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Dustin Group AB
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Thank you all for standing by, ladies and gentleman, and welcome to today's Q3 report conference call. [Operator Instructions] Please be advised, the call is being recorded today, Wednesday, 4th of July, 2018. I'd now like to hand the call over to Mr. Thomas Ekman. Thank you. Please go ahead.
Thank you very much. Good morning, everyone, and most welcome to our third quarter presentation and conference call. Hope you all have had a good morning. Here on our side of the call is myself, Thomas Ekman, and we have Johan Karlsson, CFO; and Fredrik Sätterström, Head of IR in the room as well.So we have a great and historic day today. First, we have a strong quarter with a solid growth within our SMB segment as well as improved margin. And we have an exciting expansion where we now take the next step and export our successful business model, combining e-commerce with relation sales to The Netherlands since we are acquiring Vincere Groep. It's a company specialized in managed services, cloud solutions and security, and -- but we'll come back more on that in a little while. But first, we will go through the quarterly results for the first quarter.So going to Slide 2, Dustin at a glance. Many of you know us, of course, but for those of you new in the game, Dustin is a leading IT e-retailer with a wide range of hardware and software and related services to it and solutions. We have a centralized warehouse and efficient logistics platform that can ensure fast and reliable delivery to our customers. And with the addition of high-level IT expertise and competitive pricing, that enables us to meet the needs and demands for primarily small and medium-sized businesses but also large corporates to the public sector as well as consumers.94% of our business is B2B and 6% is B2C. To-date, before we enter Netherlands, [ sales force had ] come from Sweden, and 15% to 17% come from Norway, Denmark and Finland, respectively. And further on, of course, we will also add Netherlands to list.We have roughly 250,000 products, both hardware and software, in our assortment, where 75% of those are sold online and the remaining 24% are sold through our strong relationship sales forces. So overall, you can say that we are well positioned in a growing market and are benefiting from the underlying trends, such as in accelerating online market, of course, and a strong growth in mobility, managed services, security and cloud-based solutions.Moving on to Slide 3 to look at the Q3 for some highlights during the quarter. We have had quite high operational activity during the quarter where we signed agreements to acquire DAV Partner, a Swedish company that will strengthen our offering within audio/video and conferencing solutions following the acquisition we did in Q1 of JML.We also signed an agreement to acquire the Finnish company, ITaito, which offers a broad offering within managed services, cloud services and data center solutions to SMBs in Finland. And this will, of course, strengthen our total offering in the Finnish market, which is really good. And of course, even though it happened after Q3, I would also like to mention the acquisition that we will come back to more after the -- after some numbers here. And then also, that we won an agreement with NRK, the Norwegian public broadcaster, where we will offer Backup-as-a-Service and storage to NRK. This agreement, I think, is a very good example where we use the expertise of a once acquired company and add Dustin's size and competence to it, which makes us eligible to take on such an important agreement.Also worth mentioning, which we released on Friday, is that we won a framework agreement with the Danish government, the municipalities and regions around Denmark, at an estimated value of -- or annual value of DKK 500 million. Although, right now, it's a standstill period, given it's a public deal, for a couple of days, but it's also a very important proof of our model that works for SMBs as well as larger public and corporate contracts. And on that note, of course, I would also like to mention that we won, also, Stockholm's [indiscernible], which is also a strong public contract. However, also, it's a standstill at the moment, but it's also proof that we are improving and strengthening our efforts towards the right large corporate and public contracts.Moving on to Slide 4, some financial highlights for the group. Earnings for the third quarter were strong in terms of sales and margins. Solid sales growth in the SMB segment while we were slightly negatively impacted by lower volumes in the LCP segment. More advantageous product mix with a larger share of advanced product and services was the reason behind much of the margin increase. And furthermore, a more favorable balance in sales between the SMB segment and the LCP segments had a positive impact on the margin.And if we look at the numbers, net sales increased 9% to SEK 2.462 billion with an organic growth of 1.6%, where SMB was up 9.4% and LCP was down 5% and consumer sales were up 10.9%, roughly the same figures that you saw in Q2.Our gross profit from the group came in at SEK 396 million with a gross margin of 16.1%, up 1 percentage unit from last year. And that, in turn, then filtered down to an adjusted EBITDA margin strengthening to 4.4%.Furthermore, we had strong cash during the quarter. Earnings per share increased to SEK 0.87, and the net debt was at SEK 968 million, which equaled to a net debt ratio at 2.0x before the deal with Vincere.So Johan, will you take us a bit deeper in our segments and financials?
Yes. Let's move to Slide 5 and the SMB segment in some more detail.I think, as Thomas said, we continued with the very strong sales growth in our SMB segment, and we reported a 17.2% growth in the quarter, of which 9.4% was organic in constant currency. Sales growth was particularly strong in Sweden and Denmark, where the online business was extremely successful. Finland, even though coming from low numbers, also grew by more than 100%.Segment result increased almost 29%, from SEK 92 million last year to SEK 119 million this year. This resulted in a segment margin increase from 10.3% to 11.3% for the quarter. Both a strong product mix in the comparable units and the new acquisitions contributed to the margin expansion. And added to that, private label sales continues to develop well and is currently all in line with our plan in our 3-year plan, so that is a really good contribution to our margin journey as well.Further to that, Software-as-a-Service continues to expand. It developed from 24,000 users last year to 48,000 users this year, so 100% increase year-over-year. And all in all, this concludes a very strong quarter for SMB with the sales growth of 17% and profit increase of 29% so a very strong quarter for SMB.If we are then moving to Slide 6 and the Large Corporate and Public segment. Sales in this segment grew by 2.7% reported in the quarter, but the organic sales, as Thomas said, fell by 5%. In the quarter, we have continued to see fierce price competition in Finland and Denmark in the public sector, and therefore, we've been less active and more selective in these markets, that, of course, affecting sales growth. The positive sales development for larger corporates that we saw in Q2 has continued, and we have had positive organic growth in all the markets in the corporate sector. New contracts, mainly in Finland, continues to put pressure on margins. In total, segment margin was down from 6.8% last year to 5.9% this year. As a result, the segment result decreased by SEK 10 million to SEK 74 million for the quarter.Moving on to the B2C segment on Slide 7. B2C represented 6% of sales in the quarter but showed good growth numbers. Reported sales was up 12.8% and organic growth ended at 10.9%. During the quarter, we saw strong growth in all markets outside Sweden, and from a product group perspective, sales in consumer electronics and mobile phones were particularly strong. Our focus on margin with the extra boost from good sales development improved segment result from SEK 4.9 million to SEK 7.9 million, or 61%, really strong achievement from the B2C team in the quarter.Then moving on to Slide 8 and some more details on the balance sheet and net working capital. As mentioned before, we had a net working capital negative SEK 237 million at the end of the quarter. This is a record low number, supported by the accounts payables that continues to be affected by the favorable payment terms from some of our key suppliers. We estimated the temporary effect of these to be around SEK 250 million. Receivables developed well and increased slightly less than the sales growth. Inventory was slightly higher than our own plans. This is due to the -- to 2 larger customer rollouts and slightly higher inventory for private-label products. Thanks to the good net working capital, the net debt was down SEK 30 million compared to last year, resulting in a net debt to EBITDA ratio of 2.0x, which was 0.3x lower than last year.We then move to Slide 9, looking a bit at the cash flow and the CapEx for the quarter. Cash flow in the quarter was positive with SEK 251 million compared to negative SEK 183 million last year. Change in working capital was really the source of the largest difference, and of course, also, less investments in this quarter compared to last year added to the positive difference from last year. CapEx ended at SEK 12 million, of which SEK 7.9 million was investment in the IT platform.Back to Thomas.
Very good. Thank you, Johan. And now over to Slide 10 and some more details on the acquisition on Vincere Groep in The Netherlands.The Vincere Groep is a leading IT service provider in The Netherlands, and the acquisition of this is, of course, that -- it strengthened our SMB offering and will serve as a platform for us in The Netherlands. It's really good. And it will, of course, increase the accelerated growth for us with the current strategy to increase our share of managed services. And as said, I think this is an excellent foundation for organic growth, further consolidation and, of course, also launch of Dustin's online platform in the Dutch market.The company is focused on cloud and security along with IT solutions with the associated hardware and consultancy service to it with the key verticals primarily in education, business, health care and government. Vincere Groep had net sales amounting to EUR 67.1 million at an LTM level of EUR 71.2 million with an EBITDA of EUR 5.6 million with an LTM level at EUR 6.2 million. So it's a good, strong company.And as a summary of the transaction, the transaction value or the enterprise value is EUR 65 million, corresponding to an LTM enterprise value over EBITDA to a multiple of 10.5x. Sellers are the current management as well as ABN AMRO, and management will remain in the company in their current positions. And the transaction will be completed today, 4th of July, and also will be consolidated as of today, the 4th of July.And financing with this, we will finance this with our existing credit facility. And in order to fully implement the current growth strategy in the Nordic region, and of course, also take advantage of the growth opportunity identified in The Netherlands, the Board of Directors intends to propose a preferential share issue of SEK 500 million to SEK 700 million to be carried out during the fall, now, 2018.Over to Slide 11 and the rationale behind this is, of course, that this is a substantial increase of our addressable market. Today, in the Nordic, we have around SEK 150 billion, and now, we will increase that to SEK 250 billion, which gives us a lot of more room to grow. And it's a perfect platform for expansion and consolidation. There are a lot of consolidating opportunities in the Dutch market, and it is as fragmented as the Nordic region. And also, the customer demand or the customer -- yes, the customer demand is very similar to the Nordic region.It's a highly experienced and driven management team. We have similar corporate values as ourselves at Dustin. And we also believe it's a very attractive financial profile, so we will have substantial earnings contribution already now in 2018 -- or 2018/'19. Good thing here, of course, is given that we are moving towards managed services, we are increasing our share of recurring revenues in this. The company has a high share of recurring managed services contracts. And also, it's low -- the largest customer accounts for less than 5% of the total sales, which gives the company low customer dependency and with high satisfaction among the customers looking at the share numbers.And as I said, this is a very good platform for us to start for launching ourselves in the Dutch market and for further coming consolidation and the launch of our online platform. So there are very many strong rationales for us to acquiring this and export our good model with the combination of e-commerce and relation sales and increase our share of managed services and recurring revenue.Johan, will you go through a bit of the group in brief and the financial effects?
Yes. Let's move to Slide 12. Yes, Vincere Groep is a national -- a nationwide provider of managed services, and they are combining that with value-added hardware, much like the Dustin business in the Nordics doing the same thing. The company was founded in 2013 by the current owners, and they have, currently, approximately 1,500 customers in Netherlands, primarily within the SMB segment. Currently, they have around 370 employees in 8 locations in The Netherlands. The company is focused towards 4 industry verticals, as they have defined. That's education, small and medium-sized businesses, health care, and governmental. And as Thomas said before, total sales amounted to EUR 67 million last year with an EBITDA margin of 8.4%.If we then look at the financial impact this will have on Dustin on Slide 13. LTM numbers are included here. Sales for the group will increase by 7.3%, coming from the acquisition, while EBITA will move from SEK 474 million to SEK 524 million or an increase of 10.5%. EBITA margins will increase from 4.7% to 4.9%. And all in all, EPS coming from the acquisition will go from SEK 3.71 to SEK 4.17, an increase of 12.5%.Back to Thomas.
Very good. Thanks, Johan. So going to a summary on the -- Slide 14 to summarize Q3. We have had a good margin improvement and a robust and solid performance in SMB where net sales increased 9% and with a slightly 2-tiered sales trend in SMB and LCP. Gross margin at 16.1%, up 1 percentage unit since last year, and adjusted EBITA margin at 4.4%, giving us an earnings per share at SEK 0.87.So all in all, a good quarter. The combination of a more favorable balance in sales between SMB and LCP segments and a more advantageous product mix with a larger share of advanced products and services have resulted in good strengthening of the margins. We have a solid financial position, and we are well positioned to continue a profitable expansion, both organically and through acquisitions. And with the acquisition of Vincere Groep, we will expand our addressable market to an estimated SEK 250 billion and further strengthen, of course, our position and offering within, primarily, managed services and recurring revenues. So I said, all in all, a good quarter.And I think this concludes our presentation. And we are, of course, very happy to take any questions you might have. Over to you, operator.
[Operator Instructions] First question, it's from the line of Magnus Råman.
Congratulations to this acquisition. I think all questions -- or many questions will be focused there. And I will start by asking if you will operate Vincere under its current brand or if you will change it to Dustin.
Yes. Thank you, Magnus. There, we will -- it will continue from -- until further on, at least, under its own brand. But over time, of course, Dustin will -- we will launch Dustin in that market, especially when we launch the online platform. But for now, until further on, we'll -- it will continue under its own brand.
Okay. Will you set up a local Dustin website in The Netherlands with a full product offering as you have it in the Nordics?
Yes, more or less. We aim to launch -- I mean, as we see our business model, as you know, we see it a combination of the strong online e-commerce platform we have and combining that with relation sales and combining it to a customer offering where we can offer also managed services. So we will do that. Definitely, we will do a set of that, and that is also when we're looking into, of course, launching the brand there.
Right. So will you have a local fulfillment capacity? Or will you deliver it from [indiscernible ]? And what capacity is there in terms of that in Vincere?
I think we will -- there is local capacity in Vincere Groep today because they are delivering from their own warehouse in the -- in Holland, and we will use that when we are building up the online business there. Depending on the success of that, of course, we will then have to reevaluate how that capacity should be used and if we need to expand it. But -- so, in the beginning, it will be using their platform.
So you believe you -- if you open up a local website and have the full product offering of Dustin as in the Nordics, you believe you will be able to source all that goods from local storage at Vincere's current warehouse?
That is our intention at the moment. Yes, it is.
And of course, you see as we do it today, you saw also the distributors we have, but that is our intention as of today. And then given the success we foresee, then of course, we'll look, as Johan said, build out the capacity over time.
Okay. And you mentioned here a high share of managed services in Vincere. But can you give us a rough split in revenue between hardware sales and services in Vincere?
Yes. Hardware is about 35% of sales, and the rest are services at -- in any kind, let's say.
Okay, that's helpful. Can you also, perhaps, give us a feeling of -- you talked, of course, about EBITA and EBITA margins, but how does it look on gross margin level in Vincere?
The -- gross margin is clearly higher than we have in Dustin, so it looks very much like the managed services companies we have in the Nordics. And I think we have said that we believe that the managed services part can do up to, let's say, double the margin on EBITA level compared to our, let's say, hardware business. On -- what the -- on GM, that's basically, I would say, the same ratio on GM as it is on EBITA.
Okay. That's clear. And just a final one here from me. On the financing here and the planned share issue, is it fair to assume that at midpoint of this planned share issue that you will be back at around the same gearing level as you are today of 2x net debt to EBITDA after the share issue has been completed?
Yes. I think it's -- I think that's correct assumption. And I mean, again, we're doing the share issue to continue the growth journey. So we need to look at it as a future opportunity activity because we see that there are still many options -- or opportunities in the Nordics to continue the consolidation journey. And having had the discussion with the Vincere Groep management, the same opportunities actually exist also in The Netherlands. So it's really to continue that journey why we're doing the issue.
The next question, it's from the line of Victor Höglund.
Yes. Congratulations on a very interesting acquisition here. First, a few just questions. Can you just repeat how much did you say the target was of Vincere's sale?
About 1/3.
About 1/3? Okay. And then how -- can you say something about how fast the process has been here? Or has this been a company you looked at for a long time? And then you say that management will remain, is there an earn-out? Or how do you hold on to them?
This -- all these kind of processes are usually quite fast, and we work very hard to get it done. But these then, of course, as you know, over the history, we have been looking in The Netherlands before, given also that -- but it's always comes up things, but it has not been interesting, but this is an interesting case. And we believe this is the right moment to do, to expand ourselves here. And -- sorry, the second question, Victor?
Was just on how do you [indiscernible] management?
Yes, yes. Sure. No, they are, of course, extremely eager to get in. As you know, ABN AMRO is selling their part, and now they have been also looking for a partner that really understands what they do and how to continue the journey and how to continue to move on and expand in the Dutch market. So the management is really motivated. And we, of course, find the right incentives for them to stay on to the company and to continue to be part of the Dustin family. So I believe...
[indiscernible] you will buy 100% of it also.
Yes, yes, yes, we will do that. Yes.
Okay. And then I have a few more questions here if that's okay.
Sure. Yes, sure.
So growth seems to have been somewhere between high single digits and low double digits if you extrapolate the past 12-month trend. Is that in line with how you see growth for Vincere?
Yes, growth for Vincere. We expect -- yes, yes, that's in line what we see as well.
And margins uptake here should continue ahead or how should we think about that? Since you're up from 0.4%-or-so in the past -- last few months here. Is that a pattern you expect to continue?
There is some uptick left to be done, let's say, in the group because they are consolidating and they are gaining, let's say, the scalability of their platform that they have been building in the last 4 years. So our view is that, yes, there will be some uptick left to be done in the margin.
Okay. And the EPS addition here that you mentioned on slide, I think it was, 13, right -- it's, yes, 13, of 12.5%, that's before dilution or after dilution?
That is before dilution.
That is before dilution. Okay. Last question on this, the price, 10.5x EBITDA. Is that where the prices are now when you buy acquisitions? Or is that because you enter a new market now that you pay a bit more than what you've done in the past? Or how should we think about this price level? It's obviously below the multiple you trade at, so it's still very good. But I was just -- is this a reference for future or not -- or how you view that?
No. I think, exactly, it's below where we trade, but it is -- this is a company with a high share of recurring revenue, which is tied to a slightly higher price. It's a large company. It's a large acquisition compared to our previous one. And of course, as you say, this is an entry to a new market, and it's a foundation for us on the Dutch market, which, of course, also can imply a slightly higher value. But we haven't seen other price changes in the Nordic market, so I -- we should view this as an entry, recurring revenue and a large acquisition. And in that sense, we think it's a good price.
Okay, very good. And just a few questions on Dustin also, sorry, if that's okay.
Yes.
Net working capital, you mentioned, boosted some SEK 200 million plus from current procurement terms, basically. How should we think about that ahead? Is that going to reverse anytime in the next quarters or years? Or is this a new level or -- you talked a bit about that, but just point us in the direction here, so we...
Yes. I think what we've said before, Victor, is that we have a commitment for, let's say, 6 months at a time. So we are rolling that facility 6 months forward all the time. So our visibility is 6 months on that and not longer than that.
And there's no big shift coming up in Q4 that we should be aware of here?
Not from that, no.
No? And then on LCP, 2 short questions left. On LCP trends, they are -- well, it's much the same story as for fiscal Q2. How should we -- what do you see in the market now? You mentioned a few things and that you do have a few initiatives. There's some movements in the market. But do you expect LCP to stay at this kind of trajectory now for a while? Or do you see new orders in the market or new things coming up here that could move the trends up or down? Anything you want to point out to account for this?
I think, from LCP, we see, as you also mentioned there, we have some good deals such as the one in Denmark, and of course, in Sweden as well on the public side. And we see also -- I mean, it's roughly the same trend. But we're also improving in -- improving our efforts on the corporate side, and we are improving on, of course, on the right public deals to take, like the Danish one, for example. So we foresee, roughly, the same trend going forward, some lightenings here and there, but overall, roughly the same trend for LCP.
Okay. Organic growth in SMB -- this is the last question. Organic growth in SMB was 9.4% here in fiscal Q3. Is there anything we should think about here when looking into the next few quarters ahead? Or is that how it's trending now? And -- or -- yes, anything about that you can say?
I think, the SMB trend, as such, is quite stable. We see good growth in the SMB segment. And of course, there's a -- I mean, there's always things going on in the market, but as of now, it looks like that. We're entering into a summer period, a Q4 period for us. But overall, the trends there is fairly stable, I should say.
Okay. Wonderful, and congratulations on a very interesting acquisition.
Thank you very much, Victor. Thank you.
The next question, it's from the line of Predrag.
Could you comment if there could be any kind of synergies here? I expect maybe not so much on cost but maybe on the sales synergies.
I think, overall, the -- very much of the synergies, of course, that we expand our addressable market. And we will, of course, gain synergies in scale and sharing competence within service and solutions and, of course, on the online sales side. So we believe a lot of synergies will come from that. But maybe not that high on other levels, given that we are in a new market. But we believe we can gain a lot from the scale part and the sharing, of course, of competence. And then, as said, launch our online platform with this as a foundation.
So when you say you're going to gain on the scale part, does that mean you're going to change your M&A focus in Dutch market now completely? Or will you still do the Nordics as well?
No, we will not change completely. We'll still continue our growth journey in the Nordics and still look for more bolt-on acquisitions in the Nordic part because we're not done in the Nordics. And -- but of course, look forward also to do that in the Dutch market and to further consolidate that market. And the similarities between the markets is very good, and we can see in -- that the customer, regardless of market, that the customer needs and the customer demands is very similar, and we see that we can offer a very attractive offering towards customers in the Dutch market and as well as in the Nordics. So we will continue -- we'll continue on both regions.
And are there any differences in the price point on targets in the Dutch market versus the Swedish market, for example?
No, not that similar, I said, on the price level here, which is slightly higher than we have paid for the others. But as I said to Victor there, it's based only on the recurring revenue in the larger company or the larger acquisition we do. And of course, this is the entry and the foundation on -- for our Dutch expansion. So we don't see any -- we haven't seen any other sort of higher prices in that sense in the Dutch market.
All right. Now what about the seasonality of the company you're acquiring?
I think, given that there's a higher share of recurring revenue, the seasonality effects are not that huge, given that the recurring revenue as such is an ongoing business, regardless of summer, winter or spring. But of course, there are different seasonalities, which we'll comment to more further on. But not -- given the high share of recurring revenue, it's a good business.
I think you could also say that, building on the, let's say, our seasonality in the Nordics, yes, it's more or less the same pattern also in Vincere Groep, that you have a summer season with holidays also in Holland, where we have less revenues coming from service sales, which is not recurring, and also from the hardware side.
Right. And then maybe I missed this before, but could you let us know if there are any earn-outs here and also the growth profile for the company? And I know these guys have been quite M&A-intensive, but is it possible to split out their organic growth also?
The -- sorry, there's a -- sorry, just -- there's no earn-out in this. We're about to acquire 100% of the company. And the management will stay, and we will, of course, find the right -- we have the right incentives for that, so they will stay on with the company. And that's really correct. They have been very active in the -- in consolidating M&A activities before, so that is a journey that will continue. On the organic underlying -- on their organic growth in that sense, Johan?
Yes. They are -- they have been around 10% organic. It's not an easy number to find because of all the acquisitions they've made. So we have basically looked at the pro forma numbers because that would be as equal to organic as it comes, but that's just in the range of 10, 10-ish percent.
All right. And then, finally, on the old Dustin, so to speak. But on the framework agreement with the Danish government, could you comment on the profitability of this? And also, this could be more seasonal, I expect, than your other business. Could you give some comments to this?
Yes. It's -- overall, it's a good contract. And as you know, just to mention again, we won it on Friday. And given the fact, we've, of course, released that, and now it's a standstill for a couple of days more. But we want it as a single provider in that contract, which is really strong. Of course, a contract like that, of course, in percentage-wise, has a slightly lower margin than the overall contracts, but it's a higher volume. So it is a very good contract, and it's also an interesting move of the Danish government to move to combine all their purchasing in one contract. So it's a good contract for us, and it's really good for us to be the preferred supplier or the one supplier in that contract. So we look forward to that.
The next question, it's from the line of Daniel Thorsson.
Yes, Daniel from ABG here. So just a few last one on Vincere. I think you have covered most of it. What is the B2B-B2C split here? Is it 100% B2B?
100% B2B, yes, exactly.
Okay, excellent. And the SMB-LCP split. Do they do that split-up?
They actually haven't done that. So they haven't classified their customers the same way as we do. But the absolute highest share is in SMB. There will be some larger customers that is over 500, but the majority of it is in the what we would classify as SMB.
Okay, okay. That's fine. So, I mean, the multiple here in the acquisition is not very low, as Victor mentioned before. What is the main result of that? Is it the high share, recurring revenues, the high growth or anything especially that you like?
Yes. First of all, yes, first of all, I think the -- that's correct. The high share of recurring revenue. It's good. It implies a higher margin, and therefore, also slightly higher price. It is, as said before, it's also a fairly large acquisition. But maybe most important also, as well as recurring revenue, it is also an entry point for us and a foundation for us to start to the expansion of the Dutch market. As said before, the Dutch market is very similar to the Nordic market when it comes to how it's fragmented. We also, of course, expand our addressable market, which makes a lot of room to grow. And we foresee that we can continue to grow and to expand, both organically and through, of course, M&A activities in the Dutch market with this as a foundation as well as also launch our online platform. And we have found out that this is a good way of launching the online platform. It's similar to how we have done in Finland where we started off buying and start with companies like this and more -- but maybe more focused in Finland on the public sector. But with that as a foundation, when you have a very strong customer relationship already, it's very good to -- with that, to launch an online platform because then you already have the customer relationship and you do not start greenfield with online, which is real expensive. So this is a much better and more efficient way for us to launch our online platform, which we'll do later on here. So with all of that in -- considering all that, we will -- this is a very good price, and it's still below our own multiples. So we believe it's an attractive price; attractive entry to the market, good competence; good, strong recurring revenues; and a fairly large acquisition. So therefore, we believe that it's a good price.
Okay. That makes sense. But what is the number of SMB clients they have? Is it in the thousands? Or....
Yes, 1,500 customers or 1,500. And primarily, most of them are SMBs or up to 1,000 employees, [indiscernible] segmentation is here.
Okay. Okay, that's excellent. Are you open to similar expansions into managed services companies in the Nordics of significant size as well?
Yes. I mean, yes, we are. We are. There aren't that many. There are some companies here and there. And we, of course, always look for targets. As you know, we have a quite clear bolt-on strategy, and we believe that the market, as we see the customer demand, is going towards cloud solutions and managed services. So of course, we'll look for that. But we'll see further on whether we can go ahead with that.
Okay. Do you expect any change in the group tax rate, short term or long term, based on acquisition and given a new regional area as well?
No. We don't expect any significant change of that way. I think we can maintain the one we have had before.
Okay, excellent. And a final one on the -- related to the acquisition. Have you had any discussion from scrapping the dividend this year of roughly SEK 200 million instead of paying that out and then doing a new share issue at the same time?
That's up to the board to put forward to the AGM.
Okay. So no discussions yet?
No. No for that.
Okay. So base case will be dividend as dividend policy and then doing the new share issue as well?
Yes, exactly.
Okay, excellent. And then just a few ones on the base business here. Are you satisfied with organic growth this year so far for the group?
For the group, I should say, we are satisfied with the -- or satisfied, you can always do more. But we are -- we think it's good on the SMB segment, that there we see it's good. We are, of course, seeing the seasonality or the fluctuations in the LCP segment where we're working on towards high efforts on improving that, of course, and to see that we find the right deals and find the right contracts and to find the right offering also for that. So I believe we have a lot to do on the LCP segment. And I think, also, we, as said in Q2, we're also improving or strengthening our efforts towards the corporate side of the LCP segment. We have, as you know -- I mean, the LCP segment today, it's roughly -- 2/3 of it is public contracts. And those are, as you know, very off and on. So in that sense, we want to increase our share in -- on the LCP segment in the corporate side, which is slightly more value-driven, and we can improve the margin as well as the organic growth. So we'll continue to work hard on that, but we are happy with the SMB growth, and that is, of course, the core, so we will continue to focus a lot on that and to, as said, to also find the right deals for the LCP segment.
Okay. Just looking into Q4, slightly. When I back out the full year organic growth and the first 3 quarters last year that we know, it looks like Q4 had very strong and tough comparables from last year. Is that the right picture, making it a little bit more challenging for you to have the good organic growth in the next quarter?
It might be so, yes. Exactly, it might be so. But we look forward, of course, and it's good that the last quarter last year was good. But yes, but that -- it can be a tough comp, of course, it can be. But we'll see. But right now, we're focused on delivering as much as we can during the Q4 this year.
Okay. And then just a final one. What is the main driver of the margin expansion of 1 percentage point in SMB segment? Is it scalability, larger orders per client or any other things that we don't see?
I think, as we said before, I think the key issue here is the product mix towards more value-driven products. And we have seen the benefit this quarter, which has been some -- a bit different between the quarters. But we -- in this case, we saw better product mix in the, let's say, comparable unit, but as well as the add-on from the acquisition. So we got both sides to work towards better margin in this quarter and, hence, the good improvement of gross margin and segment margin.
The line of Magnus Råman wishes to ask a question again.
Yes, Magnus.
Yes, Magnus Råman here. I just had a follow-up on CapEx. Perhaps you can update us on if there's any change in your plan regarding CapEx. I believe you planned for some potential automation measures [indiscernible] and then now, given the expansion to The Netherlands, if there's any change here.
I think we can divide it in 2 buckets. We have, I think, said before that we believe that the ongoing CapEx need that we have said to be around SEK 20 million, previously, we believe it's probably towards SEK 30 million going forward because that we have expanded the IT platform to cover also services. So we are investing more in the service side of the IT platform in combination with the web, and that drives a bit of the CapEx -- let's say, the ongoing CapEx up. When it comes to projects, I agree with you, Magnus, that the most likely project CapEx to come up in the -- in, let's say, the next time period would be the automation of the warehouse. We don't see that coming from the Dutch market, at least not short term. That would be driven by the [indiscernible], if anything. But there has been no decisions made on that up until now.
And if you opt for a project in [indiscernible], so to speak, what's -- even if you haven't made any decisions when you have reviewed this, what would be the potential CapEx spend for such?
As we've looked at projects like this, we estimate that to be somewhere in the range of SEK 40 million to SEK 50 million.
And the line of Victor Höglund wishes to ask a question again.
Yes, sure.
Yes. Just thinking about this rights issue here. I think you said preferred. If you direct -- is it directed -- [indiscernible] share issue or how is this? And how certain -- does this need to happen? Or is this something you might do or the clients to do it? Or how should we think about it really?
If this -- to use a Swedish word, it's not [indiscernible]. It's not aimed, sort of. I mean, we are, as you know, we right now finance it on the existing credit facilities. And of course, that could go on, but the Board of Directors also look forward to look into this and to see whether we should launch this issue during the fall in order to continue, as we said -- in order to continue the growth path going forward. So...
But it's normal shares? It's not preferential shares or any hybrid kind of shares you're looking to do here?
No, normal shares. Normal shares, we look to do, yes.
You have one question, just came in, it's from Mikael Laséen.
Yes. Just a couple of questions from me. The sales per customer segment, could you mention roughly how much is generated from education, business, health care, government?
In Vincere, let's see, do I have that number here?
Yes.
Yes, yes, sure. Just a second, just a second.
We don't have that detail. It's roughly half.
25% each or what?
The different segments. Let us come back with the real number there.
Yes, let's do that. That's good.
Okay. And just a clarification, maybe. The split between SMB and LCP, you said that SMB is by far the largest share. But how shall we model this if it's, I mean, 60-40 when we consolidate this into your -- into the models?
I would start by 75-25. And then when we have done that classification ourselves, we can come back with more detailed numbers. But it is, for sure, not a high share of large corporates in this.
No. I think you can start by putting in 75-25, yes.
Okay, excellent. And when it comes to amortization and consolidation effects, anything there that you can mention, maybe.
No, not at this moment.
All right. That was -- just one more, sorry. Can you say something about how we should think about the model, the new contract in Denmark how that is ramping up if you start to deliver?
How it will start ramp-up? Or -- first, we need to -- first, we'll see that we get it in full. As you know, it's a standstill right now for a more couple of days. However, we have a positive view on it. And when we have got that, then we can come back to look into how that will ramp up and how the deliveries will go on further on because that is being set when the contract is set. So that will -- that -- we can come back to that.
And there are no further questions at this time. Thomas, please continue.
Okay. Very good. Thank you very much, everyone, and I hope -- and thank you for participating and thank you for all your questions. And we'll continue throughout the day here. And then we meet up and talk soon again, everyone. Thank you very much for today. Thank you.
Thank you. That concludes our conference for today. You may all disconnect. Thank you all for participating.
Thank you.