Ladies and gentlemen, welcome to the Instalco Q3 Report 2017. Today, I'm pleased to present CEO Per Sjöstrand, and CFO Lotta Sjögren. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. I will now hand you over to Per Sjöstrand. Please begin your meeting.
Thank you, and welcome to this meeting. I will start with a short update or a short presentation of Instalco on page 2. As you can see there, we are the leading multidisciplinary technical installation company, and we are active in the Nordic region. We're offering electrical, heating and plumbing, ventilation, and cooling, and we also have a niche in industrial solutions. We are focused on mid-sized projects, and that means size up to about SEK 75 million. We have a national coverage in Sweden, and we have this year also entered Finland in Helsinki region, and since last year, also Norway, and Oslo region and Bergen.
We can see that net sales distribution, Sweden is the largest, 81%, Rest of Nordics, 19%, but it's growing, the Rest of Nordics is growing. You can also see net sales per discipline. Still, heating, and plumbing is the largest discipline, electrical after that, and ventilation, and then last, cooling. The industrial part is about 5% of our turnover. Turning page to page 3, some highlights. We had a net sales growth of 27%. We have clear improved in organic growth versus quarter 2. I will be back to that. We have strong margins, I will be back to that also. We have a very satisfied order backlog increase of 37%.
For example, The Brick in Stockholm is 300-350 new apartments. Renovation, I would say, apartments. Three Instalco companies involved in both electrical, heating and plumbing, and ventilation. We also have the large European Spallation Source project in Lund coming in, what we call Södersjukhuset in Stockholm. We also have other hospitals around Sweden, so we have a large, big increase in our order backlog. That's very satisfying. We are also in the final stage of several acquisition processes. We have a strong pipeline in both Sweden and Finland, and we have made about 10 acquisitions this year, and we still have that goal, and I think we will reach that this year also.
We can also see that we have a continued strong market. I also will be back to. Turning a page to page four, there you can see our net sales growth. As I said, organic growth has, we have turned our negative quarter two trend. We had a negative organic growth in quarter two. We have turned it, now can see an increase in organic growth. We also for the first nine months, we have about +1.5% organic growth. As you also can see on page four, both margin and EBITDA is up three times as compared with last year.
Quarter three is a seasonal slow quarter due to summer holidays, we are satisfied with the figures for this year, I would say. Turning page to page five, this picture just shows that two-third of our companies, of our units have an organic growth. You can also see that the companies with a negative organic growth, they are rather large, sorry, large. That we had a lot of large projects ending up last year that they don't have today. Mainly, we have organic growth in our units. Turning to page six, there you can see our order backlog also growing, I'm very satisfied with this.
This also indicates even more activity following quarters. You can see that 13% in comparable units increase in order backlog, our order backlog ratio is about 0.9 of net sales, that is a historical high ratio. Turn out well. If you look into Sweden, page seven, look into the Swedish possible, is that so? We have a favorable market demand. I will also highlight that we have a limited exposure to housing market. We have about 20% of our total revenue in this market segment, that means about 10% new building, 10% generation.
It's a lot of discussion about that today, about the housing market, and I would say that we are, we have, yeah, limited exposure to that. Net sales growth, 7.1%, and you can see that we have a slightly positive organic growth and acquired growth . An extremely strong margin, I would say, 9.2%. All the backlogs as well. Turning to page 8, Rest of Nordics, that means Finland and Norway. Stable markets, we still, as you might understand, we have very few comparable units, I think there are 2 comparable units from last year. The figures are up and down, I would say. We have weak margin this quarter, but very good conditions for improvement.
We've taken a lot of actions that I'm very satisfied with. For example, we have appointed a new business area manager for Norway, and also some changes in the management team. I'm rather comfortable about our Rest of Nordics coming on. Okay, turn the page to page nine. We have one acquisition made quarter, and it's AS Elektrisk in Norway, in Oslo region. I think that will complete our complete our electrical presence in Oslo. Stable company with about SEK 65 million in turnover and good margins. Turning page, just to give you an update on our financial targets and dividend policy. Growth 5% over time, organic sales growth, I would say.
We have a target of SEK 450 million EBITDA, to reach in 2019. We have margin targets of 8%. Also the net debt in relation to adjusted EBITDA, not exceed 2.5. Cash conversion, 100% as a goal, and also a dividend policy of payout ratio of 30% on that profit. That's our financial targets and dividend policy. On current page 11, just a summary. I see that we have a stable growth and favorable profitability. We are in the final stage of several acquisitions processes, primarily in Sweden and Finland, limited exposure to the housing market, and also there is a continued high demand for installation services expected in all 3 Nordic countries.
There we are. I think we can stop there, and if you have any questions, please go ahead.
Thank you. Ladies and gentlemen, if you do have an audio question for the speakers, please press 01 on your telephone keypad and you will enter a queue. After you are announced, please ask your question. Our first question comes from the line of Robin Nyberg from Carnegie. Please go ahead, your line is open.
Hello, it's Robin from Carnegie. I have three questions. First one relates to organic growth. What is the organic growth outlook given that the Swedish housing market has weakened somewhat, but on the other hand, you had a 13% growth in backlog for comparable units?
As I said, I think we are limited exposure to the housing market, and it's primarily in Stockholm, a little also in Oslo. And 10% new building, 10% renovation. Of course, we have turned a little bit to other market segments, and that's what you see on in our order backlog . A lot of hospitals, commercial housing and other schools, and other. I'm of
... regarding financial targets, do you think that the company is still well on track to reach the EBITDA run rate of SEK 450 million in EBITDA by the end of 2019?
Yeah, due to the fact that we are now having, we could improve or increase margins in the other Nordic companies, countries, Sweden, Norway, and Finland. I think I have a gut feeling that we will see an increase in those margins. Also, we have a good pipe, as I said, and I think also that we can see the organic growth and all the backlog going that direction, in the right direction. I think we have a good opportunity.
Okay, finally, you comment that you have a good pipeline for M&A targets. Could you give us some flavor of the size of these potential targets? Are they around the same size as previous targets?
Yeah. I think that size of companies or units, they fit us. We can take care of them easily. And that means about an EBITDA of SEK 10 million-SEK 15 million, turnover SEK 100 million-SEK 150 million. I think that type of companies fit us. Also, it can be an add-on acquisition also as well. The smaller companies working directly to one of our other companies. It's a spread, but the average, I think, as I said, about SEK 100 million-SEK 150 million turnover, SEK 10 million-SEK 15 million.
Okay, thanks. That's all from me.
Thank you. Our next question comes from the line of Stefan Andersson from SEB . Please go ahead, your line is open.
Thank you. I guess I'm touching a little bit on the previous question, but the organic growth, given how strong the market is, has been, and most players have a very strong order intake. It's a little bit surprising, I guess. It's better than in the last quarter. Back then, you commented it on being relating to some bigger projects that were finalized and so on. I'm just wondering, looking into the Nordic region, is it, we are minus one this quarter, is that also relating to bigger projects that are ended? That's the question one, or is it just relating to acquisitions made where actually the momentum in those companies has slowed down?
The second question, maybe you already answered that, but are we out of the difficult comps now with this quarter when it comes to the Swedish revenue side?
The first question, I think I have to repeat that we compare it with very few units from last year, organic growth. Yes, you can say there is there's have been more activity in those company or in that company, I would say, because it's just one company. That's the reason for organic decline. The other question, I would say so that they are on track again. I can foresee another situation there in the next few months or year. The other question was...
I mean, you had complained before about some big projects last year, like in Q2, that were supporting numbers, and it's very difficult to meet them because you didn't have the same big projects in Q2. I guess there's a little spill off or effect of this into Q3 as well. My question is really, as we go into Q4, are you out of the difficult comps?
Ah.
Uh, or-
Good. Yes, my answer is yes.
Thank you.
Thank you. Ladies and gentlemen, as a reminder, if you do wish to register for a question, please press 01 on your telephone keypad now. As we have no further questions from the phone lines, I'll return the conference to our speakers.
Okay, thank you very much. See you next quarter. Thank you very much!