Earnings Call: Q2 2019

Jul 12, 2019

For standing by. Welcome to today's Q2 Report 2019 Conference Call. I must also you that this conference is being recorded today, Friday 12th July 2019. And I would now like to hand the conference over to your speaker today, Duona, Kristafone. Please go ahead. Thank you, and good morning, everybody, and welcome to this webcast. And the presentation on the second quarter report was paid. I'm sitting here in Stockholm together with you. So Pionan, as you know, is newly appointed CFO, and I will get back to that within Fort Lee. And we have 1 hour, and we will go through the station with good pace and then be open for any questions. The agenda for today, short about a few appointments, including then you saw, I will talk about the overall performance in the quarter, a few words markets and then you also will take us through the financials, then a bit deep dive into each division and the 4th a bit about the strategy execution as we are driving it and then a short summary. So that's the plan for the presentation. And then moving over to a really good news, is that we have appointed you also, Pinan, as the CFO, for what period And I'm really, really happy with that. As you know, Stefan decided to step back then a couple a few weeks ago and we then, work with you as acting CFO, but, we have now decided then that you also, has appointed the CFO for what period. You also have some extensive background from period. And, I think he brings in a lot of knowledge about this business and is a great person. So I know that Youssef will bring a lot of quality into the management team over at Perry. So, and again, you will, you also will take us through the finance part just within shortly. So that's one of course, very important appointment. And then another one I want to highlight is Marie Truggstad. Who has been, who's appointed, you have those sustainability at all, period. As you all know, the sustainability part of our business has always been a part, and it's increasing in importance. Marie has an extensive background from international business within the area of sustainability she's been working for, among others, Thalia, and also soft defense. And, Marie will join what period on October 1st. So we're really happy about that. Now looking on the overall quarter and also the 6 months, we feel it's been stable period for what period and with stable growth and profitability. Of course, we are still in this situation that we are working with the pro form a numbers and also then also having paid us an acquisition then for So that sometimes makes the figures and the numbers a bit difficult to follow. But if you look on the pro form a, we feel that the group jointly together is performing in good pace. And we also feel that the integration is actually going better than we have expected. And we are also realizing the cost synergies with a faster pace than we have planned. And also when you look on the overall demand, we will get back to that, but On the overall segments, we see a continued good demand, both on industry, infrastructure actually, the energy segment is becoming more and more interesting also. We have seen one area or a few areas where we have seen a slight slowdown. And one, we also talked about in quarter 1, that's out the multi segment. And as you know, we are exposed to a few large clients also here in the Swedish market. And here we have seen a slower demand, during the quarter. We have also seen, on the architect side, as you know, we have a few separate brands, architect brands with operating in Sweden, but also in Denmark and also Norway. We have seen as a consequence of the fact that there's been slowdown on residential building, which is not our core focus, but that has affected the architect business as such. Where we have seen a slight decline, having some impact on us over the last quarter, not a really big one, but we have seen that there has been, as we see, it's more architect capacity available in the Swedish market than demand in the second quarter. So we're coming, that affects us a bit then. And then We also have had in Denmark an effect on the infrastructure, which we see this also partly because we are we have been between projects. So we have been ramping down a few projects at the same time as we haven't started up to ramp up new projects. On top of that, there wasn't in Denmark that was also affecting the decision process in getting new assignments. This is nothing that we see as a long term issue. We are working on all of those, but these things were the ones that affected us in the second quarter then. But as you know, then in the numbers, we ended up on a solid $5,400,000,000 on the top line, an EBIT on 481, which we felt was in line and good. And the EBITA margin then with 9%. And for the full 6 months, we also had a solid growth of 5% for the 6 months 2 point 5 for the quarter. Renewable also explain a bit of effect on period on the on the on the growth numbers. But all over, it's been a solid week. We hope for a bit more than, in some areas. But again, these areas where we saw some slower demand affected also based on, but nothing that we are working on them, I would say, all over them. And then moving over to the integration of period has been the big thing for us. I would say, as you all know, that we is done, and we have done the right issues. And and, you also will talk a bit about how the balance sheet balance sheet is develop developing And when it comes to the integration, we are ahead of plan. I'm very happy with the pace that we are getting our two companies together and that we have from the beginning focus a lot on the on our clients and being able to go out with joint customer offer in many areas very early. And we can see the effect right now. There are lots of projects that we are now putting in the bids where we are using the strength for the both organizations. So that's very good. When it comes to the cost synergies, we are ahead of plan, our own plan. You know that we have communicated one 80,000,000 as a running run rate cost synergies. And we are ahead of that internal plan. So we actually have realized run rate synergies to the amount of 100,000,000 or 99,000,000. I always said that we are committed to the 180, but our ambition is higher. But, so let's see them, but right now, we are very be on having 99,000,000 as a run rate. And again, with stable organic growth and earnings, we feel that this rather big integration, between the two companies is going very stable with good pace. So that's very good. And again, just to remind ourselves what kind of company we have become. I think we are still a company that has a very broad exposure to very different interesting segment. As you can see from this slide, with the portfolio, what we have seen is, of course, that our our dependency on the Nordic market has have declined a bit. We have now a bit broader international exposure with more business in Europe. And we have 50 countries where we are present. And the majority part of our portfolio is, delivered in different kind of projects, which we think is very good. Slight increase on fixed price for effect where we really feel that the per reorganization brings a very strong capability in process execution and actually we're a lot of good money on the fixed price profits. The customer base is, of course, becoming stronger when you're bringing to strong companies together. We know and we can see that now that the portfolio subs has been very both from a segment point of view, but also from a geographical reach. But that means that our top 10 clients some of them we have been working with, together, or joined, both with and and now when we bring the company together, we have even stronger to these companies. So, that's good. And then coming to the market, we see that the demand in overall work period for sustainable solutions continues to be very good. And of course, this is driven from all the disrupted trends. If it's the overall climate challenge and the urbanization and together with all the opportunities, you have a digitalization and then the electrification going on, there is an underlying strong demand for high competence, service within the area of engineering and design and also advise the service. That's clear. And we see that continuing for sure. The market for infrastructure also in general is strong. And you know that we have a very strong position in buildings. And even if we have had, you know, our in between Perfect and, for example, Denmark, the overall business is doing very well, and we can see that the demand for technical solutions in complex buildings like airports or hospital also commercial building continue to be very favorable. The same is valid for the industry sector, where you also see a lot of our clients are working in the area of disruptive trends, with 5G or electrification and the automation subscribers. We have seen then, as we have said, then, the demand in the automotive industry is being somehow impacted by some cost saving activities or reprioritization of the R and D portfolios during the quarter. So But we see this as a more temporary. We know that many of our clients are getting back with their, R and D spend, and so so we, we, we are not feeling that this is a long term situation in the opposite, we see also a lot of good activity, this many of the automotive clients, but some effect we had in the second quarter Process industry market remains very strong, especially in Europe. And in the market, we see a continued good demand for large scale energy projects, for example, in Southeast Asia. And at the same time, we work a lot in the Nordic and Europe with renewables. And I would say the new energy landscape, thing. And I see now the advice or service we have in our management consulting business, which is focusing a lot on energy and process we will see still a continued good demand from our service. So in general, despite a few areas, the demand and the market situation is favorable for us. Of course, we are bringing in a lot of new projects, and I will say many of these ones on this slides are also consequence of us being stronger together. So, I would say many areas we have combined are the best competitors from all of them per year. And this is just an example of the portfolio that we are bringing in. And the order intake is continue to be very strong in our key segments. So with that, I will leave over to to you also to take a few, take you through a few slides related to the financial part. Thank you Jonas. So let's talk about our revenue first. We are delivering the second quarter SEK5.4000000 of revenue that's roughly EUR 1,800,000,000 added compared to previous year. And then if we take the pro form a numbers, we delivered roughly SEK 5,000,000,000. So we have SEK 400,000,000 also when counting Peru as acquired already per January 2018. So when we are talking about continued organic growth, I'm happy to say that we are having that one. Then the 2.5% organic growth during the quarter is impacted by the calculation, how we do it. We are we are looking organic growth only from our perspective. So anything that Pearl delivered as growth figures is not part of the organic growth. As such when we are talking about reported numbers. If we would trust the per report as acquired first January, that could add some 2 percentage points on the growth. So if we take the phone points follow-up or at earlier, we are actually quite solid on the growth numbers. Having said this, we have been impacted then by the Automotive Industry slowness and the Architectural slowness. So that has a minor impact in the figures, especially when we are talking about the full portfolio level. Also, if we are looking forward on the growth, we are quite strong here. So I'm very happy to see where we are standing and looking forward for the coming half, of course, also. Then if we jump from the revenue to bottom line, we are delivering SEK481,000,000 EBITDA excluding the items impacting comparability or affecting comparability, which were in total SEK 76,000,000 This is purely integration costs, as was our $99,000,000 of the synergies ahead of plan, this correlates with that one. So So the synergies are coming at the cost, which is also ahead. In general, the pace how the integration costs are expected to happen is still following the same logic as we have announced earlier SEK 180,000,000 synergies will come at cost of SEK 180,000,000. So also if we are seeing full year numbers, we are SEK 99,000,000 of cost synergies and we are having that at the cost of SEK 94,000,000. So we are very well within the frame of our plan yet being ahead in the implementation. If we are then slightly impacted the automotive and the residential building, but it has not been fully material. On the portfolio level, we need to remember that automotive is around 10% of the total portfolio and not the full automotive sector is impacted It's only one part of the automotive sector. And architecture also is only smaller component of our total offering. So I do not see issues in this topic. Then if we are seeing the combined group, we can see that we are delivering roughly 5,400,000,000 revenue compared to the 5,000,000,000 previous year. So we are having roughly SEK 400,000,000 growth in there, which is asset solid. If we are taking the EBITDA numbers 481 compared to 474 previous year. We need to remember the calendar impact due to both shorter than previous year Q2. And then the second component we need to remember is that Peru is coming to the portfolio as happy as our Permoo employees of Swedish National Day, material part of the Permoo people were not celebrating or they're at least working on that day. So we are now coming to a different world from comparability perspective also. So the final component is maybe that this portfolio show in 40% increase from SEK 108,000,000 to SEK 148,000,000 on the profitability. We need to remember that we are in the middle of an integration that our target is to stop talking about former OS and former Peru. It is every day a bit harder to make a difference how the numbers flow. So as an example now in the that we have been talking about the cost synergies, we are seeing the impact now in the federal part because many of the we have taken, especially on the platform level, have impacted more further than our platform. And thus, in this type of separate calculations, it bringing benefits to the former Peru, but in real life, we are only working without any kind of quarters. So that's why we also intend to stop talking about forward and former third rate is more from strategy perspective wise because we want to be one group. But also from number perspective, it is harder and harder make the difference what is former over and what is former Then if we are talking about cash flow and net debt, this is now excluding IFRS 16 impact. $7,100,000,000 at the end of previous quarter. And maybe just to highlight the biggest components, we had the rights issue to $2,800,000,000 flowing to equity and obviously coming as money in. And then we pay the SEK 560,000,000 dividends to our shareholders. Everything else, if we are seeing what is happening is more or less business as usual. And reaches us to $5,100,000,000 or $5,150,000,000 of net debt at the end of the quarter. If the adjusted rolling 12 months, our net debt to EBITDA is 2.7 times, which is very close to our target, but not yet But at the same time, when we continue delivering solid operational cash flow, we are within our financial targets in a very short time. Also maybe on the cash flow from operating activities, our cash conversion was not as strong as it should have been. But also, we need to point out that the 2 last days of the month 29th 30th was Saturday and Sunday And that impacts and pushes some of the payments on early July. So if I would take the 5th July situation, we have far more cash at hand than at the 28th June. So this is normal seasonality as such. So all in all, our net debt position is where we want to be is going to be where we want it to be. And that enables us should be choose to take a couple of interesting bolt on acquisitions in the 2nd semester. If we see strategic fit and rationale on Then we have including the IFRS 16 leases. So then we can see that we have some 2,500,000,000 more net debt or 2,600,000,000 more net debt if we take the IFRS leases into account. But otherwise, everything is aligned with how I commented on the previous slide. So let's go forward. Okay then. So getting back to thank you, Youssef, for that. And then getting back down shortly, to each of the divisions then starting with the infrastructure this said the infrastructure then ended up, but just about SEK 2,000,000,000 in sales. And the EBITDA margin was 9.6% and And in general, we say that there's a solid development within infrastructure. We have a few pressure points as we talked about Also, we mentioned our DarsTech business is 1. We have also felt that in the operation in Denmark we are in between some of the projects that in fact affected a bit of Danish operation, including that we felt that there was a bit delay in get the new assignments approved within Denmark. So that's where we have had some effect that have effect the margin, during the quarter. But I would say when you look on our core, you know, the core countries where we are enjoyed together in Sweden, Norway, Denmark, Finland and mainly Switzerland, there is a big underlying demand for infrastructure solution within the transportation segment, rail and road, but also on the building segment, On top of that, we have a strong position in our niche offering like architects and Design. So if you look then how these counties are planning to invest in infrastructure solution, and for example, complex buildings, we see a continuous strong market. And we will address the pressure points as we talked about, and we are doing that at the current. So we we feel that we have a solid strong position in the infrastructure together. Absolutely correct. Maybe just when we are talking about reported numbers that we have on the screen, we need to remember that the 3rd report of the portfolio is coming at a significant lower March level than the overlap part of the portfolio. So the 1.8 percentage decline in the EBITDA margin is is still mainly coming from that. And we have a very healthy and good portfolio in general. So as we talked about, when we're informed about the joining forces, we feel that the work position in infrastructure has been very strong in developing very well. And And by combining down Toyota, getting Finland, getting some interesting niche offering, for example, in Germany, And then the combined group in the SIT Sedan, we feel that we don't we are much stronger. But of course, then the Earthport had the higher EBIT margin the third part, and now we are drawing the full effect of combining these 2 groups and taking out cost synergies and focusing a lot on developing a client offering. So, that's the infrastructure when it comes to industry and digital solution in general, there's a strong market. We ended up at point 4,000,000,000, and the margin was 8.8%. Of course, we have an automotive exposure as you also talked about and here we have seen some decline decline. I mean, it's been quite open in the public that some of the big automotive players, for example, in Sweden have had some, different programs to address cost issues or how to hand in the R and D spending. That has affected us a bit during the quarter, but we see we see that the trend is positive. We are addressing it and we are our position is strong in many of the areas. So we don't see that as a long term, problematic area and opposite. We are, we've seen a lot of opportunities, and we are addressing the station we have right now then. And the underlying demand for automation for digital solution across the sectors are still very strong. For example, food and pharma business within our industrial division is doing very well. And there are continued good demand across the markets we are operating in. But automotive have been bit weaker in the quarter. Process Industry, yes, below $1,914,000,000, EBITDA 9.6 percent, and I would say that this market will continue to be very strong, and I are so much like the fact that Here, you can see really a lot of positive effects from combining payori. Of course, having the long traditional strong position in this area, but all so, oh, we're with a lot of capability and you want it together, we are becoming very strong. I mean, in pulp and paper, we are the world leading player. And then, we are also strong player in petrochemical and mining and metal as one interesting segment. So we see a continued solid development in this segment across all the markets you're operating in. And the order intake continues to be strong. Energy ended up at 830,000,000 EBITDA on 7.3%. And in general, we see the energy field becoming even more and more interesting. Clearly, is that all of part, as you all know, have had some challenging years behind us with kind of the repositioning from a lot of large scale power generation project in Europe and Nordic. Where we're now moving into more renewables and I would say the new energy field At the same time, we have a continuous strong market in a big part of the world where there still are a lot of large scale energy projects planned and executed. The OS part on the international business has not performing that good. We have been too small scale. And I, we have talked about several times by combining with a much stronger period business model and footprint on the international business, we have become a much stronger company, jointed together. The team within the energy division are working very hard now to combine the two groups and to actually execute on the strategy, where to operate, how to operate, and and quite a lot of the synergies are coming out of this group then. And I'm very happy that we one hand are able to do that. And on the other hand, developing a solid margin then. And I know that Richard Pinock has and the division said that our ambition is to be on the corridor 8 to 10% on the margin down the road, which we feel absolutely is our ambition then. And at the same time, I can also note that, for example, in Sweden, the whole question related to energy is becoming big. There's a lot of discussions about transmission capacities with them. We are moving into a more and more electrified world and how will, how will we meet that? So the demand also for advisory service within the field of energy is becoming big. That also has a positive impact of our management consulting business, where we are really strong in advisory service on energy. So this business, we are looking forward to continue to execute on the strategy. And I think it will be a solid growth down the road with good margin. So, yeah, and so basically when we are seeing the energy numbers and we are looking especially the growth, here you see the example and the impact of not celebrating this national day to certain extent. So even though the organic growth in here looks like minus 4% it is part of our current portfolio compared to previous portfolio, So if we would just take the combined operations, if Perrigo was acquired 1st January 2018, we see that the revenue would have gone from 770,000,000 ballpark to 830,000,000 figures of 60,000,000 or roughly 7% up So what we now see is that we are combining the operations quite successfully, but then maybe we have been adjusting the OF operating more a bit and then we are seeing there are some decline from revenue perspective, while the Peugeot has been growing at the solid pace. And then we can also see that we have actually gained 1 percentage point compared to the reported numbers profitability, but also we see solid increase on adjusted base of pro form a base. Profitability. So we are doing a lot at the moment in the energy to combine the operators. At the same time, we are evaluating our total energy opening portfolio to meet our 8% to 10% ambition on profitability. Good. And finally, management consulting, which is a very solid business. And as you see here, we are delivering EBITDA margin, 15%, having SEK 200,000,000 in sales. This is, of course, an a really interesting position focusing as we said down the process industry and energy globally, high end advisory service, this business per se is a bit more volatile because you are also basing a part of it on success fees, etcetera. But it is a it's a fantastic business as such complementing the overall engineering offering they have across the other divisions down. So we are looking forward to continue to developing this nice position we have in management consulting. Yes. And then it is important to see that management consulting is absolutely crucial when we are talking about revenue synergies within the overlap recombination because management consulting is often the gatekeeper door opener to various other services. And this one, we are also happy to see that it's progressing really well during the second quarter also. We really feel that this is a strategic, interesting position, as you also said, and we will work hard to continue to I think that was a part of the portfolio. Good. So that was the divisions, and I will just move to the last part a bit about how we work, continue to work. And of course, branding is an important part, and you all know that the left over the years have created a strong brand in Sweden, not the least, being highly ranked by young professionals. Last year, we came out in this on the number 4 position. After a few good ones like IKEA, well, of course, and Google. Interesting, there was a new present, started this year were all at for sector rank, that's number 1, when there was some, when the scientific researchers could also which brand do they rank highest when they come to research. So point with this one is to say that our brand is highly ranked, which is an asset for us. And we will continue to work very hard on the branding topic also looking now in, of course, that we have 2 very strong brands at the current besides the local brands we have. We have now all of them. We have podium and we are working now to assess how to maximize the position we have on these 2 strong brands. And we will get back to that a bit after the summer during the fall. The strategy, just to highlight, we are continuing to working very hard right now in executing this strategy, how to drive growth, create value, how do we drive operations and how do we make sure that we have the best possible people practice. And these 4 pillars were the base pillars for former UHWA and they are the same base pillar for UHWA group as combined, even more important now since they have become larger company with also a stronger international business to real assess how and where to grow how to create value, how to improve and change the business model as we have talked about so many times and moving up in the value chain in delivering more and more a combined offer that enables us to have value based selling. The operations as such of course, here you have a lot of the cost synergies, everything from how we delay the management structure, how we are combining our functions, how we're maximizing our system landscape and also how we work with the facilities down the road. So in this area, we see a lot of the cost synergies step by step being executed. And then again, coming back to the branding, but also worth clearly a company operating in sustainable solutions meeting a lot of the demands from a client is actually a company where people want to work. And this is something that we will even SMI is more, down the road. So this 4 pillars are as important as XL as ever before. And then just about the cost synergies, we are now on the run rate of SEK 99,000,000 and I think question will come, why are you not raising your initial target 180. Well, we could do that. But first of all, our ambition is to come as close to the 180 run rate by end of this year as we promised as we promised also externally and we are focusing extremely much focusing on that. And then step by step, we will of course increase. And we already have an increased ambition internally, but before we go out and talk about higher cost synergies externally, we will make sure be done, get to the SEK 180,000,000 as we promised. It looks very promising, of course, being on SEK 99,000,000, but we also know that step by step, we need to attack other areas like system landscape and facilities that takes some more time to realize. The majority of the $99,000,000 is, of course, the fact that we have been able to release different positions that has been overlapping. But again, it looks promising on the cost side. And on top of that, we are, of course, working very hard to maximize the positioning. And by that, deliver, revenues, which is a big part of the world business case. And I can just note that if you look on the project portfolio as such, there's a lot of effects by us being a combined jointly stronger group. The financial targets, not to say too much longer this one, you know, we have communicated them and, and, you know, that we are working hard to reach them. I mean, we delivered now 8.9% EBITDA, which is below our target of 10%. So we have some work to do, and the annual growth of 10%, which would be a combined organic and, acquisition growth. We really are, are, looking to meet And then as we said, the net debt position is improving step down the road. Yes. And then trust maybe on the growth that we are at 5 point to half year at organic growth and remembering that that excludes the further part of organic growth from the numbers. So I would say that we are pretty much meeting meeting the 10% when we talk about organicsMFA parts of the organics is still delivering or even some parts over delivering. When you zoom out and look on the fact that we have done a rather big integration over the last 5 months OF and period together. And we are delivering a solid close to 9% EBITDA margin. And as you also said, when you look on the underlying organic growth, that's the 2 groups combined, we are close to the 5%. And then the balance sheet are is getting strength that will give us the capability to also do bolt on acquisitions it is a fact that these targets are within reach. And so that's why I feel I feel, pleased with the fact that we have a solid business right now. Of course, there are areas that could have been better but for sure, it's a very solid and good start of our combined company. And I think, as we said many times, looking on the market in the different segments, looking on infrastructure Industry and with the capability and the competence we have for 4, we are looking forward to a very exciting, second half year. So with that, just summarizing that the 1st 6 months have been very stable, and organic growth again 5.2 and then 2.08 adding on the effect what you also said. And if you would include the Perry Park organic part, we will be higher also in the second quarter. And there's an overall, if you look on the overall business, a continuous strong demand. And then we have had some pressure points we talked about. And we are very happy with the integration growing going very well and the cost synergies ahead of plan, obviously, the effect of the SEK 99,000,000 run rate will come down more in the second half year because A lot of these synergies we have been executing in the end of the quarter, but the run rate is close to SEK 100,000,000 now after the second quarter. So that gives us a strong and good platform moving into the second half year. So I think with all that said, we will open up for any questions. Points. Yes, operator, we are ready for questions. Thank you very Please stand by while we compile the Q And AQ, which will only take a few moments. And your first question comes from the line of Frederic Sabineovic from Nordea Bank. Please ask your question. Your line is open. Thank you very much. On the auto issues within industry, is it possible for you single out, for example, saying how much that segment in particular declined year over year? And also as a follow-up on that, with Daimler issuing a profit warning today as well, is this the start of something that can get worse or do you believe you can turn this around and how in that case? So first of all, let's talk about the automotive like we have disclosed earlier in various our materials. We have Automotive is around 10% of our total revenue, around 30% on that. Industry and digital solutions revenue. And that is covering all sorts of automotives. So it's not only the personal vehicles, but it's also trucks and so on. And now we are seeing that what is the impact on that, that revenue, so for example, If you take 30 percent of 1,500,000,000, we are talking about the 500,000,000 revenue in total from Automotive. That has declined some 5% to 6 percent of that ballpark number as a revenue. And then we need to remember that we have been also able to gain part of that revenue back from other in base because we have a vast and good offering throughout the industrial segments. But the fewer impact of automotive decline is in that And then you will not be on the second part of the question. Yes. Well, if you look on that and that's also what you referred to today then, but if you look on our position then with Perry, clear that we are operating to a few large players in the Swedish market. That's our majority of the customer base. On top of that, we have operation in China. And we know that the whole automotive industry is on the R and D side investing a lot in the new fleets related to electrification, autonomous cars, driving a lot of the demand on embedded system, for example, but also, on, R and D service into that area. And then if you split our offering into both R and D, and then we are also, of course, strong in the kind of, operational part, meaning the manufacturing part, providing automation solutions to, to the factories, so to say. And then on the R and D side, we are delivering everything from, you could call it, professional service, team delivery. We are operating satellites when we are executing a lot of the prospects, to the players. And with all that combined, I feel comfortable that we will not have a big hiccup in the automotive down the road in the opposite I see we see opportunities in that segment because we know that they have they have to continue to invest in their R and D and their car fleet. That we now have an effect is, I think, more from a timing perspective that some of our large clients have to adjust their cost base and act on that. And we are then taking action on that, and we knew that when we published this on the report that we see that not more that there will be a lot of follow-up questions and people might interpret that it has an over proportional big effect on the overall portfolio and you also tried to explain on that. We don't see that. So I'm not too worried about the profit warnings related to a number of sold cars because the service we are delivering are much more related to the future, platforms that the automotive players are implementing. And that's, for example, what we see that the demand on our service, for example, in China, on our Shanghai office, is continue to be solid. It's not the biggest operation we have, but the fact that that many of our clients are investing in electrification and new platform is as strong as ever. Super. That's very clear. Thank you. And on the infra segment, I remember in Q1, you had some utilization issues Q2 looks better. Are these issues behind us now? And also if you can give us some flavor on the utilization on our group level as well, which is down a bit year over year. Yeah, I think, yeah, I think, and overall, As you noted, and we had a slower start in the beginning of the year, where we were very ambition of growth. And we had actually too much capacity, you could say, Infra have improved utilization and we are fighting them in the industry division as a consequence among others on the automotive with utilization. But overall, I feel comfortable that we are addressing utilization topic and we're focusing a lot on it. Done when it comes to the infra, I think the pressure points we talked about has affected us a bit. We talked about architectures, but even here, we are taking actions And also in Denmark, we have some issues, being in between on the project portfolio. But overall, I feel both industry division and the infra division are taking actions on these threshold points, and I expect that we will continue to improve the utilization in the second half year. And maybe when we are looking about the utilization and the year year impact. We continuously need to remember that we are comparing on the previous year numbers, reported OS numbers and now we are having 4 months of Peru numbers included in there. And if we see the utilization rates, they are inherently lower in Peru than in all, mainly due to the advisory and technical consulting services. So in terms of the project delivery and delivery was a majority of the offering and the professional services were only small part of the offering then if you take the utilization rate curve, the more you are in the professional services, the higher utilization rate you have, and the more you are in advisory services, the lower utilization rate you have. So we have also this portfolio combination impact including the numbers that you see in the quarterly reports. So I think when doing a big acquisition or merger as we have done with the Wharton paid with slightly different business model. Besides the fact that we have a market impact, we also have a mix impact of utilization, but we we will sort that out even better moving forward. It will still it is still an extremely important component, of course, I feel comfortable that we are addressing utilization, especially in these two areas infrastructure and in the industry and digital where we have had some segments with a bit lower demand during the quarter. Okay. Thank you. And a follow-up on that when you mentioned Denmark, the phasing issue there, how much did that affect infrastructure segment this quarter. I mean, and any flavor on that would be, would be helpful as well. In total, in our total portfolio, it's practically immaterial. I can double check that one. It is a fraction of what I told about Automotive. So Okay. Super. And in absolute terms and on EBITDA, how much is the impact on, on the calendar. Can you give us a number of our range here once that hit your figures? When we are taking kind of the pro form a numbers, we are talking 20,000,000 to SEK 30,000,000 we bought back. Okay. Super. And I know you don't disclose this number anymore, but can you you give some flavor on the order backlog and how that has developed in the quarter and year over year terms? Yes, I can't, like, leave it to you, but in general, we feel that order intake continued to be very strong. Yes, we have a solid order intake and we that different divisions are having a slightly different kind of outcome, but in general, it is really strong and solid in our order book back is on the level that we are really happy with. Super. Thank you. And one just finally, when you alluded to 8% to 10% EBITDA margin with the energy segment, what time frame are you looking at? Well, we are now operating just about 7. And, we have a lot of work to do and we are security, it was mentioned that we have part of the the portfolio is assessed. We have some homework to do at the work before we we went together with period, you know, and the jointed together, the team is addressing, you know, how do we combine the different sites we have, which where should we operate, and all of that is to drive. Of course, the focus is really to get the margin up. And then also to drive growth. So I I I can't say a time frame, but, I think it is within within an, yeah, I will not say a time frame. Okay. Just to put a bit of flavor. So we have 2 different types of actions in there. The other part of the action is the synergy part, which you see already now in the results. And those ones are quicker to materialize. And then the second part is that adjusting of the offering part. And on that one, along, let's say that the weaker energy project is easily 18 to 36 months of duration. So when you are swapping the when you are choosing what you offer and what you tend to date tender in a better segment with better margins until you have all of the older potentially lower margin projects out, it takes normally a year or even a bit longer. This is now in general terms and just to put flavor also if you want to have more playbook to see how further energy turnaround went from 2% levels to the 8% levels. That took almost two and a half years, but that's also 6% So I really feel that Richard Pinnock and the team is doing a really great job. And I think we will be on the 8 plus with not too long down the road without saying exactly one. Thank you. Thank you. And your next question comes from the line of Ola Sodomatt from Kepler. Please ask your question. Your line is now open. Thank you very much. Just a couple of follow-up. Just to clarify, the organic growth, if Pogo has been consolidated from the first of January 2018, it had would added roughly 2% to current numbers. Could I get it right then? Yes, that is how I roughly calculated it. And you can see it also from the combined operations perspective in the report that then Peru has gone on year to date basis, SEK 400,000,000 for example, up and that it's not included in the numbers at all. So from organic growth has not been included. And now we are talking about pro form a basis. Yes, that's very good that disclosed that number. And if then coming back to the where we saw the weakest organic drop in the industrial and digital solution division, you're saying that you're not worried about the long term trend, but how should we view the coming quarters? Can you change assignment for an engineer that have been working for us without the motive to other areas quite briefly or does it take quite a while or do we expect Automotive to come back within a couple of quarters? So how should we be coming quarter? Yes, without disclosing as we don't exactly when, but of course, you are on the right things here. First of all, we believe that, we believe that part of this automotive we have seen is also related to some of the actions that the customer is taking. So we think it will get back to And on top of that, we have the ability to focus on other assignments for part of the people working muted. Now we need to remember that we are delivering more and more advanced service, which is a part of our strategy. So So but if you compare to a product company, we can we can be quicker in changing some of our services to other segments where we have a strong underlying demand. So for example, if you look on the digital embedded systems that we have a strong position in Of course, the team is now taking a lot of actions in refocusing some of that capacity to other segments. So I'm not so worried, as I said before, that we will be stuck in, in with too much capacity in automotive. But of course, when some of these big players take quick actions, even though we are fast, we will have some hits. That's how it works. Especially, I would say, on how to say the low end offering on the more professional service side, it can go very fast. But as I told said before, we also have everything from that offering all the way up to project assignments where we really offer competence that our customer do not And here, we are more a long term fixed, how to say it, and it's not so easy to just change. And then compared to many others, we have quite vast offering for we have solid growth areas if we just take food and pharma, we take defense or we take telecom and such. We have quite good capability to shift people also to these ones. And once they are growing and there's a solid demand, it definitely helps situation. Yes. But I still have to ask, and so I understand the development here in the short term, that have you seen the biggest hit in Q2? Yeah, I mean, I can't, of course, take into account everything that automotive, customers are planning to do, but we feel that some of the actions they have done, I feel that they have taken action for this year and that there are no, they are now executing on that. So we believe and hope that many of these actions have been taken and that we are now adjusting according and that we will see we will see a more stabilized and down the road, growing business again. That's our belief. But at the same time, we have plans if it would not be like that, then we need to take other actions. But if you look back on our communication, including the Capital Markets Day, Robert Larson Head of the Industry And Digital. Also on that, talked about some varying tendencies in automotive. So Of course, this has been going on now during the spring, also public announced that some of the big Swedish automotive clients have taken action to address their cost situation, affecting consultants as we have done. But again, we have so many different offerings and we are constantly also bidding on new offering, for example, in the perfect service model. Yes. And you asked a last question about the synergies. Yes, it's going very well, apparently. And How much about the run rate was roughly SEK 100,000,000 at the end of the quarter? How much was realized during the quarter? Is it possible to say? Well, now first of all, if we take the 99,000,000 second cost synergies, we had in end of Q1, we were at 25,000,000 second. That pretty much rolling into the Q2 numbers. But remembering that that is an annual run rate of 1four of that one probably SEK 6,000,000, then from the SEK 74,000,000 materialized during Q2, it was more than we had in the plan. And many parts of that month were materializing only on the last part of the quarter. And even the last weeks of the quarter. So those haven't had that big of an impact in 2nd quarter. They are rather starting to roll into Q3, for. And then maybe a final comment is that you see that the performance improvement in Peru is around 40%, fifty percent compared to previous year. That one is partly showing that the cost synergies are more visible in their And they are coming, but at the same time, some of the openings have been built or some of the services have been built now more into Stockholm compared to maybe in Finland. So then you can't discount at all of that one would be based on cost synergies. Thank you. Thank you very much. Very helpful. Thank you. Thank you. And your next question comes from the line of Johan Dahl from Danske Bank. Please ask your question. Your line is open. Yes, hi there. I was just wondering whether this problematic area which said to be existing in the sort of legacy award for prices. Have you in any way, has that caused you to alter your recruits plans for the current year, perhaps to go more carefully going forward? Not really. As I said, so you said, actually, if you look on the overall business as such, it's a few, few smaller areas actually you want. So I think We as we also write in the report, we are looking forward to continued growth in the second quarter. But of course, in this specific areas, we need to be careful how we use our capacity, not getting, having utilization problems or ending up with too much people not being on assignments. But if you look on the overall company with 17,000 employees on the $20,000,000,000 plus revenue rate, we are as offensive as we have been. But in some segments, you need to be selective and that's why also the operational model right now is that we have a clear structure on business areas and P and L units, and each of these, managers knows what's the plan? Is it to focus a lot on growth with a solid market or do you have to address utilization? But looking on the overall new one, it's we are as offensive in recruiting on a roll basis. Got you. And just looking on the Woolworth legacy operation, just looking at a second quarter. I mean, you're printing 150 basis point decline in adjusted EBITDA margin. To what extent was that a sort of surprise to you? Well, I think we could feel automotive as we felt already in quarter 1. And then you never know how much you would be hit from it. So that we knew what's coming. We have talked for quite some time about private housing going down and would it affect the architect business or not? I mean, we are not primarily focused on private housing as such, but we have felt maybe in the second quarter that the spillover effect has been coming in more in the second quarter. So I wouldn't say it was a surprise, you won, but still it hit us a bit. The Danish operation was maybe coming up a bit, during the quarter that we were not able to ramp up new assignments at the same pace as we were closing down few other ones and that affected the infrastructure a bit. So it's a mixture you want not super surprising. And then we need to remember that the WAF operation is coming from quite high levels on the infra side. We don't see any you know, significant weak weakening. It's a couple of pressure areas that we need to address, and we are addressing it. So it's a mixture you want. Okay. So just a final question on amortization of intangibles related to acquisitions, is that minus 60 here the underlying sort of level we should see going forward, yes, sir? I need to double check that one, but that's what the amortization levels were now on that, that's just 2nd, we have Maybe you also can get back. Thank you. And your next question comes from the line of Eric Alanda from H. C. B. Please ask your question. Your line is open. All right. Thank you. So first of all, just about a question regarding the residential market in Sweden. From previously, what I've remembered is that OZOF had just 1% of sales generated from Swedish, resident, residential, How is this spillover effect actually affecting you, sir, so that you talk about the weak market in relation in relation to that in your infrastructure business? Well, as we said, Eric, is that we still have that exposure, but we have done, as you know, over the last few years, acquired a few architects companies, which are operating under a stand alone brands and there's some very concern we have Gottlieb in Denmark, among others. And this company, and that means that we have an architect business, But what we have seen over the quarter is that while the residential buildings in Sweden have declined, there has been a lot of architects companies that now need to refocus in other areas. So that means that there are more architect capacity, you could say, available than maybe the demand. And that has had an indirect effect on the architect business. So I would say, if you look on our building operations, for example, that has not been affected, at all, due to that. Because that we are not focusing on the rest of that. It's more the Archer technician business. And I think you also said it's, if you look on the overall group, it's not a significant business at all, but just for infrastructure, it had some impact in the quarter. Yes. And then this is something that is a function of time. So people learn when you see that it goes dry. It is natural that you go to seek for other markets. There's a barrier of entry on every market. In architecture, it's quite high. So it's difficult to jump from residential directly to something else, but the more you have done, the more you can develop the competencies and so on so that you can make a transfer to another market. And that's all in actual. And obviously, we have exactly the same time to adapt to such market changes. So the further we go forward, the market stabilizes and normalizes. We are taking action, Eric, and I'm not so worried, But for just in this isolated quarter, we sent some effect of it. Thank you. Very, very clear. The second question is regarding the energy. Maybe I didn't listen good enough, but, I mean, why what is behind the negative organic growth within energy? And also, given that you're giving get tough for comparables now, the coming quarters as well, is this around minus 4% something we should expect in organic growth terms also the coming quarters? No, first of all, going back to the explanation that's how the Urban quote is measured. It is only former OS, which we are measuring. So if we take the total combined operations as if Peru would have been acquired earlier, we see a solid growth in there, but material part of the growth is actually in the Peru operations part and far smaller component optics growth is in the OAuth operations part. And then within, especially in the OAuth, what we have taken some difficult decisions on adjusting our offering which also is seen as a negative component. But if you see the total portfolio component, the organic growth is solid and stable. But splitting to be between former numbers looks slightly let's say, stupid, to be honest. But the methodology is built on a going concern perspective and not based on a platform acquisition that we have made. So the comparison is actually difficult. But if you just take the compound operation, then you see that the growth is solid. So I think what you need to remember, Eric, also before we went together further, we addressed the fact that what it was not performing. If you go back a year ago, we had really low numbers and we we knew that we had to cut out some of the businesses because we were not making a profit enough. So we had a plan to execute that. And that we are doing now jointly together in the new division then, but, then add. So that's why it looks like it does. But if you add on the pay report, then if you include that organic part, it would be solid. That's why we feel comfortable, Eric, that when we have addressed these topics, mainly in the work portfolio, we will have a solid growth and a good margin development in the annual division. Perfect. Thank you. And just like a final question. I mean, it seems when I started to follow this company, maybe 2 years ago or something, everything was very good in terms of market demand and so on. And it was until that until maybe 2 quarters ago, and then you started talking about the weaker automotive sector and so on. Now we have problems also with residential and architecture market in Sweden, but also in Denmark, do you think that the market is actually turning more sour overall? Or do you see that the market demand is near they are strong as it was before? Or can you talk a little bit about that? Yes. I mean, it's a valid question here, but think we need to if you read what we are saying, we are saying that if you look on the overall structure market in the countries you're operating, it is as strong as it's been. If you look on the industrial segments, I mean, there is a lot of have reached the peak or not, but we see a continued good demand. For example, if you look on Food And Pharma, for Digital Automation Solutions, we see Automotive as a stand alone segment having some adjustments during the quarter, and that we felt for a while. The residential building we have seen, now it affected a bit the architecture. The end of this strong process industry as we have not talked a lot about, now it's as strong as it's been and our offering is stronger than ever. Management consulting is doing well. So I we are sticking to what we're saying. The market overall looks continued very strong. A few segments, yes, and that we are addressing. So I think also when you referred to 2 years back, Well, yes, there was more probably less effect from, for example, private housing and now the multi players were running on the highest peak ever done. So, in these two segments, I think it was a different ball game 2 years ago, but I have to say that taking into account that we have done this in a complex integration theory, I'm so pleased to see that the segments where we're operating in the overall basis looks very promising down the road. And then you need to remember that we have been fearing if you now compare to market and you compare the performance we have been actually delivering very stable 9% EBITDA for past decade and we are still delivering very, very stable 9% EBITDA at the moment. So maybe it is a bit more related on how we comment to markets than what is actually happening on the market. So I think the numbers and you also said it, I mean, the report is not so easy to read due to the how you have to report, but if you take into account the period of business, as if it would be full owned by the full year, we would have a stronger organic growth and we would deliver to close to 9% EBITDA. And it's for us, it's not perfect all over, but it's a very strong base. Continue to and on top of that, we are taking out costs. So Based on all that, we are looking forward to an exciting second half year, with some areas we need to work hard on, but in a continued good market. Also to you so and have a great summer. Yes, you too. Thanks a lot. Thanks. Thank you. And we don't have any further seen at this point. Please continue. All right. So thank you all for listening in. And with that said, we also wish you all fantastic summer. I'm looking forward to getting touch soon again. Thank you very much for participating and have a great summer. That does conclude your conference for today. Thank you for participating. You may now disconnect.