Green Landscaping Group AB (publ)

STO:GREEN

Earnings Call Transcript 2022-Q4

[Operator]

Welcome to the Green Landscaping Group Q4 presentation for 2022. [Operator Instructions] Now I will hand the conference over to the CEO, Johan Nordstrom; and CFO, Carl-Fredrik Meijer. Please begin your meeting.

[Johan Nordstrom, executive]

So thank you. And as mentioned, welcome to everyone, to Green Landscaping and the presentation of our fourth quarter report of the year 2022. My name is Johan Nordstrom. And together with me here today, we have Carl-Fredrik Meijer, our CFO.

So let's begin with a short introduction to Green Landscaping on Page 2. We are today one of the leading landscaping service providing companies. That means we have outdoor services, we have landscaping services, and we have road and winter services. We were founded back in 2009 in Sweden and now have business in Norway, Sweden, Finland and Lithuania. We're also the leading consolidator of the landscaping market in Northern Europe. I believe we went into Norway a couple of years ago, then Finland a year ago, and then Lithuania back in 2022.

There's a lot of talk about decentralization. And to my opinion, the -- we all have different definitions of it. So to us, it really means that we have a business model that is based on trust and local accountability. And that really means that we have 48 subsidiaries, they act locally, they are close to the customers, they can make quick decisions and they are business-minded. And that really enables us to provide good service to the customers. And we also see that, that has a healthy impact on the bottom line. So that was really the short introduction to the group per se.

So moving on Page 3, please. And as you perhaps are aware, we had a very strong development in the fourth quarter of 2022. Even though that on a macro level, the economy is quite turbulent, we have high inflation rate, interest going up, and it's a lot of uncertainty into the market. The way we look upon our specific market, it's quite the solid market conditions. We haven't seen a significant impact. We have seen, of course, the impact of inflation but otherwise, in terms of customer demand and what's going on in the marketplace, it's quite stable conditions for us.

The numbers we achieved in the fourth quarter is really that the revenue grew by a healthy 74%, and we achieved SEK 1.6 billion in revenue. And of course, as expected, 2022 was quite a hectic year for us in terms of acquiring and welcoming new colleagues. I believe we had a grand total of 11 companies coming into the year in the year of 2022. So they contributed by the mainstay, and that's close to 60% of increase came from new companies. But we all saw a very healthy increase in organic growth. And of course, that number is, to some extent, a result of the inflation but we also saw that we had new contracts, and we also had quite a substantial amount of additional work that is a part of the contract, but above and beyond that base level of the contract. And that contributed a grand total of 14%.

I would not speculate in how much of the 14% that is based on inflation. I assume that question would come up. I don't really have a good -- we don't have a good answer at this point of time. We are, of course, adjusting the, let's say, the fixed agreements on an annual base, but we have quite a number of different contracts and there are different index clauses and there are different variations to it. So that means we have to go and take a deep dive in each one of our subsidiaries and each one of our subsidiaries have a large number of contracts. So I won't make qualified guess. I know that some part of the 14% is based on inflation but to what extent, we have to come back to that one.

In terms of profitability, I'm quite happy with the number of the 98% increase and we achieved the number of SEK 166 million and that's a healthy development for the company. And in particular, we saw that the EBITA margin of 10.2% is quite strong. And of course, the reasons behind it is that we have a positive mix effect from the acquired companies as we typically acquire companies who are led by very good entrepreneurs. They have been in business for many years, and they have run successful and profitable companies and then you have a positive mix effect from them.

We have also been, I would say, very prudent and worked very hard for many years in terms of improving some of the less profitable companies we have in the group. Some of you have followed us for a number of years, knew about what we did with the old Svensk Markservice and who we made those into subsidiaries and so forth, and that has been going on for 3, 4, 5 years, I would say. And we have seen a trend that today, we can really see, I would say, a very strong positive trend on that those businesses are improving. And I'm quite happy with the work that has been done with our employees and improving those businesses.

And in the quarter per se, we also made 4 additional acquisitions and I will come back to those more in detail further down the road here. So let's move to Page 4, please.

Just to go back on the growth a little bit here. I did mention the sales grew by 74%. And we saw the organic part of it that is quite high, and we are happy with it. As I said, I don't know the inflation. And also, of course, when you have had 11 acquisitions done during the year, of course, we are growing quite significantly in that area.

But on the right-hand side of the picture, when we look upon what's the historical trend here, then we see that we have been doing this for a number of years. I believe we had a CAGR of the excess of 30%. So we have a steady growth. We have been growing and that's a part of our strategy too going forward as well. So continue to grow both organically as well as by acquisition.

And just a short comment on the organic growth there that, we are operating in a quite big market. And it's kind of -- if you choose to grow organically too quickly, we consider that to some extent, being a risk because you have new customers, you have new contracts, you need new employees. So if you grow too quickly during a short period of time, you have a tendency on not making those margins. And that -- so it's a trade-off between how fast do you want to grow organically versus what type of margins can you provide. And we prefer to grow on a kind of a steady pace in line with the market, and that's, to some extent, 4% to 6% on the organic side and then keep improving the profitability. That's the chosen strategy we have. So we are not per se look -- being very aggressive on the organic growth target. However, we like to make the profitability out of our contracts. Page 5, please.

Order backlog is kind of important to us and that one grew a healthy 51% year-on-year. So that's a significant growth and in line with our expectations, given the number of companies and what type of companies that we have acquired during the -- during 2022.

Also, this business has a high retention rate, meaning that if you are the incumbent supplier to a contract, you are -- and you want to keep the contract, you are quite well positioned in order to do so because you have the upper hand versus our competitors when it comes to bidding for that particular contract because you know the details of it in a slightly different way.

And also the majority of the contracts we have are long-term contracts. They span typically 3, 4, 5, 6 years into the future. They are -- majority of the contracts are also fixed contracts and you have an additional work coming out of those contracts. So having a large order book for us gives us a very good visibility on the development moving into the future. So we're kind of happy with having this order book, in particular, as the market conditions out there are kind of difficult or challenging then the order book is, for our extent, it's a good place to be.

Let's move on to next page, please. Here, we take a little bit more deep dive into the market per se and the market is growing. And that should be seen in the light of, if we are going into a recession or if we have a crisis, what typically happens. So moving back 10 years in time, and we actually did the analysis when we move back even further to see what really happens on the spend of our municipalities. And this graph describes their spend in Sweden, per se.

We have made the same analysis in Norway, and we can see that we have a CAGR on the average of 4% in Sweden. We are about -- obviously, around 6% in Norway. So it's moving -- it's -- the market is growing organically by 4% to 6%.

And also, if you look upon our -- let's say, what we do was the proportion of that spend -- the customers. And it ranges between 5% to 6% of the customer's total spend. So it's a small proportion. And again, should we move into recession scenario, then from our perspective, having a lower visibility from the customer side, that's a good thing to do. If you have major spending items in your budget, that's typically the ones the customers will be looking at. And what we are doing is quite a small part of their total spend and thus will fly under the radar.

Next slide, please. Here, we take a little bit of a deep dive into the profitability and the development of the profit margins. And as mentioned, we had a very healthy growth in terms of profitability in the fourth quarter of 98%, whereof the organic was 27%. And that one -- I know the 68% that comes from acquisition is kind of important. They really are. And we are happy to see that number but as we have been dealing with organic part as we can see when we come to the segment report, that we have made significant improvement in the old entities. And I'm quite happy to see that both the organic companies or let's say, the old companies are performing in a very good way and that the new companies that comes in are also continued to perform -- performing in a good way. And that really leads to the healthy growth of the profitability.

Now this is on the right-hand side there, you can see the trend going back since 2020. So it has been a growing trend for a number of years. We did see a setback in the second and third quarter, mainly due to the inflation and now the trend is continuing to trend upwards. So I'm happy with the performance, and I'm quite proud that we ended the year at a record high level of an EBITA margin of 8.5%. That's a good number for us.

Next slide, please. Moving into the different segments we have. I won't do too much detail here. So it's pretty much what's in the paper. So in Norway, net sales grew to SEK 740 million, and that's both acquisitions and organic that contributed to that one. The EBITA margin went down from a very high 20% to 13.4%. That is still -- it's not a big concern to us. It's only the numbers game, really that are growing, and we bought or acquired some large companies. They still have a healthy profit, but the mix effect really means that we went from 20% to 13%. And that's kind of expecting, given the size of the total revenue we have in Norway and the numbers of companies we have at Norway at this point of time. And again, Norway is doing it. That's the strongest region we have.

Then we're looking upon the Region Mid in Sweden. They also grew to SEK 349 million and that was a significant contribution from acquisitions as well as to some lesser extent, the organic part of it. They did have a very positive development on the profit margins. We went from a negative 0.7% to a positive 7.2%. And the reasons behind that one is twofolded. It's the acquisition that contributes, but it's also an organic development of companies. As we did have some challenges in that region -- the last quarter, and we made some big changes that cost us little bit money. And that's why you actually have a slightly negative 0.7%. So we went up against to some extent, an easy quarter there. But having a 7.2% is a healthy profit margin for that region.

Moving down south to Sweden. There, we also saw that we had a healthy organic development. We went from SEK 161 million to SEK 191 million and that is more or less all organic growth there. And they also showed a very positive trend in terms of the organic development of the profitability, where they achieved, I would say, a very strong 13.1% and yes, that was a very nice development they had there.

Next page, please. And then we have Region Stockholm, and to some extent, we had a positive impact on the revenue side from the acquisition of Sorex, but we also saw that we had a strong contribution organically in that region and we reached a revenue of SEK 201 million. And also here, we see a very good development on the margins, where they achieved 8% -- sorry, 8.7% and yes, it's a strong performance. And those who have followed us for a number of years knows that -- challenges we had in Stockholm, and it seems that we have finally turn the corner. We have seen for a number of quarters now that they are gradually improving, and I'm quite happy to see at what pace they are improving in Region Stockholm, that's impressive done by the local management here.

And then they have Region North that actually shrunk a little bit. So they have the SEK 94 million previous quarter or previous year and now they achieved SEK 91 million. And this is mainly due to 2 factors. You had a very strong winter previous year. To some extent, we see the weather dependency here, but it's not the majority. It's like SEK 3 million on the revenue side. However, we also see that the margin went down to a large extent. And that is really that you are replacing wind work that, to some extent, is more profitable with other work that has less profitability in it.

And we also had some operational changes in one of the entities that we -- so to say, had to deal with in the fourth quarter, and that was an extra cost associated with it. But otherwise, I don't see that as a major issue here. It's a hope, it sound. We have a good management. So they will continue to perform. It was a hiccup to some extent.

Then we have Region Finland, and that's quite a new region, and that means that the numbers are, to some extent, moving quite rapidly in different direction here. But again, we saw that the revenue came in at SEK 191 million and that the EBITA margin went up to a very healthy [ 13.1% ]. So they are becoming more stable as you have more companies coming into the group there. So that's pretty much what I had on the segment performance.

So moving on to next slide here. We have 4 acquisitions to report upon from the quarter and let's start with H&K Sandnes AS. It's a Norwegian company. They were founded back in 1972. It's a classic, I would say, groundwork company that are into water and sewage, very skilled management. They have an annual sales of NOK 140 million and about 50 employees in that company. No, we have quite a few companies who are into water and sewage. So that's slightly and surely becoming, I would say, a sub-section in what we do here. We have 3, 4 companies who are specialized in that area. So we do welcome them into the group.

And then on the same page, we have Stebule in Lithuania, was founded back in 1993 and this is really a classic service company. They do exactly what Svensk Markservice and Green Landscaping used to do in the beginning. And that means they take care of the parks, you have winter services, you have all the stuff that makes our cities green and looking good.

Long-term contracts, very good customer relationships and quite an advanced company. And in terms of size, it's actually one of the larger entities we have, even though the revenue is around EUR 13 million, they do have 330 employees. You have a different cost level. So should that company be in Sweden, Norway, Finland, then you can easily double the revenue or more. So it's -- I would say, quite big company, quite professional work they are doing. They have a good management in Mr. Stanislovas and his team. So we are happy to have them aboard and do welcome them being part of the group.

Next slide, please. And then we have Taimisto Huutokoski in Finland. Also a very stable company, was founded back in 1952. They are in the plant nursery business that it's some extent, an [ outward ] in what we are doing. But there's very nice match between what this company does and the other remaining companies we have in Finland. They create actually a very good entity and a good team and talking about team, they also have a very strong management team that impressed upon us. So they are really a good contribution to our local business in Finland. So we do welcome them to the group.

They have an annual sales of EUR 3.5 million, revenue with 30 employees. And you have to keep in mind here, this is a long-term business. These guys when they talk business, they basically plant a tree, and then it takes 10 years before you're going to sell it. So they are really long term in what they are doing and how they are investing and how they are managing their company, and we clearly can learn something on what they are doing.

And then the last company is H.T. Vike. And that's a company run by Hans Tormod Vike -- sorry, here, I got wrong paper. It was founded back in 2012 in Norway, and it does provide -- there's a market change going on here in Norway as well as in Sweden, and that means that the traditional fuel stations are being replaced by automatic fuel stations, you have washing stations and you have the electrification or the charging of electrical vehicles.

And as that market is transforming, that's really the work done by Hans Tormod Vike So they come in and then they remove the old systems and put up the new automated stations, and they do that all over Norway. And they have an annual sales of NOK 60 million. So it's a good contribution to the group, and it's actually forward-looking because we know that the electrification is coming. It will have an impact on what we're doing and they are kind of part of that transformation.

I think that was what I was about to say. So I hand -- thereby hand over to Carl-Fredrik Meijer.

[Carl-Fredrik Meijer, executive]

Thank you. Going to some numbers on the quarter. So net sales increased almost -- yes, from SEK 900 million to SEK 1.6 billion, as Johan mentioned. EBITA almost doubled. And I am particularly satisfied with the organic EBITA growth of 25%, meaning that the companies that come into the group, we make them better as well as the older companies. And Sweden actually went from 4% margin to 6.6% margin during 2022 full year.

The EBITA margin increased to 10.2%, and we're at 8.5%, as Johan mentioned. We had a strong cash flow of SEK 215 million, I will come back to this. The order book is solid. The earnings per share increased significantly, more than doubled during this quarter. So it went to from SEK 0.6 to SEK 1.4 during the quarter. And we will be talking more about earnings per share growth going forward.

The leverage -- the financial leverage is in line with target. It went from 2.7x at the end of the third quarter to 2.4x in this quarter and we extended our credit facility by one year to 2025.

Cash flow. We had a strong cash flow of SEK 215 million, up from SEK 47 million during the same quarter last year. And we had a very strong growth in -- organically in both Q2 and Q3, and we used more working capital, and we see somewhat of a small reversal here in the fourth quarter especially compared to last quarter, the last year.

So what drove the cash flow here is that the EBITA went plus SEK 80 million. The working capital contributed to SEK 50 million compared to last year. And we had a SEK 476 million in the cash and cash equivalents at the end of the quarter.

Cash flow bridge. So here, we've illustrated the cash flow statement in a simple way. So the first part is the operating cash flow and you see the SEK 215 million. Then we have the investment activities where we made acquisitions, the 4 acquisitions, we used SEK 289 million in cash and then SEK 32 million in CapEx and other investments. And then the third part is the financing activities, and we took new loans of SEK 326 million during the quarter. And we have other financial activities, such as amortization and lease payments of SEK 70 million in the quarter. So all in all, we had a net cash flow of SEK 150 million during the fourth quarter.

Financial leverage. We have -- we are below our target of 2.5. I usually say that I'm happy when it's between 2 and 3, given the stable nature of this business and the cash flows. And we have a strong generation of cash flow from the operating activities this quarter, as I mentioned before. And this means that we actually deleverage over time from the profit and cash flow generated from the businesses. And then when we make acquisitions, the leverage temporarily goes up a little bit. But yes.

Loan maturity profile, since this has become a more talked on topic during this year.

[Johan Nordstrom, executive]

It's kind of a hot topic.

[Carl-Fredrik Meijer, executive]

Hot topic. We can say that we have only bank loans today. They mature end of 2025 as of now, and we have 1 year -- 1 extension year that we can use and we're quite happy with this. The total maturities amount to SEK 1.7 billion today. And we have one covenant in our contract, and that's the financial leverage one and that leaves plenty of headroom at 2.4.

Financial targets. So if we sum up the year, we grow by -- grew by 53% this year compared to a [ profit ] of 10%. We had a long term -- medium- to long-term target reaching 8% in EBITA margin, we're now surpassing that to 8.5%, up from 7.4% a year ago. The leverage, talked just about that, it's 2.4x, which I'm happy with. And we suggest that no dividend -- the Board suggests that no dividend is given for the financial year of 2022. And then over to you, Johan.

[Johan Nordstrom, executive]

Okay. That really is the last slide then. So just to sum up there that there is a turbulence in the economy. As I did talk about, but at this point of time, we do have some readiness, of course, and we're monitoring what's going on. But from a market perspective, when I talk to the situation of the customers, there are solid market conditions and we have a very healthy backlog, as I mentioned. So we're kind of looking forward into the year to come here.

And also, I'm quite pleased with net sales that increased by 74%. It's a very high growth phase we are in as a company. Profit-wise, we increased almost by 100%, was 98%. And of course, I'm really happy with the margin development both as I mentioned, from acquired companies who seems to thrive and develop in our business, but also in particular that some of the less profitable companies are gradually improving their performance. And I'm quite happy to see that the work they are doing are being appreciated by the customers, and they are improving their profit margins.

So all in all, we are presenting a strong quarter, and we are quite pleased with the development with the company and where we are at this point of time. So thank you very much. And by that, I believe we hand over and open up for questions.

[Operator]

[Operator Instructions] The next question comes from Henrik Jernbeck from SEB.

[Henrik Jernbeck, analyst]

Region Finland performed pretty well in this quarter. It was impacted in the margins. And now you have included Lithuania into Finland. I mean, could you talk a little bit about the recent acquisition and the new markets and how that is affecting the Region Finland and is that the reason behind why we see a big step up in the margin?

[Johan Nordstrom, executive]

The reason is really that if you are growing into new markets, and then you are following the company's financial into a very small group, then you could have some, let's say, uneven or odd numbers that would surface. So that's why when you achieve a critical mass, then it's easy to compare really the performance of region and the companies they're in.

For example -- example if you have a company or landscaping division, they really don't have much to do in the first quarter, for instance. So if they break even, they are kind of happy then they move into the high season of the second and third quarter. And to some extent, what happens in the fourth quarter depends in Finland, when the winter comes because that's the end period of the landscaping ground work that they can do. So if that company comes in, let's say, the second quarter, then they would show a very good number, and then they got -- when a year have passed, then you're going to show to some extent that they are trending downward, that's hopefully the case.

So that's really why we prefer to -- before you have a critical mass, then we won't single out any companies or markets from that perspective. So we don't comment exclusively on what -- in Lithuania. As I mentioned, we are quite happy with the company. I'm quite impressed with Stebule as a company. And they do have profit margins equal -- greater to the group target.

[Henrik Jernbeck, analyst]

Okay. So I mean you make another significant increase to the backlog this quarter. Could you give a percentage split maybe between the public exposure versus the private? You said that the majority is public, but have you seen any difference now in Q4, maybe the private sector is a bit weaker.

[Carl-Fredrik Meijer, executive]

No. Not really. We have not seen that actually. So we think the activity is currently both in the public sector and in the [ private ] in our space. So the split between the order backlog and orders coming in is similar to what it has been before.

[Johan Nordstrom, executive]

When we look upon the market, I believe actually...

[Henrik Jernbeck, analyst]

Sorry. I can't hear you.

[Operator]

Sorry. This is the operator speaking. I think we have some technical issues. We lost connection with Green Landscaping.

[Carl-Fredrik Meijer, executive]

Can you hear us?

[Operator]

Yes. [indiscernible] and we're perfect.

[Henrik Jernbeck, analyst]

Yes. We can hear you.

[Johan Nordstrom, executive]

Okay. Good. Sorry about that. I don't exactly know where you lost us. But from a market perspective and the information I have, it was basically in the third quarter that we did see that the customers raised some -- earned up the risk of the recession that would happen. And there were some talks about the postponing projects, therefore. But that was in the third quarter of 2022, to us it seems like the market to some extent moved on.

And we don't see them that cautious anymore and they're actually moving along with the different projects. So they're not postponing projects or talking about own projects. That was in the third quarter when I think everybody was scared of what will happen.

Now it seems like it's more back to business as usual, in the segments we are in. I know that there are other segments out there who have, of course, will be negatively impacted by inflation and by interest rates and those areas. But where we are sitting, I don't see any major impact at this point in time.

[Henrik Jernbeck, analyst]

Okay. Understood. I know that there are some concerns about tenant-owned is that -- with the [ emphasis of that ] I guess, tenant-owned housing in your private exposure, how much would you say that you are exposed to tenant-owned housing units?

[Johan Nordstrom, executive]

Yes. We have some exposure into that segment. And by some, I can basically address them to one company, that I know do some refurbishment and are active in that area. But you are talking about a company with a revenue less than SEK 100 million. And at the end of the day, you won't be able to see that on the consolidated numbers of Green Landscaping, where it had -- very -- it impact and our exposure...

[Carl-Fredrik Meijer, executive]

Yes. They're doing great.

[Johan Nordstrom, executive]

Yes. So at this point of time -- but even if they should come to a complete [ standstill ] which it won't. But no, you won't be able to see any major impact on our business. That is simply -- too small company to have any negative impact from the number.

[Henrik Jernbeck, analyst]

Okay. And so my final question is regarding the Region Middle and Region Stockholm, I mean, this Q4, they performed quite well, well above the historical average. And you say that there's been a long ongoing work that you've done in the last years, maybe?

[Johan Nordstrom, executive]

Yes.

[Henrik Jernbeck, analyst]

Is it something that we should expect going forward? Or it's just also due to some seasonality effect?

[Johan Nordstrom, executive]

The trend is not seasonality -- is seasonal. The trend is what the trend is, that means that they are improving gradually their performance, both in terms of revenue, in terms of how they are taking care of the customers and the quality they are delivering and in the [ quarter ]. That trend is underlying, and I would say, quite strong. I won't make any forecast in terms of what will happen into the future, but we are still very actively working in these companies to improve their profit and their margins and the quality of services they are doing.

But I'm quite impressed with the work. It is taking us some time in order to show the numbers, but I'm still happy with the performance. They have done a great work.

[Operator]

The next question comes from Alexander Siljeström from Pareto Securities.

[Alexander Siljeström, analyst]

Johan, Carl-Fredrik, congrats to a really strong quarter. I have a couple of questions here. And I appreciate that you don't want to break down sort of the price and or the volume contribution here in the quarter. But -- and you mentioned that you are still prudent here with sort of the organic growth. Could you just say something about the market as well? Or do you see a prudent competition as well, i.e., that other players don't sort of try to get a launch out of the market through aggressive pricing?

[Johan Nordstrom, executive]

I believe I did mention in Copenhagen that I've been around for a number of years, and we've been through a different -- a couple of cycles historically. And so from my perspective, I might be swearing in [ churchship ] but it's not necessarily an [ evil ] thing that things get a little bit tougher in the marketplace because that means that the competitors who are trying to buy market shares or not making enough money, they are really struggling. And that means that you're basically cleaning up the market a little bit. So from that perspective, I'm -- I would say, I'm happy with that the market conditions are tougher.

But from my perspective, again, it's not necessarily an [ evil ] thing. You can only -- let's say, you can only buy market share for so long. But then when the profit margins are hurting, then you are jeopardizing your business, and that's a lesson that will be learned. So from my perspective, again, it's -- I don't really don't see that happening. We saw it in the beginning -- by that, I mean in the beginning of 2022, when we actually saw that the inflation is coming up, should we increase our pros or should we stay with the current pricing and so forth.

And in a number of companies, we actually said that no, inflation is coming, and we have to show profits. So we have to increase the prices. Should we lose business, which we, to some extent, did in some cases, but the market will adjust and the competitor will adjust to the current cost level. And I think we are at a point of time right now where that adjustment has already taken place.

[Alexander Siljeström, analyst]

Okay. Very interesting. And just on the organic growth here going forward and then maybe especially related to the first half of '23. Should we sort of expect a higher organic growth here in H1 as well and then maybe more normalized growth heading into H2? If you could give some color to that, that would be very helpful.

[Johan Nordstrom, executive]

Sure. As I mentioned, I don't like to give forecast and we typically don't do it. But of course, if we are saying that we, in a non-zero inflation, marketplace would like to grow in line with the market. And if the market is growing by 4% in Sweden, 6% in Norway, and so forth, then you should expect us to grow by 5% organically in a zero-inflation or a low inflation environment.

Now when inflation goes up significantly, then, of course, that number should go up as well. So from my perspective, I do expect to see a higher growth number because of the inflation whether that number is in 8% to 10% or 12%, I can't say, and I won't say at this point in time. Should it be higher than 5%? Yes, it should be in my book. But how high, sorry, I can't give a number at this point of time.

[Alexander Siljeström, analyst]

Sure. That's very helpful...

[Johan Nordstrom, executive]

Yes, to some extent, it should be higher than what you have seen lower. And then we also have to keep in mind that the organic growth for 2022 to some extent, 2021 was also hampered by the discontinuing of non-profitable contracts and one entity in Stockholm, where we discontinued the business as well. And we don't have those activities going on any longer. So you should have a slightly higher organic growth because of -- those numbers were hampered by the improvements we did profit-wise as we help the companies back instead of -- we wanted them to grow the bottom line, not the top line.

[Alexander Siljeström, analyst]

Yes. Perfect. Perfect. That's very helpful. And then just a question here around M&A for '23. Now you're back at 2.4x -- in pro forma leverage. So just thinking here, should we expect the M&A example to go down a bit compared to '22 or how are you sort of broadly thinking here without giving any sort of specific items.

[Johan Nordstrom, executive]

We -- a couple of years ago, we set out on a target on how many companies that we are comfortable with bringing into the group. That might be strength that you have that fixed growth, but that's really how many companies do we see out there? How can we do the onboarding process and we made that when everything was happy and interests were very low, and we saw companies or colleagues to us out there who are easily during 2, 3, 4 times as many acquisitions as we did, that we basically said, no, this is our strategy, let's stick to that plan. And that means we are sticking to our plan and that means we should continue to acquire companies at the pace we had done historically. We don't see any major changes in that area. What we have seen, however, is that we, to some extent, have started to, as we are becoming a bigger company, we have also started to acquire slightly bigger companies on the average than we did historically.

And then if you look upon 2022, that was kind of a hectic year. I believe we had one company that actually was planned for 2021 that fell -- so to say...

[Carl-Fredrik Meijer, executive]

The closing was in January.

[Johan Nordstrom, executive]

The closing was in January, so from our perspective, that was actually a 2021-year acquisition. So if you move that company, it's the company [ underdeveloped ] -- if you move that from back into 2021, then you basically get the pace we are looking for.

[Alexander Siljeström, analyst]

Perfect. Perfect. That's also very helpful. And then I guess just a final question here from the presentation. Very interesting here with the market analysis. And I just wanted to double check. Does this also include landscaping activities or is more maintenance or what's included in the -- in that graph?

[Carl-Fredrik Meijer, executive]

This is both investments in parks and buildings and stuff like that. It's a bit broader than our scope of services, but it's a good proxy for the market share or the money spent on our services. And it includes investments, that means rebuilding and building new places and green areas and parks and stuff like that. But it's only the public sector. And it's a part of the public sector because it's only municipalities. But it's -- I think it's good proxies.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Johan Nordstrom, executive]

Okay. Thank you, everyone, for listening in. As mentioned, we are satisfied with the fourth quarter performance and are looking forward into what the year of 2023 will bring us as we see great opportunities out there. So thank you, everyone, for listening in.

[Carl-Fredrik Meijer, executive]

Thank you.