Good morning and welcome to this presentation covering the fourth quarter and the full year of 2023 in Ratos. I am joined by Jonas Wiström, our President and CEO, and Jonas Ågrup, our CFO, here in the studio, and they will guide us through the results. This webcast is also recorded, and you can find it at ratos.com afterwards. Without further ado, I'll hand over to you, Jonas Wiström.
Thank you, Josefine, and thank you everyone for joining this meeting this winter morning in Stockholm. We turn to the first slide showing the full year of 2023. I think this is the best year we have done so far since we changed the strategy in 2018 and started to reduce debt and increase EBITDA. This is yet another year we've done that, and I think it's the best year. For the year, EBITDA grew with 14%, and we had strong EBITDA growth in both industry and construction and services. EBITDA declined some SEK 200 million during the year in consumer, and that was planned. We need to get less capital tied into Ratos, and we will continue to work with this. Jonas will come into that also: the essence of a better ROIC and growth, and so on. Net sales over the year up 13%, including in organic growth.
Cash flow, which we really focused on since one and a half years ago, has really given results. We have a cash flow from operations of SEK 4.23 billion, and the free cash flow is over SEK 3 billion. Our leverage continues to go down. If we adjust for the reverse of impairments in Aibel, it is 1.1. The reported leverage is 0.7 compared to 2.5 last year, so a very, very strong year for Ratos. Looking into the quarter here, the EBITDA is up only 2%. I think you all know by now that that is due to Exrail, where we affected results with SEK 77 million on the EBITDA side.
We continue to have a strong EBITDA growth in industry, coming back to that, and in EBITDA in construction and services, again affected by the corrections in Exrail, which stands for less than 2.5% of the total revenue of the Ratos Group. In consumer, EBITDA is roughly the same. I think it's SEK 1 million difference between the years, so they're holding up their EBITDA, coming back to that when I go into the business areas. Again, the same in Q4. We continue to sell out our storage with lower gross margins, and it has been very strong cash flows effects in Plantasjen also during the year and during positive cash flows effect during the year and during the quarter. Net sales down 3%. 2% of that is Exrail, 2% is currency.
Strong cash flow again in the quarter, SEK 882 compared to 2021, and free cash flow again super strong, if I may say that as the CEO. Coming into the sales, sales down a little bit in the quarter again, not only Exrail this time. We also see lower sales in SSEA Group in Sweden and in Speed Group. Looking into the business areas, starting up with construction and services already spoken a little bit about that. I think here the important thing, if we look to the segment of construction, and by the way, from quarters from now on, starting with Q1, we will, in an ambition to be more transparent, also give the numbers for the different segments. But I will talk them through this time. In construction, HENT had a great quarter and a great year and strong order books coming into next year.
When it comes to SSEA Group, they had a bit weaker quarter, and the order book is not as large as HENT's, so they will be affected somewhat in 2024. As you know, SSEA Group is partnering only and is doing really good profitability EBITDA margin. Another good year for our team. If we look into the critical infrastructure business area, we have really, if we exclude now Exrail, both Presis Infra and Aibel have had another very strong year in all perspectives, I would say. Going into industry, sales up 12%, organic growth up 4%, or sorry, it's down 4% due to actually the weaker wind market and also Speed Group. If we look overall, it's been a very good year and a very good quarter, and it's led by Diab and HL, who has the strongest EBITDA growth.
Diab is a pure organic journey with a shrinking wind segment. HL Display is both organic growth and acquisitional growth. If we go into consumer, net sales declined, and the reason here is because Plantasjen in Q4 had actually higher sales in local currency, but we had a negative currency effect here. If we go into KVD, again, they sold or distributed more cars but have a lower revenue due to a business model where we do not buy the cars and sell them, but we broker them. That's the old business model for KVD, but we differed a bit from that last year and the year before. So KVD has had a very strong year. Plantasjen had a very weak year from an EBITDA perspective, but a strong year when it comes to tying up capital and inventory.
With that, I leave over to you, Jonas, and talk about the financials.
Thank you, Jonas. So we'll move over to the financials, and I will start with the net sales and adjusted EBITDA. Again, you can see that we lowered sales 3% and the organic sales growth were also negative 3%. If we look at the LTM numbers, we had sales of SEK 784 million, and if we look at the adjusted EBITDA, we were up 2% in the quarter. I will come back to the adjusted EBITDA bridge later on and explain how it looks in detail. If we look at the LTM numbers, we were a little bit above SEK 2.2 billion for adjusted EBITDA. If we look at the cash flow from operating activities, we have really strong cash flow in the group in the quarter, as you can see: SEK 882 million in cash flow from operating activities.
You can also see that we have a positive change in net working capital, a positive of SEK 580 million roughly. So we have been able to reduce capital tied up in the business in a very good way. If we look at the business areas, we see good cash flows from operating activities in both construction and services, but also in industry where we have good positive cash flows and good cash conversions. If we look at the 12 months and the full year, you can see that we have a positive cash flow from operating activities of SEK 4.3 billion roughly, and that corresponds to a cash conversion of 190%. So again here, good numbers, and you can see here also that the change in net working capital is a good number, SEK 1.4 billion positive.
I just wanted to highlight some of the companies where we see good operating cash flow during the year. In HENT, we had really good cash flows during the year. Also Plantasjen, where we had the inventory reductions, we had really good cash flow. Presis Infra, HL Display, and TFS are other companies where we also saw really strong cash flows during the year. We will continue to focus a lot on the capital tied up in the business in order to reduce that and also to make sure that we have good operating and also free cash flow going forward. If we look at the net working capital, you can see that we actually posted a negative number here in the fourth quarter. If we look at the last four quarters, the average LTM sales, we are at 1.9%, so it's a really low and good number.
Here again, we have seen reduced inventories. Plantasjen is one of the companies where we have reduced inventories, but we also see good performance in trade receivables and inventories in general, where we see the days coming down quite a lot in many of our companies, and we had good positive trends for both DIO and DSO. Then also, if you look at the contract liabilities, you can see that it has increased a lot, so SEK 2.4 billion, which is a good number for the quarter or for the year. Then I move to the bridges. If we look at the net sales bridge, it was in total down 3%, as we said before.
We have acquired growth of 4%, SEK 300 million, a little bit more than SEK 300 million positive, and this is very much driven by the acquisition of Semcon, but also we saw the add-on acquisitions in HL Display. We have organic growth, which is negative. Here, as Jonas explained earlier, we have seen lower sales in SSEA Group mainly, but also in some other companies. Then we have FX effects, which is negative 2%, and this is very much driven by the Norwegian krone that has been weak in the fourth quarter compared to the same quarter last year. As you know, we have quite big operations in Norway within Ratos. Then finally, in other, we have minus SEK 190 million, and this is the correction of the reporting errors in Exrail.
If we then move to adjusted EBITDA bridge, you can see that from the acquisitions, we have good adjusted EBITDA, SEK 35 million contributing from the acquisitions. When we look at the organic growth in adjusted EBITDA, you see it's positive 19 when it was actually negative on net sales, and this is very much driven by Aibel, where we saw strong, good results in Q4 this year. Then if we move on to FX, we also had a negative effect on top line of the Norwegian krone, but you can see we have a positive effect on the adjusted EBITDA, and this is mainly related to the business area industry, where we saw positive effects in Diab, TFS, but also in Aleido in the quarter.
Then finally, coming to other, you see that we have a negative effect of the Exrail corrections, but we also had in last year, in the fourth quarter, we had quite high M&A costs in the parent company, and we had also costs for restructuring in KVD, which we didn't have this year. Leverage, we talked about that. You can see that we have a good positive trend, so reported leverage is now at 0.7 times. We have good cash flows that reduced the debt that we had, so we repaid debt of SEK 2.3 billion during the year, and we also increased EBITDA during the year. You can also see that the net debt actually was reduced by roughly SEK 2 billion during the year, down to SEK 2.7 billion. Financial targets, these targets remain the same.
We are aiming for an EBITDA of at least SEK 3 billion by 2025, adjusted EBITDA, and leverage should be in the range of 1.5-2.5x. Then we have a target also for dividend payout, and it should be in the range of 30%-50% of profit after tax. As Jonas said, we will going forward focus even more on return on capital. We will look at return on invested capital, ROIC, and measure that in the group and for the business areas and for the companies. We will also in parallel start to look at economic value added for the group and the business areas and our companies. So we will have a lot of focus on that going forward. So by that, I leave over to you, Jonas.
Thank you, Jonas. I think this with return on our capital is a very focused thing next year. I'm not sure I should go through all the numbers one more time here, but my final remark would be that again, it's our best year so far. Secondly, we now have a financial position that makes it possible for us to accelerate the add-on acquisition journey in the companies that are the foundation for the technology and infrastructure group coming forward. When it comes to the markets, I think everyone is aware of that the construction market is under pressure, but also all in all, there is an uncertainty not only about the geopolitical situation, but also around inflation and interest rates. We are humble here. We don't expect a very strong market, but rather maybe a little bit weaker market.
With our strong financial position, we are well fitted to have another great year in 2024. Thank you so much for listening, Josefine.
Thank you. Well, let's open up and see if we have any questions. I think we're going to start off with Henric Hintze for ABG. The line is open for you, please.
Good morning, everyone. Henrik here. So you mentioned an increased focus on add-on acquisitions going forward. Could you just comment a bit on what companies you see the biggest potential in with regards to those?
Thank you and good morning. What we've seen so far is I think we have done 19 add-on acquisitions since we started with that. Many of them have been in HL Display, creating very, very strong shareholder value, very synergistic acquisitions to a low valuation compared to Ratos and HL Display. I think we'll do more there. We will do more basically in critical infrastructure and in industry, both the industry companies we have—I already mentioned HL, but we have Diab there, we have Aibel there—all are companies that could acquire add-ons. Same on the service side with Aleido and Semcon and Knightec. Again, Aibel Presis Infra is also good platforms for add-on acquisitions. Do you want to add something, Jonas?
Okay, thank you. Do you have another question?
Yeah, I could also follow up with: Are you also considering buying up some of the minorities you have in your currently owned companies?
Yes. First, I want to say that when we buy companies with minorities in the SPA, we have a call option to acquire the remaining shares. Before I joined, there were one or two companies that that is not the case, but in general, yes, we will buy up minorities also, and I think you will see that during the coming year even.
All right, great. Thank you.
Thank you, Henric Hintze , for ABG. Let's see if we have Rasmus Engberg from Handelsbanken. The line is open for you, please.
Yes, good morning, and thanks for taking our questions. I'd just like to start off with the working capital and how we look on that going forward. You've, of course, made some very large reductions during the year, but I would like to hear if you have any comments on where you think is a sustainable level and how we should look at it going forward.
Well, during the year, we received quite a lot of advance payments from customers, and that, of course, will be paid back eventually to the customers. So it really depends on what type of orders we will receive and if these orders sort of contain a lot of advance payments from customers. So I foresee that you saw that we had a negative net working capital. I foresee that it might be difficult to remain on that really low level, but we will continue to focus a lot on reducing the capital tied up in the business. So I expect that we will see good levels going forward as well.
Okay. If we are looking on the construction part where you mentioned that there's a slowdown, HENT on one hand has a strong order book, while it might be a little bit weaker in SSEA, could you just mention roughly how your visibility is there and when we should expect to see more of a larger effect?
In the order books for construction, I think we have a fairly good visibility, and now we're really going into single companies here, but SSEA Group and Vestia will do an okay year next year, so it's no crisis at all. They have weaker order books for 2024 but stronger for 2025, oddly enough. So it's not something that's worrying us. Again, we're not into the residential area, and we're not into buildings with projects with private financers that are weak. So we feel quite confident that the market is weaker during 2024, no doubt about that, but it will be good results anyway.
Understood. Just lastly, a follow-up on the M&A add-on question. I would just like to hear how your pipeline is looking for the year. Is it more in a building-up phase, or are you looking for more on execution?
Yeah, I'm happy to bring up that question. I should have mentioned it in my presentation earlier. As you know, you might remember we had a Capital Markets Day in February 2022 when we launched a new strategy and a more focused group, et cetera. The next morning, the terrible war in Ukraine has started, and the M&A market flew away with that, I would say. It has been a very weak M&A market, and many of the acquisitions we've done on add-ons have been bilateral processes. We hope, and I think we all hope, that we will see interest rates coming down and the M&A market open up again, not the least for financials buyers. So that is something that still sort of slows our processes down, is the market situation we have with high interest rates. It's both selling and buying.
Okay, thanks for the answers. That's all from me.
Thank you, Rasmus. Do we have anyone from Pareto online? Georg Attling , maybe?
Yeah, good morning.
Good morning.
Josefine and Jonas. Jonas, I just wanted to start in the construction services business. You talked about this order backlog already, but can you help us just piece together 2024? How much do you have already secured compared to 2023? So just trying to figure out how much did you roll on how much did you execute on the order pipeline you had in 2023, and how will that compare in 2024?
Yes. I mean, we are not giving exact forecasts, and we're not giving forecasts. It's a policy from us. I can't say the exact number, Jonas, but I think when it comes to Norway, we basically have what we need, if you understand what I say, for full year 2024. In Sweden, we need to sell more this year. But it looks better for.
Yeah, and this order backlog, have you started?
In Sweden, it looks better for 2025, which is yeah, that's the case for hard backlog.
But has there been any struggles in rolling out this order or executing on the pipeline or on the backlog or any delays at all?
No, and it's a good question because you might have an order book, and then the byggherre, whatever that is in English, the buyer of the project is out of finances, and that has not happened. We don't think it will happen due to the fact that we have public clients to a large part, and the others are, which is a minority at least today and as we can see, very good balance sheets. So we're not too worried about that.
Okay. Just the final question on the order backlog: Is it that HENT when you say Norway, I guess that's HENT, and then Aibel also, that's really where the strong order backlog is, or does this go for more companies in the business area?
Yes, it's true that we disclosed the backlog for Aibel in the report, I think. We said it was a little bit more than NOK 32 billion, so they have an extremely strong backlog. For HENT, as Jonas said, we have a backlog which makes 2024 a good year. That's what we expect.
Yeah. Yes, I mean, we have backlogs in most of our companies. If I show HL in the industry area, Aleido has had weaker order intake during 2023, however, increasing or holding their market share. Again, in Diab, wind is down, and it's now like 25%-30% of the revenue. We have been approved in Diab for being the supplier of all interior in the new Airbus aircrafts from next year. There is no company sort of where the order books are shrinking fast or going away or so, but I'm just saying that the market in 2023 was better than I thought in 2022. Maybe I'm a little bit negative, but I don't take the market for granted for 2024. That's what I'm saying.
The situation in the company now is, if you look through the order books or so, is good, I would say, except for Speed Group, for instance, which still have very low volumes from their main customer and so on. There are always some problems here and there, but all in all, we stand stronger than ever.
Yeah. Maybe talking about problems, could you give us an update on Exrail and sort of how you stand there, both in terms of the company in itself? Do you feel like you've passed these problems that you're highlighting in the trading update? And also maybe the legal actions that you didn't rule out last time you commented on it.
It's a good question. I just want to reiterate they're 2.5% of our business, but of course, this was a sad story. I think I said last time that the financial numbers are corrected for 2023 and 2022 and 2021 even. Of course, this is also a shock internally for people and so, but at the same time, relief for many. Now we are putting together the documents we need to present our claims. So that's what I want to say about that, and I'm not going to tell you who we will put or which we will put a claim on, but now the important thing in Expin is to focus on the business going forward, and that is a fantastic market, as you all know, not only in Sweden where the situation is urgent in many perspectives for the rails, but also in the Nordics. Okay?
Yeah. Just a final question for me, if that's possible, on Plantasjen. Obviously, very strong cash flows this year that have impacted EBITDA, as you said. Is it possible to sort of quantify the effect on EBITDA the sharp inventory reduction has had?
I can't do it. Can you do it, Jonas?
No, I can't actually, but.
We can't.
It's a lot of money.
It's a lot of money, but we're quite happy with the results in Plantasjen. It sounds strange, but we also or Jesper Lien and his team is now starting on this cost reduction program also for 2024, but I'm very happy we got the capital down.
Okay, that's all from me. Thanks.
Okay, thank you. Georg Attling for Pareto. Do we have Johan Sjöberg, perhaps from Kepler Cheuvreux? Online, please.
Actually, yes, hello. I have just one question. Looking at your comments on the M&A and the interest rates and being both a buyer and a seller, what are you the most, so to speak, here? Where do you see the biggest problem in terms of either to sell or for you to buy right now?
Good question. I'm not sure I can put one in front of the other, but maybe more difficult to sell. You can buy everything, but it depends on what you pay, and so it's a hard question to answer. But if you force me, I would say it's difficult to sell.
Okay. Looking at your M&A pipeline also, is it mainly or I assume it's mainly add-on acquisitions, but are you also looking for platform acquisitions?
Not really, no. Acquisitions that we will do from now on are strongly connected to the companies we have today, if I put it that way.
Perfect. Thank you very much.
Okay. Okay, thank you very much, Johan Sjöberg, Kepler Cheuvreux. Do we have anyone else online who want to post a question? Nope, that was all. So thank you very much for your questions. This webcast has been recorded, and you can also see it afterwards at ratos.com. Thank you so much, Jonas and Jonas.
Thank you.
Thank you for being with us this morning. Thank you and goodbye.
Thank you. See you soon.