Ladies and gentlemen, thank you for standing by, and welcome to the Q4 report for 2019. During the call, all participants will be on a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question during this time, you will need to press star one on your telephone keypad and wait for your name to be announced. I must advise you that the call is being recorded today, Friday, February 7th, 2020. I shall now hand over to your speaker for today, Jonas Gustavsson. Please go ahead.
Thank you, and good morning to all of you. This is Jonas Gustavsson speaking. I'm sitting here in Stockholm together with Juuso Pajunen, our CFO, and we will take you through this presentation, covering 2019, and of course, Quarter Four. Thank you again for calling into this presentation. Let's start off with the first slide, which is basically an overview of how we ended up in the quarter, Quarter Four, and also the full year. As you can see now for Quarter Four, the net sales amounted to just about SEK 5.4 billion, which was a decline compared to last year. If you look at the combined operation then, ÅF and Pöyry, with 2.9% minus. I will get back to that. We are very happy that we have been able to improve the EBITDA margin from 8.8% to 9.5%, ending up at SEK 560 million.
Just looking on the full year, we are happy that we have been growing with 5.3% the full year 2019, and if you use the full ÅF Pöyry as one company compared to 2018, and then also improve the EBITDA in absolute numbers at 5.4%, and we have kept the EBITDA margin stable. I would say that we are ending 2019 with a strong operation, and then, of course, we will get back to one segment that has been lower during Quarter Four. Looking on the general market, it's been stable in most segments. What sticks out is automotive, and I would say connected manufacturing industries. Here we have seen a decline during the year. However, we have seen during end of Quarter Four, a stabilization if you look on a sequential development. If you look year on year, Quarter Four, automotive has been going down.
We are very happy with cost synergies, and as you know, we have then delivered SEK 218 million run rate cost savings, compared then to the target we had at SEK 180 million, and we can now see these are impacting positively Quarter Four, supporting the margin. We are now extending this program into 2020. I will get back to that with another SEK 120 million. This will also support us during 2020, and at the same time, we have also now finalized the analysis of the repositioning program in Energy, and this will have a negative impact of SEK 105 million that we have done already guided for in conjunction with the Quarter Three presentation, where we gave an interval, and now we have finalized that, and it's SEK 105 million.
Looking on the next slide, which if you would look at the reported numbers, so to say, of course, it's been an interesting, thrilling year for us because we did the acquisition of Pöyry, meaning that the reported numbers, we have a 37% growth. If you look on the full year, it's actually up to 41% growth. Of course, then a big change on the EBITDA margin. I would say that the Pöyry acquisition as such has proven to be as good or even better as we planned for when we started to look at that mid-year 2018. We are very happy with that. Moving to the next slide. Market. I would say in general, most of the markets and segments in our core markets are stable. If you look on infrastructure also, I would say most markets and segments stable and good.
We have seen some delays in some transportation projects. I wouldn't say that's a market trend. It's more based on where we have our business. In general, Infra continues to be a solid and good market. In Industry and Digital, that's where we have seen the decline over the year, and that's very much related to the automotive segment and the connected manufacturing structure. This we have been seeing declining over the years, so we have been mitigating that to support the margin, and what is good now, I would say, is that we see more a stabilized trend by end of Quarter Four. Still, the comparable number down to last year is much lower. We can see some very good segments in the industry. For example, Food and Pharma, and the Defense industry have shown very good development during the quarter. In Process industry, strong.
North America, Nordics, and South America, strong regions, and we have seen that for a while, the whole bioeconomy change is supporting, among others, pulp and paper. Also in the Energy Division, we can see an improved demand, especially in nuclear. There are some delays in investment decisions, but in general, we see that the energy market as such is stable and developing in the right direction. Especially also with all the actions that we are taking in that division. If you just isolate the automotive market and the related supply chain into that, the tier 1 suppliers, and we have some timing effects in energy with an EPC project that is fading out. I would say the market in general is stable and good. Of course, we felt that automotive volume reduction during quarter four.
This is just an update on our portfolio and the share of revenue when we have then closed 2019, you can see then that infrastructure remains the largest for us, 38%. Industry and digital 29%, energy and process industry 15% each, the management consulting 3%. We have our industry segments, where infrastructure also 20%, energy, power, process industry, Real Estate, then automotive and vehicles. We have the other segments. Again, on the right side, we are 75% of the revenues in the Nordics, then we have Central Europe and some strong core countries outside Europe. Moving into the cost synergy program of 2019, we set a target for us to reach SEK 180 million, we have over-delivered that.
We reached SEK 218 million. Actually, it came as we hoped and believed that it was not a proportional over the year, it was more an exponential that we saw a lot of activities when we closed the deal during the spring and improving effects during the autumn. We had a good effect in quarter four. I would say we had good progress in all areas. Just to say, one, we could now start also to see some effects of combining the real estate, that we are closing down office and we are bringing people together and using that leverage. The integration cost amounted roughly to SEK 250 million, which basically means that we have to invest SEK 1 million to get SEK 1 million saving, it's a good payoff for this investment. Of course, we are carrying that run rate with us into 2020.
On top of that, we are launching, we have started already with the next wave, which we are targeting another SEK 120 million run rate saving for this year. That will also be supporting the savings we have with us from 2019. We are also more clear now to say that in conjunction with the investment program we have on the platforms and on the IT side, we have a cost increase due to that amounting to SEK 50 million-SEK 70 million because we are implementing new ERP system and CRM system and setting the system platform supporting us for the future. Roughly half of these savings will also support us in doing those investments in the IT platforms. We expect a SEK 50 million-SEK 70 million P&L impact from that investment program in 2020.
All in all then, if you will look on 2019 and 2020 as such then, in cost synergy and the efficiency program, we are targeting a number of 338 when we close 2020 run rate saving. Of course, some of that will then be reinvested in our business, as I said, related to the IT platform. I have to say that I'm very happy with the operational performance and the organization's ability to execute on those cost savings, and this is something that we will bring with us moving forward then, because this, end of the day, is strengthening our different divisions' ability to be very forward-leaning and aggressive on the market. This is very good. If you look on the next slide, this is again a bit more around this cost program for 2020.
It's a bit same things as we did 2019. We have still more, I would say, synergy-related cost savings. On top of that, we are now step-by-step then, how to say, fine-tuning each divisional management layer, sales structure, operational efficiency front end. Of course, we will step-by-step get these gains from the combined IT platforms, et cetera. Clearly, we are investing in our operational platforms. We have IT systems. We have already communicated ERP, and of course, these are investments that are capitalized, but the cost related to implementing those systems, we have an increase then in 2020. These savings that we are driving for 2020 will partly be reinvested in supporting that program.
I would say we are so much looking forward because we can already feel the strength we will have when we will operate with unified system across the company. We will have a stronger position. The total run rate of those savings, half of that will reach bottom line for 2020, the run rate savings. Just a few words on the repositioning of Energy Division, this is something that we started to look at, if you remember correctly from the ÅF point of view. More than a year ago to realize, especially that international energy business, we had to do a reposition because we were under critical. There were markets and products that was maybe not fitting us perfectly. We had started that analyze, we went together with Pöyry, we have even strengthened that ambition.
Now during quarter four, we finalized that analysis, and we even started to execute on that. It consists of exits from certain markets and products and, I would say, a renewed sales structure. We expect these effects to step by step be visible during the first six months of 2020, and I would say that we can even feel that improvement already now. I think they're doing a fantastic, good job. That will mean, though, that we have a negative impact on the SEK 105 million in quarter four compared to the range that we communicated in quarter three, which was SEK 130-SEK 150. It was lower then. Now that analysis is done, and we are executing on that program. Of course, we are continuing to bring in a lot of good projects. I would say the order pipeline looks solid and good.
This is just a selection of what we are doing in the different business. We have new frame agreement with some of the regions in Sweden. We have interesting business in Finland for designing of the Tampere tram. We have a very interesting client, which is Oatly. They have a quite offensive investment program, and we deliver to them. We have also other project in Gothenburg. Chr. Hansen in Denmark moves on. We have other business in Finland. I would say that looking on the order pipeline for all our kind of project part of the business, it continues to look solid. With that, I will leave it over to you. To take just through a few of the numbers. Please, Juuso.
Thank you, Jonas. The first slide is about the growth and the revenue. First of all, as we can see, we have a total growth of 38% in the quarter. This is highlighting the Pöyry acquisition, and I prefer to mention it because it is a major topic and a big impact for us during the year 2019. Obviously, when we are talking about the total growth on combined operations minus 2.9%, we can't be fully happy with that number. When we go down with the divisional split, you will get a bit more flavor on that one. Basically, we see we have solid growth in infrastructure and in process industries, and then the lower volumes are especially coming from automotive and then the supporting manufacturing segment.
In energy, we have basically a major EPC project almost completed, and it generated less revenue in Q4 2019 compared to 2018. Finally, management consulting, which is inherently volatile when it comes to success fees, and the Q4 2018 was highly huge, probably the best ever from that perspective. That's in a nutshell what we are seeing. If we summarize strong growth when we compare the total growth due to Pöyry acquisition, solid growth in most of our segments. We have some decline in especially one market segment, and then otherwise mainly timing-related items in energy and management consulting. If we then talk about the profitability, what I have to say is that I'm really happy on the 9.5% EBITDA margin on Q4. On combined operations, the comparison point is 8.8% compared to previous year.
This is something that we need to continuously remember, that we had roughly one working day less compared to previous year. Also that obviously impacts the revenue levels and the decline in there. With less working days, we have managed to substantially improve the margins. At the same time, if you compare that one to the cash generation, we are also generating this margin improvement as cash. If we look this figure, I'm quite happy to report the SEK 516 million above previous years on combined operations, and obviously clearly above on reported. We are having solid performance in all of our divisions. We have sequential improvement, from Q3- Q4 2019 in all of our divisions. All in all, in this front, I'm quite happy.
Especially then the cost synergy program, SEK 280 million run rate savings, and we have been able to show that that is now visible in our margins. We are talking roughly SEK 100 million positive impact in 2019 from the actions implemented. Now going for 2020, we have the 218 run rate that should support us. We have a really strong platform now that we are going to 2020. If we take a bit of the bridge and the divisional view, we see that going from 8.8%- 9.5% or SEK 492 million- SEK 516 million. We have had the negative calendar impact due to one working day less. We are talking about a ballpark of SEK 30 million rounded impact on that in a negative side. That has been then covered by basically synergies you see in the common or group elimination part, SEK 35 million improvement.
We see process industries, energy and management consulting improving also the absolute profitability in plant industrial and digital solutions are then not contributing as well. As said, sequential improvement if we take from Q3- Q4 and we take the delta Q3 2019, Q3 2018, we have been squeezing that delta smaller, and we see that our actions are having an impact. I'm fairly confident that we will continue with those ones. Going further deeper into the divisions, we see that infrastructure is having adjusted organic growth of 2.3%. It is lower than in earlier quarters. We still see some softness, especially in architectural market Q4 compared to Q4 previous year. We have had the delays in the process in transportation, but otherwise it is solid, it is strong.
Industry and digital solutions -4.7% in the growth, basically driven by automotive and the manufacturing sector. This is something that has stabilized now between the quarters, we are now going on a lower levels than earlier. Q1 2020, for example, is still facing growing and strong market of Q1 2019. Also if you put that one into the context that we have been losing top line, we have been able to stabilize the margins. We are delivering 8.5% margin in a division. It's not within our ambition, but given the market circumstances, I'm quite happy to see this type of a number in here. If we see process industry 20%, it's a happy number. If we put that one, if we take the combined operations, we are roughly 9% growth.
No matter which one of those you are looking, this type of a growth combined with 13% profitability, is an exceptionally good performance and we are really happy to see it. This is supported by solid market conditions. There are many projects in the planning phase or in implementation phase, both in Nordics and in Latin America. This is favorable for us. Energy, minus 2.4% growth. This is something that we need to understand the EPC projects being in here. We have at any point of time, we have 0-2 EPC projects. Currently we have one, and it is pretty much on the finalization stage, which means that we have less revenue from that one. The impact is roughly SEK 50 million Q4 2018- Q4 2019. That translates to 5 point some percentage points on growth on combined operation level.
If we adjust for that one, actually our energy division is growing. If you see the margin 8.3 compared to 6.8 percentage points in combined operations, that's 150 basis points improvement. This is something that we are also really happy to see, and we see some minor impacts already coming from our repositioning. This is the route that we want to continue, and we are fairly confident that the actions that we have started in Q4 will materialize further in the second or the H1 of 2020. Also in here we see the impact of the synergies from the merger. AFRY and Pöyry had similar type of operations and combining those ones have been positive. Management consulting growth. We are not happy, but this is something that I am not worried at all.
Q4 2018 we had in a way a unicorn quarter what comes to success fees. We were not able to repeat that one in 2019. That is within the business model. We are still delivering 13.3% margins compared to 15.9% previous year. We can even say that the underlying operations are stronger than year ago if we take the success fee volatility out from there. All in all, I would say that especially what comes to the EBITDA percentages, I'm really happy. On the growth, we have some work to do and items to address in our some market segments. The second component that I'm really happy to report is the cash flow. We are delivering basically almost SEK 2 billion of operating cash flow for the year or SEK 1 billion operating cash flow for the quarter.
This is now visible if we take the net debt levels, we have four-.
Please stand by while I reconnect your speaker
Is it working now? We are still on mute. Which one is it?
Yes. You are now live in the call.
Thank you. I would be highly thankful if some of the AFRY team would confirm that we are being heard. Elin, I see you are there, so could you confirm? Good. My deepest apologies for the technical issues. We do not know what happened, but we are absolutely happy to be back. I understood that you lost me when I started to talk about the net debt. Basically, I am extremely happy on the SEK 4.4 billion net debt and the 2.2 if we take going concern operations on net debt to EBITDA. Our balance sheet is not a limiting factor on any of the actions we want to take in the future. That is also highlighted by the board of directors' proposal on dividend of SEK 5 per share.
You put that one into the context of our dividend policy, it is 50% of the adjusted net profits of the year. Obviously, when we take the items affecting comparability, it would be above. Five SEK per share is roughly 560 million SEK for the company, and we are happy to distribute that one to our owners. We are confident with our balance sheet position.
Thank you, Juuso. Just to finalize, 2019 again, that was an exciting year and for sure there's a few things that we will and need to address, but overall, we are pleased with the positional period and integration. We launched a new joint brand, AFRY, still having the legal name was Pöyry. We are happy to unify our forces under the AFRY brand step by step, and it has brought us a lot of new energy. Moving into 2020, I think we have an excellent platform, excellent base. Just to summarize where we are, I think we could say that by improving the profitability and the strong cash flow, it shows that we have a good grip of our operation, and I'm very pleased with that.
I think that's been for some of your concern then, can you do a big integration of the Pöyry and how will that materialize? I will say that we are a much stronger company now. We have an overall solid demand in most segments, very much supported for the big global trends. We see this need of our engineering competence and design competence all over the segments. Yes, we have had a bit of a decline in automotive. We are addressing that, and I think the good sign is that we are more flat and we have a sequential more balanced volume. This is something that we're addressing. All over it looks good.
I think to deliver the SEK 218 million in the cost synergies, adding on the SEK 120 million for 2020 will give us a strong position because as more and more we become operationally strong, as more offensive and aggressive we can be front-end. This will also be supported by the IT investment we are doing. These are needed, and we are doing that. We are driving that program as we speak, and it delivers as we expect so far. I have a good feeling that by step-by-step, we will have these joint platforms that also will support our operational performance moving forward. Right now there's a lot of focus on efficiency and I would add growth. Of course, now moving into 2020 with the favorable market, we are focusing on growth. Of course, unified with our joint brand, AFRY.
This is basically ending the presentation so far. With that said, again, we want to apologize for the break we had on the phone, but open up for any question.
Thank you very much. Ladies and gentlemen, we will now begin the Q&A session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Again, that's star one on your telephone keypad for any questions. Our first for today is from Johan Dahl from Danske Bank. Please go ahead.
Yes. Hi there. A couple of questions. Firstly, on this new efficiency initiative that you're launching, you're talking about efficiencies SEK 130 million-SEK 150 million. When do you expect that to be net, sort of accretive to profitability in the group?
Yeah. I will. Juuso can also, but I think we talked about SEK 170, Johan, but Juuso will take you through the thinking behind it.
Yeah. Basically the 120 million SEK is something that we are now working on. We are using the same methodology as in the synergy program for the 2019, we have different type of components in there. We are quite confident that we have a solid progress throughout H1 and continued in Q3 and Q4. At the moment, we are foreseeing somewhat linear progress, but given the content of the program, having the efficiency and the platform component, the efficiency part is a bit more operations driven and subject also to market conditions a bit more, while then the platform part has the IP and real estate components dominating it. Those ones are coming in a bit more binary type of component, how we address and how we progress, for example, moving people to new offices and IT is driven by certain milestones.
So-
All in all, I would talk about linear implementation at the moment.
Of course, Johan, we have a bit of the momentum from the 2019 program because we had a good progress by end of the year, and we are using that momentum into 2020, adding on also a few efficiency activities.
I'm just wondering what you're budgeting for, if will it be accretive at all in 2020 or no?
I mean, partly it will be, but we talk about the run rate, and then we have been highlighting that this investment program we are doing then on the IT system platform, part basically say that efficiency and cost savings will be reinvested in our operation at the same time as we have the momentum from the 2019 program with us. For sure, we should have an overall benefit and support on the bottom line throughout the year. Again, part of it will be reinvested to support that SEK 50 million-SEK 70 million cost increase that we have to implement all those new systems that we are doing.
On energy, having decided on the activities and taken the charge here in Q4, can you explain a little bit how much sales are you cutting away and potential impact on your reported profitability?
I have to, Johan, first reiterate that we have been continuously talking about repositioning, which is from my perspective different compared to restructuring. We are pushing our sales operations into different market pockets, and our key impact on the profitability is that we gain different type of projects. We target different type of projects having different type of higher profit margins, and that will come in visible little by little during 2020. At the same time, like you saw from the margin from the energy, there's the merger synergies that are visible in there via better span of management and taking over some overlapping functions or activities. That will continue to be visible continuously, and then the repositioning part is coming throughout H1 and little by little continued in H2.
I would say, Johan, that being in ÅF before then we going forward to the Pöyry look and our international energy business, where we have had some trouble some years. I feel now confident with this program and the execution that we are doing from Richard Pinnock and team that we will have a strong and solid operation. We are more selecting on what products we're bidding for. I wouldn't say, as Juuso said, there's not a big negative top line thinking about it. I think we should have also growth down. We have the EPC projects that will come along. I have a strong confidence we have that we will reach that 8%-10% margin band that we have said, and also to reach growth in that division.
Okay. It seems as if Pöyry reported weaker top line Q4 2019 compared to 2018. Can you just elaborate a bit on these big EPC projects? What sort of headwind are you meeting there for full year 2020? You said SEK 50 million Q4. Is it like SEK 200 for 2020, or how do you view that?
We have basically in the Pöyry part now, we need to continuously remember that the combined operations or making a split between ÅF and Pöyry is not very meaningful anymore because how we have been pushing people and operations to different legal cells. If we take on a macro level, we have two components in the former Pöyry side. We have the EPC project component, which has roughly SEK 50 million quarter four to quarter four previous year impact on the revenue line, which is purely coming from a timing of an EPC project. We are implementing a thermal power plant in Philippines, there we had in Q4 2018, the heavy installation material delivery part ongoing, now the project is ramping down. The thermal power plant is being taken into use. It's not generating that type of a pass-through elements anymore in the revenues.
That is definitely visible and attributable to old Pöyry. The second component is coming from the management consulting success fees that I explained also earlier. If we take any other operations, ship process industries and so on, there's no revenue decline in the former Pöyry side.
No. I would like to add, Johan, I think we have the strength and position to take, as Juuso said, one to maybe also two large EPC projects a year. We have good prospects and hopefully we'll get one of these also coming in this year. They are more binary. I don't see that we are in any case weakening in the end of it. In the opposite, I think we are getting stronger in the operational parts of this.
Okay. Just finally, in terms of calendar effects 2020, what do you put into your expectations there for the ÅF Group 2020 versus 2019? That's all. Thank you.
We have an average one calendar day more in 2020 compared to 2019. Obviously one calendar day more, all things equal, should mean one working day more of revenue generation. You put that one on the 17,000 employees we are having. You can do the math from there with your own parameters.
It should be a better year.
Yes. That's the conclusion.
Thank you.
Thank you, Johan.
Our next question for today is from Dan Johansson from SEB. Please go ahead.
Thank you. Hi, Dan.
Hi. Two questions from my side. First one, recent strikes in the Finnish pulp and paper industry. Do you see it having any impact on your process industries business for Q1?
Basically, first we need to understand that it is our clients who may be in strike, and none of the major CapEx projects are not stopped down and so on. Basically, we don't expect it to have material impact in short-term to our business. In the longer term, obviously, it's never good to have turmoil in our key segments as such.
Short-term not, let's see how long the strike will continue, because, of course, it's not beneficial for our large clients in Finland. Okay, very clear. Thank you. Last question on the cash flow. As you mentioned, it looks very strong in the quarter. Is this any sort of one-time effect in the net working capital improvement, or it's just a very solid underlying cash flow development in Q4? Thank you.
Well, part of that one is seasonality. If you take a longer track record, our business tends to deliver Q4 strong cash flows always. We have been working heavily on the net working capital and talking about cash and creating cash culture, and I would like to believe that is now visible in our numbers.
Okay. That was it for me. Thank you.
Thanks, Dan.
Our next question is from Johan Sundén from Carnegie. Please go ahead.
Hi, Johan.
Hi. One question from my side as well. It's on the revenue of the group in the quarter. When I look at the bridge between the divisions, it seems like other and eliminations has increased substantially compared to Q4 last year. What's the reason behind that?
Thank you, Johan. Basically, we are making a major merger at the moment. If we, in a way, put a bit of the legacy and history on the topic, ÅF was working in a quite local environment with limited number of internal counterparts. Pöyry has been working in a quite international environment with quite substantial number of internal counterparts. That legacy has created into different type of internal elimination rules within the two groups, which has meant that when we are combining these two ones, we have needed to make some decisions, and we don't yet have a full system support for all of the accounting and consolidation work underneath. That has created wider elimination differences.
The second component is that when you look for the combined operations and the view from the previous year, making these eliminations in retrospective for historical data is almost impossible, or at least would require such a substantial amount of manual work that we have chosen not to pay too much effort on that one. That's in a nutshell what has happened, but it's also quite financial technical. It is something that we are now working on and improving our system landscape. We should see this one stabilize.
Yeah. Around the full year effect should be some kind of good thing to look at for the future then?
Yeah, in a way, yeah.
Okay. Perfect. Thank you. That was all for me.
Thank you.
Ladies and gentlemen, just as a reminder, it's star one for any questions. The next is from Erik Elander from Handelsbanken. Please go ahead.
Thank you. Hi, Erik.
Hello, guys. I have some questions here for you. In 2019, actually, your industrial and digital solutions declined in terms of organic growth. Do you expect the weakness in the automotive and industry sector to continue in 2020? Is it possible to come back to the group target level within this segment of 5% organic growth going into this year?
Well, good question. Of course, we know the market right now. As we said, we have seen a stabilization, I would say, between end of quarter four when it comes to automotive. I would say, of course, automotive have an impact on related supply structure, and that we saw declining, as we have said on over the year. We have seen positive, I would say, in segments like food and pharma and defense industry. There are also bright spots into the overall industrial segments. What to see into 2020, Erik, not so easy for us. We are not guiding the forward-looking either. Of course, we are doing everything we can to drive growth on those segments where we have a good demand, and we see some good opportunities. There are several.
At the same time, as we are seeing at least now, what we see right now, I would say a sequential stabilization on the automotive part. There are some great trends supporting us also in the industry, automation, digitalization, electrification, to mention a few of them. I'm not worried, Erik, about the underlying trends in industry and the opposite, I think they talk in favor of us. Of course, when you have a large segment that also affects the related manufacturing industry like automotive, having a decline, of course, we see that. Looking a bit ahead, not speculating on the market as such right now, I believe that the underlying trends speak very much in favor of our industry division. That's what we are looking forward.
Let's see, Erik, we will do everything we can to continue to drive efficiency operations and to go for growth also in that division for sure. There are many bright spots.
All right. Thank you. Talking about growth in the energy segment, it has been improving in terms of organic growth. It has been improving now for some quarters. Do you expect the energy business to grow, I mean, positive organic growth numbers in 2020? Or will you continue to focus on margins by reducing staff?
I would say that if you take away these EPC projects that are very, as we said, they are big and they will come or not. If you take away them, we expect growth. I mean, Richard Pinnock and the team are doing an excellent job in repositioning the whole energy business, targeting countries, projects, clients where we have a good position, solid projects. Yes, if you take away EPC, we expect growth, but we know also that the focus has been very much to reach that interval between 8% and 10% EBITDA that we gave them as a challenge, because going back a couple of years, ÅF have been very much volatile and being on larger levels. On top of that, a few small divestments we might have.
In general, the underlying energy business, yeah, we will see growth, and it's very much supported on the transformation on the energy market. We all know that at a certain point, the whole electrification, renewable, the whole challenge we have on the sustainability part and climate challenge will support us and the need of engineering solutions in the energy market. I'm quite positive.
Okay, great. Then on the net recruitment, so the development of a number of employees quarter-over-quarter, it actually declined by 277 people. What is the reason behind this?
Well, I think you see the effect of course, if you look on the industry and digital, they had to mitigate the fact that we lost a bit on there. That's been a kind of reposition. Then we have the effect on the group in general. I mean, the synergies as such have declined people on the functional side, et cetera. Then I would say how we are organized right now, we are organized in 5 divisions and a number of business area with full P&L below, and they have the full focus on growing, setting the focus on their different structure. That's basically answers it, but we are recruiting a lot, and people are also leaving. That's what we see. I think this was more a timing issue on the reduction.
This is a timing issue, and then we need to remember that we are talking about full-time equivalent, and this is maybe a place where we have some challenges combining kind of the Pöyry way of reporting and our way of reporting.
True.
From employee and FTE perspective, we have been fairly stable actually. That's the first question.
Yeah.
Okay, it's not like you're seeing a higher personnel turnover again among the consultants?
No, not at all, in the opposite, Erik. I think FTEs are only complicated also joining the two companies together. For sure, all our divisions have a high focus on recruiting and growing. I think moving into this year, that will be the name of the game because the platforms are becoming more and more solid.
Yeah.
All right.
We see we still have more employees at the end of Q4 compared to what we had at the end of Q3. This is also something that we need to highlight.
Yes.
Okay. All right. The final one for me. In the infrastructure division, are you seeing that customers are becoming more reluctant when it comes to new projects? If those transportation projects that you have seen being delayed just of a one-off case, it's not a structural change in the market?
I would say not a structural change in the market. It's more one-offs for us. I mean, the market in infra, we know it, especially in the Nordics, but also when we include Switzerland. It's still very solid. I think more ability sometimes I think also The client to handle a lot of these big projects at the same time can delay some of the decision points, but the underlying demand infrastructure project continues to be very solid. These were more, I would say, related to us than one-off. I don't see a structural change in the markets.
Okay. Thank you so much, Jonas and Juuso, for your answers. That's all for me.
Thank you, Erik. Thanks a lot.
Our next question is from Ola Södermark from Kepler Cheuvreux. Please go ahead.
Hi.
Yes. Hello. Hi. Yes, hello Ola Södermark, Kepler Cheuvreux. Some follow-up questions on-
Hi
On Erik's question about timing and contracts in the infrastructure business and you also highlighted that some projects were closed with lower profitability than expected, is everything happening Q4 and can we expect some positive effects quarter-on-quarter in Q1, or should we expect some negative effects in Q1 as well?
No, I think you should not expect I think we always, as you know, we are becoming more and more project business, and now we happen to have a few delayed projects in transportation, and we close a few projects with lower contribution than we expected. This is nothing that is a systematic thing that we should think will come. Every quarter we have pluses and minuses. Now it happened to be a bit more on the minus side. This is nothing that we expect moving forward.
Okay, that's very good. Also a question on the investments in a new platform and IT investments. I know our experience that when companies are implementing new structure and IT platforms, it could turn the focus internally. Do you see any risks there?
Well-
you lose some momentum?
No, I can tell you that, a year ahead of the acquisition of Pöyry, we had already decided at ÅF that we had to do it, and we had to implement a new ERP system. We started to work with that a year ahead of the Pöyry acquisition. We have continued to work with that. I guess that shows that we are not fully internally focused, because in the meantime, we have been able to make an acquisition of Pöyry to integrate that, deliver the 5.3% growth over the year, stable margin, still implementing and driving the ERP and the system platform. I am not worried about that. I would say that we are doing this in an extreme rigorous way because we know that if you do it the wrong way, it can end up in trouble.
At the same time, I think we as a company, using also Pöyry's experience and the suppliers we have, it's a much higher maturity in how to implement new system platform. There are obstacles that you need to maneuver in and handle, but what I see is that we do it in a very rigorous way, and I don't have any fear that this will be a problem for us. In the opposite, these are the things and tools of system we need to be even sharper in our business. That's why I'm quite pleased with what we have been able to do as a joint company this year. For sure we do not have the perfect system support, so to say. Still with that not perfect system support that actually drive inefficiency, we are delivering the result that we're doing now.
I'm quite positive in how we are implementing it, and I'm very much excited what kind of strength it will give us.
Sounds very good. Just a last follow-up question on the order pipeline, and just out of curiosity, has any area in the order pipeline year to date surprised you on the positive side or on the negative side, just to get a feeling of what's happening right now?
Well, I would say, of course, we see the automotive decline, and there's a big transition in automotive, as you know, that many of our clients are investing in new platforms. There are some big bets for the big automotive. How far do you transform to electrification? How much are you protecting your old platforms? There's a big transformation. End of the day, that will be beneficial, but throughout the year, we saw a decline that was something that we didn't see coming then, but we have adjusted for it. On remaining part, I think it's been very strong. If you look on processing this year. I was in Brazil last week, by the way, looking to some of the big clients and projects we have in Brazil.
I was just amazed how strong our brand, and I'm not talking about Pöyry that has been very much in Brazil for a long period. I mean, we are the company that actually implement those big investments in the bioeconomy in Brazil. I would say that the things that we looked at for Pöyry, that we said this we will gain with Pöyry, for sure, there are things that we always want to have more, but in general, I can assure you that it gave us exactly what we wanted. Yes, there are more integration work to do, but I'm positively surprised how ÅF, Pöyry together are looking on what we can do.
Okay. Thank you very much.
Thanks a lot.
Okay, our next question is from Johan Dahl from Danske Bank. Please go ahead.
A follow-up. It's been fairly slow on acquisitions for obvious reasons in the last 12 months. What's your outlook here for 2020? When would you say that your balance sheet is fixed to continue to grow?
Well, I think as Juuso said, we are very happy with the quarter for cashflow, Johan. We expect also solid into this year. That means with the net that we have now that we are ready for stepping up that. This is of course, was in the plan. At the same time, we are becoming maybe even more selective what companies to buy. There are basically two things. We are now step by step improving our pipeline on potential acquisitions. I don't see you'll see a big catch-up effect. For sure we are ramping up the focusing on that. We are getting ready for some larger ones. This is also very much supported from the board. Again, the net debt position is supporting that.
Yeah, given the higher demands on candidates, have you sort of cleaned out the pipeline and sort of restarted it? Is it that a slower period in 12 months have created a lot of potential deals to be made in the short term?
Well, the truth is that just when we did the Pöyry deal, we had a lot of other prospects that we discussed with. Of course, when we did the Pöyry deal, we had to say no to many of those. Some of them are still in the game. We are looking at them. At the same time, as we talked about that this, and I joined the work now close to three years ago, we are looking also for companies that will help us in the transformation. We are targeting higher up in the value chain. We are looking at software companies. We are looking at companies that could also maybe give us a recurring revenue to complement our service business. For sure, we are more selective also from a strategic point of view, where do we invest in companies? We have a broad geographical spread.
There are more variables, but I've seen now we are get both in balance sheet and direction. We are getting ready for now take on 2020 on acquisition side.
Yes. If we prepare the pure pipeline, the pipeline is solid. The M&A activity in our industry is there, so there is opportunities. As Jonas says, we want to be careful on which opportunities we grasp.
Thank you.
There are no further questions that are waiting.
Okay. We are getting close to 11 o'clock. Thank you all for listening in, and for all the good questions and dialogue. Thank you from us here in Stockholm, and we wish you all a great day. Thank you so much for listening.
Thank you very much, sir. Ladies and gentlemen, that does conclude the call for today. Thank you all for joining. You may now disconnect.