Welcome to the Netcompany Interim Report for the first 3 months of 2023. For the first part of this call, all participants are in a listen-only mode. Afterwards, there'll be a question-and-answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I will now hand it over to CEO André Rogaczewski. Please begin.
Good day, and welcome to this presentation of Netcompany's results for Q1 2023. My name is André Rogaczewski, and I'm the CEO and co-founder of Netcompany, and I'm joined today by our CFO, Thomas Johansen. Before we get going, there are some important disclosures that I need you to read through. Could we please have slide number 2, please? I'll pause for 30 seconds here and let you all have a read-through of these important disclosures. With that, can we please go to slide number 3, please? The topic of today's presentation is our performance for Q1.
I will walk you through the business highlights for the first quarter of the year, I will also go through our financial guidance for 2023, which is maintained from what we communicated to the market in January in connection with the release of our annual report for 2022. Once I'm done, Thomas will go through the numbers in greater details before we open the call for questions. Can we have the next slide, please? We grew revenue in Q1 with 13.7% in constant currencies, all organic. Currency fluctuations impacted revenue growth negatively with 1.4%, leaving reported revenue growth at 12.3%.
Gross profit in Q4 increased by 5.5%, yielding a gross profit margin of 28.6%, which was 1.9 percentage points lower than the same period last year as expected. We saw continued strong margins in the UK and continuously improved margins in both Netcompany-Intrasoft and in Norway, while margin in the Netherlands was slightly lower. The main reduction in group margin is a result of lower margin in the Danish business. Adjusted EBITDA was consequently also lower in Q1 2023 compared to the same period last year. We added close to 1,000 full-time employees when comparing to the same quarter last year, bringing total FTEs to 7,497, an increase of 15.1%. Can we have the next slide, please?
We have won a number of new contracts during the first quarter of the year, of which I am mentioning a few here. In Denmark, we have re-won a number of contracts with the Danish Tax Administration, which is a testimony of our continued focus on quality in the projects we deliver. In addition, we have been selected to work on the development and maintenance of the new travel card to be implemented in Denmark. In Norway, we have been selected to work with the Norwegian Health Agency, which enhance our exposure in the health area in Norway. Can we have the next slide, please? In Netcompany-Intrasoft, we have also signed a number of new contacts, contracts in the 1st quarter of the year, as highlighted here. Two contracts were won with one of the agencies within the European Union to provide various IT services.
In addition, a contract which was won with the Lithuanian Customs Agency to upgrade the current old version of Intrasoft Customs Solutions was won. The work is managed out of Greece remotely. Further, we see continued strong pipeline development within the Recovery and Resilience Facility in Greece and expect contracts in this aspect to materialize in Q2 2022. Finally, we expanded our relationship with the Greek energy provider, HEDNO, and expanded our relation with a large cybersecurity project along the already ongoing projects there. Can we have the next slide, please? Taking a look at the composition of employees as shown here, it is becoming clearer and clearer that Netcompany is transforming into European IT service provider.
As of Q1, less than 1/3 of our employees are now based in Denmark. We see continued strong headcount, in particular the U.K., Norway, and Netcompany-Intrasoft. In uncertain times like these, I'm truly proud of our continued employee growth and our continued commitment to hire top talents in all of our markets. Churn for the last 12 months was higher at 20% for the group compared to the same period last year. This was caused by a spike in churn with the freelancers in Netcompany-Intrasoft based in Luxembourg. Looking at the 3-month rolling churn rates, we notice lower churn rates across the group, apart from Norway, which is a clear result of cooling down in the labor markets.
However, when comparing 3 months churn rates with those from Q4 2022, we see a clear increase in the churn rate in Denmark that increased from 12% in Q4 2022 to more than 17% in Q1 2023 as a result of the higher involuntary level of churn realized. This is fully in line with our plans and in line with our communication in connection with the annual report for 2022. Can we have slide number 8, please? Despite uncertainty in general in the first quarter of 2023, we delivered strong financial results that are supportive of our full year guidance. We are have, however, still early in the year, and despite a strong Q1, we maintain our full year guidance at this point in time of revenue growth between 8%-12% and margins between 15%-18%.
Before I pass on the word to Thomas to give you a more detailed view on the financial performance, I want to remind you about our upcoming Capital Markets Day in June. Can we have the next slide please? On the 1st June, we host our Capital Markets Day in our new corporate headquarters in Copenhagen, which is pictured here. A separate invitation has already been sent out today and make sure to register. On the Capital Markets Day, we will give an update on all our markets and our progress on our platforms and products, and we will be presenting our midterm financial aspirations that we want to be achieving by 2026.
It will be a day where you will get an opportunity to meet other executives from that company and Thomas, and I will look forward to hosting you personally in Copenhagen. On that note, I will hand it over to Thomas to take you through the financials in greater details. Thomas, please go ahead.
Thank you for that, André. Like already mentioned, I am CFO in Netcompany, I will now go more in details with the financial performance for Q1, 2023. If we move past the break-in slide number 10 and straight into slide number 11, please. André has already spoken to our financial performance in general terms, I will now go more in details with the performance in Q1, 2023. Revenue growth for Q1 was 13.7% measured in constant currencies impacted growth negatively by 1.4 percentage point, leaving reported growth at 12.3% for Q1, mainly as the Norwegian kroner depreciated significantly. Growth was above 20% in all units apart Denmark in Q1.
The lower growth in Denmark was a result driven by a decline in the private segment as some decision on projects were deferred and the impact on the change composition in churn leading to slightly lower utilization. While the private segment declined around 3 percentage point, the public segment in Denmark grew by more than 13%. The development in the private segment was to a certain extent expected, as the larger enterprise customers tend to be delaying decisions for bigger projects in times of high uncertainty. We take comfort in the fact that the pipeline remains strong and warrants for growth during the year. The first quarter is historically not a strong growth quarter for Netcompany-Intrasoft. However, in this particular quarter, we realized strong performance across the business, but in particular within the EU and the public segment. In the private segment, sorry.
In the public segment, near-term pipeline cases are expected to materialize and impact Q2 positively. In the U.K., growth was driven by strong performance in the public segment, where we start to see the result of the focus on platforms to support sales processes. For the remaining part of the year, we expect that to continue or to be further enhanced. Growth in Norway of close to 28% was mainly driven by the private segment. Q1, 2022 to some extent was negatively impacted by the issues with a small number of projects observed during the first half of 2022, making the comparable somewhat easy. Growth in the Netherlands is beginning to materialize, and as in the U.K., as a result of the dedicated pipeline focus that has been exercised in the last 18 months in the Netherlands.
Can we move to the next slide, please? Gross profit margin decreased by 2.1 percentage point compared to Q1 2022. This decline was mainly caused by the lower margin in Denmark, which was 35.5% compared to 40.3%. The lower margin in Denmark was caused by the impact from the change in the composition of churn, where we realized a higher proportion of involuntary churn in Q1 2023 compared to last year. This was expected and is of temporary character until the pyramid structure is fully aligned. In addition, delay in decision of some project in the private sector that led to lower growth in Q1 also impacted gross profit margin negatively. This is also expected to be of a temporary character.
Margins in Netcompany-Intrasoft were improved as a result of better delivery on projects and a slightly higher proportion of fixed-fee projects than in Q1 2022. In the UK, margins were unchanged at 30%. However, where the margin increased to 30% level realized back in Q1 2022 was mainly driven by increased utilization. Margins in Q1 2023 were driven by sustained high utilization and sustained high quality delivery on projects. Margin in Norway also increased as a result of better project deliverables. The lower margin in the Netherlands was a result of increased use of resources from the Danish organization on business development work, mostly related to customs and digital government opportunities. Can we have the next slide, please? Adjusted EBITDA was 3.5 percentage points lower than compared to Q1 2022, at 16.6%.
The reduction in EBITDA margin realized in Denmark was a result of the impacts from the lower gross profit margin and the increased cost for the enhanced go-to market approach. Netcompany-Intrasoft margin increased significantly, driven by a better gross profit margin, and the performance within Netcompany-Intrasoft continues to improve and more joint projects are building in the pipeline. In addition, projects within the RRF in Greece are also materializing, and as André mentioned, we expect to see projects to be executed related hereto during the second quarter. Both types of projects will have positive impact on margins in Netcompany-Intrasoft going forward. In the UK, margin was, for all practical matters, flat at 20.1%, and again driven by gross profit margin performance, which was also the case in Norway, where margin increased by 0.7 percentage points.
While the margins in Norway are still below group, we see a clear indication that the margins will continue to improve throughout the year. In the Netherlands, margin improved by 1.1 percentage points, but like in Norway, from a low level. However, margins are now positive, and like in Norway, we see a clear indication that margins will continue to develop positively during the remaining part of 2023. Can we have the next slide, please? Work in progress improved when seen relative to revenue and increased 11.3%, whereas revenue grew 12.3% in the first quarter. This was a result of tighter management of processes around work in progress, especially in Netcompany-Intrasoft.
Along with an increased focus during 2022 on collection and time to cash, the actions around work in progress is the starting point for improved working capital management. Can we go to the next slide, please? Free operating cash flow in Q1 was strong and increased by more than 180% compared to the same period last year, despite lower absolute earnings. This is a result of the focused collection of receivables, moving balances faster through work in progress to accounts receivables, and the continued collection of older overdues that were reduced from DKK 83 million in Q1 2022 - DKK 56 million in Q1 2023. Comparing to Q4 2022, the collection of older overdues have also improved from DKK 63 million at the end of the year - DKK 56 million at the end of Q1.
Days Sales Outstanding was reduced from 60 in Q1 2022 to 54 in the recent quarter of 2023. We have continued to deleverage, and we've repaid DKK 200 million on our bank loan during Q1. Leverage was reduced from 2.8 times in Q1 2022 to 1.6 times in Q1 2023. Free cash flow will, for all practical matters, be used to pay down debt further, and we expect to deleverage further from the current level of 1.6 during the course of 2023. Can we have the next slide, please? While the level of uncertainty remains high in 2023, we do have a strong level of visibility of our revenue for the year, as highlighted here. Overall, visibility improved from close to 9% to almost DKK 5 billion at the beginning of April 2023.
With that, I have concluded the detailed financial review and will now open up the call for questions. Can we move to the Q&A slide, please, and open up the call for questions? Thank you.
Thank you. If you do wish to ask a question, press star on your telephone keypad now. To withdraw it, press star again. We'll have a brief pause while the questions are being registered. The first question will be from the line of Claus Almer from Nordea. Please go ahead. Your line will be unmuted.
Thank you. Yeah. Hi, André and Thomas. I have a few questions regarding FTE and revenue growth. The first question goes to Denmark, and the 6% revenue growth you had in Q1 compared to 13% growth in the FTEs. Why this difference? That would be the first question.
I'll take that, Claus, and thank you for the question. In Denmark, what we see is the impact of the, quote-unquote, "right sizing of the pyramid structure," which means that we are seeing people that are leaving us but are still employed throughout the quarter. Hence, they count basically as FTEs, but they are basically not billable. That's the main explanation on that. It takes some time for the FTE level to come down, but we are in the process of that and expect that to normalize during Q1 and Q2.
Does that mean that we should on a adjusted number, see FTE only growing this around 6% as the revenue, or should we see or expect revenue growth in Denmark to come up in the coming quarters?
Without going into specific guidance, per country, because we don't do that, but we do not expect the full year performance for Denmark to be a copy of Q1. I think I'll answer it that way.
Okay. Hopefully, better. I guess that is in your reply.
That is implicit in the reply. Yes. Thank you for clarifying.
Second question is also about the FTE growth and then moving up on a Group level. It's up by 15% and yes, there is some issues with this, trimming the pyramid, but you are guiding 8%-12% on Group level full year revenue growth guidance. Why this difference?
When we started, when we gave the guidance for the full year, 8%-12%, clearly, high uncertainty. We are off to a good start to the year, growing 13.7% in constant currencies, which is more in line with the 15.1% growth in FTEs. Still early days in the year, but clearly, we are satisfied with the performance of Q1. We'll see where we end, where we end the full year.
Do you see any, clouds on the sky that could justify a significant lower growth than you are wrapping up your FTE?
Difficult to predict the future, especially in these times. We don't see any major negatives. On the other hand, there still is uncertainty. With the uncertainty also comes the downside that it is really difficult to predict. So far so good, I think is how we would label it, Claus, and then we'll see where we end the year. We're not really too keen on making any firm statements on what's gonna happen on macro and what's gonna happen on geopolitical uncertainty, simply because it's impossible to predict, at least from our side.
Yeah. That's fair enough. That was all for me. Thanks.
Thank you, Claus.
Thank you, Claus. The next question will be from the line of George Webb from Morgan Stanley. Please go ahead. Your line will now be unmuted.
Hi, André and Thomas. Hope you're both well. A few questions on my end, please. Firstly, on Netcompany-Intrasoft's strong performance. It was also strong in Q4, but in that call, you were calling out some license sales and pass-through sales. No mention of kind of similar dynamics in this release, and you mentioned there's some positive project factors into Q2 as well. Was there anything significant around those items in that 20% number for Q1? Also if you could talk about operational priorities for Netcompany-Intrasoft this year, that would be helpful. Secondly, on Claus's question around the pyramid reshaping in Denmark, can you give us any feel for the size of the growth headwind in Q1 in Denmark from having those non-productive employees? Lastly, one clarification on the Netcompany-Intrasoft backlog.
In the Q1 release, it says there's about DKK 5.7 billion of backlog expected between 2024 and 2030. In the Q4 report, I think it was DKK 6.1 billion between 2024 and 2029. Wondering if anything there has changed. If no. Thank you.
All right. We'll, we'll take the questions and hopefully we've got them all there, George. Otherwise you need to help us. On the performance of Netcompany-Intrasoft in Q1 and the specific question as to was that growth driven by license revenue as we saw in Q4? The answer to that is no. The top line growth in Netcompany-Intrasoft was based on projects, completion of project deliverables, both within the European Union, within the private sector in Greece, and just generally strong performance and good underlying productivity. The DKK 3.2 million that has been income recognized as license revenue in Q1 is mainly related to Netcompany Core.
Basically, monetization of some of the products that we have been working on, now also in Netcompany Core. In Q2, our expectation is that we see some of those projects under the RRF, and that will most likely have a higher proportion of license revenue. I'll leave it at that. Then maybe on what we see on Netcompany-Intrasoft in general, I'll leave that to André to give a few comments on that.
I think on their operational excellence, I mean, we see a continuous improvement in the way we address projects both in Netcompany Netcompany-Intrasoft but also in common projects, of course, it has a, has an influence. It's very difficult to say exactly how fast we can move Netcompany-Intrasoft into becoming Netcompany in a delivery aspect completely. That's gonna take some time, and we said that all the way through. Of course, in all the things that we do together and also in, in reutilizing some of the platforms that both Netcompany and Netcompany-Intrasoft has is having an effect. I think we'll see also the projects being made under the RRF, more and more common approaches will of course yield a better operational excellence. I think we'll I'll leave it with that.
It's a continuous effort that both companies are really striving to follow and follow up on. We're, I think we are, we're seeing the first results of the aim to do so. There's a lot to be gained there, but it takes time. I'll leave it with that.
On the second question on the impact on the change to the pyramid and rightsizing of that, we're not going to be too specific on that other than it does have an impact and it is having an impact mainly in Denmark. When we gave guidance for 2023 back in the annual report, there was this quote-unquote, "overall impact from remuneration and like impacts of 1.5% point for the group." That is mainly related to impacts in Denmark, and it's mainly related to the first half. That's why the impact is bigger in Q1, and there's than 1.5 flat throughout each of the quarter.
On the Netcompany-Intrasoft backlog, it is developing all the time. We see new deals being signed especially with the European Commission. We also release income from the backlog, so that's the nature of that, George.
Understood that. kind of happening. Thanks and look forward to catching up with you soon.
Bye. Absolutely. See you.
Thank you, George. The next question will be from the line of Austin Rheault from Barclays. Please go ahead. Your line will now be unmuted.
Hi, thanks for taking my questions. Congratulations on the results. First question I have was just on headcount developments for the rest of the year. You still added almost 150 people sequentially in terms of this full-time employee count. Was wondering with sort of the attrition in Denmark, now increased, how you expect that to develop over the coming quarters. Do you still expect this full-time employee number to tick up sequentially for the next quarters? We've of course seen some competitors starting to headcount, to cut some headcounts. I was interested if you could give some color there. The second question I had is just on the depreciation and amortization, which was higher as a consequence of the new Right-of-Use used assets from the new headquarter.
That's of course led to stronger declines below EBITDA. I was wondering if for the rest of the year you could provide some guidance or direction for what D&A should do over the coming quarters as well. Thanks.
Okay, thanks, Austin. Maybe I do the first one, you can do the other, the second question. When it comes to headcount, in Denmark, but in general that's our policy. We're hiring a lot of people, and we're doing it in a very structured way. We know exactly how to educate them and what to use them for, and a lot of them are actually new people coming also out of universities. We'll continue to do that. We have pinpointed exactly what competencies we need in terms of what we have in our pipeline as well. We do that as a continuous effort, and we'll continue to do so.
Of course, we will always look at the pyramid and try to shape it accordingly to to the perfect size. Continued efforts in hiring talent will be done throughout 2023, just as we've seen so far. When it comes to the new headquarters and depreciation-
Yeah.
I'll leave that to you, Thomas.
Thanks for the question, Austin, on D&A, Austin. In Q1, there is a steep tick up in depreciation to the tune of around DKK 15 million from DKK 30-DKK 45. That is mainly related to the cancellation or the termination of the rent agreement at our previous headquarter and cost for reestablishment of that, which is being depreciated in the first and second quarter of 2023. When it comes to the request for a sort of guidance on depreciation and amortization throughout the year, I think that's a good and relevant question, and we will give some more clarity on that in the Capital Markets Day. That's a topic which is well-suited for that.
We'll revert to that, Austin, on on Capital Markets Day. I hope you can wait another three weeks with with those informations.
Sure. Super. Thanks a lot.
Thank you, Austin. The next question will be from the line of Balajee Tirupati from Citi. Please go ahead. Your line now be unmuted.
Hi. Thank you, gentlemen. Balajee Tirupati from Citi. Two questions from my side, if I may. Firstly, if you can comment on how has your demand view evolved over the past three months? Could you also kindly share additional color on the pipeline and client decision cycle in private sector, but also if any evolution has happened in public sector? I have a follow-up question.
Yeah. It's a good question. I think what we're seeing right now is that there's a continued demand for digitization, both in public and private sectors across our markets, but it varies a great deal. There's a lot happening, especially when it comes to introducing new platforms on top of existing ERP or mainframe systems and utilizing even artificial intelligence as a future power of productivity. We are very much involved in those dialogues. Sales cycles are traditionally, both in public and private sector when it comes to these platforms, they are 6, 9, 12 months long and even sometimes longer.
We are very well-positioned, and I think we see some areas in private sector, we are seeing a real nice buildup in pipeline, but they also need to be executed upon it, so to speak, and closed as deals. We're of course working on that. Overall, I have to say demand is, as we used to see, strong. The demand even in markets where financial conditions are somehow more difficult, for instance in the U.K., we still see a strong demand both in public and private sector for digitization. It's just a question of being positioned correctly with those strategic platforms and reutilizing what we've done in Denmark in many of the new markets, and that's where we're focusing.
That's also why I'm really looking forward to the Capital Markets Day, because we will show some really good examples of that, on this, on the Capital Markets Day. Yeah.
thanks for the answer. Follow-up question is on your revenue outlook for 2023. After a relatively stronger first quarter, and hopefully second quarter again should benefit from a softer base comparison.
You are still maintaining the outlook of 8%-10% growth. Could you comment on what underlying expectations factored within top and bottom end of your 2023 outlook?
Great question, Balajee. You know how I'm going to answer it, huh? At this point in time, we take comfort in a strong start to the year. I understand the question in terms of how do we reconcile 13.7% top line growth with the 8%-12%. Of course, that's a question that we get. We'll leave it at this, where we say we're off to a good start to the year. That is comforting. There's still uncertainty in the rest of the year. Of course, as we progress through the year, that level of uncertainty will gradually decline. We still think it's early days to change our expectations.
Of course, it is a much better start to the year than had it been another number we reported. That was a very long no answer, but I'm sure you can appreciate why we say the way we do.
I appreciate that. Thank you.
Thank you, Balajee. The next question will be from the line of Yiwei Zhou from SEB. Please go ahead. Your line will now be unmuted.
Hi, André and Thomas, thank you for taking my question from SEB. I have also 3 questions. I'll do one at a time. Firstly, could you maybe comment a bit on the revenue visibility trend here? I mean, normally you compare to the revenue visibility a year ago. I realized the trend has sort of decelerated a little bit. It was a 9.3% growth, indicating 9.3% growth at the beginning of the year. Now it accelerated to 8.8% at the end of Q1. Is, can I understand this as sort of a softer ordering take during Q1? If this
If I understand correctly, is it mainly driven by the Danish public, private segment, or do we see, do you see sort of softer, contract wins or intake, in some other areas?
The development is mainly driven by the softness we saw in the private sector in Q1 in Denmark. Your assumption there is absolutely correct, Yiwei. What we also then see and why we are comfortable with the full year is our expectation to see certain certain projects and contracts come to close in in Q2, especially within the RRF sphere, which would be with the Netcompany-Intrasoft in increase. There's a little bit of timing in it, and it's mostly related to the little bit of softness in Q1 in the Danish private segment.
Okay. Then it comes to my next question. When do you expect the private, Danish private segment to pick up again? Can you maybe comment a bit about the trend, going into, this quarter, in the second quarter?
We'll refer to refrain from not giving any, specifics on Q2, since we are on the call on Q1. In general, timing is really difficult to predict, but we expect it to be more normal sometime during the year. Of course, we will do everything we can to make that as fast as possible. Sometimes, actually most times, we do need also to have our customers to sign the contract before we start working. We see, as André said.
Yeah
... good pipeline development. We have some really interesting dialogues across industries in the Danish private sector. We'll see on the timing. I'm not gonna give you a specific date, even though you asked for it. I'm sorry.
I also want to follow up the end of the question on the FTE, especially in Denmark. The FTE growth was 13% in Q1 and aware about revenue growth. Maybe just want to challenge a little bit, if I'm allowed. If the activity doesn't pick up in the coming quarters, and how quickly can you adjust your Danish resource to match the demand? I mean, we normally see a sort of big margin impact for the IT service business if the resource cannot meet the demand, the demand rise.
I think on our side, it is, we're not afraid to not be able to hire more resources whenever, activity level increases significantly. The margin drag we see in Q1 is because it takes longer time to adjust downwards than it does to build up in support of increased activity level. We have a strong employee recognition, a strong recognition with the students on various universities. And we continue to see that. And then maybe on the general term, André, on the employee market, we don't see any specific bottlenecks that worry us.
No, I think, the situation is different now than it was just.
Just a year ago, as it's more normalized and churn levels are coming down to normal levels, the heating of the market is definitely different. That goes not only for Denmark but across. As you said, Thomas, it's easier to ramp up. Also, I think over the last 1, 2 years, We're much better at utilizing resources across the group. When we need to spike up on certain projects, we can do it across the group and then add on afterwards. It gives us more flexibility also to accommodate drastic changes and needs for resources in particular areas. Overall, the resource situation is certainly. Well, it's always a battle for the right talent, but it's certainly improved seen from our perspective over the last 1.5 years.
Great. There, thank you. I'll turn back to the queue.
Thank you, Yiwei. For the next question, please state your name and company before asking your question. Your line will now be unmuted.
Hi, this is Aditya Buddhavarapu from Bank of America. Thanks for taking my question. Just a few from my side. Firstly, you talked about some of the RRF projects benefiting Netcompany-Intrasoft in Q2. Can you talk about how that, maybe some of the benefits actually for the rest of the year as well, maybe even in the second half? That's the first question. And then second, at the full year results, you flagged a few drivers which are behind the margin guidance for the year. Could you maybe just talk about some of the phasing of those drivers through the rest of the year in 2Q and again 3Q, 4Q? Working days, salary increases, the investments in the new go-to-market approach, headquarter move in Denmark, which is already done, I guess.
You also have the headquarter costs for Netcompany-Intrasoft. Maybe just how to think about the phasing of some of those drivers through the rest of the year?
Sure. When it comes to the RRF developments in particular of course in Greece, there's no doubt there has been some bottlenecks and it takes time to both tender and win these deals. However, we are very well positioned, and we definitely see a rise in our pipeline when it comes to RRF and also the how concrete these things are. We expect that to go up over the year. Many of these systems have been talked about and designed actually for a long time and now are materializing. That's, that's a positive development. We see, we will see a rise there, and we also see a great combination of Netcompany-Intrasoft, and Netcompany Group platforms and products to be utilized in RRF.
We do have a natural position in that game because we already have about approximately 20% of the market in Greece. Of course we are addressing many of these projects. When it goes for your second question about driving the margin.
The phasing of the impact of the 3.5 percentage point was what I heard you asking about, Aditya. A good part of the margin hit that has to do with remuneration, rightsizing of pyramid structure and the likes, is mainly going to be Q1, Q2, and mainly going to be in Denmark. When it comes to the go to market, so the 50 bips, that's a evenly distributed impact over the year. When it comes to the headquarter, 50 bips in Athens, that is Q1 and Q2 and Q3-ish. More, and of course also Q4, so more or less evenly distributed.
The new headquarter in Copenhagen is from Q2 and onwards, so that's more towards the back end of the year. The working day impact is clearly a second half impact on margin. The salaries have been increased as we normally do by the 1st January, and that means that the average cost per employee will follow the normal pattern and even out as we go through the year in terms of hiring graduates and substituting throughout the pyramid.
Understood. Very clear. Just one follow-up from my side. On the free cash flows benefited, in one queue from better working capital, again, obviously, do we think about some of the moving parts on free cash flow for the rest of the year?
On the moving parts on free cash flow and what we've said in connection with the full year, and which we still reiterate, is that the free cash flow is going to be better in nominal terms for 2023 than it was in 2022. Continued strong focus on working capital. Continued focus on collection. We still have an amount of overdues more than 90 days. It has been halved since last year, but there's still some things to be had there. We can still work with the time it takes for when we do work until we put it through work in progress and collect it in cash. Some opportunities to improve there.
There are a few bips and bops there. I think that's also a topic which is well suited to go in more details with on the Capital Markets Day. We'll be also more specific on that on the 1st June, Aditya.
Perfect. Sorry, one last one from my side actually. Because strong growth in the UK, how much of that is sort of more greenfield wins versus.
Market share gains from some of the other players in that, in that space.
That's all market share gain from competition. It's one of those things where it's more gentle to look at % when you are a small player in the country. Even though that we are now beginning to have a significant amount of people in the UK, 550-ish, we're still a challenger in the UK market. What we can see is that our continued focus on products and platforms, especially within customs, within tax, our solutions within various capabilities that is highly regarded within defense, is really giving us a good name.
That is prompting more business to come through the pipeline that we then execute on. I don't know if you want to add something, André, on the UK.
Yeah. I think, what we see in the UK right now is there's two... As you said, Thomas, there's an industrial domain-specific knowledge that we have in putting systems into place quickly in those complex areas like tax and customs, but also all the public areas. We see in government in the UK that company is now associated with being able to deliver at time, budget, and within the right quality. We will talk about that at the Capital Markets Day. We'll also see how we can reutilize many of the technical components and platforms in order to get productivity up and being able to deliver even more with the same resources.
That's a continued effort that we're doing across markets, and I'm really gonna look forward to show some of that at the Capital Markets Day in three weeks.
Great. Very clear. Thank you.
Thank you. As a reminder, press five star to ask a question. We have a brief pause while the questions are being registered. As there are no further questions, I will hand it back to the speakers for any closing remarks.
Thank you all for joining in today, and I wish you a very good day. Thank you.
Thank you.