Thank you so much, welcome all of you to this webcast where we will present the result for Q1 for AFRY. We are sorry about the delay of five minutes, I hope we are now up and running and that you all hear me well, that you can see the slides. Moving into the quarterly results of Q1, immediately to slide number two, page number two, where we show the overall result for the Q1. As we have in the headline, we have seen a stable result during Q1. The combined company, which is the interesting numbers, where we could see that the net sales amounted to SEK 5.2 billion and the EBITDA SEK 474 million corresponding to EBITDA margin of 9%.
The top line we're shrinking minus 3.1%. We have highlighted three main issues explaining why we had a negative growth. That was, number one, effect from the stop in automotive supply chain during end of the quarter. We also have an ongoing repositioning of the Energy Division, actually to reposition Energy in those healthy markets and segments that we want to operate in. Here we have taken a kind of top-line hit, but actually the underlying performance is improving. On top of that, we had a big EPC project in Philippines that was closed down or finalized, and that also, in the comparable number, affected Q1. That's the major reason for the negative minus 3.1. If you look on the EBITDA, SEK 474 million and the 9% was actually solid from our side.
You could always wish for more, but also including some effects in especially Industrial & Digital Solutions end of the quarter. I think the 9% shows a solid, stable performance in the overall quarter. We had a solid cash flow development. Juuso, our CFO, will comment more on that. Of course, then we took a lot of measures to mitigate the effects from the corona crisis that we could see end of the quarter. Of course, we will now feel them more in Q2. Thank you so much, and welcome all of you to this webcast where we will present the result for Q1 for AFRY.
We are sorry about the delay of five minutes, I hope we are now up and running and that you all hear me well, and that you can see the slides. Moving into the quarterly results of Q1, immediately to slide number two, page number two, where we show the overall result for the Q1. As we have in the headline, we have seen a stable result during Q1. The combined company, which is the interesting numbers, where we could see that the net sales amounted to SEK 5.2 billion and the EBITDA SEK 474 million corresponding to EBITDA margin of 9%. The top line we're shrinking -3.1%, we have highlighted three main issues explaining why we had a negative growth. That was, number one, effect from the stop in automotive supply chain during end of the quarter.
We also have an ongoing repositioning of the Energy Division, actually to reposition Energy in those healthy markets and segments that we want to operate in. Here we have taken a kind of top-line hit, but actually the underlying performance is improving. On top of that, we had a big EPC project in Philippines that was closed down or finalized, and that also, in the comparable number, affected Q1. That's the major reason for the negative minus 3.1. If you look on the EBITDA, SEK 474 million and the 9% was actually solid from our side. You could always wish for more, but also including some effects in especially Industrial & Digital Solutions end of the quarter. I think the 9% shows a solid, stable performance in the overall quarter. We had a solid cash flow development, and Juuso, our CFO, will comment more on that.
Of course, then we took a lot of measures to mitigate the effects from the COVID-19 crisis that we could see at end of the quarter, but of course, we will now feel them more in Q2, and we have taken a lot of measures to protect ourselves and make sure that we have a solid operation also in the Q2. All over, a solid Q1. Moving into the next slide, these are some of the things that we have done. Of course, you could say that basically from one week to the other, we were going from the way we worked before to, how to say, distance work using a lot of digital platforms for close to 17,000 employees across the world, and it has worked tremendously good.
I'm deeply impressed in the way we have been able to manage operations across our company. That has worked very well, and it shows that we have a high level of IT maturity in the company. We have now taken actions across different countries, especially in Sweden, using short-term work allowances, and we have now roughly 1,600 employees on different kind of short-term work allowance. Most of them centered around automotive, because I guess you all know that on one Friday end of March, all three big clients in Sweden decided to stop operation due to interruption in the supply chain, and actually, then we were really affected from that. We have also taken actions in staff functions across the company to take out costs and make sure that we're moving into Q2 with as good cost structure as possible.
Today, we have roughly 1,600 employees on short-term work allowance. We have, of course, reduced cost-cutting across the company. These are short-term savings, but we are also, of course, increasing the ambitions down the road in our ongoing cost program of SEK 120 million that we announced in the Q4 that will help us also to ensure that we get sustainable savings in our company when we are coming to after the summer, for example. We are continuing with the important investment program, but we have changed a bit in how we integrate that in order to make it more efficient, but we are still making sure that we get these essential IT platforms in place. As you all know, we have done the board proposing a waiver of the dividend, and we have also renewed the credit facilities.
I think just within a few weeks, we took a lot of actions that is supporting our financial performance in Q1, but also moving into the Q2 . Juuso, you will come back to that, but of course, it is a good thing these days to have a big part of the cost structure being flexible, and here you can see just a rough overview that a lot of our cost is, of course, connected to personal costs. If you compare that to an industrial company where you maybe have 70% fixed cost, we have 70% of our cost base is then, in different ways, variable. Of course, now we are taking actions on the billable consultant side when they are affected from, for example, in automotive.
On top of that, we are now using all the tools we can in different countries to take out cost, being prepared for a tougher market climate into Q2. If you look on the overall market, I would say that we started up the year in good pace. January and February, moving as we expected in a good pace, and then of course, we saw the effects from the COVID-19 pandemic hitting us or affecting us in the end of the quarter. If you look on the infrastructure division with a lot of public business, we're seeing that the market is in general stable. For sure there are areas like private buildings where we can see some effects, but if you look on the overall volume, especially if you look on the Nordic, but also including Switzerland, there's a big appetite to continue projects.
It's a good place to be. Industrial & Digital Solutions, for sure, that's where we took the major hit in the end of the quarter. 10% of our total revenue, not more, but still 10% is geared toward automotive industry. Here we have three of our big clients in Sweden then that actually stopped operations end of the quarter. They are now ramping up, but it's a slightly different volume than before, and we have then taken all the necessary actions to protect us. At the same time, we have seen in Industrial & Digital Solutions, food and pharma, and defense industry doing very well. We also have growing business areas within the industry part. Of course, it's a bit overshadowed right now from automotive and the related supply chain. Process Industries, basically no impact on the crisis so far.
Good performance, good operations across all the countries we're operating in. I would say also the Energy Division, where we actually can see that the effects from the repositioning is starting to be seen, and I think the ongoing work is going even better than we hoped. Of course, we have seen some interruptions with sites that had to close down for a couple of weeks due to the quarantine rules. In general, doing very well. In Management Consulting Division, we can see the ongoing transition in energy and bio industry also giving a good market also in the Management Consulting Division. Of course, when we are now looking into Q2, we can see that we will have negative effects of the COVID-19.
Especially we can see it in the automotive industry, because that's where we have seen big interruption in operations end of Q1, but also into the first part of Q2. We need to remember that AFRY is exposed to a quite broad number of segments, and that has given us quite a good stability in crisis before, and we can see the same thing right now. 30% public business, 70% private, and also to different industrial segments. Of course, the 10% in automotive have been weak for a few weeks here in end of the quarter, beginning of Q2. In general, a good though portfolio. We are signing a lot of good interesting assignments, and I have to say that we have had, I would say in general, at the same level of large interesting projects signed during the Q1 as ever before.
I wouldn't say that we have seen any kind of project that has not been signed due to the COVID-19 crisis. Of course, there are some delays in decisions, but in general, especially on the public sector pulp and paper, we have seen a good order intake during the quarter. I will leave it over to Juuso, our CFO, who is sitting in Finland, who will comment a bit on growth impacted by the challenging market conditions and the growth numbers. Juuso, would you like to comment the slide?
Thank you, Jonas. Now we are on slide eight, growth impacted by challenging market conditions. Greetings from cloudy Helsinki. We have all learned to work from distance across the group. What has happened, basically, you can see that the total growth in combined operations is -3.1%. That is obviously not optimal, when we are thinking about where it is coming from and how it is coming from, we have positive growth in three out of our five divisions. We have two components that we have already known earlier. If you take, for example, our Q4 release you have seen there the comments related to the repositioning of Energy and the EPC project volume. We have had one major EPC project in Southeastern Asia that was in the heavy implementation phase, and now it has been materially completed.
There we have a big delta between the materials and sub-consulting delivered to client compared to previous year. The other part is that we have divested a unit within the Energy fully according to our plan within the repositioning program. These have combined us to have a reduction in volumes in any case. On top of that one, we have the automotive that has been clearly a difficult segment, but at the same time, the Q1 2019 was still a difficult benchmark as you may remember that the automotive segment issues that we have been repeating in the couple of past quarters started mainly in Q2 previous year in 2019. Q1 2019 has still been a tough comparable period.
If we look all in all the growth and we think about it, we have lost some SEK 200 million of volume. At the same time, if we take the divestments and the materials and sub-consulting components in total, this SEK 230 million is the total number, not only the EPC project impact. We can actually say that the underlying growth of our own engineers has been there. We have been able to sell more of our own people compared to sub-consulting and material compared to earlier. One positive component on that one is pricing. Our average prices have been having a positive swing upwards, which I'm extremely happy to report about. The counterpart of that one is always the salary inflation. Going to next page, on page number nine, improved profitability.
When we see the combined operations, it is absolutely positive that our EBITDA margin is up from 8.6% to 9%. Despite the emerging global crisis that had an impact on us in certain segments, especially during the last two weeks of March, we have been able to improve the relative margin, and we have been able to take a step towards our long-term target of 10%. If we then see where we have been performing especially well, we have Process Industries is taking a positive result, growing result with healthy growth numbers also in the top line. Energy has been progressing in the transformation and repositioning quicker than we have anticipated. Richard Pinnock, the head of division, has been taking really good measures and has been able to move forward to have a solid, stable portfolio of energy offering. Our synergy program has been from the previous year.
Obviously, we have gained the savings. We are happy to see that those ones are materialized at the bottom line, and we have taken some general cost savings to cover the drop in volume already in March. Material part of the measures Jonas mentioned are having an impact in Q2. If we think about the negatives, we are talking about especially challenging situation within automotive, but I will come a bit more onto the details when we go to the divisional slides. Going forward to slide number 10, we can see the profitability per division and a bit of the bridge. We can see that also from profit perspective, we have Process Industries and Energy that are improving, in all measures you can imagine what comes to the bottom line.
Our difficulties and the most difficult segment has been Industrial & Digital Solutions, where basically the automotive demand sharply declined, especially during March. Once again, facing also the difficult comparables of Q1 2019. Infrastructure, we had an old case that we lost in court, which was a surprise to ourselves, that has impacted as a SEK 12 million loss, both from top line and bottom line. Thus infrastructure is behind from previous year. At the same time in the commercial building segment, especially in the last week of March, we started to see some impact from COVID-19 also. If we take calendar impact, we have only minor effects, two hours more compared to 2019 in our average portfolio. Finally, if we see the common group, it is SEK 34 million better than in previous year.
In there you see the proof of the cutting and the synergy program that we have been implementing. Obviously, some parts of those ones are also visible in the divisions, but I would say that we have been quite successful on touching our cost structure, which of course we will continue doing going in the future. Jumping into slide number 11. Growth and profitability. Here we can see the growth numbers adjusted with calendar effects and now referring to the combined operation numbers. Infra, 0.8 percentage points. Not optimal if we adjust for the loss of SEK 12 million, that's roughly 0.6 percentage points on top of that one.
We are in 1.4% corner, which is still below our ambitions and something that obviously when we raise out from the COVID-19, we need to have a careful eye on that we can leverage the potential growth in the market also. Industrial & Digital Solutions, while we can see that it's 8.5% down from growth perspective, it is good to understand that they are excluding automotive. We have solid growth numbers in other segments, and this is something that as a total operating portfolio view, we are keen to optimize and obviously then catch up with the automotive. Process Industries, solid growth going forward. Underlying market is good. Like with any industrial market, it is difficult to assess how the future looks like coming into Q2 and Q3. At the same time, we have a solid order stock and so far good outlook.
Energy driven basically by the repositioning that was explained earlier and Management Consulting taking new steps into markets where especially former ÅF has been strong in Sweden and we would expect to see growth. Our difficulties coming from the asset transaction related success fees that basically dried totally up in March when the crisis broke out and then some of the supporting services within that one. For example, due diligence have suffered a bit. In the longer term, I would say that the outlook is good and this is the place that has a short order stock, takes a crisis quickly and then recovers also quickly. The more turmoil you have in the market, the more there is also need for high-end, high-quality services like our Management Consulting is offering.
All in all, I would say that we have been able to fare in a stable environment and taking the measures as needed, and we are fully prepared for the Q2, which will be difficult based on all that we know. Like you have seen 1,600 employees on short-term work allowances and similar. It indicates that Q2 will be still a turmoil. Like you saw in our cost structure, we have all the means to take on the crisis and to take temporary measures to ensure that we can protect both our profitability and balance sheet. If we go to slide 12 on the net debt development, we have a very strong liquidity.
We had a solid operating cash flow, which pushes the adjusted net debt to EBITDA to 2.3, which basically means that excluding items affecting comparability and acquisitions and divestments pro forma on rolling 12 months. We are at 2.3, which is a fairly okay-ish number below our financial target. At the same time, what is really good and solid is that our clients are paying their invoices. We see and continue to see the solid cash inflow and that's also within our type of business where the cash conversion is fairly stable and high, important for our liquidity. If we see the net debt, it was reduced SEK 67 million. We have the operating cash flow. We had investments and acquisition related items that were SEK 106 million negative. Other impact of non-cash related items, roughly SEK 76 million.
These are such as pension liabilities, which are highly technical balance sheet components, not including cash outflow. Part of our loan structure is also in Euro terms, which when converted into SEK, means that the value of the debt increases. It's important to remember that at the same time, we have a material position in equity in Euro terms, which means that our gearings under equity component is getting a positive spin out from that one. The value of our equity has also increased. Finally, our liquidity. We have some SEK 900 million of cash at hand. At the same time during March, we had renewed our revolving credit facility, adding from SEK 1 billion to SEK 1.5 billion.
At the same time, taking our only short-term loan that we have in our balance sheet is a bond maturing in May this year, and we have secured also repayment of that one with a committed term loan from our core banks of half a billion SEK. In total, with these measures, we have also increased our liquidity, and prepared to take any kind of short-term term loan that is available. Thus, our total available funding is almost SEK 4.6 billion, almost SEK 4.7 billion at the moment. That is really positive. On top of that one, our board of directors evaluated the situation and felt that it is important to keep the company balance sheet, in a position that we can also react quickly no matter what happens, but also that we can accelerate our own needs and our own opportunity when the turmoil is over.
The dividend has been vaguely proposed not to pay. Obviously, we have the annual general meeting taking place couple of hours from now. This is the proposal from board of directors. This is about the financials. Moving to slide number 13, handing over back to you, Jonas.
Thanks a lot, Juuso, for that run through the financial situation. I have to say that I think in the current situation we are with a extremely good management team, I have to say, where part of the management team is coming from Pöyry, and you had your challenging times, Juuso, going through the turnaround, looking on the cost structure. We have Robert Larsson coming in from ABB that has been faced with a lot of challenges. I have to say myself then, being in Sandvik for the last 10 years, started with the financial crisis. I think we're well equipped for handling the crisis situation right now. I had a question from an investor: do you feel that it's a good experience to have that with you? I said yes.
Now looking what we are doing, and we are trying to describe that with these three ways. Obviously, we have been reacting and adjusting when this crisis started to affect us in the Q1. Of course then, everything from protecting our employees, making sure that we could quickly go from working at the office to distance work using all the digital platforms we can. At the same time, very quickly reacting on cost to make sure that we could protect Q1 and also moving into the Q2. Of course, I would say that we had a lot of gain from the ongoing kind of structured way we had on working with cost also from 2019. Now moving into Q2 and also looking into Q3, it is clear that the market is much more uncertain.
We see effects already in automotive industry. For sure, we are taking a lot of short-term measures to protect the Q2, where we will see effect from the crisis. We will lead both on the cost in general, but also to see how can we make it more flexible. I think we will also use this crisis to rethink and use it in a way to maybe go faster into the structure that we were aiming at, the ÅF Pöyry, the AFRY structure. We are also, of course, looking on the strategic plan, where to play and how to win. Of course, now we have a fast-forward repositioning in automotive industry, for example, but we see also other opportunities. Depending on, of course, how this crisis will play out, we will move into end of the year.
As Juuso said, we will do everything we can from leveraging from a leaner structure and also our strong position in some segments and to be forward-leaning when the market is becoming more stabilized. Of course, we are a company looking for growth, potential M&As, to build our brand and attract the best people to our company. To execute the strategy, and I'm a firm believer that the need for sustainable solutions, digital new business model will maybe be even more relevant when the immediate crisis is over. I think our company is well positioned. We will maneuver this crisis as best as ever possible, and my belief is that we will come out stronger. Of course, now we are looking at different scenarios because nobody really knows how it will play out.
We are getting ourselves prepared by doing everything we can short term, protect cost, balance sheet, as Juuso showed, to be ready then to accelerate when we see a stabilization in the market. With that, I will stay for now, and I will leave it back to the operator, and I will open over, and we will now start the Q&A, and I will hand over to operator John.
Yes, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, just press star and one on your telephone keypad and wait for your name to be announced. Once again, star and one if you wish to ask a question. We have a question that came through, sir. Your first question comes from the line of Johan Dahl. Your line is now open. Please go ahead. Johan, your line is now open. You may go ahead and ask your question.
Thank you so much. I was muted here. I was just wondering where we stand right now at this point in time. Can you see anything regarding a potential trough in your delivery towards your clients? Can you see it going forward or right now, or is there anything you can share with us here with regards to restart of project, et cetera?
Well, I think, Johan, in general, we have seen that except the automotive industry, where obviously three big clients in Sweden on the same day, we call it a bit the Black Friday, where they all closed down operations. I would say that most of our other projects have been continuing with some interruptions, Johan, due to the quarantine. We have had some sites globally that have been closing down. I would say plus, minus, in general, it continues across right now. We don't have any big interruptions in other segments except automotive industry right now.
I just thought there had been some communication out with regards to your clients in the whole vehicle, both commercial and automotive, with regards to restarts. Can you see forward here when you think things will normalize, sir?
Oh, okay. Of course, we are also in a close dialogue, and they are step-by-step restarting their, I would say, manufacturing operation. It's more a question then, Johan, will they restart the volume of R&D projects to the same level as they had before? That's more a question, which we are following closely. I think Martin Lundstedt that they've been clearly saying that let's see what kind of demand situation we will have. He continues to say that it will go from a supply challenge to demand challenge. We know that they are step by step now starting up, and we have very close dialogues with them. How can we also support the automotive clients to become more flexible, agile, and faster on the projects that we have been working on?
All right. Could you just help us also pencil in the sort of financial effects of the very big measures you're taking right now, for example, on the furloughs? Are those consultants billable at all if you look on things right now? Secondly, what sort of short-term work allowances that you referred to, how much can that amount to sort of in the very short term?
I will start and leave it then over to you to talk a bit. Of course, the 1,600 rough, it's a combination, Johan, of billable consultants that we are then using all these Short-term Work Allowances we can do to actually try to go with our clients. That's one thing, but on top of that, we have taken extensive measures then to also have people on staff functions and others on different kind of short term because they're actually ramping down a lot of activities in the quarter then basically to protect the top line drop we have. Juuso, I don't know if you want to talk a bit more about the effects short term.
Yes. Basically we have, as it is 1,600 employees, especially in automotive, then also support function and in a minor component, some other segments. This is not a 100% layoff, basically we are talking about that most of these employees are working at a certain percentage level. There's still billable work, we have been able to push quite many to other assignments and so on. The impact would not be if you just take your calculator, you take 1,600 times three months times annual sales, that would be the loss. It is far less than that one. We have not disclosed the exact number, these people are still material working also.
At the same time, we have put them, what you say in Sweden, temporary layoff position, where you can decide now whether they are being working one, two, three or four days a week. Obviously, we have similar structures in other countries. What we can say is that many of these ones are working, and then obviously when we take the staff functions, we are happy to say that that is a direct bottom-line savings. Obviously, we are also losing the top line from the billable people. In total, the impact will be material on our Q2 numbers both in the top line and in the bottom line.
The beauty of our business is, and then the positive nature of this crisis that we are all in the same boat is that there are pretty well tools available to make these type of temporary adaptation measures to be as little painful as they can be. On top of that one, we have the whole indirect spending category. You can imagine that nobody has been traveling since mid-March anywhere. This type of cost savings have been referring as more or less to auto-correction. When your top line shrinks and then you have these restrictions in place, certain spendings simply go away. That also factors into profitability in the future.
Okay, thanks.
Thanks, Johan.
Thank you. Once again, for those who want to ask a question, just press star and one on your telephone keypad. Once again, star and one if you wish to ask a question. We have another question, and this comes from the line of Erik Elander. Your line is now open. Please go ahead.
Yes. Hello. I was wondering, the infrastructure market seems to be very good, and you write this in your report as well. I obviously heard it from other sources as well. Despite this, you have grown organically by around 1%- 0% the past quarters, and margins have been declining year-over-year as well, and net recruitment has been negative. What's behind this?
Hello, speaker. I think the line of Erik got disconnected.
Did we lose Jonas? Jonas is about to come back in. If we, Erik, wait and let Jonas answer first. If you can repeat the question once Jonas is back.
Yeah. Okay.
Let's wait until we hear from Jonas.
Okay, sure. Yeah. I repeat the question then.
Yeah. let Jonas is in.
Because I didn't hear anything of the answer.
Yeah, because they dropped out. I just got a message.
Oh, okay. Yeah.
They are calling in back. There has happened some kind of technical error.
All right. Okay, I go then again.
Yeah. I'll confirm immediately once Jonas is back in, so that you can ask the question again. I think they didn't even hear it.
Okay. Jonas is not on the line right now?
Yeah, they dropped out from the line.
Oh.
Jonas and the team is on the drop out of the line. Apparently, I don't know if it's between Nokia and Ericsson, but Finland is up.
It's just given mistake now.
No, everyone else on the line can hear.
Okay.
Jonas, are you there? Okay, not yet. I am deeply apologizing these kind of technical issues I think we have had today. A couple of too many. We will sort this one out with the service provider also.
Yeah. No worries. Bad stuff happens even to the best people.
Yeah, that's especially when it comes to IT. Sometimes things are a bit volatile. Still not there. Okay, let's talk about the question. Jonas will join when they get the technicalities up. You are asking why infra is not growing basically more than the 1%. Of course, when we take now this Q1 number, we need to put the SEK 12 million check in the revenue that would improve it a bit. We would be around 1.4%, 1.5% growth. As you note, there appear to be more positive growth than if you take the peer group. I can say that we have two impacts in there, the other one we have been referring earlier still in last year, that we had some difficulties in our Danish operations. At the same time, we have been evaluating some parts of our Central European operations.
We can say that kind of the core of the core in our infra, which is especially Sweden, Norway, and Finland, we are doing really well. Other parts of the portfolio we are assessing continuously and first ensuring that we are on par with the performance that we would like to see. That's definitely one component in there. If you would go deeper into the numbers, you would see that we are maybe losing a bit more on the sub-consulting and material part on the volume side than in our own employee contribution. Now all of this one you need to also put into the context that there's two underlying factors. You can take the former Pöyry factor.
If you go back to the Infrastructure Division numbers in the former Pöyry or then regional operations like they were called at some point of time, that was below the portfolio business. Obviously we did not stop on trying to make them on the portfolio after the merger. Then there's the acquisitions in Denmark that former OAS made that we have been working on those ones to make them to be on the level they would need to be. That in a nutshell the infra.
Okay.
Infra part.
What I think here is that despite writing that the market is good in infrastructure, the net recruitment is negative, i.e. quarter-over-quarter you decline in terms of number of people. You're not actually then recruiting into the strong demand that you referred to. Why is that?
You are jumping to conclusions because the portfolio is consisting of various different markets and various different places. Actually where we see the strong demand and where we are performing well, we are net growing, and we are growing in a quite positive manner. At the same time, the places where we are not fully happy, we are stable or actually shrinking a bit, and that in net produces the lower growth numbers in total that we see at the moment. We are not losing in the recruitment market in the hot places, which is important for us that we are not losing there either. At the same time, our portfolio is not in all places as solid as we would like to see it. In those places, we need to take actions, and we need to be able to react on that part.
Okay. Then a second question regarding remote work. It's obviously impossible to say how large part of a consultant's assignment that they can do remotely, but which one is most or less negatively impacted by the fact that you cannot meet the clients at the moment? What parts of the business in terms of business areas is most affected by the fact that you cannot meet other employees.
Basically it is not maybe a segment question, it is rather like a project life cycle question. That in the early phases of a project life cycle, when we are talking about consulting, when we are talking about basic engineering, detailed engineering these type of assignments, it is easy to work from wherever you are. The biggest issues are coming from the heavy, big information models that you need to be running, and then the limitation normally is your home broadband. To make sure that our people can work with the heavy design softwares, we have basically made good type of arrangements in our offices, putting computers away from each other and making sure that we have in a way safe spaces to work with when your bandwidth from home is not enough, for example.
This is something that is very easy to do remotely, no matter where you are. If you go to the parts of the offering that are more difficult to work remotely, you see, for example, the automotive part and the professional services part of that one. When you are actually in the client site, working in a client factory, for example, as a mechanical engineer or other engineer. In those places when the facility or industrial facility is not working, then obviously our guys can't work either, and this is normally work that you can't do offsite. The third component that is impacted is on the construction sites. If you stop a construction site, then obviously our guys who are in the site supervision or the CM part of the construction site, those ones also drop to be idle.
It depends rather on the life cycle of the project than the segment. That is how well you can work from distance. Now Jonas is back.
Yeah. Sorry about that. We try to get in. Some technical problems. Maybe sake of time, Juuso, if there's any questions that was directed to me that I would be happy to answer. I know that you were out for a while. Sorry about that.
Quick recap. The questions were infra growth. I explained on the situation in Denmark and how we are stabilizing the Pöyry part of the infra that was below portfolio profitability. Those are mainly explaining the infra growth not being as high as it could be, but at the same time in our core market, Norway, Finland, Sweden, we are able to grow. We are not losing in the recruitment game. The other part was working remotely question. Those were Erik's questions. Do you have, Erik, further questions?
No, actually. Just to clarify the second question there is that the remote part of your consultants working not from the office but from home is that it is not the big issue going forward?
For you, is that correct?
That's correct.
No. That's absolutely correct.
It is correct. I would say that today, we are surprised how quickly we could start operating from home and from different kind of environments. I think we have very high performance in that. Just in Sweden, I would say large majority of all our work is based from homework, so it has not affected us at all. It has been very positive.
Excellent. Thank you very much, both of you.
Thank you.
Talk to you later.
Thank you. Your next question comes from the line of Dan Johansson. Your line is now open. Please go ahead.
Thank you. Good afternoon. A few questions from my side as well. I'll start with the first one. You mentioned price increases in your presentation. Could you say something about the magnitude? Is it perhaps in line with the wage inflation you're seeing, or is it even above that? Thanks.
Yeah, I will leave that question to you, Juuso. If you take the pricing question?
Yes. Basically, when we are talking about pricing, first we need to remember that average price is coming from our geographical portfolio. It's coming from FX component, it's coming from the seniority structure. The first answer is that as a combination of all of those ones, we see a very positive impact on the average fees. The second part of that one is that, yes, we have a salary inflation, and that salary inflation is also driven by two different factors. There's the seniority structure or the underlying age pyramid, actually. If you hire more seniors than juniors, your average fee, but also your average salary goes up. You have the normal inflation part, annual adjustments on the salary. Those ones, we have been fairly good to balance in a manner that we are able to recruit and keep the attrition in order.
As a result of those ones, you actually see that our underlying EBIT margin is slightly improving. We have gone from 8.6%- 9%. It's not only a question of salary inflation and increase in prices. There are also other components impacting. In a nutshell, positive price increases and slightly lower salary inflation than the prices.
Okay, perfect. Thanks. Second question. In terms of revenues from your private clients, are you seeing already now increased willingness to invest and perhaps start up projects a bit quicker, for example, within infrastructure? Could you give some flavor on that?
I would say that we see quicker maybe from the immediate start of the COVID-19 crisis, feels like long time back, but actually only a few weeks back. We could for sure see some clients are now interested on seeing how can we recover some of the projects that took a stop immediately. From that sense, I think more and more clients are starting to maneuver in a post-immediate COVID-19 crisis situation. On that question, I would say yes.
Okay, thanks. The last question from my side. You seem to have a quite solid turnaround here in Energy. Are you satisfied with the current structure you have with the business, or are you seeing some further fine-tuning ahead there in the coming quarters? Thanks.
We will see some fine-tuning ongoing, and I think Richard Pinnock and the team, they are executing in a very good way the strategy that we laid out and discussed also in the board. We have done some divestments, and now it will be continuous fine-tuning in the coming quarter. They are extremely motivated, and I'm so happy that we could see already the financial effects in the quarter from their repositioning. It fuels a lot of energy into the Energy Division. There will be continuous fine-tuning to find those growth pockets, those regions where we have a solid position.
I feel extremely proud and happy that after a few years, actually, where we have been struggling on the OS structure, if you remember, to find a strong position in Energy, that the combined company now, AFRY and Energy, we have a solid plan moving down the road, where we also need to maneuver in a potentially also more There will be corona effects also into that. So far, so good in the execution of a very solid strategy.
Okay, sounds good. That was it for me.
Thank you.
Thank you.
Thank you. Once again, for those who want to ask a question, just press star and one on your telephone keypad. We have a follow-up question from Johan Dahl. Your line is now open. Please go ahead.
Thanks. I was just wondering, at what stage do you envisage that this current pandemic will impact the structure of the industry? I guess some of your smaller competitors would have brutal problems. Are we there already, or does it have to be more extended, this pandemic, for that to have effect?
It's a good question, Johan. I think what we are doing now is to spend a lot of time with our clients because, of course, we want them to feel that we are a company that they can trust, that have a solid financial situation. We are willing to follow them through a crisis situation like now and become even stronger afterwards. Of course, we will keep a good eye on structural changes in the industry environment. For you, Johan, I'm not sure that we are there yet. Because obviously, all companies are using everything they can to protect themselves. We believe that it will be a partly different structure after the crisis also. I'm not sure that we are there yet, Johan, but for sure we are keeping a good eye on that.
We see some very interesting growth pockets as we have seen before, too. Food and pharma, defense industry, the overall digitalization. Of course, we want to be a strong partner also in automotive. Let's see. We are keeping a good eye on it, Johan, that I can promise you.
Maybe to add on that one, that basically if you take the industry in whole, also other companies, whether you are big or small, have the access to similar kind of state reliefs as everyone. If you think about Sweden or Nordics, there are quite okay measures ongoing, maybe excluding Finland. What the smaller ones are lacking then is most likely the access to funding that can alter in the short to midterm things. We, as a big player, we have far better access to any kind of funding than the smaller ones. That is something that we may see going forward as impacting the industrial structures, but nobody knows.
That's good. Sounds good. Thanks.
Thank you. We have another follow-up question from Erik Elander. Your line is now open. Please go ahead.
Yes. It's a lot of talk about the public sector carrying the growth torch, so to speak, when the rest of the economy is slowing down due to the virus situation, and especially considering the strong public finances of the Nordic markets as well. Have we actually seen, or have you actually seen a stronger order intake from the public sector or is still this just rumors so far?
No, I think, Erik, it has not been that long where we have been in this corona crisis situation. I think we have seen a strong public sector driven from the demand also went into this period, and it has continued. I think besides the fact that we have countries with good balance sheet in the Nordic, there is a strong need of underlying infrastructure projects. Like in Sweden, there's a lot of ongoing things. I think it has continued on a strong level in all countries, I would say. I think right now it is on a high pace driven from the underlying demand in general. That's what we can see right now.
Then, Erik, you need to put it into context that when you are talking about public sector procurement, you have the legislation in there that has not been overturned and public sector will not materially bypass those processes. We have been now, depending how you measure six to eight weeks into the crisis. Public sector's ability to materially change the course quickly is not that great, especially when we talk about big infra projects and those ones. Then the second step is that the high ambition is to improve the employment situation by kicking off big projects. You have a limited number of projects that you can kick off very quickly, because to have the big employment impact, you need to start construction. Starting construction means that you need to have some part of the design already made.
Yeah.
that puts certain type of a bottleneck on.
Yeah
kicking off infra projects.
I would even add to that also that the whole infrastructure environment was going on a quite high pace. Not that it cannot go up further, but I think in general, we will not expect big increases. It is a very solid and strong market, that's for sure.
Okay. Thank you very much to both of you, Jonas and Juuso.
Thank you, Erik.
Thank you. No further questions have came through at this time. Please continue.
I again want to apologize for the interruption we had. It's a bit interesting to talk about a company that has a high level of digitalization capability when we have some challenges to handle the phone conference. We need to talk of our solution provider in that effect. To take that aside, I would say that Q1 was stable, and the activities that we have taken in Q1 fuels us into Q2. There's a tremendous amount of energy and good mood in the company, and I'm so happy with the acquisition of Pöyry, that we run together AFRY, because we are much stronger in this crisis situation than we would have been as two different companies a year back.
The fact that we could take out the cost last year, that we had a higher run rate on the synergy cost that we came in this year with some challenges before. On the other hand, a lot of good things. The repositioning of Energy, the fact that we are implementing strong digital platforms, ERP system, that in the core of the core of AFRY, we have sustainable solutions, strong digital capability, where we believe that the demand will even be stronger. For sure, challenges in the short term, automotive, but we feel extremely energized to go through this crisis and come out as an even stronger company. That's for sure. Thank you all for listening, and we wish you a good, safe, healthy day. Thank you here from Stockholm.