Green Landscaping Group AB (publ)
STO:GREEN
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Green Landscaping Group AB (publ)
Earnings Call Analysis
Q4-2023 Analysis
Green Landscaping Group AB (publ)
Green Landscaping Group has established itself as a leading entity in the ground maintenance and landscaping industry, caring for outdoor environments across Europe. With a decentralized business model, the company excels with above-industry margins and operates in 5 countries through around 50 subsidiaries. Despite a cautious approach to acquisitions in early 2023 due to market uncertainties, they resumed expanding in the latter half and concluded with operations in Germany and a pending investment in Switzerland.
Green Landscaping reported a 21% increase in revenue, reaching SEK 5.8 billion, and outpaced this figure with a 26% increase in EBITDA, amounting to SEK 512 million. The profit margin experienced a slight improvement to 8.8%. For Q4, despite a small dip in organic growth, the company still performed strongly with net sales increasing by 2% and an EBITA margin of 9.6%. The leverage ratio remained controlled at 2.5%, signaling a well-balanced financial position.
In Sweden, Green Landscaping achieved a 4% growth, hitting SEK 2.8 billion in sales, whereas the Norwegian market witnessed a remarkable 29% increase reaching SEK 2.4 billion in sales despite a slight decrease in profit margins. Finland and the rest of Europe collectively reported significant growth of 168% in revenue and 530% in profitability, albeit with some variation due to newly acquired companies and macroeconomic factors.
The company's order backlog grew by 6%, indicative of stability due to the types of customers, mainly with public contracts, which generally promise longer-term engagements. The acquisitions conducted in late 2023 reflect the company's confidence in market conditions and its careful expansion strategy, particularly in Germany and Switzerland as they eye future growth opportunities in these regions.
The leadership of Green Landscaping Group articulates satisfaction with the year's performance, acknowledging solid quarter and annual growth. The company has navigated market challenges effectively, maintaining financial discipline and strategic growth, resulting in a very profitable year relative to industry averages. This wraps up a year where the company has laid a foundation for continued expansion and performance consistency.
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Welcome to the Green Landscaping Group Q4 presentation for 2023. [Operator Instructions]Now I will hand the conference over to the CEO, Johan Nordstrom; and CFO, Carl-Fredrik Meijer. Please begin your meeting.
Okay. So welcome, everyone, to this conference call of Green Landscaping, where we are presenting our fourth quarter 2023 financial report. And as mentioned and presenting as usual, that's myself, Johan Nordstrom, the CEO; and Carl-Fredrik Meijer, our CFO.So without further ado, let's dive into the presentation. Slide 2, please. And this is just a very, very brief introduction to Green Landscaping for those of you who are not that familiar with us, but we have grown into becoming a leading company in the ground maintenance and landscaping industry, taking care of outdoor environments. We have also grown to becoming the leading industrial consolidator in Europe. We are operating under a very well proven and successful decentralized business model that serves us very well. And we clearly have above industrial margins given the strategy we have chosen.So we are on the path of becoming a European champion. We have operations in 5 countries at this point of time as we have not concluded the investment in Switzerland. We also have about 50 subsidiaries that is operating all over those 5 countries in Europe. So that's a very short introduction on -- of Green Landscaping.So next slide, please. And to sum up the full year of 2023, I would actually start by going back to the end of 2022, where we were quite active on the acquisition side as we had made, I believe, 12 investments during the course of that year. At the same time, as we had interest rates going up, we had inflations going up, and it was a bit of an uncertainty to what will happen with the market. So as we have been very active on the investment side, we actually said that for the first half year of 2023, we took a step back on the acquisition side to see what will happen with the markets, what's going to happen with the cash flow and the profit margins and such.And then we used that time, the first half year of '23, to actually invest heavily in the platform to build up the German market for us. And that meant that we made sure that we had the right advisers. We translated everything into Germany. We actually studied German as well, so we do speak a little German. And we opened up our office in Munich. And then we made our first recruitment in Germany with the country manager of Stephan Stieglauer in Germany as well.And then towards December, when we had seen what's going on in -- with the market and our performance support, then we felt confident in starting to acquire companies again. So we made the first introduction in Frankfurt with Schmitt & Scalzo and that's Francesco, that was the first acquisition we made. And then for the second half of the year, we followed through with a further 2 companies in Germany and 1 in Switzerland. So I'm quite pleased with the way we conduct ourselves given the market situations we had towards the end of 2022 and the plan that we laid out for the full year of 2023.In terms of the financial performance, sales increased by 21%. So we came up to SEK 5.8 billion in revenue. In terms of profitability, we saw a nice development where that one actually increased more than the revenues. That's a 26% increase. That amounted to SEK 512 million in EBITDA. And that gave us a profit margin of 8.8%, and that's a slight increase compared to the year before. So all in all, I think we executed according to the plan and financial-wise, we also went according to plan. So yes, that's the sum of the year. I'm kind of happy with the performance.So next slide, please. Moving into the fourth quarter financial performance. So again, it's a very strong quarter. Net sales increased by 2%. However, organically, in the quarter, we had a negative 6%. And we have to keep in mind here that the fourth quarter of 2022 was a very strong quarter. So even though we can see a slight decrease in the fourth quarter of 2023, it doesn't mean it was a strong quarter, it really was.So in terms of EBITA, we landed at SEK 159 million, and that equates to a profit margin or EBITA margin of 9.6%. So all in all, a strong quarter. Looking upon the financial discipline, the gearing here, we are at 2.5%. And as we have stated since a couple of years back, we have a positive cash flow, then we are acquiring companies. So we are in control of the debt level as on a matter of how we allocate the funds, so where we choose to invest the money. So being at a 2.5% level, we are quite confident and we are managing that on carefully. And then as we see the market going on as we did in the last year.So all in all, that's 2.5%, that's good. And as I did mentioned, in terms of the expansions in Germany or to Switzerland, we did 2 acquisitions by Rainer and Hartmann company in Germany and then Viva Gartenbau in Switzerland to finish off the fourth quarter of 2023.Next slide, please. This is just to give you a historical perspective over the company. Going back to the fourth quarter of 2020. So that's a 3-year perspective. If you look upon the revenue side, you can actually see that we have grown almost 3x. So they're rolling 12 months of Q4 2020, that's above about SEK 2 billion. Now 3 years later on, we are close to SEK 6 billion. So that's 3x in 3 years' time. Profit-wise, we were at about SEK 100 million in the fourth quarter of 2020 and for the fourth quarter of 2023, we're actually above SEK 500 million. So that's a 5x development in profitability. So 3x in revenue and 5x in profitability for the last 2 years. So it's a pretty good track record.Next slide, please. Order backlog. Given the type of customer we have, it's a fairly stable business, I would say, with public customers. We have long contracts, and we have a fairly stable order book. So that one grew by 6% in the fourth quarter and compared to the fourth quarter of 2022. And of course, that's a mix of organic growth as a new company that is coming in. There is a difference between the landscaping companies because they have -- they typically renew their contracts. So they have a coverage of about 6 months while the maintenance, they have very long contracts and confuse the majority of the order book, so to say.So we are pleased to have that stability, and I think the number tells us that we are quite a stable company given the order book we have.Next slide, please. Looking upon Sweden development there, we can see that for the full year of 2023, we reached sales of SEK 2.8 billion, and that's a 4% increase for the full year. Organically, we grew by 1%, and we had a 3 percentage contribution from acquisitions. And in the fourth quarter alone, we came in at SEK 800 million. And again, we are going up against good numbers for the last year, but that's a negative 2% for the fourth quarter. And this -- yes, there is a difference between the ground service and the landscaping, but nothing really revolutionary. It's going according to plan.Profit-wise, we came in at SEK 174 million, and that's kind of below the performance of 2022 by minus 9%. And that's a negative 25% in the quarter, and that is mainly due to the one company that we have been referring to, which have accrued losses for the full year. And then we have made additional reservations in the fourth quarter for the full year of 2024 for that particular contract because it's actually one contract we are referring to in one company. And that means we have, for instance, made accruals for expected losses in 2024 in the fourth quarter of 2023. Sorry. I hope I got that one right. Anyway, that's the development in Sweden.Otherwise, the majority of the companies in Sweden are performing to plan or actually slightly above plan. So all in all, it's a good performance for the companies in Sweden, except the one company that we have had issues with and now we have made final accruals for.Next slide, please. In Norway, there, we grew into SEK 2.3 billion, SEK 2.4 billion, quite an impressive growth there of 29% for the full year. Organically, it was [indiscernible] it's 6%, still good. And then acquisitions contributed by 28%. So we are still seeing a high growth rate in the Norwegian market. We can also note that we have, I would say, fairly, not a substantial, but it's -- we are impacted by the exchange rate, given the difference between the SEK and the Norwegian krone.In the quarter, minus 4%, SEK 679 million. That's pretty much according to plan. And then again, EBITA, SEK 242 million. It's a decent profit margin we have there at 10.1%, down from 13.4% from the previous year. And that was in particular the last quarter of this year where they came in slightly weaker than expected. But nonetheless, it's a good performance in Norway, where we have a 10% margin for the full year.Next slide, please. And then again, when we look upon Finland and rest on Europe, and that's the region where we are most actively, I would say, in terms of acquisitions. And we are starting from kind of low numbers. So that means that the percentage -- we can see we have very high flotations on the percentage when you're coming up at the very low level, of course. But nonetheless, we reached SEK 610 million in revenue for the full year of 2023, and that's on the plus side of 168%. Organically, we grew by 5%. And of course, that means that it's mostly acquisitions. And to some extent, we have a high impact on the currency as well as impacting that segment, that's predominantly euro-based currency countries.In terms of profitability, we reached SEK 141 million, and that's 530%. So again, we are coming from very low numbers. But coming in at a profit margin of 23% in the quarter, that's a very, very strong margin. But we also have timing effects depending on when the company are being consolidated into our numbers as there might be variations or seasonal variations of their earnings reporting. So it depends when they are coming in. But now we are -- I won't say we have the critical mass, but we're getting to critical mass, and that's when we're going to see that we're going to have stability in terms of growth and the profitability coming out of this segment. But nonetheless, those companies we have there have done a very good job, in particular the companies we have in Germany as well as stable, they are really performing. The Finnish market, to some extent, it's, I would say, negatively affected by the macro environment. So there's a difference inside this segment.But nonetheless, that's where we are. And of course, looking into the future, as mentioned previously, we are focusing on Germany, Switzerland and Austria at this point of time where we are looking for companies to invest in.Next slide, please. As I did mentioned, we entered into the German market with our first acquisitions in June, I believe it was with Schmitt & Scalzo and that's Francesco, down in Frankfurt, and we also opened up our office and we hired our first country manager in Stephan Stieglauer. And then as we saw that the market, where the market is going to lead us, then we decided, okay, let's open up on the acquisition side again. So we followed up in October with the investment in Matthias Rainer and his company, Rainer Gartengestaltung & Landschaftsbau. That's a company founded back in 2005. It operates around home, to some extent they struck out but it's the divestment geographies around Ulm, to some extend Stuttgart, but it's -- the vast majority is around Ulm and that's southwest of Germany. It's a typical company. It's ground maintenance and landscaping services.Revenue-wise, there are about SEK 3 million with 24 employees, and we do welcome them into the Green Group of companies.Next slide, please. And then right before Christmas, we finalized the investment increase of Hartmann and this company. And that's Hartmann Ingenieure GmbH founded back in 1985, and it operates in Berlin, in Central Berlin, to be more specific. And this is a pure landscaping company. And as mentioned, it's in Central Berlin. They do, I would say, high-profile projects. So we are talking about the government or the Bundestag. You have the [indiscernible] area. So it's a fairly condensed area in the absolute heart of Berlin where this company are doing -- have proper work. So they have an annual sales of EUR 4.5 million, and they do that with 55 employees. So we do welcome Hartmann or actually, Christoph Hartmann and his colleagues into the Group as well.Next slide, please. And then towards the end of the year between Christmas and the New Year, we made our fourth investment, and this is an unannounced. It's still to be closed. We haven't closed that one given certain specific permits we need to do in order to finalize this deal in Switzerland. And this -- there, we have 2 gentlemen by the name of Severin Brenneisen and Heinz Gutjahr, who are the founders of the company and the company was founded back in 1992. It operates in Basel in Switzerland. And again, that's -- if you know where Basel, it's just towards the -- what do you say, it's a cross between Germany, Switzerland, and France. That's where they are located, if we are going from Frankfurt, down to Ulm and then further down into that Southwest region of Germany. So it connects with other companies we have in that area.They do offer services in ground maintenance and landscaping and annual sales of SEK 3.2 million, and they do that with 20 employees. And again, they are in Basel, and that's where they do their business.So I think that concludes my part of the presentation. And by that, I do hand over to our CFO, Carl-Fredrik.
Thank you, Johan. Strong finish to the year. So net sales, as mentioned, SEK 1.7 billion, and we reached an almost SEK 6 billion for the full year. So we still have a strong growth. We have the highest EBITDA margin ever of 8.8%. The cash flow, I will talk more about that going on with the coming slides. The order backlog was solid and the financial leverage is in target. I would also like to mention that with the share buybacks, we announced the program back in Q4, and we bought back shares worth of SEK 17 million during the fourth quarter.So cash flow from operating activities was SEK 379 million versus SEK 431 million in 2022. And in the sort of -- it was less than the year before. And the main reason was that the cash flow was a bit weak in Q4. And if you look at the chart, you can see that it varies quite a lot between different quarters due to which type of projects we are running, sometimes weather conditions and other type of stuff makes it variable. And we had a cash position of SEK 459 million at the end of the year.So let's look at the cash flow bridge. We have EBITDA of SEK 159 million. We had -- the big part here is the change in net working capital, which was minus SEK 82 million versus plus SEK 14 million last year. So this is the biggest gap. And why is that? Like I said, it's project-specific in some cases. There was also a higher demand for snow and ice removal services at the end of the quarter, and that is billed then sort of in late December were actually accrued for when ending December. And this is why the accounts receivable is up quite a lot, but also accrued income.Then in January, looking at what has happened, we have seen that the receivables have been paid and the accrued income has been invoiced and in some cases also already paid. So yes, it was a buildup. And of course, I don't like that, but have to accept that it varies sometimes between the corporates. And I'm happy to see that it has -- the cash flow has been very strong in January, reversing that trend. Then we made acquisitions of SEK 4 million to SEK 6 million. We have sold actually some assets, machinery and that type of stuff, meaning plus SEK 25 million from CapEx and other investing activities, new loans of SEK 2 million, and then we repaid debt of SEK 129 million, making the cash flow in total for the period minus SEK 68 million in Q4.We talked about financial leverage. It's 2.5%. We've been sort of dancing up and down a little bit between this 2.5% financial target. But I'm quite satisfied, like Johan said, we are deleveraging naturally with the cash flow from that operations over time. But then we do acquisitions, which makes the leverage go up somewhat. And now we've also made some share buybacks, which has the same impact. So we're quite happy being at this level. The loan maturity has been extended during the quarter from late 2025 to late 2026. We have total maturities amounting to roughly SEK 2 billion. And we have 1 covenant being net debt-to-EBITDA pro forma which leaves us plenty of headroom to where we are at the moment.And last page for me is the financial targets. We have a target of growing by 10% per year, including organically and acquired growth, and we have ended the year growing 21%. The EBITDA margin is -- the target is 8%. It's been a goal that's been with us for very long as well as the growth target, and we're now at strong 8.8% compared to the target. Second year, we're ahead of the target. And leverage should be not above 2.5x, and we're actually at 2.5x. And we have a goal of making a dividend, but we are still and probably will be investing all the profits into growth.And that concludes my part. Back to you, Johan.
Okay. Thank you very much, Carl-Fredrik. And that's pretty much to sum it up before we open up for questions. And I would like to emphasize that we had a plan for the year, as we always do, but we were actually executing the plan in a very good way. So again, given the market conditions with interest going up, high inflation going up, and a great deal or a great amount of uncertainty into the market. And also given that we were quite hectic or active in the acquisitions field on the end of 2022. That's where we decided that, okay, let's take a step back and see what's going to happen for the first half year or the first 6 months of 2023.And that's pretty much what we did. And then we spent that time being quite active in developing the German platforms as I have been talking about. And then as we came towards the summer, and we saw that, okay, this -- we are actually -- we are being in a quite good shape, and we see that business is moving along in a good way. So let's open up the office, we are doing the first acquisitions and so forth. And then we ended the year with another 3 companies, meaning that the platform now consists of 4 companies. We have 2 employees. Actually, we have one more new employee in Germany. So I'm quite pleased with the performance overall company-wise.And as we saw the numbers that we are growing by 21% in terms of revenue to SEK 5.8 billion, and that we increased the EBITDA with 26% and that surpassing SEK 500 million and a healthy margin of 8.8% versus the industrial average of about 4.5% to 5%. So we're growing at a high pace and we have basically the doubled profitability from what the market typically has.For the fourth quarter, we are going up against a very good quarter from 2022, but still, this is probably the second best quarter in the history of the company, where we see that, yes, SEK 1.6 billion in revenue and EBITDA of SEK 159 million and a profit margin of 9.6%. So it's a solid performance, both in the quarter and the full year. So we're quite kind of -- as you can hear, we are quite pleased with the performance in the company given the market conditions and how we conduct the business for the full year of 2023.And by that, I think that concludes the presentation, and then we hand it over to the operator for the Q&A session. Thank you.
[Operator Instructions] The next question comes from Karl Bokvist from ABG Sundal Collier.
My first one is on Sweden here, based on the assessment you have currently, what do you think would be the duration of the headwinds? I believe, difficult to predict the market, of course. But the -- maybe more about the company-specific ones. You said the provision taken this quarter was for, well, essentially 1 year from now and then you've taken a provision 2 quarters back for a bit earlier in the year. But do you think that this is kind of when you expect the contract to be fully worked through and then that if things can progress?And also my follow-up is just financially whether or not based on the provisions you have now taken, if the headwind on margins is now fully visible in numbers, so to say?
Yes. Thank you. We have -- the contract we have and the agreement we have made with the customer, that is that by the end of the third quarter of 2024, i.e., this year. So that means we have 3 more quarters to serve the customer with that contract. That's the agreement we have. And then that means that this is a loss-making contract, and we have been quite actively trying to prevent the negative numbers in that contract during the full year action since we started with this particular contract.So -- and then we made additional provisions in the fourth quarter for expected losses. And that means that for 2024 this year for the coming 9 months, that should end up at, let's say, a 0 profit margin, that's the expectations, and that's the budget we have laid out for it. So yes, we have taken the cost over the P&L for the full year of 2023, the running cost, I mean, and also the provision for it. So there should be a slight upside in the segment reporting for Sweden based on the development of that contract. So that's how it's planned.
Then a question to you, Carl-Fredrik. The receivables and the effects of the payments related to snow and ice removal. Would it be possible to give some indication of the magnitude just to understand a bit how cash flow would have looked if it were received in December?
Yes. So I mean, again, we had 31st of December during the weekend as we did last year. And it's evident that some customer pushed the payments towards first or 2nd of January, 2024. And I mean, looking at it, if we look at the sort of the bridge, we see that we had roughly SEK 80 million in receivables more than last year outstanding. That was pretty much in 3 companies. And yes, that's why it's so quite a simple to follow-up and look at what will happen with the cash flow and then the cash in those companies.And we saw that, that was paid in January. Then we had roughly the same amount in accrued amount. And then we have followed up with those companies. That was actually split between more companies than just 3, but we've seen that actually has been -- the majority of that, it has been invoiced since then. So that's the magnitude.
I'll ask another one before getting back in the queue. But now Finland, rest of Europe, 3 quarters now with really impressive profitability. And just to kind of think about what you see now in Norway, should we be prepared for some sort of normalization in profitability of these companies?
I think that's a trend that has been going on, and we landed the full year in Norway in terms of profit margins at 10.1%. And so in terms of normalization, I think that's what's speculating the margin here. But let's say, we had -- the companies that we acquired, as you're growing fast and you make a plan for the companies that is coming in, we ended up in a situation in Norway, where several of the companies actually performed significantly better than we expected. The downside of that one is a year afterwards, then of course, they are coming back to more normal profit margins that's been expected. Ending the year at 10.1%. My opinion is that, that is slightly below the expectations really.There is a currency effect going on at the same time as -- yes, it's a somewhat weak margin in Norway. So that's my take on it. So in terms of normalization, I do not really believe that Norway come down. I think there is more on the upside than on the downside in Norway at this point of time, but I'm very careful about giving any type of forecast in the type of, what do you say, guidance what's going to happen in the year, but a 10.1% margin in Norway. Given the industrial average, it's a good margin. Given our expectations, it's slightly below what I would have expected for the full year on 2023 in Norway.
Yes. That answered my -- another question, but I apologize for being unclear here. But just in Finland, rest of EU, where you had this really, really strong 25% profitability. I mean, should -- for that division or group of companies, should we be prepared for in '24 that we might see some kind of normalization effect similar to what we've seen in your Norwegian business?
I'd probably need another 6 months before I'm prepared to answer that question because we are growing quite quickly, and the companies are coming in. So we need more experience and more time with those companies to really understand, stable, and Francesco in Schmitt & Scalzo in Germany, they are clearly performing over our expectations that there's no question about it. We did not see those profit margins as we did the investment in those companies. So that's a positive surprise that is coming in.And then, of course, we have the Finnish companies that have been struggling with lower margins, some of them actually improving the margins. And then we are adding more companies into the Group. So it's a bit difficult to make projections on what's going on here. But again, some companies are overperforming and some companies are underperforming, while others are on a positive trend. So it's a bit too early, so we need probably another 2 quarters before we really see where we have those companies.
The next question comes from Henrik Jernbeck from SEB.
I have a question regarding the German market, and perhaps also Switzerland and Austria that you mentioned and the payment dynamics and the exposure here because you have quite a large public exposure. Is it the same exposure when it comes to Finland and rest of Europe segment, as we have seen in the past of about 2/3? Or do you -- could you say anything around that?
If I understand the question correctly, that's about the exposure to the public sector. And the answer is in Germany, yes, Finland has a more blended picture, I would say. There is a private side that is slightly bigger in Finland than the company as a whole. So I think the outlier here is probably Finland, I'm guessing a bit here, but that's Carl-Fredrik is nodding positively say yes. So the exposure to the private sector is somewhat higher in Finland compared to what we have in like Stebule in Lithuania, that's 100% public. In the companies we have in Germany, it's a very high percentage public if you look upon what they are doing. And the same is in Sweden and Norway.So I would say that Finland is outlier. Otherwise, it's the vast majority of the revenue. That is like 75% plus. That goes into the public sector and that's our strategy really, that's where we want to be. We are not dealing with construction companies or the private sector to any large extent. So the majority of our company have something like 75% of the majority on the public side and then they typically have the order contract or if it's maintenance, then you have industrial properties, where you have the public customers and then they are included into the contracts.
And also on those contracts, the public contracts in Germany, do you see how long do they -- how long are they contracts often? I mean is it 4 or 5 years as you talked about in Sweden?
No, it's not -- the majority of the companies we have are landscaping companies in Germany. So it's not flag on maintenance side of business. So it means it's a government contract. You have like a framework agreement. And the customers have a budget and then they are awarding new projects as you walk along for the course of the year. Typically, they have order books 6 to 9 months, I would say on the average, but the customers have the budget, but they don't spend the budget at the beginning of the year. They do it in sequence. So typically, they have a visibility of, I would say, 6 months, and they have a good knowledge on the amount or the size of the budget the customer actually has. So that's the situation we have in Germany. So they are not -- they have some minor maintenance, but the majority of the companies are landscaping companies in Germany and Switzerland, not stably in Lithuania, that's a different story. That's a maintenance company.
So there's quite a little bit of a different mix then on the divisional breakdown in Germany and Switzerland, I think.
At this point of time, these are more project-based or landscaping companies that we have in Germany. Yes.
And also, do you see -- in the future here that you want to maintain this landscaping and the balance between landscaping and maintenance. So when we see this on a group level changing into more of a landscaping oriented company overall. I mean, looking at acquisition targets in Germany, for example?
Good question. I don't see any major trend on a corporate level because we're adding -- so we are actually trying to keep the mix we have. And the mix, as we are talking about that we have 3 segments. So we have the maintenance segment where we originally came from. And that is about 50% of the total revenue that comes from the maintenance side. And then we have another like 30% to 35% coming in from the landscaping business, and the remainder is road and wind services, and that's predominantly in Oslo, Norway.We are trying to keep roughly that mix. And as we have a critical mass, we are now at the SEK 6 billion revenue, then that doesn't easily change. The crucial for us is the public sector. That's what we are focusing on, the customer are well reputed, they're making good money, they're quality players and the majority of their revenue goes into that public sector. Then there are other criteria in terms of sustainability, the company culture, the trustworthiness of the founders and stuff that goes into the equation when we make an investment in a company. But it must be a public sector, it's not construction or anything else. Then if it's landscaping or tree pruning, that's not that critical to us.But of course, we will end up with maintenance companies in Germany as well as we move along. And we repair that with landscaping companies. The companies we have at this point of time in Germany, that's basically 3 companies. That's the majority of landscaping at this point in time.
And I mean, the key to us is the long customer relationships, low customer retention -- high retention, low churn, but…
It's still long-term contracts. You still have framework agreements. So it's the same type of business that you have on the landscaping as on the maintenance.
And the margins are very good in that region. Is it due to being quite high entry barriers to getting these framework agreements? What are the like barriers of entry and let's say, that the competition on the local market here that you have this agreement and for the next procurement process? I mean, is it very tough to be in a procurement process, and that's why we have -- we're seeing this quite high margins?
And on the margins, I would say that the margins are not sustainable in the companies we have, but at this point of time, of course, those margins will be normalized exactly as we have seen in Norway. You're going to see that happening as we are adding more companies into the Group. Operating on plus 20% or even plus 15%. But that's tough if you want to grow. So they will come down to more, let's say, normal levels in the long run as you are adding more companies into the Group.In terms of barriers of entry, the barriers of entry, my opinion, in the German market, for instance, compared to Sweden and compared to Finland, I would say that the barriers of entry into the market is actually higher in Germany than they are in Sweden. There are prequalification criteria where you have to be a member of certain associations or branch associations. You need to have the right skill set. You need to have the right education of the employees and such. And those requirements in order to participate in a public tender is to our experience, higher in Germany. Now it's not like we have one rule for Germany. Germany have the different regions, and you have local legislations in the regions.But if you want to enter into Berlin, for instance, with like where Hartmann is, then you have to have the right skill sets. You have to have the right education and you have to have the experience and previous work that you can prove that you have to doing that in a good way. And it seems to us like the government is following up that you actually have done what you are saying you have done and so forth. And that is not necessarily the case in Sweden, that is more open from that perspective. And we also have a much higher impact of low-cost labor in Sweden that is not that common in Germany, and that is actually unheard of in Switzerland, for instance.So I would say the highest competition and the lowest barrier, that's a Swedish market, next to that one in Finland. And then it actually goes up in Norway and in Germany.
The next question comes from Karl Bokvist from ABG Sundal Collier.
Just some follow-ups. First, you partly addressed this, but the M&A pipeline, the way you look at things today. #1, of course, just what you think about the activity and the acquisition pace in 2024? And #2, if there are any particular regions that you want to focus on?
Thank you for the questions. As I said, we took a step back in the first half year of 2023. And then as you're reopening the pipeline, then we follow through with an additional 3 companies and still close the fourth one. And our expectation is to gradually move up to a pace that we have had historically. And that's about 8 to 12 companies per year. And that's what we would like to see happening in the year of 2024. It's a matter of how developed is the pipeline at this point of time in order to reach that goal. It's a ramp-up period. That's what I'm saying before you're going to go back to the pace you had.So our expectation is to come back to normal, and that's something between 8 to 12 acquisitions or investment as we like to refer to it during this year.
And a regions.
Regions. Thank you, Carl-Fredrik. As we are building up the market in Germany and also going back to the introduction slide there, where I talk about becoming a European champion. Right now, we are the second biggest company in Europe. We are clearly the one with the highest profit margin. And we are also the fastest-growing company in Europe. So we are aiming to become #1 in Europe. The biggest unconsolidated market in Europe at this point of time is Germany.And of course, that means that if we want to be #1 in Europe, then it's a matter of being #1 in Germany at this point in time. So yes, the main focus is on the German-speaking part, in particular Germany, but also Switzerland and Austria. And that's one of the reasons why we opened up an office in Munich and that we have recruited local personnel in Germany in order to emphasize that, that's our future home market, that's Germany. But that doesn't mean we won't make any acquisitions in the country where we are in. We will most likely do a couple of acquisitions in each of the countries or regions that we are operating in. But we also have to make sure that we have enough gunpowder in order to execute the plan.So yes, the plan is basically 1 or 2 acquisitions in Norway, Sweden, Finland, Baltics, each and then the rest of it, that's Germany and Switzerland and Austria. So the main focus is basically Germany.
And my final is just on corporate costs. It was a bit higher M&A transaction costs this quarter. And then I understand you at the end of the year, you usually have some payments related to incentives and bonuses and similar. But just going in future quarters, should -- is there any indication you can give us on kind of what corporate costs would be at what kind of level?
You're right, Karl, about the Q4 cost. It follows a pattern if you look at the year, I think that the same pattern is probably what we're going to see in the future. We did also invest in the office in Germany in Q4. But we don't have any -- I mean, important to us is to grow the overhead costs at a lower rate than what our revenue is.
Overhead cost is per definition, too high.
Exactly. It's always too high. However, we are making some investments in the M&A capacity and that type of stuff and the office, of course. But it should be -- what I'm saying is that the levels should not be that different basically.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Okay. So thank you very much for calling in, and thank you very much, Alex, Karl and Henrik for their questions. So that concludes this presentation. So thank you very much, and have a very nice day.