current trading. Going out of Q3, we have basically flat growth year-over-year. It's a combination of many factors. We have continued to deliver on the acquisition growth, 9%. But on the other hand, we have had negative organic growth of 9% rolling 12 months, which is a composition. The reason behind it is that we are facing a tough market in specifically Sweden and Norway, where we have seen significant negative organic growth throughout the year. However, it has improved sequentially through each quarter.
There we also have a weather impact in the beginning of the year where we faced the mildest winter conditions we've seen so far during the past 15 years. When it comes to EBITDA margin, we have an EBITDA margin decline and it correlates basically together with the negative organic growth development. However, we are glad to see that we are somewhat margin resilient. We have a financial target of delivering 8% margin. We're currently trading at 7.5%. With that said, we're not happy, but at least point out that we are margin resilient in tough markets when we compare ourselves to peers. When it comes to cash flow, we have generated SEK 390 million operating cash flow rolling 12 months, which is in line with last year. It is an item of focus for us.
We have a CapEx light business model and also we don't tie too much working capital in our field of work. So we see that we have the possibility to even improve this going forward. Also commenting on the numbers we reported in Q3, there you can see that we actually had growth even if we on rolling 12 months only have flat. But coming down to EBITDA, we had a one-off effect of a project write-down related to a subsidiary in Norway where they had been too optimistic on the revenue recognition in a few projects. We have completely addressed the management and the internal control structure within that company to make sure that this does not happen again. But with that said, we needed to make a write-off of SEK 21 million.
And adjusting for that, now we don't have adjusted reported in EBITDA, but if we would adjust it, the margin would have been in line with last year. I briefly commented on cash flow on the previous slide, but what we can just see is that we have had over the years a steadily growing cash flow. It has been slightly weaker on the last quarters, but we are now entering in our historically, from a historical perspective, the strongest quarters in terms of Q4 and Q1. So everything equals based on the working capital we now have going into the quarter, we should be able to deleverage on the levels we are at currently. Because that's the other point of view that we are currently at 3.0x in leverage and that is on the higher end of where we wish to be.
However, we have strong confidence in our cyclicality of the cash flow and therefore we have, as you have been able to see, completed acquisition despite us being on those levels during the quarter. And I guess the final slide concluding our financial targets. And I mentioned the total growth, it is impacted by the mild weather conditions in the beginning of the year. We see -9% organically, but +9% from M&A. And on a market point of view, we see a tough market in the Nordics. But however, we see signs of improvement in Sweden and Finland, but still cautious when it comes to Norway going forward. And that's the general market indication we get from our MDs. When it comes to EBITDA, we're not happy being below financial target and we're addressing it from many points of views.
We have had the margin decline in Sweden for a few quarters now, and we initiated firm initiatives in the beginning of the year where we decided that we will close a few loss-making companies. Those losses in combination with the costs related to closed entities have been absorbed in the organic numbers during the year and will be out of the books going into 2026, and in addition to that, we're also driving a lot of focus on margin improvement activities in the portfolio as a whole. When it comes to Norway, we are working with the weather dependency in Q1. However, the weather conditions we faced in Q1 this year has been so far the mildest one we've seen in the past 15 years. Will there be more mild winters going forward? That's most likely. Will there be so mild as we saw?
We believe it will snow in the years to come, but with that, we are addressing the dependency on snow in Norway in Q1 where we're working with the cost structure, but also contract structure similar to what we did in Sweden five years ago, and finally, the financial leverage 3.0, as said from a company point of view, we believe it's a high level to be at. However, during the circumstances that we have taken us through this year, we can cope with it, but over time we should be around the 2.5, and as said, we have confidence in our cash flow and therefore we have so far this quarter completed two acquisitions, one in Germany and one in Lithuania to build on to the additional two we did in Q1 and Q2. That concludes my presentation.
Thank you for your presentation. I will start with asking a question on the market. One of your strengths has been the stable market that has grown around 4% of the time every year. How do you look forward, the five to seven years, do you think it will continue or?
No, but I think going back to the market we operate in, the underlying trends are still there, then we have had a few years with high inflation, high interest rates, and what that has impacted the demand in the market as a whole. We are also partly impacted of that we have increased competition in Sweden and Norway from the traditional construction market, where we see that the players that historically haven't operated in our field are there temporarily in order to find temporary work before a new build starts again, so as said, going forward, the structural trends are still there.
And the underlying indication is that we will continue to have 3%-5% annual growth. But we are also seeing on a short term that the market headwind will most likely continue in Norway. But we are more optimistic when it comes to Sweden and Finland.
Yeah, sounds reasonable. And you have a lot of public customers. Do you feel any behavior change in those kind of customers versus the private ones?
The easy answer is no, actually. Not from a behavioral change, but of course we can see that, no, but in comparison to the private, no.
No. And do you feel any change between the maintenance part and the landscaping part?
Not a change in the underlying demand and the trends that comes from there. So the stability we have seen over the past years, we foresee will continue. No.
Yeah, perfect. On the market, as you say, Norway is having a tough time and Sweden has been tough for some years. What do you do to support your companies? And what are the most important areas versus the ones you don't want to touch as you have a decentralized model?
No, but we value our decentralized model. That's the core of our strategy. Then we have the capacity to support entities that aren't performing on the expected level. And there we work a lot with the best practice sharing. But we also have on a group level, a small team that are more as a task force going out and supporting the entrepreneur to think in an alternative way than what they've done historically. And then we're focused on the cost base or revenue strategy and so on. But it's not that we're going out and taking ownership of the entities, more as supporting them in the right direction, but they're making the conclusion on their own.
Yeah, yeah, of course. And in this market, do you prioritize volume over margin or?
No, it's clear for us that we prioritize margin. And rather that we see improved margin with lower volume where we are currently. So the entities underperforming prioritize margin before growth. And the ones operating on healthy levels, they are allowed to grow. But we don't want them to grow too fast, even if potentially a short-term demand situation would allow it. But we like stable growth from that point of view.
Yeah. And in this market, is there a specific niche or segment that is more affected than others?
No, since we divide it into ground maintenance and green space management and then compared to the landscaping, both are quite similar. But we see, or they are similar, but we have a higher degree of stability within the maintenance part of it. And there I think it's a good balance where we are currently 50, 50 in each segment.
Yeah. And you're talking a lot about the snow removal and that has been a theme the last year, I think. And we usually say that when the municipalities don't put a lot of money in the snow removal, there is often a lot of money left in the year end. Is this something you can see this year?
Yeah, it's been a historical pattern that our public customer wants to spend what they have left in their allocated budgets. Since they spent less money in Q1, it should indicate that they spend more now in Q4. It's too early to say to what extent, depending on that. Yeah, it's also a tough market. So I guess there are holes to fill. But yeah, it's too early to say what we see here in Q4.
Yeah. And then I want to continue on the M&A side. You have this year completed some bigger M&As than last year. Usually you do some smaller ones, but now you're sized up. How come you have done this change?
We thought it was, and the sizing up, when we did the entry in Norway, we saw the similar strategy. We started a bit smaller, and when we built a brand, we were able to address a bit bigger companies. In Norway, we actually acquired quite even bigger than we see now in the DACH region. But I think we will be still on average around SEK 100 million in turnover point of view. Now this year it has been a bit bigger, but I don't foresee that we will see a significant jumping point upwards from here.
Yeah. And does this affect the price tag on the companies you acquire? And how do you look at the price tag generally on the market right now?
No, but the price represents what we've met during the last year. So it's not up or down. We see attractive investment opportunities in most of our regions, but currently we prioritize DACH region. And the M&A pipeline looks good.
Yeah. And is there still a lot to do in the DACH region or?
Yeah, absolutely. I guess we have just started, and we foresee the DACH region being our biggest segment in the future. So currently we're prioritizing our capital allocation to that.
Yeah. And do you see other verticals besides the one you're acting now that you maybe will enter with M&A, or do you stick to the ones you have right now?
No, but for the time being, we're sticking where we are. That's where we're feeling comfortable for the time being. Then when we grow, we will see.
Yeah, yeah. And in the Nordics, do you feel like there will come any M&A there, or do you focus on the DACH area?
One of the reasons why we want or have decided to allocate the capital to the DACH region is basically that we want our management capacity in Sweden and Norway to focus on margin enhancement activities. Then when we have stability in that, we will most likely continue to be opportunistic in that region.
Yeah. We see super high margins in the DACH area. Will this continue, or do you think they will move somewhere?
Yeah, it's astonishing to have a segment that generates a profitability in relative terms about 20% when the group average is 7.5% currently. Over time, we will see a margin mix in light of what type of companies we acquired to it. So I wouldn't expect us to be on the high 20s, but still a segment that is being for the next few years, the most profitable one. On top of that, we have had good development during the year in Finland, underlying despite it being a tough market. In Lithuania, our company there is meeting a significant market demand.
Vilnius has been the EU capital, Green capital this year. So they have invested a lot in public urban areas, and the order book looks good for next year as well. But it's been a good demand situation there.
Perfect. Thank you for your presentation.
Thank you.
Thank you.