Relais Group Oyj (RELAIS) Earnings Call Transcript & Summary

Good morning from the cloudy and gray Helsinki. Welcome to join the online presentation webcast presentation of Relais Group quarter 3 results. Even if the weather is gray, the result is very sunny. So I'm very delighted to be able to present the results together with Thomas Ekstrom. My name is Arni Ekholm, I'm the Group CEO; and Thomas is the Group CFO.

Good morning.

Welcome, everybody. So today, as per usual, a short review of what is Relais' all about. I guess, there's always a few people who haven't followed this presentation before. So I'm happy to give you a little bit more detail of what we do and what our business model as a competent compounder what does it really mean. Then going through the quarter 3 results. Then Thomas will explain the details on the financial review side. There's quite a lot of additional information there as well. Then a few interesting points on the events after the review period and then a summary at the end, Relais Group as an investment. [Operator Instructions] Looking from the helicopter perspective, what is the business model of Relais Group? What is compounding all about? And what is our market? We are operating in the North European market. So actually, we have already taken a step towards the central European commercial vehicle aftermarket. But the main market for us is the Nordic market. And we call it enhancing the vehicle life cycle, let's say, the life of the vehicle, the life cycle from the birth of the vehicle to the end of the vehicle. We focus on the part which starts when the vehicle is imported or sold into a specific market. You customize a lorry or truck with superstructures, you add some lights in it or other equipment then you repair and you maintain to keep the life cycle effective. And it's also, from an environmental point of view, it is much wiser to repair and maintain existing car park than all the time produce new vehicles consuming raw materials. So from that perspective, also this life cycle approach is sustainable business. What is driving the market? In the Nordic, if we only take the Nordic perspective, roughly 19 million vehicles, it's also important to note is that we are predominantly focusing on commercial vehicles. So we are not dependent on the technological changes on the passenger car side. So I would say maybe 90% of our business is coming from commercial vehicles these days after the recent acquisitions. They are very stable and growing markets. The amount of vehicles is growing every year. The complexity of the spare parts and components are driving value. I mean, the components are getting more expensive all the time. There's more technology and electricity in the components. Electrification is not advancing very rapidly on the commercial vehicle side. I think there are other alternative power sources that are also interesting like gas and hydrogen that we are having an eye on. But no matter what the powertrain is we can repair and fix and sell equipment to the vehicles. So for us, each vehicle is a revenue platform. We buy a lot of companies. We develop the companies. We use the cash flow of the new companies to then finance again the acquisition of new companies, and hence, we add value to you as shareholders. That's the business model of a competent compounder. And also very important, what do we mean with competent in this perspective, we are focused on these sectors. So we know this sector very well. We know the companies. We know the entrepreneurs. That gives us a better chance to make good acquisitions because we know this business very well. The estimated value is about EUR 20 billion in the Nordics. And then if we, let's say, look at the whole European market, then it becomes rapidly much bigger. So it's -- we are not running out of runway on the market size anytime soon. How does Relais Group look like these days after the recent acquisitions, which I will explain a bit later. You can divide our business into 2 larger parts, the first being Technical Wholesale and Products, 62% for the first 9 months and commercial vehicle repair and maintenance, which is 38% during the first 9 months. And also bear in mind that since we have done a lot of big acquisitions during June, July. These numbers are not yet reflected in this division of businesses. So moving forward, the weight of the commercial vehicle repair and maintenance will grow and I think that's also important to understand that these businesses have inherently different types of profitability levels, meaning that the repair and maintenance has typically a lower EBITA percentage than the Technical Wholesale and Products division. But from the other hand, then the return on capital employed and return on operating net working capital is very lucrative also on the commercial vehicle repair and maintenance business because it does not tie that much capital. So you need to be let's say, we come to the figures later when Thomas presents, but it's also important to understand the dynamism between these business groups. Then looking at the Technical Wholesale and Products, you can see that as 2 different businesses as well, which are interconnected, which is the spare parts business, where we have recently increased the weight of the commercial vehicle, either heavy vehicle spare parts by the acquisition of LVD in Norway. So actually, it's only ABR in Sweden that is focusing mostly on passenger cars, also although on light commercial vehicles. So almost all the other companies are predominantly commercial vehicle related. Lighting equipment, there, we have some very interesting brands. We have Strands. We have lighting brands like Optibeam under the Lumise brand and also now with Matro Group, which we have actually now changed the name to Nedking Europe. So Nedking Europe is a new name for Matro Group. We have 3 companies in the Benelux. And Nedking is a very potential brand that we intend to roll out to Europe and to the Nordic countries. So the share of the own brands is very high in the company already at the moment, I would say, it's over 20% at the moment, and we want to see it growing also on the spare parts side. But the equipment and lighting side is predominantly owned brands. So that is very important from a profitability point of view. Relais growth story, if we go way back to 2010, you see some development already from there, but the real momentum starts in 2019 when we go together with a couple of Swedish companies and then take the market -- take the company to the stock market. And well, I would hate to use the phrase rest is history, but I mean it is truly an outstanding growth during the last 5 years, over 20 acquisitions pro forma. This is unofficial pro forma by the way. So it's illustrative pro forma ending up in over EUR 400 million if we combine all the acquisitions, the full year effect, we have acquired about EUR 11 million EBITDA local GAAP measured on top of what we had last year. So it's all in all, very close to the EUR 50 million target that we have set for ourselves. Well, the year has not ended yet, but still. So all in all, I'm very happy to see this growth and of course, hope to see that continue also during the next 5-year strategy period. Before going and having a crack on the quarterly results, let's still recap what do we have as elements in the growth story? How do we intend to grow as a competent compounder? I mean we are already a very profitable and scalable platform within this sector in the North and part of the Central European market. So what we can do is to combine the organic growth with operational excellence and then acquisitions. And I think the organic growth at the end of the day is a very important measurement of our ability to develop the companies we have acquired. So that's the part of a compounder that is very important that you also develop the companies that we have acquired. So it's not only acquired growth, you need to be able to grow faster than the market. And I think we have now been able to prove that during the last 5 years and also specifically now during the last quarter by growing faster than the market. The market has been fairly lackluster the first 9 months. So no real value growth in the market, but we have been able to grow 4% in quarter 3, which is really good. I won't go through all the details. I mean the devil is in the details also in the wholesale and repair and maintenance, but you need to get the details right. From pricing to looking at diversifying your customer base and also looking at how to run your businesses. I mean we have -- if we are looking at the operational excellence, we have a very detailed playbook on when we buy repair maintenance workshops, kind of 100-point check list what to fix. Even if the companies usually are in good shape, we always find some synergy benefits. For us, synergy is not a bad word. I think it's not the driving force of the acquisition, but we always find different types of synergies in the way we operate, whether it would be procurement efficiencies or just the way you run a workshop efficiently or you make the money work harder for us in the working capital optimization part. Acquisition side, we can do bolt-ons. We do bolt-ons. I will explain later what we mean with bolt-ons, just adding to the current platforms, new companies, and that is a self -- in a way, feeding machine, and we use the local organizations to drive those, which is very good. We have a large M&A group now doing these acquisitions. We can also look at new vehicle types. I mean, defense sector is very important and interesting for us as well as any company these days. So we're looking at that. And then we can also acquire new growth platforms and make real transformational deals in the future. Right. So let's have a look at quarter 3, a record strong quarter. What do I mean with a record strong quarter is net sales for the first time ever was over EUR 100 million. The comparable EBITDA was also the highest in the history of Relais Group. So we are really seeing -- starting to see the effect of the acquisitions we have made during this year. So just recapping a few numbers, which Thomas will go more deep in his presentation about a whopping plus 35% growth, out of which 4% was organic and also the comparable earnings per share has grown fairly nicely. I think the important thing when looking at the metrics relating to balance sheet is what Thomas will also explain that once we have done so, big, almost transformational deals this year, we see the full effect of the balance sheet in the books, but we only see a couple of months of the result in the books. So this will change over time, of course, when you start to get to 12 months effect of the results as well. So don't get carried away by the metrics on the balance sheet because that will change over time. Historical quarter, transformational deals, won't go through all the details. I just want to highlight what we did and recap what we did June Team Verksted and Lastvagnsdelar are really, really strong companies in Norway, really kind of cementing our position as the biggest operator independent commercial vehicle repair shops in the Nordic market. So fantastic teams, well-run companies. So really happy to have them. Matro Group nowadays called Nedking Europe, opening the business for truck accessories in Europe, fantastic business as well that many people are not even aware of how much equipment you can actually have in the trucks to personalize the trucks. Autodelar, a small acquisition in Sweden, enhancing the position of our group company ABR in a certain region. And then last but not least, just after the quarter was closed, we acquired 2 very high-quality commercial vehicle workshops in Eastern Finland also having a very important business with the defense sector, which is very interesting and highly interesting also brands that we have the license to serve there. So as a result, as I said, over EUR 400 million pro forma net sales and almost 1,700 professionals in 8 different countries. Right. The acquisitions, 64% growth of the segment. So we do have 2 segments. So I don't want to confuse you, but we have 2 segments and then a few business areas. So the 2 segments grew very, let's say, strongly. The Scandinavian segment grew very strongly, 64%, out of which was 5% and also comparable exchange rates. So we are not taking any credit for the improved Swedish krona. So 64% is basically because most of the companies we bought fall under the Scandinavian segment, even the Central European business falls under the Scandinavian segment in our books currently. And then the 2% in the Finnish and Baltic segment, which is actually above the estimated market growth. We estimate the market to have been at the best flat or even a small minus. And that actually goes for Sweden as well. So we are not growing in line with market in Sweden and Scandinavia, we are growing faster than the market. Technical Wholesale and Products, 21% growth, organically 7%. I mean we bought Lastvagnsdelar in Norway, which is a very good contributor into this growth, but also the organic business developed very nicely in Sweden and Norway, especially the workshop equipment sales in Norway was very nice and very good. And I think what is encouraging, I think I already indicated this in the quarter 2 presentation that the looks like the lighting business has started -- the presales started well, and we can really see the result of the vehicle lighting sales has started very well during the quarter 3 and especially, well, Strands is standing out again as an export company. But our Finnish and Swedish and now even Norwegian online business has developed very well. So that's really nice to see that Lumise is reaching kind of record sales during this quarter. Then the other business area, commercial vehicle repair and maintenance. I mean, you saw the number, 62% is really, really strong, but it's coming from Team Verksted, a really strong contributor. And the rest actually is showing a minus 3%, which is partly related to the very strong comparison period last year. So last year, quarter 3 was a very strong growth, double-digit growth on repair and maintenance. So this was kind of stabilizing and the trailer market in Sweden was softish and partly Finland as well. We expect this to come back on track, whether speed up or stabilize during the quarter 4. So we have no reason to believe that the market would be kind of going down, it's more like stabilizing in the quarter 4. What we have done with to boost organic growth as well, we've done a lot of changes in Sweden for our current STS chain, which we have rebranded as Team Verkstad. So we see some synergy also from a branding position point of view, where we now have in Norway Team Verksted and in Sweden Team Verkstad and also opening 2 new workshops in Sweden. So they kind of stay tuned the story will continue next year. So now wrapping up the commercial vehicle and repair workshop business. We are, as I said, the biggest operator of independent on the vehicle manufacturer independent commercial vehicle workshops across Finland, Norway and Sweden. So only Denmark is missing from the Nordic point of view. But let's see about that later. Growth strategy, how do we intend to grow? I already touched that a little bit in the kind of a compounder pyramid that I showed. I mean, it's the combination of acquisitions, organic growth and functional excellence. So as a compounder, it's all about allocating capital, making wise decisions of where to invest and then make the money work harder for us and the shareholders. So as part of that having sustainable financing solutions is, of course, important. I mean, you saw when we bought Team Verksted, we took a bridge loan of almost EUR 40 million and then to refinance that then we launched a hybrid bond solution that Thomas will then explain later, which was really strong success in the market. I mean it was always subscribed by 3x and a very wide support from the investors, a lot of new investors that we haven't kind of seen before, very established investors from all across Europe and Nordics were participating in this. So that really supports our growth for the future. It was a very good experience. And I have a few slides after Thomas. So I will now give over to Thomas, please.

Thank you, Arni. Yes, it was an eventual quarter, both from the financing side and also from a financial performance perspective. So I tried to keep it short and there's a lot of slides. I won't go through all of them, but they are all included for you to read if you want. Looking at the performance of net sales and EBITA, these are the reported numbers. Arni already explained about the comparable numbers. And looking at the reported EBITA, that decreased by 3% but here is a key takeaway that there was included a kind of short-term temporary inventory step-up booking of EUR 2 million that then took that performance number down from comparable from EUR 10.9 million. I will go through that soon in the next slide. So this is the key takeaway basically that this is a record high operative performance of EBITA during the past 3 to 4 years. And as Arni said, there was a positive impact of the strengthening of the kroner. We have taken a lot of negative impact in the previous years and the previous quarters, but now we had a positive impact of that. The items affecting comparability, as I mentioned, they are in the quarter about EUR 2.1 million and then cumulatively EUR 2.7 million. And as we have explained in our accounting principles, the normal one-sided transaction costs in a company like ours from the acquisitions. And they were EUR 300,000 in the quarter and EUR 600,000 cumulatively. But the big one here is that when we have acquired the Matro Group companies and the invested companies, they have sizable inventories and then we have to do a step up of those inventories or allocate the acquisition price, part of that to the inventories. And then we depreciate that over a 3 to 4 months period. So here, the step-up amortization is the 3 months amortization of that step-up of inventories. That has now ended. There will be no impact of this in the coming quarters. So this was a temporary impact. And that's why it's here included in the items affecting comparability. Right, going in to see more metrics of performance, gross profit and gross margin. As in EBITA, there was a big impact of acquisitions, increasing the gross profit. But then again, a key takeaway here is that the gross margin has also increased. This is due to the increased weight of the repair and maintenance business, which has a higher gross margin. And to highlight again that here in this gross margin also, the inventory step-up, as I just mentioned, they are booked in change in inventory. So they also burdened this number. So this is even better the gross margin than you see here on the screen. Operating expenses, they were stable comparably. But as we have added increased weight of the repair and maintenance business, due to acquisitions. We hear also, we have a higher gross margin. But then again, we have also a higher operating expense percentage also. So a lot of nonorganic impacts on these metrics. But organically still stable development. Going over to the balance sheet, looking at net working capital. Of course, there is a big impact from the acquired companies. Net working capital increased about EUR 17 million due to the acquisitions now in June and July. So the -- but otherwise, you can see that also inventory turnover, they are a bit down. Here again, it's key to remember what Arni said that the balance sheet figures in these metrics are fully included, but then the turnover sales side only has 3 to 4 months of sales included, so they will even out. But also organically speaking, there was a bit of a slowdown in net working capital turnover and the inventory turnover. And then also, I want to emphasize that in the cumulative numbers, NWC was also burdened by -- there's no dividend payable in the current year's numbers. So that also impacts partly negatively on these figures. Going over to the cash flow side. This was a record cash flow from operations. You see it from the chart, and also good that we have had an increasing impact from the change in net working capital now in the previous quarters. This now turned to a positive development now in Q3. You see that there's a lower increase in net working capital in Q3 compared to last year. So we are basically slowly narrowing down the negative gap in net working capital compared to last year. Then, of course, here the net working capital is impacted by also increased leases. And then we have also a negative exchange rate difference in the cumulative numbers that we already commented on in Q2. But all in all, a good, stable performance here. Cash flow summary, all the key components of the cash flow statement. I mentioned about the cash flow from operations. Then as said, we have invested a lot in new businesses during the past 3 to 4 months. That means that we have EUR 37 million of cash flow from investing activities. And here is the acquisition of the shares in Nedking Europe, that is the holding company of the Matro Group companies and then the acquisition of the shares in Team Verksted Holding. Here, of course, is missing the repayment of the Team Verksted Holding existing debt, which is then shown in the cash flow from financing activities. I won't go through the cash flow from financing activities, but the total impact of all the activities here is EUR 57 million positive. And that, of course, comes from -- we raised funds in March for the Matro acquisition that was EUR 17 million. We raised and repaid the bridge loan facility that was taken for the divested acquisition. But then the key takeaway here is that we then emitted a hybrid bond of EUR 50 million in September. So those are the big kind of changes here in the cash flow from financing activities that is worth mentioning here. I won't go through these finance agreements. If you want to look at the details more, they are included here. But the thing that I want to raise here is that in connection with the Matro acquisition, there was less a minority shareholding in the company, meaning that according to IFRS -- and we have a synthetic forward option. There is a shareholder agreement connecting to this acquisition. And here, there is a put and call option for the buyer, for [ Relais ] and the seller to close and for us to acquire that 30%. And according to IFRS, this means that we have a synthetic forward option, meaning that we have in the balance sheet in interest-bearing liabilities. One component of this is a EUR 6 million liability. And we book an interest on that also in net financial items. But as then in the shareholders' agreement, there is certain details causing that part of this option valuation has to be booked as a cost in the employee expenses. So that's why we also know from this time forward over a 5-year period, we will have approximately EUR 1.2 million noncash IFRS-based costs every year for the next 5 years. So this is the key takeaway from -- and why I want to mention this synthetic forward opinion. Then the hybrid bond. I mentioned that, that is now a EUR 50 million amount included in total equity. And this is then, of course, an equity item. And there's no maturity date of that, but key to emphasize that if we pay out dividends in the future, then also there is a liability to pay interest on the hybrid. But we have more details on this on the web page also. Here are the details on the new loans raised and repaid. I won't go through them, but you can read them if you like. And here is there finally the overall closing financial position and interest-bearing net debt at the end of September. You see that we have added loans from financial institutions on a net basis, about EUR 35 million to EUR 130 million. And then we have added a lot of lease liabilities, meaning strategic I mean, workshops vis-a-vis locations from Team Verksted. So this will increase of about EUR 40 million on that. So all in all, our gross debt is EUR 238 million against EUR 156 million last year in September. Our cash position was strong at the end of the quarter. And here it's key to note that EUR 14 million out of that EUR 38 million was reserved for the Vettery workshop acquisitions that was then materialized in the beginning of October. And at the bottom here, you see we still then have undrawn uncommitted facilities of EUR 6 million to use for future acquisitions. And also when deducting the Vettery funds, we also have good liquidity to carry out selective acquisitions in the near term.

Thomas can I add?

Sure.

Yes. I think it's also -- as Thomas said, this is -- once you buy big companies, of course, you get the whole balance sheet, you also get the debt but you don't get the full 12 months EBITDA. So that's what you are actually stating here, that's also bear in mind that this as well will stabilize as we get the results of this.

Yes, that impacts the leverage number, especially here. So it's kind of underestimate the real situation because it lacks the 12 month impact of the EBITDA. Then going over to the P&L and looking at the net financials. Here, basically, the key take aways are that we have lower interest expenses in the quarter despite having significantly higher interest-bearing debt. That has to do with the lower EURIBOR and STIBOR rates on our loans. And then, of course, here is shown the increase in interest on lease liabilities, due to the increased lease liabilities. And then again, we had a positive exchange rate gain now in the quarter relating to our kroner-based loans, external loans and, of course, internal loan receivables. You can read more on that in the report. Then to summarize the balance sheet and financial position, the key ratios. The total assets that have increased to almost EUR 500 million. Total equity, including the hybrid bond is EUR 178 million. And as said, interest-bearing net debt is EUR 200 million, an increase of about EUR 50 million. Net gearing here also coming down due to the hybrid bond. Equity ratio also including the hybrid bond, 36.5%. And as said, we have about EUR 40 million in cash assets. And then the final slide for me, the return components. One key metric we used to look at is return on net working capital. And that is a bit lower than last year. And here, again, we have the impact that we have the full impact of net working capital in the balance sheet, but only 3 to 4 months return components on that. So this will kind of be mathematically increase in the coming quarters. The same goes for return on capital employed, which is still fairly stable and also return on equity. And here, of course, the hybrid bond added to equity, of course, also impacts this metric. But all in all, good numbers and a lot of changes from a financial perspective.

Yes. Thank you, Thomas, and we want to take some more time to explain the dynamism and the changes during this transformational quarter. I think it's very important and valuable information. This year, we have seen before many times, that's the official financial target that we have, the EUR 50 million by the end of this year, the comparable EBITDA run rate. And year has not ended yet. So let's see where we land and very, very close at least at the moment, looking at the acquisitions we have done. We are in the process of reviewing the existing financial target. Obviously, as the strategy period is coming to an end and then the next period starts in '26. So we will come back to new financial targets in due course. Events after the review period, a lot of interesting things have happened -- has happened after the quarter ended. As I already mentioned, we acquired 2 very high-quality workshops from Wetteri Auto Oy in Eastern Finland and really happy to have those 2 workshops joining us, very strong local presence and also giving us a couple of new brands in our portfolio to have an official license for. And then no need to go through the hybrid bond anymore, but I mean it's, of course, as a listed bond as well trading as of 7th October. And then as of this morning, the decision was made to pay out or distribute additional dividend of EUR 0.20 per share. And you will remember that was the authorization that the Annual General Meeting gave to the Board in April to decide on its sole discretion. And now the decision has been made to pay that out, and it will then happen, if I remember correctly, next week is the date. Then very exciting, very positive news. As we have announced in June, I'm now going to retire from the CEO position next spring and focus more on the Board and advisory type of positions in the future. So I'm really happy to -- unless you haven't already seen the announcement, I'm really happy anyhow to welcome Christian to join the team. He would then take over the CEO position at the latest on 19th January next year, has a very strong track record from Ratos AB in Sweden, running decentralized organizations where we run the business area called Construction & Services. He's done a lot of M&A, many transactions during his previous tenures and also as a touching point to the vehicle aftermarket and automotive business through Toyota and also McKinsey & Company. 45 years old Swedish Master of Science from Linkoping University. So I'm really happy to have you, Christian on board and welcome you tomorrow as well when we are meeting in Finland. So this is great news, and I'm really looking forward that Christian will be a good captain for this wonderful ship called Relais. Right. Before going to the questions, a couple of slides, what is Relais Group as an investment. Of course, it's a fantastic investment opportunity for everybody. I mean this is -- we are a competent compounder. We have the sector focus. It's very clear with the commercial vehicle aftermarket. We have done a lot of successful M&As in a fragmented industry, and we have still a lot of significant acquisition opportunities. The market is large. It's resilient. It's less sensitive for cyclicality. It's also a defensive market and is structurally growing. We are already a very interesting scalable platform in North Europe and Central Europe. I mean, with this market cap and turnover that we have, I'm already now seeing a lot of interest from investors all around basically the globe. So we are above the radar level, clearly, as a competent compounder. Strong consistent growth during a long period and also good organic revenue growth, which is very important for this type of compounding business that we are running. And the decentralized model, we give a lot of power to the companies that we acquire. And there's a big entrepreneurial culture and values that we enhanced in those companies. And then looking back from 2019 when we were kind of introduced to the stock market I've shown this before. The -- had you invested EUR 1 then, it would be now worth the total shareholder return would be 143%. It's also bear in mind that we have distributed, we've turned EUR 35 million to the shareholders either dividends or share repurchases mostly in dividends. So beating the Helsinki OMX index with 2.3x. And I think personally, I'm really happy to see that the amount of the number of shareholders has grown with over 1,000 shareholders from last year September to this year September. So that is really, really encouraging. We've done a lot of work on the IR side. And I'm really happy to see that many people have found not only in Finland, but also Sweden has found Relais as an interesting investment target. Before then handing over to the questions, I want to, of course, thank our 1,700 employees, our professionals and also want to thank our shareholders. Most of you also most likely listening to this for the support and also the Board and other stakeholders. And this is most likely the last quarterly presentation that I will do as a CEO. So I also want to thank all of you who have followed these presentations during the last 5 years. So let's go over to the -- well, sorry, I missed I had one more outlook that's very important. That's basically the same I presented in quarter 3. So no really -- quarter 2. So no really big changes. So we are -- we feel and we know we are in good shape and well positioned to continue the successful implementation of our strategy. We are seeing some cautious positive signs in the market. I mean, I don't want to sound overly positive. I mean the market is still a question mark, especially on the spare part side, but the equipment and lighting business seems to be floating well. Pipeline is good. We have good targets in the pipeline. So I'm not at all worried that we would not be able to continue the acquisitions also in the future. So that is the last page of the presentation. And now over to the questions, which I think Irina will facilitate. So let's go.

Yes. Christian wants to know, you know that vehicle lighting season has started very well for Strands. Should we expect this to continue and strong Q4 figures?

Thank you, Christian, for the question. The signals we are getting and the results we are seeing are still positive. I'm not giving any kind of prelook into quarter 4, but let's say the market looks to be strong on the lighting.

Christian wants also to know you started rebranding STS workshops to Team Verkstad this quarter. Can you elaborate on the strategic reasoning for this move? Is the Team Verkstad brand significantly stronger than STS brand?

Yes, there were a few reasons. If we go back to what does STS stand for, Sydhamnens Trailer Service, we wanted to take a step out of very, let's say, STS was a very kind of regional brand and also the name gives it away trailer service. But we are not only about trailer service. We are also about truck repair and since we had already Team Verkstad we bought in Sweden a year ago and then Team Verksted in Norway we wanted to combine all of these 3 under the same umbrella, which we feel is very strong. Verkstad is very general name, but still a specific name. So Team Verkstad was chosen to be the new name to -- as a rebirth of STS. And also bear in mind that we are doing bolt-on acquisitions of workshops that have not been branded STS. So in that case, we wanted to also create a new platform in Sweden and are focusing on now making that a household name in the Swedish market.

Okay. Sama wants to know now when you have strengthened this is the main motivation behind additional dividend payment announced today and how does that relate to financing your further growth ambitions?

Thank you, Sama, for the question. I mean it is, of course, always in a limited world where you don't have unlimited access to capital, you have to make some choices. And I think there is a -- I won't kind of dwell into what is the kind of argumentation or reasoning for the dividend payment. It was something that was given as a mandate for the Board to decide upon and the Board has decided to pay it. It has no major effect on our ability to finance the acquisitions in the future. But of course, it is money that we have chosen to give to the shareholders instead of buying new companies. So it's in a way, it would be an endless discussion because there are 2 different schools always in dividends. So I won't go into that discussion.

Okay. Will asks, you mentioned in the report that EBITDA margin in the commercial vehicle repair and maintenance business is an average lower than in the Technical Wholesale and Products segment. Do you nevertheless see potential for improvement in this area, particularly in newly acquired businesses through efficiency measures, synergies and pricing? And how significant could such an improvement be?

Thank you for the good questions. Yes, absolutely, we see a potential. We not only see potential. We also have a track record of being able to do that. So inherently, just to give you a ballpark number, inherently, a typical EBITDA percentage could be like 5% for a workshop or workshop chain for one single workshop, it actually can be higher, but then you start to have administrative cost and stuff. We usually see that the max potential for a workshop chain would be somewhere like 10%. I mean there are also higher examples. So we have been able to improve it by a lot of small things. I mean we have this playbook that we call the kind of workshop excellence. And we have been able to take the profitability up from 5% to 10%. When we bought Team Verksted, which was part of your question, we already upfront identified synergy potential, which is coming from the efficiency, about NOK 30 million. So that's very substantial. It's not coming for the -- it's not coming during the first year but it's steps that we take to get, let's say, the net working capital work harder and also to get the capacity utilization, which is Alpha and Omega for running an efficient workshop. So yes, we know how to run the workshop, and we see a good potential to increase it.

And Will also ask following the new financing arrangements do you see that you would once again have the capacity to carry out acquisitions of a similar size to those in Norway?

Yes. Will, I said some of it before. So thank you, Will, also for this question. So I would say, of course, if you look at the balance sheet currently taking on a similar sized chunk like EUR 40 million would not be advisable or possible without really increasing the leverage to a levels that we don't feel comfortable with. So that would then require some other types of equity enhancement than that should that become actual, but I would not like to speculate on that. We keep the eyes open, and I think we can still tap into capital in the market and then most likely would be hard equity. But again, I don't want to speculate. But we keep our eyes open and would not like to walk away from deals if they are really, really, really important to us. So this is always a decision then for the management and the Board to make in the future.

Pia asks, can you please explain the logic behind paying the extra dividend of EUR 0.20 per share, given that you have strengthened the balance sheet with the hybrid bond. Why not leave more firepower for future M&A?

Yes. Thank you, Pia, for the question. I just relate to the answer I already gave in the first. So it's a decision that has been made.

And there's a couple of questions from Joni. Working capital was up to EUR 105 million, and you mentioned slowdown in inventory turnover. How much above targeted level you currently are?

I think the inventory question is more a temporary one. You have to also defer the question into 2 parts, first part being the acquired companies that we, of course, also inspect and see what the inventory level is. And it's part of our playbook as well that we give a target for the companies of where the net working capital should be and inventory is, of course, a big driver of net working capital. It's not the only one, but it's a big driver. Then for the existing companies, they are partly products still relating to the warm winter, but the effect of that will, of course, vanish, but also every year, we have to ramp up the inventory for the seasonal lighting business. And that is seeming to go very well. So I'm not overly worried. I think there's a few million that we can squeeze out from the inventory. But again, I don't want to give any exact number, but we are, of course, focusing on that, but it's not like -- it's not a huge problem, but we, of course, want to release cash from the inventory and the working capital.

Okay. Then you are speaking about cautious positive signs in the market in addition to lighting has been picked up in demand.

I think we are seeing a slight pickup on the workshop business. Still early days, not so much maybe on the trailer side. Equipment and -- lighting really positive, equipment is quite much relating to how cold the weather will be. On spare parts, Sweden still flattish or minus. Finland, we saw -- I'm talking about market statistics now Finland, we saw a slight uptick in September on spare parts. Really not knowing where it comes from basically on the market, whether it's just a bad comparison period last year. But I mean, cautiously positive signs here, but it's not a boom or anything.

Okay. And then have you found more possible synergies in terms of cost and when this could be visible in P&L?

I think they are already visible in the P&L. Of course, we don't kind of specifically report the synergies. From a cross-selling perspective, I think the untapped potential, the biggest ones are cross sales of spare parts, commercial vehicle spare part, products from Sweden to Norway because we have a wholesale operation in Sweden, which has a very large scale of products and also the rollout of lighting products through the workshops and through the Nedking operation in Europe. Best practices we are sharing every day. And then, of course, ultimately, the real measurement is going to be when we are seeing the development of Team Verksted and the way we are getting the synergy benefits out from there. So it's a kind of a mixed message. I mean, it's impossible to say exactly what benefit is coming from where but we are already seeing them and expect them to be visible during the next years, of course. So it's a never-ending process.

Okay. Then there's a few questions from Mohammad. Is the search of a new CEO advancing, but I think that's answered. Are you seeing more competition from MEKO that started to invest more in its commercial division?

Thank you Mohammad for the questions. Yes, the first one is already answered. Yes, we see that our dear friend MEKO has activated on the heavy commercial side, but let's see we have not yet encountered that in real life. But of course, it's -- I think the game is a bit like in the passenger car side, the OE players, the vehicle manufacturers used to control the market decades ago, and now it's roughly 50-50 independent and OE. I think on the commercial vehicle side, there's still room for the independent side to grow. So of course, I mean, this is a free market, and we welcome competition and wish them well.

Okay. Then what EBITDA margin should we accept in the whole year and how it evolved in midterm?

We will not give any forward statements on the EBITDA.

And also from Mohammad, is the objective to reach EUR 50 million EBITDA pro forma seems always possible?

Well, as I stated, we have already acquired local GAAP, I mean, the ultimate measurement will be then done when we published the quarter 4, and we are not giving any information about that in advance.

And then one more from Mohammad. What did you chose a perpetual bond as a way of financing?

Well, I would maybe say why not. I think it's a very -- I don't want to sound impertinent, so don't take it that way. But I mean, it's a fairly usual instrument in the Finnish financing market. It's not so maybe usual in other markets but the hybrid bond perpetual is very, let's say, I wouldn't maybe call it typical, but it's an instrument that we felt was the right one and not to have a convertible or hard equity having a diluting effect. So for us, after the analysis, we felt that this was a good instrument and also I think we got it in very favorable conditions.

Okay. A question from Mika. What was the organic sales growth in the lighting business in Q3?

We do not report the growth on the product group level, but the total organic growth was 4%. So we do not report that.

Okay. And one last question from Petri. Consumer sentiment has remained weak, but you mentioned your online sales reaching all-time high figures. Are there any changes in your business possibly offering or operation which could explain the development?

Strictly speaking, I didn't say all-time high. I said record. I mean, record for the time that we have had that online business. So I guess it has been higher before in the heydays of the e-commerce. I think there are many things that we -- and the Team -- Lumise team has done right. I mean, the product offering, the price points using marketing -- in a way, it's a positive surprise for us as well because if you read the media, I mean, consumer confidence is, I mean, the media is bashing all the time. Nobody is buying anything. But we don't see it really that way. And I think it's more likely -- could be also the right price points. That is the case. But a lot of good stuff has been done on the online business. So I think that is reflected in those numbers. Hard to make any bigger statement of the consumer sentiment.

That was all questions asked.

Thank you very much a lot of good questions. And there's a lot of stuff in the report, so please take your time and read it and then I just wish you a very good end of the year. And thank you, Thomas as well.

Thank you.