Welcome to Storskogen and our presentation of our fourth quarter and 2020. My name is Daniel Kaplan. I'm the CEO and co-founder of Storskogen. Together with me today I have Lena Glader, CFO. This presentation will actually be in two parts. The first with myself and Lena presenting our fourth quarter and how we're doing. The second part, we will meet Peter Ahlgren, who is head of our Business Area Services, Thomas Larsson, Segment Manager, and also Peter Engström, who's the CEO of one of our business units. Let's get started and see how we're doing. If we're looking at 2020, the full year, it's been actually an extraordinary year. We had a 78% growth, EBITDA growth, which we're of course happy with, especially considering COVID-19. We had a turnover of approximately SEK 8.9 billion and a 10% margin, which we're satisfied with.
It's actually our target margin. You might say we did 27 acquisitions during the year, out of which nine we did in the fourth quarter, and if we look specifically at the fourth quarter, we grew our EBITDA with about 50%, which is also a satisfying number for a fourth quarter, and out of this growth we had 1% was organic and the rest was through acquisitions, which is also along the lines of our financial targets, you might say, especially in a tough year with COVID-19. If we look in more detail on how we're doing, I think 2020 has really been a year of proof of concept for our business, our way of doing business. We had a good deal flow of interesting acquisitions.
Despite that, COVID-19 made the year a difficult one when it comes to acquiring companies with volatile earnings in the target companies, of course, which makes it more difficult to agree on the basis for valuation. That said, out of our 58 business units, 56 were profitable, which is about 97%, and considering the volatile year and the strange. Well, it was a strange year in many ways. I think we're very happy with that. If we look at our various business areas, we start off with trade. We could see that some of our companies, particularly aiming at their home and private individuals working at home, depending on those companies, actually did well. We had hair distributors. We have a wholesaler towards zoo stores selling pet details and pet. Well, and pets actually as well as. I mean, those companies, they performed very well.
Whereas if you take Båstadgruppen and one of the biggest business units in this field, aiming with protective clothing and protective shoes for the professional industry. Those were reasonably hard hit during COVID-19. That said, decent profitability and overall a good performance from trade. If you look at our industry sector, I mean, obviously those companies were actually mostly affected during the first half of the year and had significantly volatile environment for big customers such as Scania and Volvo. Basically discontinued operations for a while. On the other hand, we had a very strong industrial segment during the second half of the year and they basically recovered, and in the end we're happy with the performance of our industrial part, especially a few of our big business units such as Swedstyle and RS Gruppen. RS Gruppen is an automation company targeting the timber industry.
I mean, those were very successful during the year and they also look well geared to have a good 2021. Actually, if you take our service sector, we had a pretty even and strong demand during the entire year. They were less affected by COVID-19. A few companies though, of course suffered. That said, by the end of the year we're having a cold winter, which is of course affecting our fourth quarter and also I think the first quarter now with a very cold ground which makes our contracting companies. It's basically difficult to conduct infrastructure projects. That said, good profitability in the trade in the services sector and also very rapid growth with lots of acquisitions, and so we're looking forward to a strong 2021.
That said, with 27 acquisitions this 2020 and we also the same number last year and more than 100 actually going towards 200 businesses in our company. This means obviously that some companies underperform. So what do we do when we have problems? Well, first of all, we have to consider the strategy. Are we correctly positioned? Are we targeting the right customers with the right pricing models? Sometimes we have to change leadership, change the CEO or add a CFO or something like that. Sometimes they have ESG issues and need to get their things together and get order in the company, and sometimes it's cost reductions and stuff like that. However, we never give up. We've never sold or we've never discontinued a company.
Out of our 58 business units, 56 were profitable last year, which is not due to luck, but rather hard work, as you can see. I think we're looking. We're feeling very confident now about our ability to handle those problems that will arise. If we look a little bit at the acquisitions we've made. During the fourth quarter, we did nine acquisitions. Three were platform acquisitions, which are basically independent companies. One is MJ Contractor, which is an infrastructure company working here in Stockholm, a very successful company with a strong market position. We have Svenska Tungdyk who are doing integrated circuits and finally we have Evedo which is a digital agency and e-commerce specialist and a great add-on acquisition to our new segment digital services, our third acquisition is in that segment.
So and then of course as always, lots of add-on acquisitions. A few like Ljus & Komfort, Åhus Persienn and Sunteam. They're on our sun protection part, Nordic Drilling System with like a specialist drilling underground drilling infrastructure solutions. It's a segment we believe a lot in. So we're also working hard to enhance our company's market positions through add-on acquisitions. So if we look historically we've had a very strong growth, 76% EBITDA growth per year and obviously we're hoping to have a continuous, you know, nobody knows what the future holds but we of course try to put the prerequisites in place or have the capacity for future growth. And if you look at what we're doing there, I mean first of all this year we are in practice doubling the M& A organization.
We are putting feet on the ground both in the Nordic countries, but also in Germany and Switzerland and Great Britain, so we have Philip Löfgren, CEO in Great Britain and Mikael Neglén, head of the DACH area, the German-speaking Europe you might say, and with also German CEO coming in next week during his first day, and hopefully when we're looking at the Q1 report in a few months, I'll be happy to tell you a little bit more about the acquisitions on their way in the Nordics and in their new geographies. We're also always moving into new segments, getting an increased diversification and tapping new, exciting business areas, and we're also, I mean obviously if we're buying a lot of companies, we have to take care of this.
Our vision is to be the very best owner we can possibly be for these types of companies, which means that the business area organizations has to be strengthened gradually adding more industrial expertise and more also functional expertise. So that's a very exciting development. So Lena, over to you.
Thank you. Thank you, Daniel. Daniel already mentioned, of course, the growth, profitability that we're geared for, future continued growth, etc. I will now try to dig into the numbers and trends for the fourth quarter primarily here. I'm trying to keep it. I've been asked to keep it short though. So starting off with the net revenue trend, as you can see in the bars here, there is a steady growth, obviously in Storskogen and mainly acquired growth, we had a particularly high growth in the fourth quarter, growing quarter on quarter by almost 20% actually. And what is also clear here on the line that you can see is that the EBITDA margin has been kept at a quite stable level of around 10% or slightly above 10% for the past three quarters, Q2, Q3 and Q4.
And that the profitability is in fact higher than the previous year despite difficulties relating to Covid etc. What you can also see here is that the Q1 is seasonally generally a weaker quarter both in 2019 and 2020, as you can see here. This is proof of concept again of that the diversification actually results in quite stable margins. If you want to dig deeper into the numbers, I recommend that you check out our Q4 report which should be available on our homepage in English as well. If not today, then tomorrow. I hope so. If we move on then to the EBITDA level, here on these bars we show on the five bars to the left you can see the rolling 12 month EBITDA. So that's the operating earnings before, before amortization.
We started off the year with an EBITDA level of around SEK 500 million. We ended the year at around SEK 900 million. That means that we grew by around 100 million each quarter. The bar to the far right shows the pro forma EBITDA. That's as if we'd owned all the subsidiaries the entire year. We now reach a level above SEK 1 billion. That's kind of a milestone for us, closer to SEK 1.1 billion actually. If we then look at some key performance measures here, we've been growing, as you know, and we are profitable, as you know. Here I'm trying to show that growth per se doesn't add much value unless you can actually produce a good return to investors and other stakeholders. On the top three rows here, we show how the subsidiaries have performed operationally.
Starting off with cash flow, which is one of my key metrics, it shows that the Q4 is generally quite a strong cash flow quarter. Even looking at the entire year, the full year, we grew cash flow from operations by 90% approximately. The cash generation or cash conversion rate is slightly higher than last year of about 67% for the full year 2020, close to 100% actually for the fourth quarter. That means that almost all EBITDA operating profit turned in converted to pure cash flow in the fourth quarter. We also include here return on working capital. As you can see here, the return on working capital was kept quite stable at around 82% in the full year 2020, compared to 81%. Approximately the same level in 2019.
This metric is important for us, especially during a demanding year such as 2020 with COVID-19, et cetera. We've really worked hard with the companies to maintain a good capital efficiency and cash flow conversion. It actually has proven that our measures are working and our subsidiaries are working quite hard with this. On the bottom two rows we show the group return, first of all, return on equity, which is obviously higher than in 2019 when it was 10%. For a growing company like Storskogen, this return metric tends to be a bit diluted because we make quite significant share issues to fund our growth. This metric was obviously also a bit diluted by the 2 billion share issue that we did in 2020.
On the bottom row here we have Return on capital employed, which was kept stable around 10% in 2020. Finally, we have a look at the balance sheet here. The blue bars show the balance sheet total and the light brown bars show the shareholders' equity. Obviously the total balance sheet is growing as we are acquiring companies and funding them partially by external loans. The line here shows the net debt to EBITDA. The leverage basically of Storskogen. We increased the net debt; it was increased slightly during the fourth quarter from 1.3 in Q3- 1.8 in Q4, obviously as we are growing and increasing our debt. This picture also shows that there is still comfortable room for further acquisitions and further growth, because not least, all acquisitions that we make actually do generate profits as well.
So they actually strengthen the balance sheet. So there is still plenty of room for continued acquisitions. Basically, that's the main point. Thank you.
Thanks, Lena. So, in conclusion, I think 2020 was obviously a very strange year and a tough year. But I'm very proud to say that the business unit CEOs, they've done an excellent job in producing an organic growth this year when it comes to acquisitions. With 27 acquisitions, we're Storskogen is obviously doing acquisitions very systematically. And so it's no coincidence we're doing if other companies do sales, we do acquisitions. So it's no coincidence with the growth. But that said, it wasn't an easy year to be successful on the acquisition front. And I have to say we've been so and if we look at our companies and their, I mean we have a good consistent profitability across the board.
We have a strong growth in profitability and overall, and I think, I mean, our agenda is to have as low as operational risk as possible in our business units. Whereas we on top as a, when it comes to creating shareholder value, want to present you a really strong EBITDA growth. And it's been a successful year in that way, I should say. We've had a strong support from investors and shareholders. In the midst of COVID-19 in the second quarter, you really supported us. And actually, we have 500 employees and company sellers and CEOs who are shareholders in Storskogen and invested a significant amount of money. So that's obviously shows great commitment and also improves their engagement level and their contribution to Storskogen in lots of different ways. So it's a truly strategic factor to our success.
If you look ahead, obviously we are now a big company, which means that we have to implement lots of different policies, you know, structured processes and also organizational layers to do that professionally. In contrast to that, we need to retain the strong culture of entrepreneurship that permeates the entire organization. That's obviously a challenge if we're taking our growth. This means that we have to recruit a lot of people. We attract better and better people, but they have to understand and buy into the Storskogen culture and we will have various, you know, the complexities of all, you know, parts of the organization growing together with our challenges. And that's a difficult part to get that right, so the other part is of course international expansion.
As we're moving along now we're buying companies abroad, potentially up to eight countries by the end of this year. This means that we have to work across cultural boundaries and produce processes and organizational setup that works internationally. So that's a challenge as well as we move along. And finally, as we said, we're a big company. If we want to continue to grow rapidly and to capture this great business opportunity that we see, we need access to capital. And this year will be the year where hopefully we can establish a platform both for getting equity into the company but also complementing that with good, you know, side with, you know, relationship with banks and banking consortium, but also other type of lending instruments or where we can be successful to funnel capital into our investment, into our growth. In conclusion, a fantastic year.
I'm extremely proud of all my coworkers out there who've done an extraordinary job. It has not been an easy year and to produce this kind of result, this kind of even performance across the board, it's something extraordinary. So thank you all of you employees and shareholders who've contributed this year to our success. Looking forward, of course, to 2021, which will be a truly exciting year. Thank you
indeed.
Thank you.
Welcome to Storskogen's presentation of the fourth quarter. We're now going into the second section where we'll discuss together with Peter Ahlgren, who's head of our services business area and Thomas Larsson, heading up our installation and painting segment today. So if Thomas, you can stand on the side. I'll ask you, Peter, first tell me a little bit about yourself.
My name is Peter Ahlgren. I live here in Stockholm, married, three kids, and shortly my background. I started off as a management consultant at Accenture where we met originally. And after that I've been in general management working for smaller and mid-sized companies as CEO and CFO and as well have an entrepreneurial period where I co-founded about 10 companies before joining Storskogen.
All right, so tell us a little bit about our business area. Services. It's our biggest business area actually.
It's about, not really 50% of the turnover, but almost. And we have, I think about end of December we had 28 business units and now already here in February, it's 36. So we have been quite busy in the first quarter here as well. We have a quite broad spectrum of segments from infrastructure and installation to digital services and education. So I think we have a pretty broad spectrum of companies to choose from. That's why we have had a quite.
A rapid growth as well.
Yeah, so you mentioned you have a rapid growth. You bought a lot of companies, but buying the companies, the small part, taking care of it is the big part that falls into your lap.
Yeah.
How do you do that?
Yeah, foremost we have an organization working with me with head of segments, as you mentioned, Thomas, head of installation. We have three more head of segments and we have as well three investment managers. So we have an organization working with all the companies and foremost when we come into a company, we agree on a business plan with the management to ensure that we have an alignment of interest and a common goal. And usually that's on a three year horizon. So we try to look a bit further ahead than just here and now and then we work with the company to fulfill that plan and that could.
Be.
By acquisition of add-on companies. As you will speak to Måla later on, which is one of our companies where we have done a lot of add-on acquisitions, and it could be other things as well, but we are supporting our companies to make sure that we reach our goals, basically.
Obviously when we buy companies, sometimes they're successful, sometimes they go less. What are the typical challenges and upsides when it comes to services companies?
I think generally comparing to the other business areas and taking last year as an example, when the COVID situation, I think there's been a greater stability basically in the services segment. Not going down as much and not up as quickly as well. And I think many of the companies have projects with a quite long durations, could be one year or half a year, which makes them pretty resilient to rapid changes. I think that's an upside. Taking the risks in contractor service companies, which is very HR intensive. And then we have all kind of personnel risk. We need to attract talent and keep talent and make sure that key individual stays in the company.
A short word on your various segments. You know. Yeah, you mentioned them, but maybe just a few more.
Yeah, we have the largest segment. It is the infrastructure segment where we have a group of mainly land contractors. There's about 16 companies there now. After that, we have the installation segment which Thomas is setting up, which is next to that the largest. We have electricians, plumbers, group of painters. More of that you will speak to later as well. And we have a group of logistics companies and we have an engineering service segment as well as the two latest add-ons when it comes to segments are digital services and educational and HR services.
Right. So if we look into the future, what do you see there for the services business area?
I think we will continue our growth when it comes to the acquisition side. We had as mentioned quite rapid growth last year with 18 acquisitions, and here in February we have already concluded, I think it's 11 acquisitions, so we are continuing on the same path there. When it comes to the economic climate, I think it's not really good, it's not really bad. It's somewhere in the middle, and we have had a pretty challenging start for one of the companies when it comes to the pretty cold winter we have had here in Sweden for the land contract. It's pretty challenging to pursue their work in an efficient way, but I think we're looking forward to a good year.
Thank you, Peter, for your contribution today and now we'll continue to drill down into the services business area and we'll meet Thomas Larsson. Welcome.
Thank you, Naya.
So Thomas is the head of one of our business segments, installation and painting. Tell me, who are you.
My name is Thomas, Thomas Larsson. I'm working and heading up the installation business as you mentioned. Born and raised here in Stockholm, Sweden, two kids, marriage pending. Still discussing whether we should aim at investing in the house or getting married. We'll see about that.
Okay, so. What's your professional background?
Basically this is my third step in my career. My first was basically working as a management consultant for a number of years within Deloitte Consulting and Centigo, which is Swedish-based business, and for the second part of my career I've been working as a CEO in a little startup that is actually in the vicinity of the installation services business and with roots from where you and Peter also had this business incubator back in the day, so that's where I met you guys.
So I've actually been the chairman of the company for 10 years that Thomas was the CEO. So we know each other pretty well.
We enjoy working together,
I hope.
Yes, exactly. I guess we wouldn't do this for another 10 years. So that's great. So our installation and painting business, tell us about that.
Yeah, it's growing. I started here pretty much exactly one year ago in connection with you acquiring Måla. You will meet them later. By that time you also already owned a couple of installation businesses and you, I think you felt it was an interesting area for Storskogen to invest in. I basically spearheaded that initiative and we've been growing it from there on. As of January this year we basically are running a SEK 1.7 billion business and we've got pretty much 1,000 people employed within the installation painting.
That's cool.
Painting being the biggest one.
Yeah. So if you tell us a little bit more about the companies?
So basically in installation services we have pretty much three parts. Måla is one of them. You will meet them later. And we have basically plumbing services and pipeline replacements with Tepac and Rör-Expressen based here in Stockholm. And we have our electricity businesses in Elkompaniet just mentioned. And we have Växjö Elmontage and we have a nice setup on the west coast with Berndals and recently acquired El & Data here in Stockholm. Very successful company with electricity services, but also with BMS where they are very technical, technically advanced with keeping real estate online. They are working closely with CSAB and maintaining 600 real estate Internet of Things among others. Yes. But they also make sure that the elevators are running, that the fire alarms are up and running and making sure that everything runs smoothly.
Wow. So well why do we want to be an installation? Why do we find this area interesting?
It's obviously a business that's been here for many years and I think we all agree on that. They will be here for many more. To come.
Which is basically pretty spot on what we are looking for as a full-scale game. We want an industrial business where we feel that there's going to be need for these services over time. And on top of that, I think it's also investment friendly. There's fragmented businesses. There are a nice subset of companies that fit our profile when it comes to size, profitability. Also there's niches where they are pretty strong and you can find geographies where we can have companies that have a solid track record and also good potential in being profitable over time.
So that's interesting. So when we acquire these companies, do we look for synergies or do they? Are they standalone? What's your view?
I think our base case is they should be standalone cases. They should manage to buy them by themselves. From our point of view, synergies will be a bonus. So I think in the basic case they will manage by themselves, but obviously there are nice synergies there for us to help them with. Sustainability issues is one of them. We bring a nice relationship and network to them and obviously better purchasing power when it comes to dealing with suppliers.
Yeah, super. Thank you, Thomas. You've done a great job this first year. I know for sure that you actually contact some of our acquisitions yourselves and you create a relationship. Thank you, Thomas. Now we continue with drilling down into our painting business. Wow. That was a promo movie for Dillqvists Måleri, one of the companies in our business units, Måla i Sverige, which it's called in Swedish, and with us today we have Peter Engström, who's the CFO of Måla. Welcome.
Thanks.
So tell me a little bit about yourself?
Yeah, as I said, I'm the CFO of Måla i Sverige and I work with all of the companies within the group and we are in total of 16 companies of today. So I work with a lot of painting businesses.
Wow. So tell me a little bit, what does your work entail?
It's a lot of reporting, of course, and also general support of the companies. Since the companies often are quite small, in some ways they are quite streamlined. They haven't got the overhead to do some stuff. So in some ways I also support that.
Yes, so tell us a little bit about Måla, the company.
Yeah. As I told you, 16 companies, and we are mostly painting companies, but you also have other companies within the general surface industry, I'd say, like flooring, roofing, and also within facade. So we do multiple stuff, and I think we have a 12-month rolling revenue of about SEK 700 million. We're getting quite big now actually.
Well, that's a significant number.
Yeah, it is.
If you talk about market position, where would you say that more or less area?
Not really sure, but one of the biggest one I think second or third, so, and we're getting bigger like by the minutes almost, so it seems like we could almost reach top position soon, I think.
Yeah, wonderful.
Yeah.
So, what's if you talk for more, Lena Glader? I mean, what's the biggest challenge, do you see?
One thing of course, since we have a lot of companies and they are quite decentralized in some ways, it could be difficult to get them all together because some things we need to do together as a group because it will benefit everyone. So if we do one thing that is good for one company, it's probably good for all of them. In some ways it's quite difficult because we have a lot of companies, different persons and so on. So I think that could be one challenge. But also I think that's one of the benefits because you're not really stuck in one idea. So if anybody has a better idea we can switch lanes pretty fast.
Yeah, so I mean one part is that we're very decentralized. The other one is that we are having a group now of companies. What's your view on the synergies and things like that and how to work together?
Yeah, I think we can do a lot of things and we are obviously in the start now so we can do lots more. But one of the obvious things are of course supplier agreements. We could always get better agreements for materials. One thing more is that we can work between the companies maybe look at if we can borrow stuff from each other. If one company has more to do, maybe we can borrow in house instead of going to outside companies. I think that is good as well.
So lots of different companies. What would you say is the biggest risk for each and every individual company?
I'd say probably like in the past when we meet new companies, they're quite lonely in some ways. So a lot of companies say that they enjoy getting the context of a bigger company. So Storskogen and Måla provides that sort of support to a lot of companies. So you can have someone to discuss things with. You can call up your neighbor and see like, are you having the same problem? How are you dealing with this? So I'd say that's probably it.
So if you look into the future, the future of Måla, where do you see the company going?
I think we'll continue to grow. I hope so at least, so more acquisitions would be welcome and, as I said, we are always looking at companies not just within the painting industry, also like in general surfacing industry. So I think and I hope that we could diversify a bit more within that and also I'd like to explore the possibility of more cooperation between the group.
Wow, exciting.
Thank you, Peter, for joining us here.
Today and your hard work this last year. I know it's been an intensive workload for you.
Thanks.
Thank you everybody who's watching. It's been a pleasure to have you with us and of course you're welcome to listen next quarter when we'll present the first quarter of 2021. Thank you very much.