Hello everyone and welcome to this presentation of Instalco's report for the Q4 and also the full year of 2023. My name is Robin Boheman. I'm the CEO of Instalco, and with me today I have our CFO Christina Kassberg. We will kick off the presentation a little bit with a summary of Instalco. Instalco is one of the leading installation groups in the market of Sweden, Norway, and Finland. Our main business area is installation of electrical, heating, and plumbing, ventilation, alongside solutions for the industry and technical consulting. The group today consists of roughly around, or a little bit surpassed, 130 subsidiaries, a highly decentralized structure in the Nordics as you can see.
We have an impressive workforce of above 6,000 employees that are driving the green transformation, which is central to the Instalco business model as we reinstall for a more sustainable world for the next generation. Demand for our services offers are supported by several strong underlying market drivers. Summarizing a little bit around 2023, I would like to kick off and say that the last 12 months came in at around SEK 14.3 billion in net sales, corresponding to a growth of above 18%. Our earnings grew together with our top line, and we maintain a stable EBITDA margin versus last year, coming in at 7.6%. I'm very pleased with the cash flow, which we were able to grow at 33%, coming just short of the SEK 1 billion, but SEK 999 million, which is an impressive number.
We managed to surpass the SEK 1.2 billion in annual sales for acquisitions this year, which is slightly above the number for 2022, and we have a solid order backlog of almost SEK 8.5 billion. So overall, a good year. Jumping into the Q4 and some highlights here. To sum up the quarter in a few words, I would say resilient profitability and strong strategic project selection. Top line growth was, as expected, somewhat slower due to the decision to prioritize profitability, which is always key to us. We'll always go for profitability over volume, especially in a current market environment. But this also meant that we were able to defend our EBITDA margin, coming in at a strong 8% for the quarter.
It's also notable that our service share of revenues grew to the highest yet, coming in at 37%, which is a big shift toward those of you who have followed us for the last couple of years. As usual, Q4 is cash flow strong, but I'm also very pleased to say that we actually even improved ourselves significantly over comparable quarter last year. We also made 2 acquisitions, so we're still active in the acquisition market. So overall, summarizing, a good, strong quarter. But I will hand over to you, Christina, to give us and go through a little bit more detail around the quarter.
Thank you, Robin. On this first slide for me, we can see the increase in net sales with comparison of Q4 present and prior year. Acquired growth represented 12%, and this is a result of our successful M&A agenda, while organically the top line was down 2.6%. Segment Sweden was down, while the rest of Nordic remained flatish. In total, net sales grew by 7.9% and amounted to close to SEK 3.9 billion. This slide shows the quarterly trend of EBITDA in both millions and margin. Q4 is generally a strong quarter due to the typical seasonality effects, and so also in 2023.
In total, EBITDA grew by 6% to SEK 310 million, corresponding to a continued strong and stable margin of 8%. And this despite the slightly negative organic development of net sales, showcasing the flexible cost base and our ability to adjust to the market situation.
This slide shows the quarterly progression of the order backlog. In Q3, we recorded an order backlog at an all-time high level. However, in the Q4 , the order backlog was largely in line with Q4 the previous year and down organically by 9%. Right now, we would rather have a somewhat smaller but qualitative order backlog and lower growth. We are convinced of the long-term potential in our industry and do not want to be locked into weak projects when demand and the price picture turns upwards again. Today, it's possible to see several positive signals in the market. However, our service are late, cyclical, and it will take some time for that to be reflected in our numbers. We are well positioned for further profitable growth when the turns come.
As Robin already mentioned, the share of service in our revenues increased further during the quarter. As a reminder, service are not included in the order backlog. This is proof of how quickly our decentralized model sharing best practice gives us the opportunity to adjust based on the market's local conditions. Now, a segment that summarizes Segment Sweden in Q4. Sweden held up excellent to a slower market, although the underlying need and demand for our services as regards both new construction and renovation is generally high. We have noticed that geographical differences in the market situation have increased. The number of available installations projects has, in some regions, decreased slightly from a high level.
This is most evident in south of Sweden, while demand is strong in the north. Overall, net sales were essentially flat at SEK 2.7 billion, while organic growth was down by 3.7%.
Despite this, Segment Sweden reported a very strong and resilient EBITDA margin of 9.1% on the same level as last year, thanks to our strategic focus on efficiency and profitability. Okay, also summary for the rest of Nordic segment. Development of the market in south of Finland has been stable in recent months, though a relatively low level. The market in northern Finland has shown slightly positive signs during the last few months. High interest rates have resulted in more cautious behaviors in the construction industry, while other areas such as service industrial operations and, for example, data cable projects are progressing as planned. In comparison, the market in Norway remains at a relatively high level without much change from last quarter. For Instalco, this translated to a net sales growth of 29% in Q4, of which 0.2% organically.
This is in line with our strategy of increased acquisition efforts in these geographies, as well as good development from existing subsidiaries given the market conditions. EBITDA also grew by 25% to SEK 62 million, corresponding to a margin of 5.3% compared to 5.5% a year ago. We are pleased to see the continued stable development of our companies in Finland, who continue to perform well in a challenging market due to their operational improvements and project management. To then look at our performance in relation to our financial targets. We continue to perform well beyond our growth target for the full year. Net sales growth ended up to 18.4%.
EBITDA margins remain best in class at 7.6% for the full year and right on spot on to our target 8% during Q4. After the Q4 , our leverage was again back within range of our target at 2.4 times. Cash conversion improved from 85% in 2022 to a level of 90% this year due to our increased focus on working capital during the full year. Finally, the board proposes today a dividend in line with a 30% policy. All in all, we remain secure with the rate of acquisition, our strong cash flow, and the balance sheet. By that, over to you again, Robin.
Thank you, Christina. To summarize also the year, as I mentioned, we acquired an annual sales of surpassing SEK 1.2 billion, 11 companies. As you see, we have focused in the table here, you can see also that we focused on, as we said, the rest of Nordics and also the industrial segment. But we have a spread also around other in Sweden as well. So overall, very pleased with the acquisition year of 2023. This is also a very special day for us. So the theme of this quarter will actually be our 10-year anniversary because today is actually our 10-year anniversary.
So we are celebrating 10 years of decentralization. And to kick this celebration off, I would actually like to start a little movie to give you some insights and also take us back on memory lane a bit. And welcome back.
Per Sjöstrand, I know that you're listening. I hope your eyes are not watering up yet because I will continue this journey down memory lane. As I said, we started 2014, 15th of February. We have grown our business. We have taken ourselves into new segments. We have launched ourselves, IPOed. We have done a tremendous change of the industry overall. I will take you through some of the highlights of these 10 years so far. Obviously, I need to start at the beginning and give a little bit of a shout-out to these five companies that 2014 decided to trust Per, myself, and Lotta to take on this epic journey of Instalco. A shout-out to Rörgruppen, Klimatrör, ORAB, POB Elektriska, and VVS Metoder for trusting in us and letting us, together with you, take this step and journey.
So these are the five first companies joining Instalco. Then in 2016, we started off entering into the Nordics with the entry into Finland and Norway as well, which was to us a very big step of becoming international as well. Then obviously, a big step of this journey in May 2017 when we listed Instalco. And on the picture here, you see three very tired persons. It's Per Sjöstrand, our former CFO, Lotta Sjögren, myself on the day, and ringing the bell at Nasdaq, which obviously was a tremendous day for us and for our employees to take this step.
Another, to me, very defining moment, I think, in Instalco's journey was in 2018, where we really, I would say, set down the flag and also proved ourselves and proved ourselves in the installation industry overall when we took a very large project together with NCC in partnering, a collaboration of building three hospitals in Sörmland. And this is still an ongoing project. But when we took this project, it was expected to become over SEK 1 billion turnover in installations for these hospitals. It's been a tremendous successful project for it, but it also launched ourselves of becoming a real player in the installation market. So thank you, NCC, for trusting in us. Obviously, acquisitions. I mean, acquisitions is in our DNA from the start, from day one. In 2021, we surpassed the 100th acquisition.
I really want to give a big thanks to all the entrepreneurs of these 100 companies for trusting in us, for letting us continue with your legacy. We've also proven that our multi-brand strategy works and that we are a safe harbor for entrepreneurs and companies within the installation business. Going in a little bit also into the ventures that we have done during these 10 years. We came up with a startup model. Instalco has started above 25 companies so far in different areas and fields in all the three countries that we are present in today. We have proven that this model works over time and is a successful way of growing our business as well. This is something new to the industry.
We also entered into the industrial discipline, meaning that today we have impressive customers like Volvo, Scania, SSAB, LKAB, and many, many more within the industry. We are also taking back the technical consultants into the installation business where they belong. We have now above 400 technical consultants within the Nordics and continue growth in this segment, which also helps us provide a total package to our end consumers. So this is something that we are also very pleased. But I cannot do this without showing this graph, which is actually net sales that you can see since 2014.
We have continued to grow every year. We have an impressive CAGR of 45%. And I cannot stress how pleased I am with this and also the work that has been done. But I also want to stress that we have not only grown.
I think we have changed and we have put a new concept into the installation market where we now have really put in place the decentralized structure. We have shown that you can work in the installation business with a multi-brand strategy, that the decentralized leadership is the way to go. We have shown during these years also that we are resilient, strong, and can continue to give out best-in-class performance when it comes to earnings as well. So with that, I would like to say that we are very well positioned for the coming 10 years as well.
And I'm really looking forward to the coming 10 years and what it has in store for us. But now, Per, you can dry your eyes and we will get back to business and summarize a little bit around the quarter and the year. So overall, a very good performance in the current market environment. I'm especially pleased with the profitability and focus in segment Sweden has really paid off.
Our subsidiaries have been very selective with what projects to bid on to make sure that we are compensated for the value that we provide. And I remain very confident with the current level of our order backlog as well that we are able to defend our margin and are, like I said, very well positioned when the market comes back into growth. And finally, obviously, I'm very happy to now officially kick off our 10-year celebration of a decentralized entrepreneurship. And during these 10 years, we have, with our decentralized model, proven that we have the ability to adapt, that we are very resilient, and we have a strong and more diversified company than ever.
I'm very pleased with that and I'm really looking forward to the coming 10 years. With that, I would like to open for questions from the audience. Thank you for listening in.
If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you. Good morning. I guess you're going to be hearing from a lot of calls, this call as usual. But my first one is on the backlog. I realize there's a lot of variation here. But what can you say about the visibility or delivery time of the current backlog given your kind of focus on prioritizing the right one, so to say?
I mean, we are a company that is focused on the small, medium-sized orders. So I'm guessing you're talking about when do they actually will be delivered, so to say. So our main focus is on projects that are maybe between 3 to 9 months and then obviously depending on when they start. So fairly short, a lot of it will be done in the coming year, if that was what you meant with your question.
Yes, exactly. Because maybe 1 or 2 years ago or even longer before that, there could be projects 12 to 24 months out. If I remember correctly.
There are obviously a few ones, like I mentioned earlier in this little summary of the 10 years, like the hospital projects, for instance. That's a very long project. We have a few of those. But our main focus is on the small, medium-sized. So the main size of the order backlog is short-term in that sense. And also coming back to that, we have now gone from maybe 2 years ago, 17% service to now this quarter, 37%.
Understood. Then on the comment there, you say that Per's technical consulting market has shown a bit of weakness. So just what's the progress currently within intake in terms of where you are on scale and the strategy for that group if the market is now slowing down a bit?
Karl, maybe you misunderstood. I think we're seeing some positive trends in the technical consultancy that we're actually seeing orders picking up. So we are more positive, I would say, regarding the technical consultancy. I think that the trend we're seeing from the different subsidiaries within the technical consultancy is actually that there is a feel, at least, that demand is picking up or there are more projects to calculate on. So I would say it's actually the opposite. But still, we are in, like I said many quarters ago, we are in a growing growth phase, so to say. So we're still adding technical consultancy. In the quarter, if I remember correctly, we were flat-ish, I would say, in profitability. We are above the zero, but obviously not at the level long-term where we want to be.
Like I said, it's still a growing business for us and we're adding consultants every day.
Okay. I understood. I was just commenting on the remark. The prior high demand in the market for TC has slowed down over the last year. But okay. So there's positive signs on the horizon. That's how we should think. Okay. My final one is just your competitor or friendly rival, however you want to say it, had a market assessment out this morning where they believed the market was down 9% this year, could be down 7% on installation in 2024, but for growing in 2025. Now, both of you have been able to outgrow the market historically, but is the overall market sentiment something you could agree on too?
It's always tough to give out estimates of going forward and the market and so forth. However, obviously, we are obviously not seeing positive trends in that sense. So I think it will be a bit declining in the market coming years. But we're also able to outgrow, like you say, because customer tends to go for the secure options. So I think that that will actually be positive for the larger players in that sense, in a somewhat, so to say, market that is somewhat more uncertain. You will want to have as certainty as possible and then you go for the secure players. So I think that will actually be positive for us. And like you said, we have been able to outgrow the market, I think, all the way back until 2014.
So I think that the most important thing here is to find the right customer and find the right project. And that is our focus. That is what is most important to defend the margin and still be able to deliver results like we did in this quarter with 8% and also over the whole year of 7.6% EBITDA margin. I think that is the most important thing. Then whether the market is up or down a few percentage, that we can handle as long as we continue to be very strict on which projects we take on board.
Understood. That is all from my side. Thank you.
Thank you, Karl.
The next question comes from Karl Norén from SEB. Please go ahead.
Yes. Hello and good morning. My first question would be on the order backlog, which was down now 9% here organically. So I'm just wondering, I mean, I know that you are avoiding some low-margin projects and being very selective, but I guess that's also going to impact organic growth going forward. So I'm just wondering how we should read that minus 9%. Should we see minus, let's say, -5% to -10% negative organic growth in the coming quarters or how do you see the developments? It's quite hard since we don't know the composition of the order backlog, of course, but any comments here would be helpful.
No, I think the focus from us is to, like you say yourself and like I said, to call one, so to say, from ABG, that our focus is to find the right customer and the right projects on that customer. We have also grown our service business. So you cannot maybe compare it straight over. Obviously, our focus is on the margin, protecting it, making sure we have good profitability. Top line isn't that important to us in the sense and we still have flexibility on top line. So I think that focus is on EBITDA and taking the right projects and the right customer.
Okay. And then on the service side, it seems to be growing quite a lot here. I don't know if it's organically or some by M&A, but it's 37% of sales, I think you mentioned right now. Is that kind of the new sustainable level that we should think of, that you're closer to 40 than 30? Because I think you mentioned 30% in your last report or something like that.
Yeah. No, I think that you should interpret it as that we have shifted focus. So we have taken people and staff and resources from our project department into service department and making service instead. So this really shows the flexibility that we have and the possibility to shift focus. So when once, so to say, segment or projects are down, we're able to move over into more service business. We have done a few acquisitions also into companies that are very service-focused. But I think you should read into that we are able to shift focus here. And that's also why I think we're quite confident with the order backlog that we have since we have grown our service business and service is not included in the order backlog.
Yeah. I see. I see. And then a question on the development here in the rest of the Nordics. I think at least from what I expected, a little bit softer margin in this segment. I'm just wondering, is it anything specific here that is impacting the margin in the quarter? Because I think the previous quarter has been a bit better and done some acquisitions here with some higher margins. So if you could comment on that, would be helpful. Thank you.
Yeah. I mean, quarter- to- quarter, we are obviously a lot of projects being done and it's hard quarter and quarter. I think overall, very satisfied with the work that has been done in Finland. That continues to improve. We still have a bit left to go for the rest of Nordics overall to be at levels where we want it to be. Obviously, 5.3%, I mean, it's, how do you say, okay numbers. It's not to the Instalco level of where we want it to be. So we will continue to work with the rest of Nordics. But a lot of good things are happening. I think we've seen also, so to say, a little bit of, how do you say, bottoming out when it comes to Finland, for instance, as Christina mentioned a little bit here.
A lot of good things have been done in Finland to come back to good levels. Very pleased with that. We still have a bit.
The underlying trend, you would say, is still positive in the rest of the Nordics, so to say?
Yeah. Yeah. But we still have a bit to go to be where we want it to be.
Yeah. Clear. Last question from my side on new build residential. Could you comment what percentage of sales that was in 2023? Or do you have that in front of you?
Sorry to say that we don't have that number in front of us. No, sorry. It will be in the annual report. That I know. So you'll have to bear with us a bit and we will announce that. But if I had to guess, I would say it's a few percentage down from last year. But still, we have companies that have done good this year and we still have some orders left. So I think overall, it won't be a mega shift there when we summarize 2023.
Okay. Cool. Thank you. That was all from me.
As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Johan Lönnquist Sundén from Carnegie. Please go ahead.
Good morning. One question from my side as well. It's on the famous acquisition contribution number on EBITDA. When I did my method, at least, it seems like the margin in acquisitions has come down quite significantly in Q4, while the kind of rest of the group, you have margins up in Q4. Is it possible to kind of give some comment on why margin in the acquisition has taken steps down in Q4 compared to Q3?
I think it's, to be honest, I want to say, it's a little bit short to just look at quarter- by- quarter on acquisitions. You need to look at maybe a little bit longer term for these acquisitions. So, to be honest, I wouldn't read too much into it quarter- to- quarter when it comes to acquisitions. I think overall, for the year, they are roughly in line with our margins, and underlying business is in line with our margin. So it's a very small difference when we summarize the year that the acquisitions, if we so say, would do the performer for the acquired companies and our underlying business. So yeah, I wouldn't read too much into quarter compared to quarter in that sense, to be honest.
As long as you haven't had any troubles with the integration process or you have found some star projects in the order books when it has been in for a couple of quarters.
But it's also not to get into too technical details on a call like this, but it's also the fact that we change into POC accounting and so forth. So it can be a little bit variation from quarter- to- quarter when we bring companies in and so forth. But overall, companies we have acquired are roughly on the same margins as underlying businesses. That's why I say quarter- to- quarter, it's a little bit too short to look into and say anything regarding that.
Excellent. That was just the only question I had. There was a lot of good questions already asked. Thanks a lot.
Thank you.
The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you. And hello again. I just had a follow-up there on the technical consulting. I think it was, well, encouraging to hear that you're still seeing the kind of trend in despite recruiting and so on, that you said you were slightly above zero in the quarter, if I heard you correctly here. But can you just remind us how the trend has been throughout the year? Did you start the business with a slight loss and then it's been a kind of steady progress throughout the year to above and into green or black numbers, however we would call it?
Yeah. I think that's a good summary. It has been a positive trend all the way since we started. Obviously, it's very small numbers still for the whole group, but the trend is at least there, even if it's somewhat flattish, but still increasing. But like I've always said, as long as we continue to bring in, so to say, staff that are basically at zero utilization, that will constantly cost us a little bit on the margin since this is a startup business and we continue to start up new companies and so forth, and we calculate this as a group. But if you look at some of the companies that have been with the group for now almost two and a half, almost three years, that looks very promising.
Understood. Just a follow-up on services and the strategy there. On M&A, does this also mean that going into this year and the next, we might expect that most of the acquisitions you make could have a higher share being so-called service businesses?
No, I wouldn't count on that. I mean, our strategy has been to increase service overall, but I wouldn't calculate on this trend of continuous growth in service will continue in the same rate because obviously, we're very convinced that the project market will come back and come back very strong and then probably will move resources back to the project part of the business. We don't have a specific focus on acquiring service companies. Our focus is to acquire good, strong companies with good entrepreneurial spirit and good track record. Whether that is a service business or a project business, that is not the key focus when we look at acquisitions.
Understood. Then final follow-up, if I may hear, the working capital situation and the improved operating cash flow year-over-year. Just in terms of the market, if things overall are perhaps turning a bit more tough out there, do you think that going into this year, it might also be tougher when it comes to negotiations and receivable days and so on?
I'm looking a little bit at Christina here and she's shaking her head. So I think that overall, I think we had the big shift was some quarters back or some years back when, so to say, capital started to cost money in a sense, and that's when we saw the big shift in negotiations. Now, I think we haven't seen an increase or decrease. It's still an ongoing project. We still have to always focus on getting paid, always negotiate good terms when it comes to payments and so forth. We haven't seen any increases when it comes to overdues or late payments and so on. It's fairly stable. We are able, as you see, to increase our cash conversion, which I'm very happy about.
And so I think work has progressed very good during the year and we'll continue to focus on this area as well and continue to make sure that we get paid for the value that we add.
I can only add in that working capital, it's always hard work, being close to the customer and the terms in the contracts. So never to forget that and only continue hard work in all times.
Understood. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
Did we have any? We have one call. Well, we have one email. Let's see. We have a question regarding M&A and opportunities and pipeline. And I would say that there are still a lot of opportunities. There are still consolidation possibilities for the installation market going forward and in the Nordics. We still have a lot of white spots and we have a pipeline of acquisitions as always. Obviously, in a market like this, you need to be very cautious on which companies you bring along. There might also be some price discrepancies between what the seller wants and what the buyer wants in a market like this.
And we always have to protect our balance sheet as well. So I think we'll see a somewhat more cautious year, but we are very active. We are still looking for good potential entrepreneurs to join our company. Then we also had a question regarding if I can comment on the staff turnover trends and whether you expect it to be net increase staff organically in the early part of 2024.
That was a very specific question. I think staff turnover is roughly on the same level it has been. It might be a little bit declining, but overall, I see that this is something that our subsidiaries follow very closely. And we have strong brands out there. Instalco is also a very solid brand in the business. So we're able to attract the staff that we need. There might even be some less competition on staff now compared to two years or three years ago. So I think we're able to continue and we're able to find the staff that we need to finalize and continue to do the projects and service for our customers.
I think that was the final question. So I thank you all for listening in and I'm very happy to now really kick off the 10-year anniversary of Instalco. A big thanks to all the staff and entrepreneurs out there that have made this happen in 2023 as well. I'm really looking forward to the coming 10 years. So thank you for listening and have a great day, everybody.