Please begin your meeting.
Okay. Thank you everyone for calling in. I will briefly comment on our Q3 report. If you turn to page two, I just wanted to remind you on our long-term, now 11-year growth of 17.2% EBITDA. We turn to page three. There you have the numbers. We have in this quarter, good growth of EBITDA, 28%. We improved the margins. This growth comes, it's to some extent organic and also thanks to our new acquisitions. Also return on capital employed is on a good level. If you take away the goodwill, we even increased it, return on capital employed. We continue buying less asset-light businesses. Over the nine months period, we have in EBITA, 22.6% growth, which is higher than our historical level of about 17%. If you turn to page four, I let Per Waldemarson say some words on Dental. Please, Per.
Thank you, Fredrik. If we look at the Dental development in the last quarter, it was fairly slow growth compared to the other business areas. Once again, we have a quite slow organic development as we have now for quite some time. The development in the quarter has been mainly then increased profit through acquisition. This is now the full effect of the Parkell acquisition that was acquired in September 2016, which is now a full quarter captured in 2017. If you look at the nine-month period, we are developing quite stable, a 9% growth in both sales and EBITDA. We have a small improvement in the margin, partly thanks to a slightly higher share of manufacturing business this year compared to last year. I hand back to Fredrik for the other divisions.
Yes. If you look at Demolition Tools, we have in the quarter a big growth in sales and profits. It's actually driven both healthy organic growth and acquisitions. The two markets which perform for us the best right now is U.S. and Australia. Also Germany is very strong. The two acquisitions made this year is Hultdins which makes equipment for forestry machines and attachments for forestry machines. Solesbee's is a local attachment manufacturer in the U.S. Everyone is performing well. Markets conditions are good. We can add that the margin improvement is also good from 24%-26% in the quarter. It's a record quarter for us in Demolition & Tools.
If we turn to Systems Solutions, you can see that the sales growth over the year is only 4.2% in nine months, and the profit growth is 24.7%, so the sales growth is pretty weak. Actually, we had in the sawmill equipment business and also in the marine compressor business, declining sales organically. That's the reason why the change in that sales is pretty small. As you can see, it doesn't hurt us because in the marine business, profits are up, and the sawmill equipment business is not so profitable, it doesn't hurt us so much. Overall, we had a very good development in Systems Solutions also thanks to the added new companies throughout the year. If we turn, I will jump page five and go directly to page number six.
The only thing I'll comment on this one is that the balance sheet, I could maybe the inventory and the accounts receivable is a little bit high. We probably have to work a little bit more on that, but the cash flow is healthy, and our net debt to EBITDA ratio is well within our target, so we can continue acquiring companies. If you turn to page seven, we have a list of all companies we acquired this year. This year, we acquired a number of small companies, we go for more and smaller companies. I think it's basically the pressure on the multiples out there on the market. If you aim for bigger companies, you have to pay too much. We can't overpay because then our acquisition strategy is not working.
Next page, we continue increasing our EBITA margins, both organically and that we acquire companies with a healthy margin. Our return on capital is good. The organic development is very good. If you take the total return on capital including goodwill, you stay above the same level. It basically shows we're not paying too much for the entities we are acquiring. We will jump to page nine. People ask me about asset allocation. As you see, the CapEx is very low. Actually the asset allocation is the acquisition of what companies we are acquiring. The operating CapEx is not important. We turn to page 10. There you have our financial targets. They are still the same as they were in November 2014, no changes. I would like to leave room for questions, please.
Thank you. Ladies and gentlemen, if you do have a question, please press 01 on your telephone keypad now. The first question is from Jon Högner from Handelsbanken. Please go ahead, your line is open.
Thank you. My first question is on Demolition & Tools. I was surprised by the pretty strong growth in the quarter. Was this mainly related to big projects, or is this strong growth due to many smaller projects being sold in the quarter?
Yes. This Demolition & Tools business, occasionally, there is not one single big, but you can have several small, little bit bigger than normal projects. This quarter has been very good, so maybe we won't be as lucky next quarter.
Are you happy with the margin given the strong growth? Should it maybe have been even better?
We are happy with the margins as well.
On the Systems Solutions business, more or less the opposite question. You mentioned that sawmills and marine is declining. Is this a deliberate step away from some low-performing units or segments where you choose not to sell to protect the margin? Is it just cyclical that the demand has been low in those units?
Yeah, I think, first of all, it's project business, it goes up and down, swings a lot with project sawmill equipment business. It could also be that in our Estonian operation two years ago, they had record profits, record sales and everything. Basically, they sold too much, and now they have to finish these projects, so they don't have really time. They have been full up finishing off these old projects, and they really haven't had time to take on new projects. Now those old projects will be finalized this year. I think this is a bad year for sawmill equipment. Probably the only division within Lifco which is not performing as it should be is the sawmill equipment.
Looking at Lifco in total, are you pretty happy with most of the units you have, and with that, is it very limited volumes that you don't want anymore because profitability is too low? Going forward, you should probably grow more in line with the favorable market conditions that you have.
Yes, I think so. We in general are happy with the markets. We are happy with the performance of most of our companies. Yeah, it's basically sawmill equipment companies which are struggling a little bit.
Actually, the only companies where they had a major improvement potential.
Okay. Then on working capital, you tied up a little bit more than last year in the third quarter, despite not really growing organically. Maybe this is due to some parts growing strongly.
Yes. It's human. You grow strong with high margins, then you pay less attention to the working capital.
You're not worried this will come back?
I think, yes, this will come back.
Okay. My final question, you mentioned multiples, looking more at making maybe many and smaller acquisitions.
Yeah.
If you find attractive acquisitions higher up in size, how much could you stretch yourself in paying in EBITDA or whatever multiple you use?
Maybe. We say on average, we want to be around eight times EBITA.
When we buy a company, maybe we go up a little bit or down a little bit. About 10 must be very special if we ever would buy a company about 10 times EBITA.
Okay. That's very clear. Thank you. Those were my questions.
Ladies and gentlemen, as a reminder, if you do have a question, please press 01 on your telephone keypad now. We have a question from the line of Johan Dahl from SEB. Please go ahead. Your line is open.
Yes. Thank you. It's just, interested in the Dental division. If you look on the nine months to date, it seems as if organic growth is fairly weak. What sort of conclusions do you take from that? Also, margins are fairly flat-ish. Can you just dwell a bit on the improvement potential there going forward, what impact the 2017 numbers?
Should I take that, Fredrik?
Yes, please, Per.
Yeah. Johan, basically, you're right. We haven't had that for quite some time, high growth in the Dental division organically, and I think it's partly due to our strategy of being a premium distributor in the European markets. There's not a high growth in that segment. We have also, as you know, from historic development, reached a very strong margin position. It's not an easy growth case for those companies. Where we see more growth is, of course, in the manufacturing companies in other fields, where we see more opportunities for organic growth. Having said that, you also have to remember that the group market as a whole is not growing a whole lot. It's a quite slow-growing group market.
I appreciate that. Just, in the past when you've seen weak organic growth, you could argue that you've raised prices because margins have gone up. In the current year, since they're both slightly negative organic and fairly flat-ish on margins. Am I totally wrong here?
What do you mean flat-ish on margins?
No, it's just, well, we'll see where the year ends up. I guess your nine months, is it slightly up on margins, or?
Yes.
Yeah, you're up 18.4%, right? From 18.3%.
Yeah.
Yeah, I just think of the combination of flat margins and no growth. Just if you had any sort of conclusions on that, I hear what you're saying, Per.
Yes. I can make that some comment. The Dental business, we have very good margins compared to our competitors and so on. We've done a very good job in the Dental business historically. Sometimes in any business, you reach a level where it's more difficult to improve things a lot. You have to use the cash flow from that business and invest in other businesses instead. If you don't find It's a very good cash flow business and it's stable cash flows, and if we would have bad times, Dental will always continue to deliver cash flows.
Is that something you aim to accelerate if we look forward at just acquisitions in the Dental business?
Per, will you comment on acquisitions?
Johan, I didn't hear your question. Can you say it one more time?
Is that a particular area you aim to accelerate if you look on acquisitions in the Dental business? It seems as if what you've compounded so far looking into next year, I guess it's fairly flat-ish on acquisitions.
Yes, of course, we would like to do more acquisitions in Dental, we are working very hard on that. Also we have very strict rules and strict principles on what type of valuation we can apply to companies we buy. It's hard work that we're constantly trying to get the right match, the valuation and the assets we're getting.
Got you. Thanks.
Yes, I just have a comment on that. You see that two years ago, Systems Solutions was really problematic business area for us. It was basically the worst company we had in the group. Now it's performing very well, that's a lot thanks to the acquisitions. Without the stable cash flows from the Dental business, we wouldn't have been able to acquire more high-quality companies in the Systems Solutions business and grow it as we've done.
That makes sense. Thanks.
There are currently no further questions registered, so I'll hand the call back to the speakers. Please go ahead.
Okay. Thank you very much for listening in to us.
Thank you.