Welcome back to ABG Investor Days. My name is Stefan Knutsson. I'm an equity analyst here at ABG, covering the service sector, and with me today, I have Prevas and Prevas CEO Magnus Welén. Welcome.
Thank you. I'm very excited to be here. My name is Magnus Welén, and I'm the CEO of Prevas since June 1st this year, so I'm rather new in the role, so I can still blame my predecessor for everything, but, I won't do that. Okay. So, what are we talking about here? What, what is Prevas? First, I will start with some brief facts. We are an engineering consultancy company. We were founded in 1985 in Västerås, Sweden. We are listed since 1998 on Nasdaq on the small cap, but we're aiming for mid cap. I promise you, we're really focused on that. It says here that we are approximately 900 coworkers in Scandinavia. That is not true.
We are now above 900, so we are proud to actually reach that step in our development, which it was a good thing. Our main operations is in Sweden. We have minor operation in Norway and a good foothold in Denmark as well. Last year, we made SEK 1.3 billion with a healthy margin of little bit above 12%, which is, in our industry, rather decent, I would say. So I will come back a little bit to the long-term development of Prevas and what we have performed over time. But before I start explaining more about Prevas, I would like to share some trends with you, what is happening around in the world that affects us, affects you, and affects the world.
So here is some of the trends that actually is influencing things now. And as you can see, it's quite a lot of trends. It's a lot of things happening in the world, and this is a lot about technology, of course. But you can see this as a threat, that the technology is moving faster and faster and faster, but we, as Prevas, we don't see this as a threat. We see this as possibility, and that leads me to our tagline, that is, "Hello, possibility!" So Prevas is everything. All about Prevas is about possibilities and moving forward into the future. Our mission is ingenuity will save the world. We are an engineering company.
We have brilliant engineers, and we, we see that Prevas can make a big difference in taking care of all the challenges that we have in the world today, and we believe that ingenuity is the key to this. Leads me to our, our mission, that we co-create technological advancement for the betterment of all, for the people, for our employees, for the planet, and naturally, from an owner point of view, the profit. The important word here is also co-create, because we don't believe that it's enough that Prevas is the best. We believe that we, we need to be best to cooperate, so we cooperate with the society, with universities, with our customers, but we also cooperate with our competitors, or our colleagues as well, in order to meet the customer demands in the best way.
So what do we do, then, at Prevas? We work within two different areas: sustainable product development and sustainable production development. And here you can see three projects that we have been running just to simplify and show you what we're doing. We tend to say that we work with, mostly with companies that have... are product owners, and so we develop products that are physical, that are advanced, and that are connected. You see this ear protection on the slide. This is a product that we have developed for a company called Sordin. From industrial design idea through the whole development chain, through all of the tests that needed to be done, and then we also ultimately designed the boxes that this product are to be sent to the customers.
We also supported the customer with production development, how to produce this in a more efficient way, and this product is now sold globally under different brands. We are very proud of that, of course. The latest version, actually, in this where we added a functionality where you can talk between different people that using these hearing aids. For example, in heavy industry, it's important that you can talk to your colleagues, so we added a mesh function into this product, actually, with the last product development we did in this area. In the middle, you can see a urine catheter. Looking into a hospital, you actually 40% of the hospital-induced sicknesses or infections are due to urine catheters in the world. 40% are due to this.
Only in the U.S. is over 1 million people get sick due to urine catheters, and that is a major problem. Then there were two doctors in Denmark; they had an idea: "If we use UV light, then we can maybe solve this in order to reduce the bacteria that causes the infection." They talked to our team in Denmark, and we found each other, and then we ran a project for these two doctors. So we have developed from this idea, from these two doctors, now a product that actually is reducing the risk for these kinds of infection in the hospitals, which I believe is a fantastic thing to do for the people and also for the profit, of course. But it also shows a little bit what Prevas is all about.
We can actually deliver advanced and develop advanced products and systems from idea through all the development and to the customer, and everything we do is more or less including software. We are connecting our products to the web. We're connected to the cloud, so connectivity is an extremely important thing. And during the last years, quite many years now, actually, we're working a lot with cybersecurity and resilience, of course, in our products as well. Looking into the other area, sustainable production development. Here we talk about actually making production more efficient. I will show you one example here is the oven you can see there. Prevas has developed an algorithm for heating of steel more efficiently together with universities.
90% of the steel in Swedish steel mills are produced using Prevas algorithm. Why is that good? The good thing is that you reduces the fuel consumption when you heat up the steel, and you reduce the carbon dioxide emissions by using the Prevas algorithms. So that's a fantastic example, I would say. Talking broadly about product development, it's talking about sustainable development, automation, making it more efficient, and everything more as it's based on digitalization. You can see on that picture is from Meritor. We have implemented a Prevas system called LIPS to make their internal logistics more efficient and reducing cost, of course. Our market humble picture. We are a Scandinavian company, but we, but we think globally. And why do I put this? It might sound a little bit strange.
The reason is that we work with customers that play on the global market, and they put demands on us that are on a global level, so we need to be at par with their demands in order to be developed together, and that we do. For example, this furnace optimization software I talked about, we are delivering that to Spain, to the U.K., and other countries as well around the world. So we actually work outside of Scandinavia as well, in certain niches. So moving forward. Looking into Prevas strategy, you have seen this picture, maybe... Sorry, I should look here. Maybe you can see this before. You can actually choose to be the cheapest and most efficient. You can choose to be close, extremely close to the customer, customer intimacy.
You can choose to develop the absolutely best product there is in the world, a niche. And you can see that we have chosen to be in different places, and that looks a bit strange. But the reason is that Prevas is a strongly decentralized organization. We have strong nodes, and each node has their own way of being best, and they choose where they are to be in this this diagram, and how they are to be successful. And then we work together between the different nodes in order to deliver the most value to our customers. Some key aspects of our strategy. Of course, the key thing is to add customer value. We have diversified business models.
We don't only work 100% as a consultant out at the customer place, but we work also with team deliveries with larger projects that we run in-house, as I showed you before. We also have outsourcing from our customers of different critical applications, where we take care of the development and the maintenance, and we're putting up a team in order to support those things. So we have a diversified business model as such. Then we also build competitive strength. We have an EMC lab. We invest in technology that improves our capabilities to deliver to our customers. We have a decentralized organization. I think that is a key aspect and strength for Prevas, makes us very agile.
And then we have this dynamic network approach, where we work together within Prevas with all these niches, all these nodes that are really good in different areas, and then we combine that and make something even more special for our customers. And last but least, is we are action-driven company. And that was a little bit about Prevas as a company. Looking into the first three quarters of this year and the way forward. I believe we made a decent Q3, where we actually, taking into consideration the effect that we had one less working day, we maintained the margin we had during last year, which is close to 12%, and we managed to grow as well in this rather dynamic market we see in the consultancy industry today. So it was a decent quarter.
Looking into the year, the Q1 to Q3, you can see that we have grown with 16% on the top line, and we grown the EBITDA close to 12%. So we performed rather decent in this kind of environment, I believe, and we're very happy to also see that this is the all-time high for Prevas. You can also see that the EPS development is also increasing, and that we free up a lot of cash. That is a good thing about a consultancy company. It's very cash providing. You get a lot of cash out of our business as well. But you might think, "Okay, one year, what is that?" Look into the broader picture. I thought I could... Yes. You can see this over here.
This is a diagram since 2017 with the development of Prevas. Many years ago, Prevas had issues with profitability. You all—I think you know that. But it may been a massive change over the last five years, and one of the reason for that, it's many reasons, is the decentralization of our organization, and that we are more agile as a company. The engineers, I would say, engineering capabilities are the same today as it was 2017. It's more about that we are more business-driven today in order to provide better value to our customers. Looking into the EPS development, you can see that it's not only that we grow in terms of EBITDA, but we also see that EPS is growing as well. We also grow through acquisitions. As you...
In 2021, actually, I was acquired at the time when we, when Prevas acquired a company called Evotech. During this year, we have made three acquisitions. And, what we see when we do acquisitions, that the companies that come into Prevas is actually increasing their growth, increasing the profitability. So, we have really found companies that we've seen win-win together when we add them into the Prevas family.... And also we have a strong balance sheet, so we are always looking for further acquisitions in order to grow Prevas as such, but we are truly picky. We will not just grow for volume; we will go for companies that makes a good fit for Prevas. And as you read the magazines, you know that there is a dynamic market. Sorry.
What we see is that the demands is still high. Sorry, I need to ... You can see that there is still high demand in some of our sectors we work with, like energy, electrification, like defense, where Prevas are strong. We also see that there are reduced demands in some areas. But what we also see is that there are increasing competition in specifically in more junior consultancy assignments due to the overall situation in the marketplace. But as we are an agile organization, we tend to try to drive our business towards the growing areas and to be agile.
And this is a strength of our decentralized organization, where each of the units are taking the decisions needed in order to maintain our profit as well. Long term, we strongly believe that the demand for Prevas is increasing. Okay, how are we positioned in this rather dynamic market? I would say that we have a strong position. As I told you, we are strong in growing areas. We have a low customer dependency. Our five largest customers, because they are less than 25% of our total turnover, and we are positioned in companies that are stable and that are market leaders. That is also good from a risk point of view.
Our decentralized agile organization, I believe, is important for us in this marketplace, but also that we work with the core of our customers. We work with product development, we work with production development, and that is what our customers is all about. And that, I believe, is also key for our positioning as such then. And as you can see in the industry breakdown, we have a quite good spread between different industries as well. So with this, the last slide, why Prevas? Just a summary. I think it's important to emphasize that we've been around. We've been around since 1985. We've been working with some customers, like ABB, we have a partnership since 1985, so we've grown together with our customers, and we have long-term customer relationships.
We're well-positioned in markets where the global trends actually help us, like digitalization, climate transition, MedT ech. We're strong in MedTech, and defense. Sorry, I don't know what to do with my throat. I will soon stop talking, I promise. We have a diversified business models. We're not just consultants working at the customer place. We work with different kinds of models that actually ties us closer to our customers than a regular consultancy business in that sense, and that is fantastic, I believe. We have also a business called Enterprise Asset Management, where we support within the maintenance area, where we also have a partnership with Hexagon and IFS, and that means that we also are selling licenses, and we get recurring revenue as such.
So Prevas has a diversified business model set up, which we don't have been so good at explaining, but I will do that in the future better. We have a stable profitability if you look into the last couple of years, and we aim for quality growth. We don't aim for expanding Prevas dramatically. We aim for growth with quality. We have a successful track record of our acquisitions, as I told you. We also have a strong balance sheet. We have a low debt, so we are financially in a really, really good position for taking advantage of the opportunities that opens up in this kind of market we have today. And I didn't put that on, but I also believe from an investor point of view, it's important to know that we have some skin in the game.
I have that. We have people in the management team that are investing in Prevas. We have an option program. So we are a team that are committed to deliver a good future for Prevas as such. In our board, we have people that are actually owning big chunks of the company as well. So I think that summarize what I would try to say today, and I'm sorry for my sore throat this time. I promise I do that better next time. And that ends my presentation. So this was what I intended to say today.
Thank you, Magnus. You will have some rest now with, with your voice, because I will ask you the questions. I mean, it was not a long time ago since you reported Q3, but have you seen any change in customer behavior, after that point? Any, you know, any change in the, in the general market, in your opinion?
I wouldn't say that. It's quite the same development. I would put it as flat. It's not like a dramatic down, not like dramatic up. It's more or less the same as it was just during the Q3 report.
And, and-
No big changes in that sense.
Perfect. And, I mean, you mentioned a dynamic market. How do you make sure that you stay relevant in that situation?
I think our organization, our agile organization, is extremely important because they are close to the customers, talking about customer intimacy. We need to change and adapt in order to be quick and being relevant in the market, and that, I think, is one of the answer to that. And then, of course, we need to develop, always develop our competences and see, looking into the future. I mean, cybersecurity, for example, is something we've been working with a couple of years. We have a team in Denmark that are extremely expert in that area, and we're growing in those kinds of areas as well. And so we need to have a strategic outlook of the trends, the technology trends, so to say, as well, in order to be relevant.
Perfect.... You also mentioned that you see higher competition in certain areas of your business. Would you say that there is an increased risk that will also affect realized prices in the assignments?
Of course, there is risk. I mean, it's the price and and the how many consultants is out on the market, of course, can affect the pricing, but we don't see that in that sense, no. But I mean, generally speaking, that there is a... If you have a lot, the demand and the what is demand and supply. The demand and supply. I mean, of course, you have that kind of relationship, but we don't see that. And normally, we also work with long-term agreements with our customers related to pricing. So that makes us we have a quite controlled way of setting the prices with our major customers.
Is there anything that you can do on top of that, having a long-term relationship, to avoid a situation where you enter a sort of a price pressure situation?
Oh, yes, working with how we do the business and how we provide even more value to our customers. I mean, recently, we achieved an order, actually, where customer will outsource an application to us. We will set up a team for developing this application, and we will set up a team for maintaining it. And that is something else, so to say, because then you're into the customer long term. We work together as partners. That, I think, is a good answer to that. We are more relevant, we are more long term, and we work close to the customer, and that, of course, is something else.
You mentioned also that you, like, your two main areas is, it's product development and production development. Have you seen more success in any of the areas in this market? Or, I mean, is the product development having a tougher time in this market, or?
No, I don't see a big difference, actually. I mean, the underlying trend, for example, electrification, that drives a lot of engineering needs in our customer base. That is first, I would say, in the R&D area, you need to rebuild all your products to meet electrification, and then you need to rebuild your plant, and that drives a lot of demand for us in Prevas. So I would—I wouldn't say there's a major difference, from what we see at least.
Perfect. And I noticed that you have one office in the north of Sweden.
Yes.
Do you have any plans on increasing your ambition in that region to capture more of the booming demand that is going on in the industrial company?
It's one of the prioritized areas for 2024 in our business plan. We're working on that right now, but of course, we intend to grow in those kinds of areas as well. But we have a operation up in Luleå, and we are opening up more and more business and more customers in the area as well, supplying other parts of Prevas. So yes, that's an ambition for us.
Perfect. And the geographical exposure that you have, on top, like outside of Sweden, Norway, and Denmark, are you satisfied with that, or are you looking-
No, I'm not satisfied with anything, I would say. We need to grow in all our markets. And looking into Norway, we have a fantastic team working in Norway with enterprise asset management systems, but we need to be stronger in Norway. We need to grow in Norway, so we're actively actually looking for acquisitions in Norway right now, in order to strengthen our foothold in Norway. And also as well, in Denmark, we continue to grow, but we need to grow there as well. But we have said that we will not short-term move into opening offices in Germany or somewhere else.
We have so much market share to take in our core markets today, so that is where we aim to grow in the future then.
Very clear. And you mentioned you have done nine acquisitions the last three years. You still have a strong balance sheet, as you mentioned, so maybe there is more to come. But how do you work with integration, and how do you make sure that all of the acquisitions embrace the Prevas vision?
I would put it like this: We don't have a standard model, and that is one thing, because we're extremely adaptive. It's all about people, so we need to be close to the companies coming in. We need to work together in order to integrate in the most efficient way for both parties. So we are really, really flexible. That is how we think about it. We don't have a manual how to take in a company into Prevas. This way we work, take a little bit longer time, it takes some more hours, but long term, I'm convinced that we will end up in a situation where we grow together. I think that is a way to go for Prevas, at least, in terms of acquisitions.
Because, you know, if you acquire a company in the consultancy industry, all of the people can leave, more or less, and that is a high risk. But we are aware of the risk, and we're working with that, and that also means that we need to be extremely picky in terms of which companies we are actually looking into. We need to have a good match, and also not only a match in terms of what we do, but in terms of culture, in terms of people, so we align.
Do you do any kind of rebranding on the acquisitions that you do?
We have a single brand strategy, which means that ultimately, the companies coming into Prevas will have the Prevas brand. That is one of the few things that is decided in terms of when we talk about acquisitions in that sense. But then, how long time does it take for if you change a brand? That is something that we have not defined, so to say. It can take a long time, because if the company would have a strong brand, we need to be flexible, we need to be adaptive. But long term, we have a one-brand strategy.
Perfect. And then I would just like to finish with what will be your top three priorities for 2024?
I would say my top priority is actually to prove that we are a premium company. We need to be maintaining and show the market that we are here in the long term, because we had a couple of years where we had difficulties with profitability. We have adapted, we have changed the company quite dramatically, and I think 2024, the target for us is not to grow dramatically, it's to deliver a stable profitability and a quality growth, so to say. That is my top priority.
Perfect. Then I would like to thank you, Magnus, for coming and presenting with us here today.
Thank you.