Hello, welcome to Sdiptech's Capital Markets Day. Really exciting to be here because it's been truly a very exciting year for Sdiptech. There's been a lot of new high-quality companies joining the group, and they've been switching from First North to Nasdaq Stockholm, and as you know, now being part of the large cap segment. They are releasing long-term sustainability goals, as well as also growing in this rapid phase, both profit-wise, but also when it comes to more people, and also entering new markets, of course. Really exciting day, afternoon, I would say, here today. In addition to this, you probably heard that Sdiptech announced that they are raising their yearly acquisition goal from SEK 90 million to, well, we will ask Jakob about that, what it is today when it comes to the added EBITDA.
My name is Linda Nyberg, and I will be moderating this afternoon, and I'm happy to welcome you all, of course, and we have a really strong agenda, as you can see probably what we're going to do today here. We're going to have exciting discussions from Sdiptech's most important business divisions. We will have CEO Jakob Holm, of course, who will answer one question, the one you already heard, but also questions from you if you want to. We will also hear about Sdiptech's history, a lot of interesting events that have happened, but also going forward, of course. We will also dig a little bit deeper into the main business areas, which is Water & Energy, and Special Infrastructure Solutions. It's time for the sustainability and IR manager of Sdiptech to talk about the sustainability goals.
After that, acquisition activities and how to reach, of course, the new goal. Finally, the financial position, which is really interesting, of course, with the CFO, Bengt Lejdström. Before I hand over to Jakob, you heard me saying you can ask questions, and as you can see, if you watch the screen carefully, there's a little chat. Please send in questions, and we already actually got some, so keep sending them in, and we will try to answer as many as possible. Now, I would like to hand over to the CEO, Jakob Holm. Welcome. Should get some big applause here.
Yes.
Welcome, Jakob.
Thank you, Linda.
You want to answer the first question from SEK 90 million to?
To SEK 120-SEK 150, a span, as probably the majority of you have identified already. We're raising it from SEK 90 to a span, SEK 120-SEK 150.
Amazing.
It's a significant increase.
Significant. Well, very exciting. We'll have more questions for you after your presentation, Jakob. Please go.
Thank you very much. Just hold on. Some technical preparations, which should not be that difficult.
I'm impressed how you're actually using the computer to get it working.
Yes.
That's high tech.
It is.
That's what you're working with, right?
Yes, we do. We try to keep up also with the ordinary daily stuff, like this one.
Wow.
There we go.
Very impressive.
Turn it the right way. All right, there we go.
Okay.
All right. Thank you, Linda.
Thank you, Jakob.
Ladies and gentlemen, welcome to our Capital Markets Day. A lot of you have registered. It's a large audience. We're very happy for the strong interest about our company. I'm very happy to let you all meet the entire leadership team. It's an amazing team, a lot of talent, and very hard working. We are an infrastructure technology group. A guiding principle for us is to focus on sustainability, efficiency, and safety. We will get back to that. We have a decentralized model. Our companies are predominantly in the Nordics and in the U.K. SEK 2.4 billion in net sales last 12 months. Profitability margin, that's gradually increasing over the years, currently at 17.6% operating profit. Going back to growth, the most important growth metric is, of course, profit growth.
35% CAGR, approximately, over the past five years, and actually, we've increased our growth pace this year, so slightly above 50% year to date. Have a brief look at our business model. Our overall goal is to create value by increasing profits every year. We're very much geared towards that. We do that by acquiring niched companies, but also developing our companies, of course. When we build our group, it's very important that it consists of strong building blocks. Our strategy is really to focus on companies that are niched and specialized with defendable market positions, and one way to identify that is through the high margins. That's also a reflection that our margins are growing. The graph really shows what we are achieving in terms of value creation, so we're very pleased about that, of course. Moving into our underlying drivers for growth.
I've showed this very many times, I will not dig so much deep into all the details. We have the volume drivers on the left-hand side. The sector is underinvested, over foreseeable future, the underlying demand and growth is steady. Moving over to the right-hand side, that is more about the need for development within the sector. Our guiding principle has been for quite a few years now, sustainability, efficiency, and safety. That is important to us. It makes what we do relevant for societies, It's also a lever for growth. Today, we would like to introduce a new, and what we believe is a lot more relevant view on what infrastructure actually is. Traditionally, it's viewed as roads, railways, tunnels, bridges, power grids, so forth. However, the world is developing. There's a lot more areas that are important for well-functioning societies today and tomorrow.
Just a few examples. Clean air. Clean air outside, but also clean air indoors. Very important. Safety in public spaces, increasingly important. Support for disabled people throughout our societies. We want our mobile phones to be secure. We're becoming more and more exposed to that. There are many more examples in a broader way at looking at infrastructure. In addition to that, there are certain things that we really have to achieve. We have to become, as societies, more energy efficient. There is technology to achieve this. We have to bring down global warming. There is technology to achieve this. Of course, there's a lot more that has to be done. We have to produce food for billions of people around the world without destroying the planet while we do it.
There is technology to facilitate that, but there's a lot more that needs to be done. A more forward-looking and more relevant view on infrastructure must include this. The way we look at it, infrastructure is components and systems providing commodities and services that are essential to enhance societal living conditions and improve the surrounding environment. As I said, we as a society, as a planet, we need to do a lot to achieve this. We are very proud to be part of it. It makes us more relevant, but it also broadens, and this is important in terms of our acquisition goals. It also broadens the sectors for us to invest in. More about that later from my colleagues. Here's a slide which is totally impossible to read. That's not really the purpose. It's an excerpt from our sustainability report.
It describes which of United Nations Sustainable Development Goals that Sdiptech contributes to. The purpose with the slide is rather to show the breadth of our impact. Sustainability is not something that we add to our communication to look good. It's really our core business. That's what this slide illustrates. We are really proud of the impact that we have, and it gives us a strong purpose. Regulations and improvements to societies are implemented into our infrastructures. Our line of business has a very natural role in several of United Nations issues. As a result, we as a group contribute to 13 out of United Nations' 17 goals, as well as 38 out of the 169 targets. In June this year, we presented our sustainability goals. The first one around financial sustainability really is a reflection of the background of this slide, what I talked to previously.
It's about the real impact from our core business, the products and services that we sell every day, and how these products and services in return contribute to the goals. This is, of course, relevant also for our future acquisitions. The second goal, we are all facing a serious threat. We must contribute, all of us. Sdiptech is not an exception. Sdiptech, we must change internally, of course. Do we have all the answers on how to achieve this? No, we do not. We have ideas, we have ambition, and we are mobilizing to achieve the change. It's really crucial. The third goal, about gender equality. Infrastructure is very heavy on engineering, traditionally, it has attracted a lot of men. It's still very much the case. Anyhow, we believe that gender diversity really brings value to our business, we have our own experience of that.
In our own companies when women have assumed leadership roles, it has been a fantastic and positive impact. Given the nature of our sector, it is a challenge to us to achieve this goal. Nevertheless, it's very important to us. The fourth goal is about bringing it all together, setting specific goals for each of our businesses, how they can improve with regards of our overall goals. Our decentralized model is very well-equipped for these kind of targets. Every year, we've been doing so for a couple of years, we set financial goals and milestones for all our companies. Now we will also add sustainability goals and milestones. The financial and the sustainable goals will be side by side for all our companies.
Our Sustainability Manager, My Lundberg, will elaborate on our work later on, and there's also a lot more information on our website. Then finally, the day before yesterday, we presented updated financial goals, like Linda said in the beginning here. We've increased our acquisitions target. Why have we done that? Well, because we're ready for it. It really gives me and the entire team, and the entire group, great pleasure to present this. As a group, we have grown in size, as you know, and of course, our financial capacity has also grown in line with that. Bengt, our CFO, will develop that further. Sustainability efficiency has, for a couple of years, become a specialty of ours. It has opened our eyes to interesting opportunities and how we can become more relevant. Our Head of Business Areas, Fredrik and Anders, will detail that further.
Since we entered the First North stock exchange, 2017, we have significantly sharpened our acquisition criteria. That is because we understand the importance of the high-quality building blocks when we build our group. We should not only be successful two or three years, we should be successful for decades. Over the past seven years, we've developed our acquisition methodology. We've built a significant amount of structured capital that really helps us achieve our goal, and that is really to find and reach out to high-quality companies that are unknown to many. Steve and our Head of Acquisitions will develop that further. For us, this is a very natural step. It's more about evolution. We are more than ready to do this. Already this year, we have exceeded our previous acquisition goal. As I said, we're very happy and pleased to finally present this to all of you.
By that, I welcome Linda up to stage again, and we open up for questions.
Thank you, Jakob. It's really exciting to hear here. When you showed that slide, I was like, "Oh my God, what's he showing?" I can't read. As you said, I think it's just amazing looking into the 17 Sustainability Goals from the UN, and you are 13, 14 already on them.
Yes.
We have loads of questions coming in, but one of the first ones here is, now when you're growing and with your latest acquisitions and Rolec being bigger than your sweet spot between SEK 10-SEK 15 added EBITDA, will you focus on bigger acquisitions moving forward?
That's correct. Rolec was larger than our sweet spot. We will stay within our sweet spot, SEK 10 million-SEK 50 million overall, internationally, SEK 20 million-SEK 50 million. That is our sweet spot. That's why it is a sweet spot. However, we are looking at larger companies as well. When the opportunity is right, then we will take it. The majority will be within the sweet spot.
Okay. The second question, there's loads of questions coming in here, but the second question we have received is what will happen to PTS? Will you divest the two remaining business units?
Yes. PTS, our business area, Property Technical Services, that's right. We started the year with nine companies. There's two remaining after our divestments. The two that we have, we will keep them.
Okay. Mm-hmm.
Gradually, of course, PTS as a business area has shrunk now, so it cannot stand on its own. These two companies will eventually be merged into the other business areas.
Okay. If you're not happy with the answer you sent in, just email us again. Not email, but the chat. Okay. Here we have a question. Will you need to improve headcount meaningfully in existing geographies to handle the additional M&A as per your updated M&A target?
Okay. Steven will elaborate more on the actual markets where we will enter. For those markets, two of them, we will recruit people on the ground. One headcount per market to start with.
Okay. Good. I think if there's more questions coming in, I guess you will answer them later and after this show, right?
Sure. Absolutely.
I'm sorry, Jakob, your time's up.
All right. Well, thank you so much. Thank you, everybody.
Thank you, Jakob. We have the next person coming in here. Very exciting, because we're moving into Water & Energy. After Jakob here, we have Fredrik Navjord. Welcome on stage. We will talk about the biggest challenges within your field. You will talk about the trends and of course, opportunities.
Yes, of course. Thank you very much, Linda.
I'll leave you to your presentation, and then I'll be back.
Perfect. Thank you very much. My name is Fredrik Navjord. I'm Head of Water & Energy here at Sdiptech, and my ambition here is to give you a bit of a short background as to the problems that we are seeing within Water & Energy for society, and also how we aim to be a part of the solution. Starting with water. Water stress, which is the pressure on quantity and quality of water, has been ramping up quickly over the past decades. We have a growing population that's rapidly moving to urban areas. Demand for clean water is expected to increase by 40% over the coming 10 years. We have an aging infrastructure in Europe. Some parts of the water networks are over 100 years old. On average, 30% of all freshwater is lost to leakages every year.
In urban areas and cities, these numbers are even higher, reaching over 70% water loss for some major cities. In some places, demand already exceeds sustainable supply, and in other areas, water shortage is a serious hindrance to economic growth. Southern European countries are, of course, particularly affected, but we also have water shortages in some densely populated Northern European countries like Belgium, Denmark, and U.K., for instance. On top of this, we expect to see major impact from climate change. Dry areas will get drier, wet areas will get wetter, leading to floods. Current infrastructure is in most places not able to handle the current levels of rainfall that we're seeing. I think just looking at the news during the summer, seeing the floods in Germany and the U.K. are good examples of this.
As countries are becoming more and more aware of these problems, they are turning to legislation to try to fix the problem, putting increased strain on both producers and consumers to adapt to these new levels and rules. There are a number of very strong growth drivers within the water segment that will remain for the foreseeable future. How do we play a role in solving these challenges? Starting with the Water Treatment Products, they are one of the leading water treatment companies in the U.K. They formulate, manufacture, and supply specialty chemicals for a wide range of areas, everything from water production to energy, and heating, cooling applications, et cetera. They also play a vital role for the customers in meeting new legislations and making sure that their customers live up to the new standards. Polyproject Environment is another company.
They build systems for industrial, potable, and wastewater treatment, and they do customized solutions, adapted to each customer's specific needs, whether it be freshwater pumping stations or it is highly polluted industrial wastewater. Third one, Topas Vatten. They do installation and service of wastewater treatment plants. Whether you have problems in a single household or for an entire municipality covering hundreds of households, they can solve the issue for you. Last but not least, we have Auger, a U.K.-based company. They work with detection, prevention, and repairing water leaks. Now, I gave you some statistics a few minutes ago regarding water leaks in Europe. Since Auger is a U.K.-based company, let's look at London in specific. The majority of the London water mains were installed over 60 years ago. Some parts still in use are over 150 years old. London has a huge problem with leakages.
Each week, over 1,400 leaks are being repaired. Despite of this, you have 500 million liters of water being lost through leakage every single day in the U.K. capital. Switching over to the energy sector, we have similar problems here. Urbanization is a key factor here with a large and rapid influx of people to cities, increasing base demand and also straining already troubled areas. The electrification trend is also pushing and adding strain to our power grids. I think one of the major good examples here is the move we are doing towards electric vehicles. Now, most European countries have declared that by 2030, you will only be allowed to sell fully electric vehicles. We only have eight years to do a complete rollout of a charging infrastructure in Europe that works.
On top of this, our current infrastructure is, in a sense, built and designed for a very stable and steady electricity generation, from hydropower, nuclear, oil, gas, et cetera. The switch we're about to make towards renewable power, such as solar and wind, changes this completely because there you have a changing power generation on an almost minute-by-minute basis, putting incredible strain on our networks. Combined, this leads to three major problem areas, I would say. One is power generation or our ability to generate enough power to serve us over a period of time, a year, for instance. The second one is available power, making sure that we have power at a specific point in time when we need it. The last one is grid capacity, making sure that we can use power where we need it.
Using Sweden as a concrete example, here we have a clear disconnect between where power is being produced, which is predominantly up north, to where it is being used and needed, which is down south. In Sweden, we don't have a power generation problem. We have enough power being generated in total, but we have severe issues with power availability and grid capacity. Meaning in most Swedish major cities like Stockholm, Uppsala, Västerås, Malmö, it's not possible to build new industrial companies. There's simply not enough power to do that, and that poses a major hindrance to economic growth, of course. Overcoming these obstacles will be both difficult and require enormous investments in the coming years. How are we part of the solution then? Starting with IDE Systems, they develop and produce hardware and software for temporary power supply with the focus on reducing inefficiencies.
This in turn then leads to an overall decrease of energy consumption, of course, for the customers. Moving on to the rapid development within electrification, we have Rolec. Rolec is one of the largest providers and manufacturers of electric vehicle chargers in the U.K., so having supplied and installed over 200,000 electric chargers in the past few years, and they're similar in size to Garo eMobility . Looking at the power distribution challenges, we have Centralmontage. They build and develop customized switching stations and electrical automation units. Lastly, we have Unipower. Now, I mentioned briefly previously that the migration towards renewable energy will put a lot of strain on our power grids due to the fluctuations in power generation.
What Unipower does is they develop power quality measurement solutions, making sure that you can identify and fix problems on the grids before they cause breakdowns or major issues. These are some short examples on how we are involved in the solution. Looking at water and energy, they are both basically resources where demand exceeds supply today. The problem we are facing is really a resource efficiency problem. When we take a step back and look at them like that, there are a number of adjacent areas that fit very well into this resource efficiency way of thinking. Take the connection between water and agriculture, for instance. In Europe, over 50% of all water is used for agriculture, and from this, 50% of that, so 25% in total, is used in a very inefficient manner, so not helping to grow crops at all.
By using and supplying more efficient water to agriculture, we're both helping to solve water stress, but also helping to solve the need for increased food production. There are also natural ties between water, electricity, and waste management. Where efficient waste management both reduces the required energy to handle the waste, but also decreases the risk for water contamination to leachate, for instance. There are a lot of areas like this interesting for us to look at. As a result, we have now expanded our focus to two more business areas. The first one is called bioeconomy that's connected to the use of renewable biological resources such as agriculture and crops, forest, fish, et cetera, to produce food, materials, and energy. The second one is waste management and recycling.
That's focused towards solving the increasing problems with waste and also harnessing the potential of recycling, reuse, and circular economy. These areas are two example of where we can leverage our existing knowledge and expertise, add new interesting companies that fit very well into our focus on sustainability, efficiency, and safety. Just like with water and energy, the focus here will be to find great companies with a strong product solution and service offer. Finishing up by looking at the financial development within water and energy for the past few years, we can see a stable earnings growth, but also stable margins growth. Successful acquisitions have, of course, played a major part in this, but we've also seen a very stable organic growth.
COVID initially impacted some of our companies quite severely in 2020, but we were able to rapidly readjust them and revamp them, increasing margins and also making sure that we provided very good end result for 2020. Looking at the margin increase over time, this is an effect of both adding companies with higher margins, of course, but also through added margins in our current companies through business development efforts. Our future ambition is, of course, to continue to add more interesting high-quality companies with a margin over 50%. The new areas I just presented will, of course, open up a whole new area of interesting high-quality companies for us to look at and add to the group. I think Steven Gilsdorf, our Head of Acquisitions, will go into this more deeply in a minute or two.
In summary, society is facing a lot of challenges, but this also opens up for a lot of new opportunities. We aim to be a part of the solution and of course, leverage these opportunities as they arise. Thank you very much for listening.
Please stay.
Thank you, Linda.
Thank you. That was also some quite shocking news being a former journalist, I'm like, the leakage in London, and that's just one city.
Yeah. It's quite severe.
It's quite severe. Looking into other bigger cities in the world, I was really blown away when I saw this. Apparently looking into the amazing companies, there are things that can be done.
There are a lot of things that can be done and are being done.
Are being done as well. Mm-hmm.
Yeah.
You mentioned Rolec as well. We're getting questions in, if you're ready.
Okay. Sure.
One is, which are the largest companies within the business area, Water & Energy within you?
I would say at this point in time, it's Rolec, of course.
Yeah. Mm-hmm.
We've got Water Treatment Products and Multitech Site Services are the large ones.
Okay. Are you ready for one more?
Yes, of course.
Yeah. How cyclical are the companies within your business area?
It's a good question. Two of the key aspects we look for when acquiring new companies is stability and non-cyclicality. Based on that, there's not a lot of cyclicality in there. Some companies, of course, have an exposure towards new construction, and that in itself is somewhat cyclical. We have companies within energy and water that their products are being put in the ground. In the northern climate, of course, during ground frost season. Late winter, they have less activity, but again, then they have more activities in the summer and spring times.
Makes sense. Mm-hmm.
Overall, a limited cyclicality, I would say.
Well, more questions if they come in, we will let you handle them afterwards. Thank you for all the questions coming in. Thank you so much.
Thank you very much, Linda.
See you later. Okay, after Fredrik now, we have a really interesting, of course, another presentation coming up. I think that all of you have been really good at sending in questions. It seems like loads of questions coming in. We have to move on. Now it's Anders Mattson, who will actually talk about Special Infrastructure Solutions, because that's what you're head of.
Yes.
Welcome.
Thank you, Linda.
Are you ready for questions afterwards?
Yeah, definitely.
Great. We will let you talk now about driving forces and the segments within this business area.
Okay. Excellent.
Go ahead.
Yeah. Just going to try to find the slides here. One more. Okay. The business area Special Infrastructure Solutions consists of three defined segments. That's transportation, safety, security, and air and climate. What we mean by transportation, we include all means of transportation. That could be road, it could be air, could be rail, could be Yeah, I think I covered them all there, and all applications linked to those networks. The key challenge within the transportation sector is the continuously increase of number of vehicles in the networks, and at the same time, we need to get rid of the death, the major incidents, the injuries. Just in Sweden, during the last 50 years, the number of cars has doubled, and at the same time, the death rate has decreased by 85%.
The trend is there, it's happening, but we need much more investments going into this area to protect the people even further. The other segment, safety and security. By that, we mean product and services relating to protecting critical assets and sensitive information, but also personal safety. Sorry, I'm not standing here. I need to stand here. Sorry. Okay. Sorry. Yeah. Sorry, I lost my train there. Anyway, in safety and security, it's very important that. Sorry. No, I forget. Yeah.
I think you get disturbed because there's loads of questions coming in.
Yeah, okay. I was standing here wrong.
No, sorry about the screen.
Sorry. Yeah.
The key challenges that you talked about now.
Yeah, mm-hmm.
Would you like to emphasize something more? I think everybody can see the slide, but is there something you want to really.
Yeah. No. Yeah.
It's regarding the safety aspect here.
It's roughly around 60% in the U.K. of the adult people they felt very or fairly unsafe if they walk alone in the dark. It's pretty obvious that the perception of the safety is not there in the society today, and we need much more investment going into that area.
Yeah.
Very important area. Mm-hmm.
Yeah.
The last segment is air and climate, and a key challenge within this area. Is the increasing health problems due to poor indoor air quality. An interesting data point is that roughly 10% of the children in Sweden, they actually report some kind of symptoms due to the poor indoor environment. We spend much more time indoors, and it's obvious that the climate or the air is not good enough in the schools today. Just looking at those mega trends, the challenges, it's pretty obvious that we will be needing a lot of investments going into this area in the future. That's a good start for us. Okay.
Important areas.
Yeah. Moving in to the transportation sector. Here, key trends within the transportation area is, first, one, safety aspect. I already touched upon that one. Many cities around the world are committing to a Vision Zero, so no death in the traffic systems. Our company, RedSpeed, they're working with speed cameras, red light cameras, and also distracted driving cameras. It's not only sophisticated cameras, but it also very sophisticated software attached to that because you need to be able to understand the pictures from the camera. They have a very strong position within this safety aspect. If we talk about another trend, efficiency and automation. I talked about that, increasing volumes in the transportation networks. To cope with that, you need more efficient processes or actually automated solution.
Our company, Hilltip, they work with road safety equipment, so primarily salt spreading machines and snow plows. Not only that, they are also having some really strong tracking solutions. If you have a fleet manager, you have 100 cars, you can actually track who's doing what, the amount of salt that is being spread, and you can actually also integrate that into the customer's software. Let's say a municipality, they want to pay only for the amount of salt being spread on a specific road that day, for example. That's, of course, driving a lot of efficiencies for that customer. Another key trend is the shift away from the fossil fuels. We know that vehicles, of course, vans and cars, are moving to completely electrified solutions, but also the applications need to adapt to that.
Our company, GAH, in U.K., they're working with refrigeration solutions for last mile deliveries. When you get the groceries to your home, they come in with vans, of course, with refrigeration solutions inside. They also now need to develop solutions that is completely driven by a battery pack. It could be a separate pack, but it could also be integrated into the car or the van's batteries. They have a solution for that is called E-Fridge. It's becoming extremely attractive by supermarkets in the U.K., and we hope to expand that in other countries as well in the future. That's around transportation. If we then move into the next segment, safety and security. Key trends here, I talked about it already, the protection perspective that it's continuously drive for protection of critical asset and sensitive information.
Our company Cryptify, our software company, I should say, based in Gothenburg, Sweden, they work with encrypted communication for voice messaging and actually video conferences as well. If you are a government office and you don't want to use WhatsApp or Teams, you can actually use an on-premises solution from Cryptify, much more sophisticated and enable that kind of protection that is needed for sensitive information. Another key trend is around personal safety. We know the increasing need for product and services in regards to personal safety, and specifically around the working sites. Alerter, our company from U.K., they're working with fire alarm solutions, especially for deaf people, primarily within a school environment. It could be teachers, it could be students in a school environment.
They get actually a messenger vibration signal instead of just being dependent on a light solution, which of course is much more secure for those people with hearing disabilities. Okay. We are moving on to air and climate. A key trend within air and climate, we already touched upon that one as well, and that's regarding regulations, increasing regulation for the air quality, but it's also driven by well-being from individuals. Actually it's a very strong driver for improving the air quality. Our company Medicvent, based up in northern part of Sweden, they are providing products and services for cleaning air in hospital environment. They're taking out dangerous gases and smoke so that the people that work in the hospital environment can actually breathe clean air on a daily basis.
They have a very strong position in Northern Europe and are growing with distribution models in those countries. Another key trend is around monitoring and sensing. If you want to create that specific climate that is needed in a commercial building or in an industry application, you need a lot of data information to be able to know what to do, how to change the heating, the cooling, the ventilation to optimize that. That's exactly what KSS, a company based here in Stockholm, they are targeting commercial buildings primarily. It's a lot of data-driven analysis to optimize the climate and to save energy, of course. Okay, moving on. My last slide here regarding the financial development in the business area.
If you're looking at the graph, you see pretty nice growth trend over the years. The key driver for that has been successful M&As that have been adding to the business area. We have actually had a very stable organic growth as well. The target between 5%-10%, as you know. Also something that I'm very proud of is the resilience during COVID. We actually not only expanded the margin, but we actually managed to grow as well. That's a pretty strong evidence of our good companies out there. Regarding profitability, if you see the average there at the rather high level, around 25%, we see a slight decrease now coming into 2021. That's due to our GAH, our company, a rather big one, coming in late last year, around 17% margin.
That of course is pushing down the average margin for the complete business area. Final one about the future. The future margins will depend on coming acquisitions. We are targeting companies between 15%-30% in margin. I would love to say only 25%, 30%, but it's a lot of good companies out there around 15%, 20% that we're not going to say no to them. I think the key message is that we are very selective in the M&A process. We're not going to add companies just because we want to grow. That's not our philosophy. We are selective, and we just going to add high top quality companies to the business area. Okay.
Thank you, Anders.
Yeah.
Loads of questions from me, but I know loads of questions are coming in as well.
Okay, good.
One from me is like, the majority then of the turnover from your business area comes from products, right?
Yes.
Yeah. How does these component shortages that we're reading about pretty much every day? I mean, how does that affect the companies within SIS?
Throughout the pandemic, w e have been very clear that the key target is to be able to deliver. To supply the customers with goods. We have actually tried to increase inventories. To cope with that. We see actually greater challenges now coming into quarter four and maybe next year. Yeah, we are trying to keep up with inventories, and then of course, some cases, we can actually change components to be able to go for more standard components instead of customized stuff.
Okay.
That is also helping us. We can see that now.
I've received another question here. From the audience about EBITDA margins within SIS, of course. What would you say is a realistic margin in the future?
We were coming from last year then at 27%, and we see it coming down. I would say that. Yeah, it will depend on a lot of the common acquisitions to come. The 27% last year was really high. Now we're coming more down to 25%. It will depend in the future on what kind of companies we're adding to the group here.
Okay.
The business area.
Last one is, do you see any other potential areas and segments within SIS?
Yeah, we talked about where we're going to grow. I think here, my first slide is showing the challenges in infrastructure today, and I think it's a lot of possibilities within those three areas we have today. Just expanding to other geographies as we're looking into. I think that's going to give us enormous amount of companies to add. Then I think in the next step there will be to maybe add another segment or two.
Very interesting. Thank you so much, Anders.
Okay, great. Thank you.
Thank you. Thank you also for listening and all your questions. Now we're moving to our next topic. Well, we say the word pretty much in every sentence here, but it is of course, sustainability. We have Sdiptech's Sustainability and IR Manager here, My Lundberg. Welcome.
Hello. Thank you.
My, we will give the stage to you, and afterwards, I think there are going to be questions.
Thank you.
Go ahead.
Thank you so much, Linda, for the introduction. Hello, everyone. My name is My Lundberg, I work with sustainability and investor relations here at Sdiptech. When it comes to sustainability, there are really so much to talk about today. With a limited timeframe, I will focus on our newly set goal, as well as how we work towards them. For those of you who's been following Sdiptech for quite some time now, I'm sure that you seen or heard us saying this many times before, that Sdiptech acquire and develop market leading niche companies with products and services that contributes to more sustainable, efficient, and safe societies. This is really the core in our business. It's what we do, it's who we are, and it's a purpose and reason to act.
Jakob already touched a little bit upon the SDGs and the fact that Sdiptech contributes to 13 of the 17 goals, as well as 38 of the 169 targets. Six of these targets are connected to the Sdiptech group operation. However, our most important contribution occurs through the products and services that Sdiptech's business units offers. Therefore, while we were working on setting our sustainability goals, it was very important for us to make sure that the core in our business to acquire companies that contributes to more sustainable, efficient, and safe societies was integrated into this goal. Therefore, our first and perhaps the most important goal is that all the companies that Sdiptech acquire should contribute to one or more of the SDGs. How do we ensure this?
Well, according to our philosophy, companies with a sustainable business model and few sustainability risks has a better potential for long-term profitability and growth. To support this and ensure this idea, we created a handbook for responsible investment last year, including sustainability criteria in the acquisition work selection process. This is developed with three approaches. The first one is exclusion, which means that we opt out companies. The second one is inclusion, which means that we select specific companies. The third one is influence, which means that we develop our existing companies. Let's dig a little bit deeper into this. In line with our philosophy, as I said, we— oh, sorry. We do not invest in companies that are involved in the production or distribution of sectors such as fossil fuel or, for example, products and services that are critical for active warfare, et cetera.
These are some examples of sectors that we strictly exclude. In addition to specific sectors, there are also a couple of sustainability issues that we need to consider. It could be in connection to a specific industry, but it could also be in connection to if we are looking into acquiring a company that are active in a region where there is a lack of compliance when it comes to, for example, transparency, human rights, working conditions, corruption, et cetera. That was a little bit about the excluding part. Of course, there is much more about this to read about on our website, in our handbook. If we move on to the including approach, and as I mentioned, our philosophy is that companies with a sustainable business model and few sustainability risks, have a better potential for long-term profitability and growth.
We have been focusing on acquiring companies that contributes to more sustainable, efficient, and safe societies for many years now. This is really nothing new to us. Moving forward though, we will do even deeper sustainability analysis, both when it comes to the sourcing process when we are evaluating a company. For example, to map physical and transition-related risks and opportunities according to the TCFD. Also when we are in dialogue with companies to make sure that before we acquire them, we really discuss deep discussions about their view on sustainability, what are their biggest impact, and how do they work with these topics. Finally, the third approach, which means influence, or that we are developing our companies.
We believe that as a long-term owner with no exit strategy, we have the opportunity to develop our companies in a more sustainable way to help them make sustainable decisions. This leads us to our second and our third goal. As mentioned, we have for many years now, been focusing on sustainable acquisitions in line with our first goal. Going forward, we will focus just as much with the internal issues to help our companies develop and make long-term sustainable decisions. This is also established in our environmental and social goal. Because the same way that our biggest contribution occurs through our business units, it's also where we have our biggest impact. Of course, these are really important questions for us to work with. Now you might wonder how this works in a business with a decentralized model like the one we have.
I'm going to talk a little bit more about that. Firstly, due to our focus on sustainable products or companies that have sustainable products and services, you can say that sustainability is usually already an important question for these companies, and they understand the value of working with these issues. Still and of course, we don't take this for granted, and we do really want to emphasize to our companies that working towards our ESG goals can be financially value-creating. For example, by attracting talent, building equal teams, reducing costs through resource efficiency, et cetera. Therefore, we have created a handbook for our business units with a lot of inspirations and checklists with activities that can improve their operations. For example, how to streamline the processes and thereby reduce costs, or to help them improve their offering for the customers. Firstly, we inspire and educate.
Secondly, we have been collecting ESG data for many years now from our business units. This is a really good starting point to map the current situation, looking at each of our company's development, the biggest impact, the biggest challenges, and opportunities. Of course, each effort that we discuss with our companies, they will differ from company to company. This is followed up on board meetings and strategy meetings with each of our companies. We discuss these matters further and make plans. Finally, when we have a clear view on what can be done, we set individual goals for each of our companies. This leads us to our fourth sustainability goal.
Since ESG is a central strategic pillar in our business model, the fourth and final goal we really think ties the sack together, saying that all the companies within the Sdiptech Group must have incentives that are linked to sustainability-related goals. The four goals follow a clear structure that is integrated both to the acquisition process of new companies, but also the development of our existing ones. The fact that we link incentives to our sustainability goals, both for the individual business units, but also for the group as a whole.
It has a very important signal value that fits very well into our decentralized model, giving our business unit that extra carrot and showing them that these are highly prioritized questions within the Sdiptech Group, and that we really do believe that companies with a sustainable business model also has a better potential for long-term profitability and growth. I think that's my time. I'm going to welcome Linda back up here again to see if you have any questions for me.
Thank you, My. Very impressive work and very ambitious.
Thank you.
Questions coming in here, but one of the questions I had is that all your companies within the group must have incentives linked to the sustainability goals we just saw, but with 30 different companies, how are you going to do that?
Yes. Well, it is an extensive work, o f course, but it is also because it's important for us. As I mentioned, we have started to map the current situation, and we have started the discussions with our companies and making plans. We are aiming to have a plan and incentives- Goals for each of our companies in the beginning of next year, so Q1 2022.
Okay. Here, ESG, talking about that, can you elaborate/quantify the KPI-related incentives for your subsidiaries' management teams?
Yeah, sure.
It could be, for example, strictly or purely financial incentives. For people in leading positions within the companies. It can also be investment support.
Okay.
for sustainable projects. It can differ a little bit.
Mm-hmm. More questions. There's lots of questions coming in, but another question is, your climate goal is set in relative numbers to turnover. Is that enough, or should you not strive for absolute numbers?
Okay. With our business model and o ur acquisition ambition. That's a very tough goal to aim for and something that is very hard for us to promise. We believe instead that we can help the companies that we acquire to develop in a more sustainable way, and in that way, actually make a difference.
Tell us about your gender equality goal.
Okay. Jakob talked a little bit about that. I think 100% of the managing directors of the companies that we have acquired are men, so this is definitely a challenge for us. We are working with education, we're working with succession planning and external recruitment, et cetera. We are working with this, and it's very important for us because we see that it's very rewarding. Today, we are actually 30% of the management of our business units are actually women. We are going towards the right direction, but it's a work in progress.
Yeah. It's not just you. The whole world, I would almost say, is striving when it comes to that. Another question is, what percentage of revenue is taxonomy-aligned?
That's a really good question. I think every company right now are working, trying to figure out the reporting for Taxonomy, and so has we. We have started the work. We don't have that exact number yet, but we see that we have a lot of business units that will be Taxonomy-aligned. We will report that in our yearly report next year.
Thanks, My, and thank you everybody here for the questions. Thank you, My.
Thank you, Linda.
We're moving on. Very exciting afternoon, and we're not done yet. We're going to have Sdiptech's Head of Acquisitions now, of course, and that's Steven Gilsdorf. Welcome. You newly just set a acquisition target. We heard about it, and I guess you're going to tell us how to work towards it as well.
That I will.
I'll let you go. The stage is yours, Steven.
Thank you, Linda. Good afternoon, everybody. My name is Steven Gilsdorf. I Head up the Acquisitions team here at Sdiptech. Today, as Linda said, I'm going to tell you a little bit about how we work and the road ahead. Let's get started. One more. Perfect. In 2014, Sdiptech started to create a methodology for more effectively and efficiently finding and acquiring companies. We separate our process into basically two phases. One is origination, the other is execution. After that, we work together as a team to onboard and support our companies as part of Sdiptech. In the origination side of things, on a general level, as the picture you see shows, it seems quite simple. We have an internal team that scours our current focus markets to proactively identify companies that fit with our investment criteria.
Once we've done that, we initiate contact with those companies in order to meet the entrepreneurs, learn about their needs, work hard to understand the companies themselves, and also talk and discuss how Sdiptech can be a good home for them. At the end of that, of course, if the company fits our quality demands, and we come to an agreement, we reach an agreement and welcome them to the family. It's simple from a picture standpoint, but in reality, it's actually quite difficult. I would say the methodology that we have created, that we've actually over the past few years have really sharpened, has enabled us to what we focus on internally is to find the best companies first. In Europe, there are 25 million companies in the EU, including the U.K., of which 5 million are in our core markets.
Now, these markets have varying levels of data quality and availability, which is why we have actually internally created multiple data sources, as well as designed and implemented proprietary data analytics and IT systems. Once we look through a universe of companies, we create a very long list of companies. We take that long list, and then we start to filter that with our internal sector knowhow, our collaboration with our business area managers in an aim to shorten that list. After that, we take that shortlist, and then we reach out to all those companies to build a relationship, often over a very long period of time. We do that for two reasons. One is to understand those businesses, to really rigorously analyze their ability to fit our investment criteria, and to understand the quality of those businesses.
The second reason we do that is to build a relationship with the entrepreneurs. By doing so, we create an opportunity to win opportunities and deals that aren't just based on price. Assuming we get those companies to the next level, we work together with those entrepreneurs to find a transaction structure that continues to motivate them over a long period of time, and also minimizes our risks. At the end of the day, finding the best companies first is actually like finding a needle in a haystack. As we previously communicated, we have increased our acquisition goals. We've done this for a number of reasons. As Bengt will mention to you, we have the size and the financial capacity now to look at more companies. We have the methodology and structural capital internally to find the best companies first.
We've done market pilots, which give us the confidence in our ambitions to increase our acquisition goals. We've scaled our operational capabilities to enable us to onboard and support the companies that we acquire. These internal capabilities have given us the readiness, so to say, to take advantage of the pool of companies that will come from us moving into new adjacent sectors, as well as new geographies. As Jakob mentioned in the beginning, we do have a more relevant view on infrastructure, which calls for new acquisition sectors. These sectors, we believe, will support our mission for a more sustainable, efficient, and safe society. One example of this is, as Fredrik walked you through, is resource efficiency. Historically, we've acquired infrastructure technology businesses in water and sanitation and power and energy. Going forward, we'll look at infrastructure technology businesses within bioeconomic, waste management, and recycling sectors.
In addition to new adjacent sectors, we're also looking at new markets that fit our methodology. We analyze markets based on a set of criteria. For example, a country's appetite for infrastructure investments, its regulation for sustainability, efficiency, and safety, its business climate, as well as culture, i.e., can we do business with individuals in that country? Finally, the fit with our Sdiptech methodology. These our core markets fit positively to these key criteria. In addition to those core markets, we've identified new geographies that we're looking at expanding into, one of which is Northern Italy, the other is Netherlands. I think there was a question earlier about headcount. We aim to put feet on the ground in two of our markets, of which one of them is our new market in Northern Italy.
We're looking to hire an individual there to support our acquisition endeavors in the Northern Italian market. We're also looking to put an individual in the U.K. market to help accelerate our acquisitions in the U.K. market. Other than that, we don't see any need for material increase in our headcount to reach our economic goals. Together with new markets, adjacent segments, and our internal capabilities, we're well prepared and ready for an increased acquisition pace.
Sounds really good, I won't let you go.
No.
Thanks, Steven. Really exciting, and you mentioned there in the end, Northern Italy, U.K.
Yep.
Very interesting markets. Questions coming in. I have questions, but we'll start maybe with this one. You mentioned these new markets, so what risks do you see?
We've chosen these markets based on the criteria that we followed for a long period of time, which our current core markets adhere to. We actually don't see any additional risks.
Okay.
Than what would otherwise be inherent in our current markets. Naturally, in every market, there are local tax regulations or legal codes in which we need to follow and adhere to. Together with our historic experience and our local advisors.
Yeah.
We'll be sure to navigate those risks appropriately.
More questions coming in. Are you ready?
Yep.
Yeah. Oh, why aren't you hiring someone in the Netherlands?
That's because the Dutch culture, which arguably in many cases is very similar to the Swedish culture, their English is very good. We have an internal capability of actually reaching the Dutch market at the moment, where we do not feel the need to put feet on the ground in the Netherlands.
Mm-hmm. Thank you. Very short question as well. Thank you for that.
Yeah.
In your view, the question here is, what does evaluations look like right now?
Valuations have been creeping up quite significantly.
Yes.
over the last couple of years and even the last year, despite the pandemic. The, I think, macro statistics continuously put out information of record M&A volumes. Both in terms of number of deals and size of deals. Firsthand, from our side, we have seen valuations increase. Materially in some instances, and in those instances where we've had to stay disciplined and actually leave processes. With that said, we do look and evaluate companies. High quality companies with good growth will demand higher prices.
Yeah.
So.
True. Are you ready for more questions?
Yes.
Yeah. Another short one. What is most important, volume or quality?
Quality.
Okay. That was a quick answer.
Yes.
We have time for one more. Okay.
At the moment we won't.
Do you want to develop on it?
Well, I-
Yeah.
I say historically we haven't had to choose between the two. I don't suspect that we would have to choose between the two going forward, thanks to our internal methodology of finding the best companies first. We do not compromise on quality.
Here's a little bit longer one. How do you see the margins in companies in the new segments, waste management, agri? Usually these have lower margins and grow less.
In every mature market you'll find niche companies. I think those niche companies inherently have carved out positions for themselves that enable either greater margins. Sometimes even greater growth because they're capitalizing on the trends that we talk about throughout the day. We find that even in mature markets such as water, we have very high quality, high profitable companies that fit our investment criteria. They're there. It's our job to find them.
Many questions coming in.
That's good.
We've got to let you go, Steven, and you will have to email a few people I think.
Okay.
Well, thank you so much. Nice having you here.
Thanks everybody. Thank you.
Yeah. Thank you, Steven. Actually now it's our last speaker coming up, but not the least as you say in this context, very important man, the CFO. Welcome.
Thank you, Linda.
Bengt Lejdström, you're the CFO for Sdiptech, and you're going to now have a small presentation, and are you ready for questions afterwards?
Absolutely. It's always interesting to be the last speaker to try to find out if everything you intended to say has already been covered by your colleagues and questions to them. I think I could add some more interesting things.
Of course you can. Go ahead, Bengt.
I will start with to just repeat the three financial targets that we have now. We still have the same target as before of having an organic profit growth of 5%-10%. As Steven just said, that even though you could consider some of our markets being a little bit more mature, we can always find interesting entrepreneurial companies with a very strong underlying demand, also good development over time. When we acquire companies, we always require that they have had a very strong, solid track record before we acquire them. We feel quite confident when we say that we find these top companies that can continue to grow in a steady and even pace. I will come back to our updated goal. The third goal on this list is our financial debt, you could say our gearing or capital structure.
We have said that our financial net debt should not be above 2.5 when we compare it with our EBITDA profit. I will come back to that in a little bit more detail. What we have said many times now today, our third goal here is the acquisition target to acquire companies with a profit of SEK 120 million-SEK 150 million in run rate per year. What's important here to understand and consider is that these three goals, they can live together, meaning that we can achieve the acquisition target without hitting the ceiling of the financial debt. They have all been calibrated, like the previous old acquisition goal of SEK 90 million per year was also calibrated towards our financial position at that time.
Since we have grown and our financial position is stronger, we can also then of course increase our acquisition target when it comes to absolute numbers. If we look then upon some historical numbers when it comes to how much we have acquired, we have had the goal of SEK 90 million per year. We have been quite steady. Actually, if we look on an average, we have been able to acquire companies with a profit of SEK 93 million in average per year. This year we have actually acquired already corresponding to SEK 108 million up to the latest acquisition we announced a few weeks ago, the IDE Systems in U.K. We feel, as Steven has presented, we have a very strong and solid process of finding and executing our acquisitions. We have the financial strength to pay for that and take it into our balance.
We also have a very strong organization within our business areas to help the companies continue and develop this very good profit growth over time. Now we increase the targets. This, of course, is only a graphic showing that over time going ahead, we can acquire them between SEK 120 million to SEK 150 million of profit per year. Of course, it may vary. As also Steven said, we never compromise, meaning that sometimes perhaps the acquisition will actually come not in December 1 year, it will come in February the year thereafter, meaning that the volume may fluctuate a little bit from year to year, but on average, we feel very confident with this new target. Sometimes, however, it could come up a bigger acquisition like we had Rolec earlier this year, above SEK 80 million.
That is a little bit on top of the rest because we have our sweet spot of, we said SEK 10 million-SEK 50 million, or perhaps rather SEK 20 million-SEK 50 million in profit when it comes to the size of the companies. Typically, if we stay in that sweet spot, we handle about four to six, perhaps seven acquisitions per year, and our organization is very well prepared for that. As I said, the acquisitions may occur at a little bit different times during the year. I understand this is quite a tricky task for you, when you try to pencil in how much profit will Sdiptech now acquire this year going ahead. Sometimes the acquisitions come in the first part of the year or perhaps some other times it comes in the later part of the year.
As you can see from this figure, where we show how much of that year's profit has actually been hitting the books of that year, it varies quite a lot. The dark gray area of these columns is actually how much of that year's acquired companies have contributed to that year's profit. Sounds a bit complicated, perhaps. The yellow parts of these columns, they show how much is still remaining, and that will be rolled over into the next year. Of course, the group will benefit from that profit increase in the year thereafter. As an example, in this year, we have acquired for SEK 108 million, of which SEK 48 million has already been in the books up to June this year and another SEK 60 million to come at the rest of this year or early in next year.
Fluctuations will probably occur also in the future when it comes to how much of this goal will actually hit the books for each and every year. Turning a little bit more to our financial position itself and the balance sheet. We have, as mentioned, as a goal to stay below a debt level of 2.5 compared to our profit, the EBITDA profit. When we say financial debt, we mean debt to banks, financial institutions, and also bonds, if we would issue one. We haven't issued any bond so far, but perhaps could be in the future. It could be a sustainable linked bond, for example, or something similar. All of that is then we consider as financial debt. As you can see here on this graph, the light gray line is how much this ratio have been throughout the years.
You also see in the yellow columns here when we have taken in more equity, and of course, if you take in more equity, you reduce your debt, so this number decrease. And 2017, that was the year when Sdiptech introduced the B-share on the stock exchange and taking in about SEK 500 million. The next issue we did a little bit more than a year ago in June 2020. We did it to, as you could see, before 2020, the line of the financial debt ratio were slowly increasing. We made some very good acquisitions, but you also have to let the cash flow from the acquisitions come in in order to keep the debt levels at the current level.
We thought it would be to stabilize the balance sheet and give more flexibility to take on a little bit bigger acquisitions or more acquisitions in a shorter period of time. We did that as, you could call it safety measure for the future strategy. Of course, also the debt level decreased, as you can see. The latest issue we did was here in early March. We did that to be able to take on board the Rolec company and still keep a very decent debt level, as you can see from these figures. That was three different underlying needs and reasons why we have done these issues of new equity.
Important to say then, this new acquisition target does not require us to do an issuance of more equity because it's still aligned with the current balance sheet and financial position. In this chart, you can also see our total net debt in relationship to our profit, and that one is actually above this ceiling of the 2.5. This debt level consists, in addition to the financial debt, of what we call conditional debt to the sellers of companies to us. When we acquire a company, we want the entrepreneur to share some risk. The entrepreneur reinvests some of the money he or she has received, and will get that money back under the condition that certain, typically profit levels, have been reached the next four or five years.
On top of that, the seller could also have an earn-out with an upside to get even more if the performance is even better. The thing is, what's important there, that much of this conditional debt will not have to be paid unless the profit levels are higher than the profit levels today. That means if you compare this debt with the current profit level, it is not really a relevant number because the debt would decrease if it would stay at the current profit level. A bit complicated, perhaps, but we try to explain it as good as we can in our financial reports. Yeah, as I said, that sometimes we need to bring in more equity, but it's typically only if acquisitions would happen in a shorter time period.
If we find three companies each having a SEK 50 million profit, perhaps we need to strengthen the balance sheet in the short time, but we're a very large deal. That's not necessary for a target itself, but we cannot exclude it from the future. Steven mentioned a little bit about the multiples that we see on the acquisitions. Sdiptech actually issued a press release three years ago, or four years ago, sorry, in the fall 2017, where we disclosed how much we paid on average for the acquisitions so far, I think it was from 2015 to 2017, and it was in the range of 5.5-6. As you typically can see from our press releases, when we show how much we pay for a certain acquisition, you find them are typically between 7% and 9%.
Also a little bit, as Steven mentioned, the reason for this is we see increased competition. There are new compounders popping up, both on exchange and off exchange. Our model of acquiring companies and leave them not alone, but leave them under an independent governance in our decentralized model become a little bit more popular also outside, perhaps, the Nordics. We have to live with that a little bit more increased competition, and that is driving prices. There are a lot of money lying around, there are funds available, and also the banks and other institutions, they are willing to increase the gearing, the debt level of the buyers, they are willing to lend out more money. There are a few investment alternatives to acquisitions, really.
All of these things drive prices, but we still see with our more soft factors than hard price tags, we win the bids anyhow, even though we are perhaps not bidding the highest price because there are so many other things in our offering to the sellers that they like. We will not compromise quality. We will always focus on quality companies. We will only acquire companies, as My has mentioned, that contributes to sustainability, efficiency, and safety in our societies and lives. They should have this solid track record, so no turnarounds or big bets, lottery tickets, or that kind of companies. They should also have had a profit margin that is quite decent. Above 15% is our absolute threshold, but in general, they have even higher profit margins.
All in all, as a conclusion and wrap up for my part, I feel very confident that we can live up to our targets and continue our very great journey ahead.
We can't stop the recording or the broadcast right now, but that was a really good end, I think.
Yeah. Thanks, Linda.
Questions coming in, and I have one for you as a start. How will you finance this increased acquisition target?
Well, of course, in absolute numbers, we need money. We need cash, so we will, if necessary, if our own cash flow is not enough. We have a very strong cash flow, even though this year we have seen some buildup of inventories and such. Not as strong as previous years, but we have a good cash flow that will finance, but also ordinary loans from banks, perhaps a bond, as I said. Yeah. That's well taken care of, so to say.
Sounds good. We have a question here. What is special about your earn-outs? Why are they longer?
One very important reason for that, and that's connected to that one of our most important tasks, is to have a succession in the companies. It's not unusual that the entrepreneur and seller wants to retire after he or she has sold the company, and we want to do that in a very controlled way without speeding it up. We say doing this four or five years, it's long enough for the entrepreneur to continue a few years with us and learn us and get to know us, and when together we make the succession. It's also, of course, to have this carrot to earn even more money over time. That's, I would say, the main difference.
To make them stay a little bit longer.
Yes.
Would you issue equity before you find and/or close to sign an acquisition just to have enough firepower?
No. We did that last summer. As I said, we need to rebalance a bit, but just based on today's message, that's not the case, no.
You touched upon this one, how is Sdiptech's debt right now?
Right now it is not very big.
Yeah.
We took in more money this year as well. No, we have a good headroom in existing credit facilities, so we don't need to ask for more money. We can just draw more money on the facilities we already have.
Another question. Do you have revenue and margin targets? Do you see potential for more margin improvement in the future?
Well, to start with, we don't focus on revenue. We actually don't have any targets of the revenue increase. It's always profit. Of course, on the individual company level, we have margin expectations and targets for every year. We set individual targets for each and every company every year, and even longer term. Also on the group as a whole, we don't put that as a target. We guide. We say 19%-20% EBITDA margin for this year.
Oh, so many questions. Can you expand on what characteristics let you win deals when you're not the highest bidder?
Yeah, that's what you call the soft factors. One thing is that we are focused on these segments that both Fredrik and Anders has mentioned. They find the discussion with us about the future possibilities to increase their businesses, the entrepreneurs' businesses. They think that has some substance, so they like the discussion and that this could be what we call smart money. We help them to reach their earn-out actually, by helping them to increase their profits. Very much that focus and competence within the different areas.
More questions coming in. I actually want to thank you here, Bengt. Do you have something you would like to add now, given all the questions and the presentation?
I guess say that stay tuned with us. We will, in about a month's time, issue our report for quarter three. I guess we'll have a chance to have more questions coming in then.
Very exciting. Thank you so much, Bengt.
Thank you.
Yes, lots of news ahead, of course. Thank you all for you listening in today. As you know, you can see all this material on Sdiptech's website shortly, and all separate sessions will also be posted on Sdiptech's LinkedIn in case you want to see something again or missed it. Do not hesitate to reach out to these guys. They will answer all the questions you have, so reach out to them individually if you want to. Well, I hope you had a great Thursday so far, and have a really great late afternoon and evening. Thank you very much.