Welcome to the Vimian Group Conference Call. For the first part of the conference call, the participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Patrik Eriksson and CFO Carl-Johan Zetterberg Boudrie. Please go ahead.
Good morning, this is Patrik Eriksson, and welcome to our conference call. We want to give you a brief update on the news that we launched earlier today, this morning, and we're very excited about another major milestone in the company for Vimian. First, we're launching new financial targets. We're launching a rights issue of approximately SEK 1.6 billion, and we are announcing our intention to uplift to the Main Market in Stockholm. These are three very fundamental building blocks that we would like to put in place to further drive significant shareholder value in many years to come. But before we get into that, I'd like to take a few moments and recap what we have achieved in 2023.
First of all, we finished with a solid 11% organic growth last year, which was well above market. Our adjusted EBITDA grew 19%, and our adjusted EBITDA margin was 26.3%, and we had a decent cash conversion from last year. We've continued to consolidate our acquisitions during last year, and we made good progress there. As you have heard prior, we have a new CEO in place, and I'm really pleased to be here. Last week, we also announced and proposed a new chairman for the board of directors with Magnus Welander, who has a past as a CEO of the Thule Group here, another Swedish-listed company. This creates a great platform for us to continue to build a world-class company on. Before we move into some of the other details, I just want to recap our strategy.
We have an organic strategy, and it has a number of different components to it. One is centered around education to really drive awareness and skills to address the white space that exists in almost every single segment that we operate in. The second one is around innovation, where we have new products and new techniques that will help us drive significant procedure volume growth and be able to treat animals in a way that maybe wasn't possible in the past. The third part of our organic strategy is all about reach. We have a number of companies that we have bought that have great products in a certain area, a certain region, or a country. Taking those products and spreading them throughout our entire network of reach is another great way for us to drive growth in the future.
And then, of course, we're always interested in supplementing this with M&A. When we do this, we have a great position for both driving growth organically and inorganically, and we'll continue to drive profitable growth. So let's talk a little bit about our track record from an M&A standpoint. It's been almost three years since we did our IPO, and we've done 32 acquisitions since, adding about EUR 110 million of revenue and about EUR 30 million of EBITDA. When we summarize all of this and we look at how these companies have been doing, after we've acquired them, on average, we've had over 25% EBITDA growth since the time of acquisition.
And how are we sourcing these businesses is really through long-term relationships with very successful entrepreneurs, and most of these conversations have been bilateral. And we continue to see very strong activity in our M&A funnel. So let's talk a little bit about what are we interested in buying? What is our criteria for acquisition, or what does it take to come into the funnel? And it's basically four different components.
We're very interested in companies that can add to our current portfolio in terms of products. We're also interested in geographic expansion. If we can get a new channel or access to new customers, that is also of great interest to us, or if there's new capabilities or technology that we can acquire to get into accelerating our organic growth. If we look at some of the discussions that we're currently having that could materialize as soon as this half of 2024, in the MedTech space, we've built a very successful orthopedic business. We're looking to replicate this success in another therapeutic area inside of MedTech.
We're also looking at our Specialty Pharma business in two different ways. One, we believe that there are opportunities to expand the geographic reach there and also add new therapeutic areas in Specialty Pharma. And then lastly, in our Veterinary Services, we're constantly looking for new service offerings to actually expand the already great offering we have for our membership platform there. I am a strong believer, and we believe now that with the rights issue that we are announcing today, we will be very well positioned to take full advantage of opportunities when there is materialized on these companies that could become for sale in our funnel so we can act swiftly and be there when they are for sale. So let's talk a little bit about our new targets and revised targets.
Just as a reminder, the old targets were set about three years ago in conjunction with the IPO, and the world looked a little bit different, and Vimian looked different too. We have almost doubled in size since, and the composition of the company has evolved through these 32 acquisitions that we have conducted since. So we've now reviewed the long-term financial targets, and the board has now set the new targets for the company. And it's an adjusted EBITDA above EUR 300 million by 2030, and more than half of this EBITDA will be generated through organic means. This target is set in a way that it is not contingent on any further capital injections.
We'll drive the organic portion of this through double-digit revenue growth over time, like-for-like adjusted EBITDA margin increase, and an improved cash generation, and continue to be very select and targeted with the value creation of acquisitions to complement our story. Our financial net leverage target remains the same at 3x. We're also announcing here the intention to change our listing venue to the Main Market in Stockholm. We're doing this so that we can get higher liquidity and better awareness for our company and broaden our investor base.
We will continue to prepare for this, and when we get closer to the uplifting date, we will also arrange a capital markets day, and we'll come back with the exact date for that to give you a more thorough update on Vimian as it is organized today. So in summary, it's a key milestone for us today. We're launching the rights issue of SEK 1.6 billion, and we have subscription and guarantee commitments from our largest shareholders, and many of them are supporting us.
I think the latest tally is about 92%. We have adjusted our new financial targets to give clarity on our financial ambition between now and 2030, and we're announcing the intention to uplift to the Main Market. With these building blocks in place, I'm convinced that we are well positioned to create financial and create significant shareholder value over the many years to come. I'm excited to be able to lead together with the team the creation of a world-class company in the animal health space. With that said, I'd like to move over to the Q&A section. Thank you very much.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Rickard Anderkrans from Handelsbanken. Please go ahead.
Good morning, and thanks for taking my questions. Me too, please. So yeah, first on the 2030 target on EBITDA, nice to hear that it's set not to require any further capital injections. But could you specify, quantify roughly how much of the plus EUR 300 million EBITDA target do you expect to be achieved through M&A, or how much do you model this sort of organically to get there, just to get a sense of how much the M&A will be an engine to reach that target? Thank you.
No, thank you, Rickard. When you do the modeling here, our intention is that we're predominantly going to grow to that target through organic means, but we will supplement it with M&A.
All right, that's clear. Second on M&A, historically, Vimian has acquired targets between seven-nine times EBITDA, roughly. Is this where you're seeing multiples at the targets you're looking at at the moment, or what's sort of the multiple profile? And I also noticed that you mentioned like-for-like EBITDA margin increase going forward. So I guess that implies that acquisition targets will be margin dilutive, at least in the beginning. Thank you.
Thank you, Rickard. Sorry, Patrik, do you want me to take?
Yeah, go ahead.
Yeah, morning, Rickard. And thank you for good questions. And as Patrik said, and I can just complement what he said on the first question, we've said that at least more than half of the growth up to our long-term financial target of EUR 300 million should be organic. And as we said also, that we should have over the period an organic growth of at least double-digit or more than double-digit. So let's just add on your first question. On the second question on multiples, as you say, that's correct in terms of what we've paid historically. What we will pay for future acquisitions, of course, difficult to say, depends on each specific acquisition target and type of acquisition. I would say it's probably not a completely wrong assumption going forward, either looking at historical multiples.
I wouldn't make the assumption either that acquisitions necessarily will have to be margin dilutive. Again, it depends on the specific acquisition. If we look historically, we've done a lot of very good acquisitions, and some of them have been, call it, margin dilutive initially, and then we managed to improve margins under our ownership and continue to grow the companies. And some acquisitions have been margin accretive. So I think you could see both, and I wouldn't take it as an assumption to say, based on the targets we set, that acquisition necessarily would have to be margin dilutive from the start. And of course, our ambition, regardless of margin accretive or margin dilutive, is that we will continue to improve and drive further margin expansion and margin improvement in the acquisitions that we do.
All right, that's very clear. Thanks for taking my questions. I'll get back into the queue.
The next question comes from Kavya from UBS. Please go ahead.
Morning. Thank you for taking my questions, just to please. So firstly, it says, "Now committed to double-digit organic growth and like-for-like margin expansion." Is it fair for us to assume that that will be the case for 2024 as well? And then the second one on the funds being raised, just to clarify, so these aren't all being earmarked for a specific deal that's in place, are they? It's going to be over sort of multiple you're looking at multiple targets. Thank you.
Thank you very much. Maybe too, let's talk about your second question. So no, there's not earmarked for a specific acquisition, as Patrik said, and as was said in the release. We do see that M&A activity is picking up. We see that our funnel is building up with interesting acquisition opportunities that could potentially materialize here during near term. And we want to make sure that we have the financing in place to act on those opportunities if we decide to do so. So just make sure that we have the funds and financing needed to act on what we think are very interesting opportunities that's starting to materialize more and more. And sorry, your first question, just remind me.
Oh, yes. So the commitment to double-digit organic growth and like-for-like margin expansion, is that what we should assume for 2024 as well?
So we have an ambition to continuously grow ahead of the market. I think we are present in very interesting areas of animal health markets where we see a lot of potential and untapped medical needs and potential for long-term growth. We definitely have the ambition to continue to grow ahead of the market. As said, from a financial target perspective, our ambition is to deliver double-digit growth, and the majority of achieving the financial target should come from organic development. Why we see this is the ambition that we've set for ourselves if you look at from now up until the period of 2030.
Then, as we said in the earnings call for the fourth quarter, we've seen that we've started the year good in both Specialty Pharma and in Veterinary Services with high single-digit growth if we look to the start of the first quarter and a good momentum. Then we did highlight just for the first quarter, given the AOP program in MedTech, we will see slightly lower growth in the first quarter from a MedTech segment perspective comparing year-over-year.
Thank you very much.
The next question comes from Adela Dashian from Jefferies. Please go ahead.
Yes, good morning, guys. I appreciate all the additional color on the conference call thus far. But maybe if you could provide us with some additional color on the timing of this rights issue. I mean, you spent most of 2023 speaking of prioritizing organic growth and integration, etc. So this becomes quite a shift in the strategy going forward. Is there anything in the markets that have materialized in terms of, I guess, your M&A pipeline, or is it just a new CEO in place that wants to take the company in a different direction now in the very near term? Thank you.
Yeah, Adela, thanks for the question. We see a pickup in the momentum in our M&A funnel, and we want to be ready to act when the company's there that we are very interested in buying becomes for sale. So that's the first thing. The work of continuing to integrate, we've started to do the lifting there. We have more work to do, but we can do those two things in parallel. So improving our existing business is an ongoing item, and these companies typically are only for sale once, and we want to be ready to strike when they are. And that's why we're preparing ourselves to be in that position today.
Maybe a follow-up on that, because you made so many acquisitions since the IPO, and you highlighted some of the areas in which you want to or wish to expand your exposure and presence. But what is it in the foundation that you've built today that, I guess, is lacking and needs additional yeah, just anything additional to what you've already established?
Yeah, great question. So if you think about our MedTech segment, for instance, MedTech has a number of different therapeutic areas, and we've, in a short space of time, built ourselves up to a leading world position in the orthopedic space. Our ambition is higher than that. Obviously, we want to take full advantage of the opportunities we have there, pursuing more white space in that area. But we're now looking at what is the next natural MedTech therapeutic area for us to enter into. So that's one example. So that would be a new segment for us.
In our specialty pharma, we have wonderful products and good coverage from a country standpoint, but there are still areas where we feel like either our product portfolio is a little bit weaker than we would like it to be, or we can see targets that will help us significantly enhance our product portfolio. And also, there are some geographies where we can either enter into a new geography through an acquisition or where we can strengthen our existing footprint significantly.
All right, that makes sense. Thanks.
The next question comes from Arvid Nikander from Carnegie. Please go ahead.
Good morning, and thanks for taking my questions, too, if I may. First off, could you say anything on the number of M&A targets that you're looking at as potential opportunities for 2024, and roughly how much M&A spend you view as feasible for 2024, assuming these opportunities materialize?
Good morning, and thank you very much. Sort of relevant additional questions as well. On number of targets, actually, we have an interesting pipeline with a number of different targets in, I would say, call it different type of targets and different sizes. And as said, the funnel is building up and becoming more and more interesting as we see activities picking up in the M&A market. Of those, we have maybe sort of, say, a handful that could be relevant targets being of a little bit larger size that we're looking at at the moment.
And of course, in terms of timing, it's difficult to speculate if we decide to go forward or not. But again, we have a handful of maybe a little bit larger opportunities, and then an interesting funnel is building up with M&A opportunities and activity is picking up. In terms of sort of what can we expect from M&A during 2024, again, very relevant question. It's difficult, again, to speculate.
Needs to make sure that the targets that we have that we think are interesting and relevant, that we find the right timing and the right valuation, and that we also deem that they will be value-creative to move forward with. If all of that will happen in 2024, difficult to say, and maybe don't want to speculate too much from that perspective. I think what's important in that area, we see that we want to make sure we do the right acquisitions when the timing is right and the opportunity exists. We've now set this up for a possibility to execute on interesting M&A opportunities with this rights issue. In combination, that we organically, as we said, will continue to drive good operational cash flow and to improve our cash generation and drive the organic development.
Okay, fair enough. Then just a quick follow-up, if I may. So do you expect, let's say, that enough of these opportunities materialize that you would have sort of flexibility on how much you would spend? Would you, in that case, end the year with a meaningful margin to your leverage target, or could we see the gearing coming up towards 3x EBITDA towards the end of the year again?
Also relevant question. Potentially, of course, as said, we want to make sure that we do good value-creative acquisitions that will add to us achieving our strategy and our long-term financial targets. Then in terms of timing, again, difficult to say exactly when that will happen. I think, yes, we have a financial target in terms of leverage, meaning that we will strive towards long-term financial. We have a strong development of Vimian also going forward, but making sure that we manage sort of our financing and our balance sheet in a diligent way.
Hence, we also have the leveraged target that we sort of steer ourselves against. So from that perspective, potentially for the right acquisitions, and if the timing is right, yes, we can sort of move closer to the leveraged target from where we are now after we look at the fully subscribed rights issue. But again, depends on timing and size of acquisitions that potentially will happen in 2024.
Fair enough. And then the last one, if I may. So obviously, lots of interesting opportunities in the MedTech market. So when you say you're looking at new segments, are you able to be a little bit more specific on the white space that you're eyeing? Would it still be sort of in the realm of the broader space of surgical equipment, or could you be venturing into completely new product types?
Thank you. When we talk about a new segment inside of MedTech, we think we have already built a very strong foothold. We're one of the global leaders in the orthopedic side of the MedTech industry. So we're looking at something that is outside of the implant orthopedics to supplement that. And there are several others, just like on the human side where there's a lot of different things to pick from. We're biasing something that grows faster than the market on average, have a higher margin potential than the fleet average in the market, and where we see that there's significant white space and a long runway for future sustainable growth.
Okay, great. Thanks so much, guys.
Thank you.
Thank you.
The next question comes from Blanka Porkolab from Barclays. Please go ahead.
Morning. Thank you for taking my questions. I have a few, please. The first one is, could you give us an idea on the number of companies in the pipeline? Then my second would be, it would be good to know what new therapeutic areas in Specialty Pharma you're looking to expand into, or at least give us a steer on the size of the addressable market. And then my final question is just around the new targets on the double-digit organic growth figure that you provided. Is it fair to assume that this is perhaps below the prior target of 15%? It would just be good to get an idea of what range we can think of when it comes to that double-digit number. Thank you.
Thank you, Blanka, for the questions. So first, on the pipeline target, as Carl-Johan said, we have a big pipeline there, and it keeps growing. Many companies, we target, we find them, we put our eyes on them. They can be in our funnel for a long period of time before they're actionable. Others are approaching us, seeing what we're creating here together, and they'd like to join and be part of what we're creating in Vimian. The funnel is growing, and we see an increased activity in the funnel.
We're very selective what we choose to pursue and acquire in that funnel, of course. And the criteria are strict, as I went through a little bit in my presentation. It has to make sense for us and fit into our strategy. They had to add something valuable to us that we don't already have. So those are the criteria. I think your second question was about the pharma business, what we would be looking at there. And if we look at the pharma business, we're very proud of what we've built so far.
There are some areas from a product standpoint where we can enhance our current offering within our existing three or four therapeutic areas that we have. So it's very possible that we would do a product-centric or related acquisition there. Sometimes you also get a geography concentration as a result of that that is complementary to what we already have. So that's a positive. We're also looking at other additional therapeutic areas that we can enter into, and there are a handful that we are very interested in to potentially move in and add a therapeutic area to there. And then your last question was about the double-digit target.
I think you can see we were very explicit in our old target in terms of what our organic growth was going to be. We're very confident that with the strategy that we have in place that have already delivered a solid 11% way over market last year. I think the strategy is really solid. We can continue to execute on that. Also in the future, the underlying market is healthy.
There's good CAGR growth here, and it seems to be fairly resilient against all the bad things that are happening in the world. So we believe the double-digit target is a really solid way for us to run this over the period from now until 2030. The majority of the EBITDA that we're generating in 2030 is also organically generated. I think that's important to keep in mind as well.
Great. Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Well, thank you very much for joining us here and the announcement with passing this important milestone in the history for Vimian and in our pursuit of building a world-class healthcare company for animals. We're delighted with the progress that we're making, and we look forward to beat the targets that we have announced today. Wish all of you a very nice weekend, and thank you very much for dialing in today and for the call. Have a wonderful day.