Ten years of decentralised success

CEO Robin Boheman comments on the Year-end report January – December 2023. It was on this very day, 15 February, ten years ago that Instalco was established via a merger and acquisition of our five first installation companies.

During the fourth quarter, Instalco showed an overall good earnings development with continued strong profitability. Net sales grew 7.9 percent, of which acquired growth amounted to 12.0 percent while net sales decreased 2.6 percent organically. At the same time, we have delivered in line with our stated strategy to maintain profitability and present an EBITA margin that amounted to 8.0 (8.1) percent.

This is proof of how quickly our decentralized model of sharing “best practice” and maintaining the entrepreneurial spirit gives us the opportunity to adjust based on the market’s local conditions. A clear example is how the share of service in our revenues increased further during the quarter, to the highest to date of 37 percent, or 30 percent for the full year.

When we look back to 2023, we can sum up an overall good performance from Instalco in the current market situation, far better than the construction sector. We consistently deliver strong numbers compared to 2022: revenue, profitability and cash conversion.

Long-term, resilient profitability
For several quarters, we have been describing how, in the current market, we are putting extra focus on choosing the right customers and projects, which has still been the case during the last months of the year. We have noticed large regional variations in both demand and pricing, actively choosing to not strive for higher volumes via low-profitability projects. Instead, we are prioritising our margin and accepting the projects where customers are willing to pay for the value we create.

During the fourth quarter, it has resulted in the backlog of orders being on a par with last year, despite the increased net sales. For right now, we would rather have a somewhat smaller, yet high quality backlog of orders and lower growth, since we are confident about the long-term potential in our industry. Furthermore, we do not want to get locked into weak projects once the trend in demand and pricing turns upward again. Several positive signals can be seen on the market, although the services we offer are relatively late-cyclical, whereby it takes time for change to be reflected in our numbers. We are well positioned for additional, profitable growth when the upturn happens.

More moderate pace of acquisition, stable financial position
Thanks to our high rate of acquisition at the beginning of the year, when several large companies joined the Instalco team, acquisitions were overall on a par with 2022 in 2023. The pace, however, was more moderate during the second half of the year. During the fourth quarter, we made two acquisitions in our strategic growth area, Industrial. One was in Sweden and the other in Finland.

Thanks to our strong earnings growth, very good cash conversion ratio and fewer number of acquisitions during the fourth quarter, we were able to get our net debt/EBITDA back within range of our target. As of 31 December 2023, it was 2.4 times. We feel secure about our balance sheet and can continue pursuing M&A activities with our existing financial solutions. We have ongoing discussions with high quality companies that would likely be a nice fit with the Instalco model. Nevertheless, we are prioritising the task of integrating our newly acquired companies so that they can quickly contribute to the Group’s continued positive earnings growth and cash flow.

Safety first
There have recently been a number of tragic accidents in the Swedish construction industry. Everyone in the industry must take this very seriously and strive to minimise the risk of accidents in the workplace. Instalco has a vision of zero workplace accidents and we are continuously pursuing preventive measures to create a safe work environment for our employees and subcontractors. One example is our Safe Employee programme, which, besides rules and routines for avoiding physical damage, also encompasses social safety.

Ready for the next ten years
It was on this very day, 15 February, ten years ago that Instalco was established via a merger and acquisition of our five first installation companies. Growth has been rapid since then and today, Instalco consists of more than 130 high performing companies. Through acquisitions, effective strategy implementation and decentralised entrepreneurship, we have reshaped the installation industry and proven our strength. Despite the challenges our industry has repeatedly faced over the last ten years, we have affirmed our adaptability and resilience, which is rooted in our decentralised model and collaboration.

Our employees and their entrepreneurial skills are our most important asset. I would thus like to take this opportunity to thank each and every one of them for their dedication and efforts. I am proud to be a part of this team. We are well equipped and ready for the next ten years.

The full quarterly report
https://instalco.se/en/investors/reports-and-presentations/