Welcome to the Röko Q3 2026 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Welcome to Röko's earnings call for the third quarter. The good pace on acquisitions since end of last year continued in the third quarter and contributing to the year-to-date growth in Adjusted EBITA of 30%, together with organic growth. Note that the net debt-to-EBITDA ratio has increased 0.5x- 2.6x. The leverage metric is impacted by the pace of acquisitions that are phased into the EBITA metric. Since the end of September last year, we have completed six acquisitions. In the third quarter of 2026, net sales increased 44%, and Adjusted EBITA increased 57%. The growth was predominantly driven by acquisitions, as we have completed six acquisitions since September last year, and organic growth of 9%. In addition, we had positive exchange rate differences in the quarter.
The global demand driven by AI and data center investments have resulted in a supply shortage of memory, which benefits one of our companies, ETB Technologies. The company's development has increased throughout the year, and the growth was very strong in Q3. ETB accounted for 6 percentage points of the organic growth in the quarter, and the other companies grew organically with around 3%. I can add that some companies in the group experience challenges relating to the memory supply shortage, but the effects are not material enough to report. The political issues impacting the group performance in 2025 were introduced in the second quarter, and hence, the effect was also impacting the comparison figures for the third quarter last year. We still experience some market uncertainty for companies selling large systems and installations in the U.S. market.
Apart from this and a continued weak construction market in the U.K., there are no specific market phenomena that are relevant, but rather company-specific factors that determine the performance. Several of our companies are handling the situation well and are improving their margins, both in the quarter and nine-month period. For the year-to-date period, the reported margin was flat, but underlying margin increased for the comparable companies, both like for like and with a positive mix. However, offset by recent acquisitions that have a below-average EBITA margin. For the nine-month period, net sales increased 27% and EBITA 30%, and organic net sales growth was 6%. In the year-to-date period, it was partly offset by negative exchange rate differences of 2%, relating predominantly to the first quarter.
Free cash flow after CapEx can be a bit volatile in the quarters in our group, but for the nine-month period, it increased with 34% as a result of margin improvement in comparable companies. Despite organic growth of 6%, the working capital development has been controlled. Note that last year we had costs for the IPO that impacted cash flow negatively with SEK 41 million in the nine-month period. Looking back at some of the recent quarterly reports, I have mentioned an improved market for acquisitions, and in the nine-month period, we have acquired five companies across a variety of industries. The companies have market-leading positions in their respective niche markets. The acquisitions have a combined annual turnover of more than SEK 1.5 billion, adding approximately 24% growth in net sales for the group on an annual basis.
The timing of acquisitions is not a straight line, as you know, and the activity in the first 9 months of this year is a result of improved markets and diligent work by the team at Röko, where several of the companies have been known to us for many years. The team is very dedicated and is working hard to source and assess acquisitions, and I think the pipeline continues to be at a better level than in previous years. Turning to page four. Growth in EBITA was, as mentioned, 30% in the first nine months. It says 20 on the page here, given that we show the LTM number. If we look at the CAGR since the end of 2023, Adjusted EBITA has increased with 17% per annum, despite negative effects of -2%.
The net debt-to-EBITA ratio increased, as mentioned, to 2.6x, explained by the acquisitions and net investments for this totaling SEK 2 billion so far this year. While the reported net debt-to-EBITA is now 2.6x , it's important to highlight that the phasing of acquisitions will have a deleveraging effect all else equal, and also that we are comfortable up to 3x leverage over the longer- term. Can also mention that the leverage split is becoming a bit more balanced as net interest-bearing debt increases and put/call option liability decrease all else equal.
We have a modest leverage in relation to the covenants in our bank agreements, approximately 60% of the covenant threshold. Over the long-t erm, I think it's clear on this page that we have shown organic growth for most of the years, despite 2023, with improved margins across the board and also improved return on capital employed, as you will see. We focus on acquiring companies with good market positions in their niche markets and with evidence in the financial performance through solid EBITA margins and good cash conversion. The pace of M&A has been good in the first nine months of this year, resulting in increased net debt-to-EBITA, which is expected as acquisitions have a direct impact on the balance sheet, but not on the P&L.
Despite this, I think it's very good to highlight that the return on capital employed has improved with 1 percentage point during the year-t o- date period, compared to the same period last year. Return on capital employed increases over time, driven by organic growth in the companies, amortizations of intangibles, and by being disciplined on acquisitions. Turning then to page six. Our free cash flow increased in the quarter and cash conversion was in line with last year, or even a little bit better, but remember that we had IPO related costs in 2025. We're always working with our management teams to improve cash flows, and currently, we monitor potential extensions in delivery times closely. Return on capital employed increased, as mentioned, to 15.5%, driven by profit increases in the comparable companies, however, partly offset by recent acquisitions.
The ratio can fluctuate a little bit due to the timing of acquisitions, but we aim to increase it over time through organic developments and disciplined acquisitions, as mentioned. I urge to look at the development over a longer time. The return on capital employed, excluding intangibles, remain at a high level, evidencing the asset light group of companies. It declined a bit due to some of the recent acquisitions having been companies with more in-house production and hence a little bit more asset heavy businesses. Acquisitions in line with our investment criteria and disciplined valuations are attractive for us, and we don't pass on them even if they have a negative impact on return on capital employed in the short term. Röko is a group of niche companies that predominantly grow through acquisitions. Since 2019, we have completed more than 40 acquisitions, and five so far this year.
We're sector agnostic, but strict in our criteria, and therefore, the timing of acquisitions is not linear, but we have now managed to acquire approximately five companies per year on average and added high quality niche companies to the group at an average EBITA multiple below 8x . I can say quickly on the five acquisitions this year, that we believe they all have strong market positions in the respective niche markets, and financial performance that evidence that. With that, I will hand back to Vena, who will moderate the Q&A session if there are any questions. We ask that you please ask your questions verbally. Thank you all for listening in.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Alex Upman from Danske Bank. Please go ahead.
Hi. Congrats on a great quarter. I was wondering a bit, given the strong growth for the quarter and 6 percentage points from ETB, how should one interpret this and what is that sustainable growth rate and what should we expect regarding this? Thanks.
Thank you, Alex. What I can comment in relation to ETB is, I guess the AI development is no news to anyone on this call. Many of us likely experience the benefits from various models daily, and the investments to support the technological development are vast. Several of the best performing companies, I guess, on a global basis in recent years are companies that supply various products for the AI infrastructure. ETB is well-placed. They're doing a great job. We are just happy with the development. There's no possibility for us to say how long this will continue at this level. But I think what is important to also bear in mind is that the group, apart from ETB, is also growing organically.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you all for listening in. Have a great day.