Relais Group Oyj (RELAIS) Earnings Call Transcript & Summary

So good morning, everyone, and warmly welcome to follow the webcast presentation of the Relais Group quarter 3 results, and greetings from the, as usual, very gray Helsinki this morning. We're happy to have you joining the presentation today. My name is Arni Ekholm. I'm the Managing Director of the group. And together with me, I have our CFO, Pekka Raatikainen, who will, together with me, walk you through the results of quarter 3. As you probably have noticed, we have transferred to the IFRS accounting standard. So this presentation is slightly more detailed and broad than what we have had in the past for this quarterly presentation. So this presentation will take probably roughly 40 minutes and after which there is a chance to make questions. And you can -- easiest way to submit the questions is to push the Ask a Question or click the Ask a Question button, which is visible on your screen below the video. And then [ Rosa ] will collect the questions, and then we will entertain them at the end of the presentation. So firstly, I will explain -- some of you have already heard and seen the presentation, some slides of it. What does Relais do in practice, what is our business. Also now in connection with the IFRS transition, we are opening up the business slightly more detailed than we have done before. So you will also see some business unit and product group level data that you haven't seen before. Then I will recap the quarter 3 business results. Pekka will explain the IFRS transition effects in brief and then walk you through the financials for the first 9 months of the year. Then I will also touch upon our acquisition strategy as it is a key part of our value creation and growth. Then the summary slide at the end, summarizing Relais as an investment, and then we will have the questions and answers, as I said, at the end. Before kicking off, a few words to our thousand dedicated professionals that have performed in a very solid and strong way during the quarter 3. So I want to thank you all for your contribution during this quarter. It -- the first half year was a rocky ride, what I call a kind of perfect storm. Many reasons, external and partly internal reasons. But you have really showed what you have made, and I'm really grateful for that. And also I want to thank our shareholders and business partners for the support you have shown to us during this time again. Good. Relais in brief. We are a leading Nordic consolidator and what we call a smart compounder, I will get back to what we mean with smart compounder, having a sector focus on the vehicle aftermarket. And we, at the same time, act as a growth platform for the companies we own. So the intention is to make the companies thrive and grow. If we just very briefly look before Pekka goes into the numbers, the turnover reached EUR 185.5 million during the first 9 months, which is a growth of about 13%. Comparable EBITDA, EUR 27.6 million with a growth of 2.7%. And then comparable EBITA reached EUR 17.9 million, which was a slight decline of 8.8%. Our strategy, this is recapping, but I bet there are a lot of people who haven't seen parts of this presentation before. It's a very clear strategy. We have basically 3 thrusts that we use to make the company grow and to add shareholder value. We intend to grow also in the future by acquisitions. So we consolidate the aftermarket. We focus on operational excellence. We have about 20 companies in the group at the moment, and we are continuously developing the operations and to seek more profitability from these companies. So we develop them with our sector, deep sector knowledge. Organic growth. Since we have the sector focus, we can also take advantage of the synergy benefits between the companies in different positions of the value chain, i.e., we can, let's say, distribute the group own products through some wholesale companies or repair and maintenance companies. So there's a clear path for the synergy and hence also accelerating the organic growth. Buy-and-build model, I have also shown before. This is the way we create value. I've added a few comments here. It's increasingly important that we find the right companies, that we invest right, especially under these economical circumstances. It's really crucial to find the right companies who have a healthy core, good management and healthy and sustainable profitability because the challenge sometimes is that the numbers look very good. But in this kind of challenging times, we want to be sure that the ability of the acquired company to also continue producing growth and profitability is on a high level. And here, we can leverage our in-depth knowledge of this sector. So that's the benefit of the sector-focused approach that we have. We concentrate on this business that we know the best and also, of course, look at adjacent categories within the sector. The next step is when we acquire the company, we develop it further. We, as we say, build great businesses. We utilize the synergies. We increased focus on execution and strategy. So all of us in the management team are personally involved in helping these companies to grow. There's a big amount of freedom in the companies. So it's not one size fits all, but there's also a very clear accountability. So we are decentralized, but we're also focused. Then what we call the smart compounding is that we are just not buying companies, but we buy companies that we know and we can add value to the company since we operate in this sector. And it's not only compounding financial capital, it's also compounding competence. So we benchmark between the companies. We learn from each other. I can get back to that when it comes to repair and maintenance, what we have done there to learn from each other to have best practices and to increase the profitability. This also opens up the possibility for add-on acquisitions to accelerate organic growth. So this is fairly clear and easy to understand what we do. Hindsight, again, we have bought a lot of companies during the last years. I think during the last 2 years, about 7 companies. In 11 years, we are -- we have, say, [ 10, double ] the size of the company, so it's a huge development. And then, of course, the kind of opportunity is to increase the operational efficiency between the companies that we have bought. Even though they have a lot of liberty then, as I said, we try to utilize the group also. So the sum of the parts is actually bigger in that respect. A slightly new way to look at our business, what it consists of. We have grouped the companies into wholesale due to their role in the value chain and then commercial vehicle repair and maintenance, and I will also show some numbers how these are -- how big these groups are. But you can see on the group wholesale, spare parts and equipment, ABR is mostly concentrated and focused on passenger car, spare parts and partly Startax, but most of the other wholesale businesses operate on the commercial vehicle sector. And the repair and maintenance is solely focused on the commercial vehicle sector. We have 1,000 professionals in 6 countries. Good. So let's have a look at the business areas, the wholesale and repair and maintenance. You can see here that the share of the repair and maintenance grew in the first 9 months of the year from 25% to 33%. And that's a direct result of the acquisitions we did in Sweden last year, STS, Sydhamnens Trailer Service and Skeppsbrons were part of it. In wholesale, we had 1 acquisition, Trucknik in the north of Sweden, which is a booming economical area. And we reached to, let's say, maintain the business on a flat level, which I think under these circumstances is a good performance, especially thinking that the Swedish krone exchange rate has deteriorated. So in comparable exchange rates, there would be probably a slight, let's say, one-digit growth organically on this part as well. Good. Then moving forward to look at the product groups. Spare parts, no surprise to anybody, that is a big part of our business, roughly 1/3. Therein, reported value, we went down with 1%. But again, since Sweden is so big market for us, this would be in comparable exchange rates, a slight plus. Lighting, on the first 9 months of the year, a small plus. So we have been able to defend the positions on the lighting market, which is good. Equipment is basically all other equipment in the company. We have a lot of equipment for different vehicles, be it power management or other type of mostly electrical equipment that we have. But we wanted to separate the lighting for everybody to understand how important business it is for us. And repair and maintenance, that is solely the whole repair and maintenance business. So we do not differ here the sales of the spare parts that happens in the repair and maintenance sector. So that is the wholesale of spare parts is not included in this repair and maintenance. So it's the full repair and maintenance business. And that is roughly 1/3 of our business. So it's relative weight has increased from 1/4 to 1/3. Right. So then let's move to the topic of the day, the quarter 3, what happened on -- during quarter 3. I call it a stable quarter. It was kind of returned to stability after the rocky ride we had in first half year. As I said in August, when I was standing here presenting the quarter 2 results, we initiated a lot of different activities and actions to counteract the effects that we experienced during the first half year to increase the operational efficiency of the group. And all these projects have been kicked off and they are running in full speed. You will remember that we increased the net working capital, mainly our inventories last year and this year, in advent of the expected delivery problems from China, and there indeed were delays in the deliveries. So we increased the stock quite much. And that, of course, is something that we are now bringing down because the season is on. But also we want to lower the level of net working capital on a longer perspective as well by having more efficient processes. Another very important topic under these inflationary times is how agile you are on your pricing process in the wholesale business because it's a lot of details in wholesale business. I think we have 150,000 SKUs. And the way you do the pricing, you really have to be preempting the suppliers' price increases. And I think we have managed fairly well but I think there's still more to gain there by being more analytical in that part. So we expect the level of net working capital to go down during quarter 4 and the pricing optimization to increase the profitability during next year or at least to defend the profitability because we have not yet visibility in detail how the supplier prices are going to develop next year with the inflation. And of course, something that we do under any circumstances, but specifically now under the kind of weak consumer demand, is that we have increased the commercial activities to counteract the sluggish demand situation, especially in Finland. Looking at the turnover, the sales grew with about 10% -- 10.3% on the quarter, reaching EUR 64.9 million. And that with comparable exchange rates is plus 12%. That's driven mainly by the acquisitions on the repair and maintenance sector, but also the other sectors managed to keep their positions. And the comparable EBITA percentage improved clearly from the last 2 quarters and went to 12.3%, and this had a clear effect on the cash flow, which Pekka will then explain later. Then deeper, looking at the wholesale, what's happened in the wholesale business. We managed to reach last year's level, looking at the comparable exchange rates, which I think is a good performance. And this is not quarter 3 numbers, to remind you. This is kind of a double-edged sword, I would say, that the Scandinavian market was very much more robust than the Finnish market. And also the Scandinavian market, the Swedish market was supported by 1 acquisition we did in the booming north of Sweden area with a wholesaler or spare parts for trucks in the north of Sweden. In Finland, I think the result is very much relating to the consumer confidence situation we have in the Finnish market, which then reflects to our resellers. It's not too much we sell directly to the consumers, apart from our e-commerce, but it is, of course, having an effect on the total business where companies are defending the cash at the moment. But it's still an okay performance, I have to say, under these circumstances. A good thing is that we have been able to defend the gross margins in the wholesale business, meaning that we have been preemptive in the price increases, as I said. Then moving forward to the repair and maintenance business. There's a heavy growth which is coming -- let's say, mostly the top line growth is coming from the acquisitions we did in Sweden, but also the stability we have managed to gain on Raskone, our Finnish operation, where we did activities in the first half year. They are now starting to bear fruit and there's a very heavy and, let's say, a healthy demand situation for the aftermarket repair and maintenance business for trucks in both Sweden and Finland at the moment. So I think it's more like these kind of times probably also support the independent sector with reasonably priced products and services. So we are the biggest operator in this sector for the independent business of maintenance and repair for commercial vehicles. Spare parts, which is a very important business and product group for us, are stable level. Really nothing too special. It's not a specific season for any type of spare parts, but it's a good solid quarter, that we managed to reach it's 29% of the full sales and its total sales. And it's in value -- reported value flat, and the gross margins we were able to defend also due to the price increases that we implemented. Good. Then lighting, a still very important product group for us in comparable terms reaching last year's level. A slight decline on reported net sales driven by new product launches and strong performance of Strands export markets. As I have told before, Strands is very successful in exporting to Central Europe and Benelux and partly other markets in the North America, for instance. So this is a combination of both domestic success and export success. And the season started somewhat later. This year, I think the customers were hesitant to commit to presales, but it has started okay. But still, there is uncertainty, as I mentioned, generally in the consumer markets with some parts of the lighting sector is directed to consumers. And this kind of consumer discretionary purchases are affected at the moment by people not, let's say, daring maybe to spend so much cash. But if you have good offers, we can see almost on an hourly basis because we have an own web shop, so we can see how the consumers behave and what kind of price levels are appealing to them. And again, a positive thing, gross margins largely on last year's level, which is a result of being awake with price increases. Okay. So that was about the product groups. I wanted to explain a little bit more in detail to you the development of the business areas and product groups. Then a very good question. How does the outlook, how does the future look like? Even though we have good lights, it's hard to see long enough or far enough. And there are a lot of external factors outside our circle of influence that play in here, which we can't really affect too much. I mean, the global situation, the geopolitical situation, Russia's war in Ukraine and the great uncertainty it has caused. Everybody here knows the situation on the macroeconomic level and also zooming in more to the private companies and private people. So it's like the money out-of-pocket situation where the energy prices are soaring, electricity and partly fuel. So it's really hard to say and to forecast on the demand for the last quarter. So there are a lot of external factors. What we then do know are the circumstances that -- with our sales control, which are within our circle of influence and the things that we can do to counteract the external factors. So we feel that we are well positioned for quarter 4. I mean, we have the products to deliver on the lighting sector and also the other spare parts. We have not drawn down the inventory levels too low not to be able to serve our customers, which is vital for wholesaling company as well. Looking at the repair and maintenance business that was facing some challenges in the first part of the year. We have fixed them. It looks very robust, the demand situation. And also the cost situation and the structure has improved very much after the first half year. Just give you an anecdotal example. As I said the last time, 1 bottleneck for our growth in the repair and maintenance sector was the access to labor force and to retain and recruit mechanics. So what we have been able to do now is that we have increased the amount of mechanics in Finland with 20 from the beginning of the year by external recruiting partners but also internal training. At the same time, the administration headcount has gone down with 20. So the ratio between the, let's say, mechanics and administration has become much more healthy from that perspective, and we have more capacity. And that applies to Sweden as well. So it looks encouraging all in all on that one. But still, of course, the macroeconomic factors are there. As I stated a bit earlier, we believe that there is a possibility that this kind of recession type of times can even increase the demand for reasonable priced spare parts and repair and maintenance services. The companies tend to find, let's say, more reasonable alternatives when it comes to pricing. And regarding corporate acquisitions, I will come back to a bit later, but we are actively processing this market. The valuations are coming down, of course, there's always a slight delay on that one at some stage. Of course, there's an equilibrium where the expectations on both sides find each other. And this is, of course, sooner or later, there will be a good chance to do good deals in this market as well. So all in all, having a look at our ability to deliver things that we control ourselves, the projects we have going on, the outlook on the repair and maintenance business and the repair and maintenance business where we have made these improvements, so all in all, I think there's a good foundation to carry out our strategy also in coming quarter and moving forward. So Pekka, please take it away, IFRS transition.

Thank you, Arni. Good morning. And yes, as mentioned by Arni earlier, we thought that as the IFRS transition was just recently launched and the IFRS information therefore has been available for only a short while so far, it might be worth spending a couple of minutes for analyzing the differences between IFRS and FAS until we abandon the FAS world and figures for good. . The first clear difference can be seen when we look at the EBITDA, where the IFRS EBITDA is significantly higher than it was in FAS. And this is due to the elimination of lease expenses. We have a comprehensive service network in Nordics and Baltics, mainly operating in leased premises. And once these leases are eliminated, according to IFRS 16, we see a difference in FAS and IFRS EBITDA. Looking at EBITDA, the definition of it has changed and has been restated as the amortization of goodwill no longer exist in IFRS. And once we calculated EBITDA by adding back amortization of goodwill on it, we today calculated differently by adding the amortization of acquisitions that represent roughly 1/3 of the level that the amortization of goodwill used to be. On EBIT level, we once again see a difference. And this is mainly due to the amortization of goodwill that are not in place yet. And there is -- as we had made many acquisitions along the years, the amortization have been significant burdening the EBIT in FAS world. And now that they are no longer there and they are amortization of acquisition instead, there is a clear difference. And it can also be seen when you look at the profit for the period figure. The difference is mainly explained by the acquisition, how they are recorded in IFRS currently and in the future. In balance sheet, there is one clear difference that can easily be seen, and it is the right-of-use assets where the value of the lease contracts has been capitalized and presented in one figure. The figure representing, as I mentioned, the whole service network and logistics center network we have of our customers. On the other side of balance sheet, we see lease liability representing related to this IFRS adjustment made. The equity is higher in IFRS than it used to be in FAS, and this is once again explained by the amortization of goodwill that are canceled and added back to the equity in IFRS. But all in all, the total of balance sheet is increased by a significant amount due to the transition. As mentioned by Arni, the third quarter was significantly better than the first 2 quarters where the -- it contributed a lot when we look at the cumulative numbers that we -- there were no further gap incurred in comparison with last year's cumulative numbers, we were mitigating the gap significantly by the third quarter performance. This, I think, is a good moment to briefly discuss about the new alternative performance measures we have launched along the transitions, those comparable EBITDA, [ EBITDA ] and operating profit. The idea behind this thinking is that once we, in our strategy, have been and hopefully will be making acquisitions, there are some differences between IFRS and FAS that are good to keep in mind when analyzing the impact of acquisitions. And when we defined the items affecting comparability, we found out that there are mainly 3 type of costs that might be wise to eliminate to better illustrate the business performance of the group. And those are: the acquisition-related advisories that are no longer capitalized, potential revaluation of contingent consideration liabilities, and third one are the listing costs that are one-offs in a long term and not part of the fixed cost base. And that's why we thought that by launching comparable figures, the business performance is better illustrated in our reporting. The EPS definitions are partly restated along the IFRS, and we can see a difference if we compare them with FAS EPSs. Otherwise, the other KPIs here reflects the business development very much in line with the previous slide KPIs. Balance sheet total is currently higher due to the right-of-use asset and lease liability. The equity was also impacted. But with comparable IFRS figures, they are not major changes other than the impact of the most recent acquisitions made at the -- in fourth quarter last year and second of this year. Cash flow development. This is very crucial and important part of the business. And as mentioned by Arni, we're very, very delighted to see that the measures launched to improve the working capital started to materialize and made a significant difference in cash flow from operations. And once we put all these together, we see that cash flow from financing was pretty much plus/minus 0 during the period. Investments consisted of the acquisitions of Skeppsbrons and the minority shares of Tunga Delar and SEC. And this was financed by the positive cash flow. So we saw a slight improvement in group cash in comparison from the -- with the year-end last year. Thank you.

Yes. Thank you. So a few words about the acquisition strategy just before we wrap up. As I said, we are very disciplined. We have a very good acquisition process. We spent a lot of time in analyzing the market. We have a very long list, if you will. The market is -- the market size for the aftermarket is about EUR 20 billion according to our own estimate, and there are 19 million vehicles here in the Nordic and Baltic regions or in the value chain where we operate. There are myriads of different opportunities explore. And at any given time, we have discussions going on with potential targets. As I explained, we have been very disciplined when considering the potential deals due to the general market situation, although you should not exaggerate that either. I mean, if there are good deals, opportunistic deals, we will, of course, aim to do them. But I have seen a slight delay on the expectations on the valuations of the sellers and what we as a buyer would be willing to pay since it is very hard to predict the sustainability of the profit level of these companies. But again, having said that, there are good companies there to explore, and I think the situation also opens up good opportunities where companies and owners are then, let's say, maturing to sell at this time and to find a new good owner for the company. So we will continue to process the deals and then let you know when things happen there in that front. Then the last slide before letting [ Rosa ] to facilitate the questions. Just to sum up, what is Relais as a company from an investor point of view? Active sector-focused consolidator, we intend to grow also in the future by making deals and acquiring companies in this sector. We have a solid cash flow and profitability track record, which is very crucial for a company focusing on acquisitions. The growing underlying market with defensive characteristics under these kind of times, we start to see already signs of that, of course, a little bit early days. Every vehicle is a platform of revenue for us. I mean, there are different things you can do for the vehicle from when it's imported to the country to when it's then finally demolished in the market, whether it's equipping or spare parts or maintenance. So it is kind of a big [indiscernible] good installed bases on the market. We have a diamond in the -- inside our business, which is called lighting, our own brands. We have a good potential to really accelerate the growth. So I will come back to that in the future, how we intend to accelerate the growth in this own business and own-label business. Then we have an own e-commerce solution. We have a couple of web shops that we are running, and we are learning every day more of that business, and I think we can capitalize on that one also for the other businesses. And then we have an efficient and decentralized operating model, so we don't put all the eggs in one basket. But it's centralized enough so that we can steer it in a controlled manner and retain the liberty of the local companies to have this entrepreneurial spirit in the company. So it's a kind of balancing act. So all in all, so these are the strengths of our concept at Relais. And now, okay, 35 minutes we have spent. So we have time now to take some questions. I hope that there are some challenging questions and maybe, Pekka, if you come over here as well. So [ Rosa ], please go ahead.

We have quite many questions here. First one comes from Joni Sandvall. How much organic growth was in Q3? And how large was the pricing component?

Let's say, it is -- I would say it's a flat organic growth across the -- I mean, it varies from business unit to business unit, but it's about a flat organic growth. The price increases, of course, vary because we have different types of businesses. But I would say, during the year, anywhere, let's say, between 5% to 7%. But that's really a conglomerate of different product groups. So it's more like a -- yes, an estimate at the moment.

Then we continue with Joni Sandvall's question. Can you comment on efficiency program? How much extra working capital you have currently?

Yes. Firstly, thank you, Joni, for the questions. I forgot to say. I'm unwilling to give a specific number. But they are, of course, in a company of our size, having a turnover of well over EUR 200 million, so we are talking always about millions when we talk about reduction of the net working capital. So we are, of course, growing at the same time. So for more important maybe is the ratio of net working capital to the turnover that we try to keep on a certain level. But we are talking about millions. I'm willing to say what is extra, but there's potential still to reduce it.

Then continue with Joni's questions. Regarding pricing optimization, how much this should contribute all else equal for 2023 gross margin?

At this stage, without yet having the full analysis, I would say that it would be a good performance if we, under these circumstances, can retain the group gross profit. So I'm unwilling to put a number on any potential increase on that one. In specific companies and product groups, it will mean an increase in profitability. But on the whole, I think defending the current gross profit is a good starting point.

Okay. Have you seen any decline in sourcing prices?

Not really yet. I think what we are seeing from China at the moment is that there seems to be capacity, and that some of the problems that they have had with logistics are not that critical anymore. But it's early days to say of price decreases at the moment. But I would not be surprised if there's a kind of overcapacity situation. It could lead for some products. But it's very -- I would be very cautious to forecast anything on that.

Okay. Then still continuing with Joni. During H1, you had shortage of professionals in repair and maintenance. How has the situation evolved? And what is your expectation for the rest of the year? Did you have any meaningful additional costs, for example, sick leaves in Q3?

Yes. I think I mentioned shortly about that one. So we have been able to really fix this in Finland. So we have about 20 more mechanics at the moment compared to the -- what we had in the beginning of the year. It is twofold. We changed the salary setting system to more focus on the fixed salary, which in this type of times, is more appealing to many employees. And then we have had external partners helping us with recruitment. We have enforced our HR department. And also we have trained people ourselves with our own education program. So we haven't had any deviation of sick leaves on quarter 3. I know COVID is still out there, but it hasn't been an issue anymore for us. And in Sweden, the situation was not so critical for lack of mechanics. So it's more stable at the moment there as well.

Then we have a question from [indiscernible]. How do you see your ability to do acquisitions in 2023 considering of rising interest rates and present market environment?

Yes. Thank you, [indiscernible]. I would say that we have 3 thrusts that we can use for acquisitions, partly the senior funding, senior loan financing. We can use our own share, which we tend to want to use if we want to commit the owner to the company. And then we can also look at equity or equity-like financing moving forward. So I'm confident that we can do the acquisitions that we are wanting to do.

Then we have a question from [indiscernible]. Since Relais entered stock market, the company has done several acquisitions. What do you have learned and what has surprised you?

Thank you, [indiscernible]. Very good question. I think we have learned that you should do your homework properly, which we have done. Of course, you cannot spend too much time on DD processes either because then the costs will fly out and the process will be delayed, but to kind of find and analyze the most important parts in the DD process that can prove the sustainability of the profitability of the company, to focus on certain things that we know are the levers that we can push as an owner. So we know the companies fairly well. We know the sector very well. That helps us to do the analysis. So that's a kind of learning, to do your homework. Another learning is that the synergies that you put on Excel, they never come so quickly as you want them to come. Well, never is a very strong word to say. I think it requires a lot of work from both sides, from the owner and the sister companies to get the synergies in place. So you really need to plan well, and you need to resource the synergy exploration well because it doesn't happen automatically. Other than that, I think there are, of course, smaller parts, but I would say it is kind of be disciplined with the process, analyze the companies in a thorough way and then make sure that you get the synergies. But we have also happy surprises from the perspective that when we do benchmarking and try to find the best practices, which then actually translate to better bottom line, we can learn from each other. So that's a good learning.

Then how much M&A firepower you have currently?

That is a result of what I just said with the 3 thrusts. So it is basically impossible to give a number because all these components are variable. I would say enough.

Then a question from Mika Karppinen. What was the organic sales growth in Q3?

Yes. I think Joni asked the same question, but -- and my estimation was about flat.

Yes. Let's continue with Mika's questions. What kind of visibility you have on lighting business for important Q4 season? How the Q4 season has started?

Yes. And also thank you, Mika, for the question. Again, I'm willing to comment on the performance of the ongoing quarter, but the things I mentioned on the outlook are valid. So it's -- there is, say, a reasonably good business going on at the moment and has been going on in Q3, as you can see from the numbers. But the uncertainty is still there. So we don't know towards the end of November and beginning of December, how the market demand looks like. The lighting season continues all the way up to end of February, where November is one of the absolutely key months. So we are just in the mid of key month, and then you have all these kind of Black Friday and Singles Week campaigns going on. So it's anyhow early days to say. But there's a certain amount of uncertainty, no pun intended.

Yes. Then we continue with Mika's question. How sizable sales prices hikes have you carried out this year? How much they contributed to sales growth in Q3 and Q1 to Q3?

Yes, that's a tough one to say. I think I stated already that the price increases vary between 5% to 8%. But again, it's an average. I mean, there might be product groups where they have been higher. The market volume has gone down, which means that I think the organic growth is mostly coming in the big picture from the price increases and then the result of the acquisitions.

Yes. Then I have a question from Petri Gostowski. Did sick leaves have an impact on the repair shops business in Q3? And do you expect some impacts from this in the current quarter?

Thank you, Petri. No, they really didn't actually. I think we are following very precisely the amount of hours that we are doing. And it was in an invoicing and the amount of hours the mechanics are present in the workshops. So there was no deviation caused by COVID. Impossible to say the effects moving forward about the pandemic, but we seem to notice that the effects of COVID are not so bad anymore. People get back to work quicker than they did before. So I think it's a vaccination program that is helping on this one. So I'm not expecting, but I'm not a fortune teller so I can't say.

Yes. Then we have another question from Joni Sandvall. What was your average interest rate in Q3? And how is expected to develop going into 2023?

That's maybe I would ask Pekka to comment.

Yes. We actually haven't disclosed the interest rates, But the -- I can say something about the structure of the loan base there. They are partly in -- denominated in fixed interest rates, but most of the loans are variable. And of course, we see the increase in market interest rates and have prepared in our calculations in many ways to bear the effect of if they still keep rising. So we don't see it's limiting our ability to operate or make acquisitions.

Maybe add that, we consider our, let's say, financing costs from the senior financing be on a very good competitive level.

Good. Good comment.

Yes. Then a question from Mika Karpinnen. How sizable cost savings are you targeting to get from cost adjustment measures?

Thank you, Mika. It's not really about cost-saving activity. I mean, we are a very lean company as it is already. So it's more the efficiency of pricing and net working capital. We have done some measures on the repair and maintenance business, but those exercises have mostly been done. Having said that, if the demand situation next year would be -- I mean, if the macroeconomic would -- somehow the market would collapse, our operating model is very agile also in that respect that we can very quickly adapt the cost base, as was the case in 2020 quarter 1 when the COVID pandemic started, quarter 1, quarter 2. So we can very quickly do measures. But it's not a cost-saving exercise, basically. It's more like being operationally more efficient how we deploy capital.

Yes. Then a couple of more questions from Petri Gostowski. Do you see prices going up also next year?

Again, Petri, very good question. Thank you. I would not be surprised that they will because then you have to take in consideration the delay of the product flow on the supply chain that -- the effects of the supplier base cost increases affect the average prices of the products you have in stock with a certain delay. So that will be pushed forward. Another factor is the Swedish krone versus euro. That has deteriorated. So then your average prices again tend to go up, which then we have to counteract. So yes, I expect the prices to go up.

Yes. Then last question for now from [indiscernible]. Do I remember correctly that you stated in some interview that you are looking for a 20% return in M&A? If not, could you give me some hints how high hurdle rate you use?

I have to confess, I do not remember having said a specific number of 20%. But I would say that if you look at the return on investment or return on capital deployed on our general group level, I would expect the acquisitions to be at least on the same level as we are. But we have not set a specific target for the new companies.

Thank you. No more questions.

Yes. Thank you, [indiscernible] for the question. Good. All right. Thank you very much, and thanks for joining us today, and thanks for taking 50 minutes of your time for this presentation. Thank you very much.

Thank you.