Good morning, everyone, welcome to this presentation of Bravida's Q2 2023. As always, it's myself, Mattias Johansson, CEO, who is going to take you through the presentation together with-
Åsa Neving, CFO.
Welcome, yeah, let's start. The agenda, the one of you who have followed us for a while, recognize this. We start with our Nordic, the position in the Nordic market, take you through the Q2 numbers. Åsa will present the different countries' performances, and then we summarize and ask your questions. Our position in the Nordics. We are continuing to grow our business. Today, we are 13,700 employees. We actually, after this quarter, have close to SEK 29 billion in sales, a lot of recurring customers, and a big part, the major part of our sales is coming from small projects and small orders. We are and want to stay as the leading Nordic provider of sustainable technical solutions for buildings.
We are a one-stop shop for our customers. Our customers can use us from early phases in project planning, through installation, the new build, construction, et cetera, and through renovation, service, and maintenance. We can offer all different disciplines that actually all our customers need in their premises, houses, buildings, et cetera. We are an enabler to help the society to transform with lower energy consumption, electrification, other sustainable services, et cetera. Our position is stable, and we are definitely in a very important space for the future as well. This is why I guess you are a holder of the Bravida shares. Fantastic track record. You can see it seems like we all have been a bit spoiled the last 2 years.
The growth have been extreme high. We have gone for the last 2 years from SEK 22 billion in sales to close to SEK 30 billion, with very stable margins and on average, cash conversion at 100%. This is, of course, something we are planning to continue to do. We can continue to do acquisitions, we can continue to gain market shares in the new markets, such as energy renovation, energy efficiency, electrification, et cetera. What does Nordic leader in sustainable technical solutions actually means? Of course, that we have the core business, but we're also working with charging stations for electrical cars, solar panels, et cetera, taking down energy consumptions.
All customers have access to our entire offering, and that is an advantage when the systems are getting more and more complex than integrated into each other. We have life cycle perspective for every building, and we are and want to stay as the industry leader in sustainability. The quarter, we start with the market outlook. It is, of course, quite challenging, difficult, to do any forecast about where the market is heading. We still see an overall good demand for service and installation, except for new build residentials. Bravida has a quite low exposure to new build residentials. This quarter is actually lower compared to the last quarter. It's down to 8% of the total sales today, still we are managing to grow our top line.
At the same time, as we see that there are some challenges in the market, we see price pressure in the market due to the fact that there is a low demand in some areas. At the same time, we can see some cost inflation, both on material, still, on the material side, even if the raw material prices is going down a bit, we can see, I guess, the producers have increased costs for energy and labor, which gives us higher prices. We also see a growing demand, and this is on the positive side, a growing demand for sustainable and energy-efficient solutions. Increasing interest rates, of course, and inflation leads to delays in some investments, and it will mean pressure on the margins in the whole industry, as well as for Bravida, of course.
At the same time, as we talk about the bit uncertain market, we can see that the order intake, if you have read the numbers, is really strong, which gives a quite mixed picture of the current situation. The highlights for the quarter: 5% organic growth, and we are growing in all countries. We are growing organically in all countries. The net sales is coming down a bit in Norway, due to some currency effects. We are growing 6% from acquisitions. We can see that we are growing in both service and installation, and order intake is improving in Norway, Denmark, and Finland, and in total, +14%, which is really high numbers if you compare to historical numbers. If you compare to the last quarter, it's somewhat lower, but still, it's very high number.
We have had some margin, a lower margin in the quarter. It's 5.6% compared to 5.9%, and it's explained by three factors, as I see it. First of all, we are investing in our future capabilities. We are investing in new digital systems, we are investing in some new resources to be able to catch opportunities in the market. Then, of course, we have struggled a bit with the cost inflation on material, mainly. We have handled that situation really, really well throughout the pandemic and the last year, but this quarter, it has started to leak, a bit, and we haven't been able to transport all the cost increases to the customer this quarter. I guess our estimate is that we will have some pressure on the margin in the coming quarters as well.
The third part is that we have been growing too much. 14% growth in the quarter, somewhat lower than some of you expected, but still 14% is a really high number if you compare to the history. I'm going back to this slide again. We have been growing for many years, but the last 2 years, we have been growing much faster than before. This has cost us a little bit too much because we haven't been able to do the sourcing in the way we want to do, and we have also been forced to hire subcontractors and other resources in a little bit too inefficient way.
In the end of the day, the most important thing is, of course, that earnings per share is growing. Earnings per share is up 5% in the quarter. High growth is actually winning above slightly lower margin this quarter, meaning 5% extra on earnings per share. Our strategy is that we want to have a higher focus on margin than on growth. That is something we want to come back to. Cash flow is improving in the quarter, SEK 134 million compared to SEK 62 million. The injury is very happy to say that they are improving. They are down with 2%. We can see a really strong improvement in Finland, but also in Norway, which have, and I come back to that, Norway has extremely low, good numbers.
The group, you see in the net sales in the quarter is SEK 7.3 billion compared to SEK 6.4 billion. We are growing almost SEK 1 billion in the quarter with a stable margin, and that is the way I think you should look at it. In total, the order backlog is around SEK 17 million, SEK 16.5 billion, compared to SEK 17.5 billion last year. Still a very strong and stable order backlog. The order intake is up a lot, SEK 7.4 billion compared to SEK 6.5 billion. Quite positive signs in the order intake in the quarter. That means an EBIT on SEK 407 million compared to SEK 376 million.
You have a 24 + 7, SEK 31 million higher EBITA this quarter compared to the Q2 last year, and year to date, we are on SEK 777 million compared to SEK 671 million. We are growing our EBITA with SEK 100 million+ year to date compared to last year. Order backlog down 5%, order intake, again, up 14%. We have increase in cost for new systems, as I told you about, at SEK 31 million compared to SEK 22 million, and those initiatives are very important for the future. We have rolled out the new procurement system recently in Sweden and Finland. It's working very well, and that is now we start to harvest from those investments, and that will, of course, benefit to a better company in the coming years.
The net sales performance, you can see this bridge in the quarter, organic growth adding SEK 330 million, M&A close to SEK 400 million. We have some currency effects on SEK 150 million. That is what takes the sales from SEK 6.4 billion up to SEK 7.3 billion. Growing in both service and installation, a little bit more on installation than service, which is a mix that we don't want to see, but positive to see that we are growing the service business with 12%, and that is actually showing that the demand for service is strong for the moment. Yeah, I said, acquisition 6%, it's the first quarter in a while where the acquisition is adding more than the organic growth.
When we're talking about the organic growth and acquisitions, we have quite tough comparable numbers compared to last year's. We have been growing a lot, the last 12 months, so that's something I think you should have in your minds going forward as well. EBITA, 5.6 compared to 5.9. We can see that it's improved in Sweden, it's unchanged in Norway, and lower in Denmark and Finland. We are not happy with the performance in Denmark and Finland this quarter. There is actually some things that we could have done better, and that is, of course, something we should work with going forward. We will strengthen our way of working with profitability in existing business, in combination that we want to improving our way of being more proactive in our sales efforts as well.
In the quarter, the EBITA margin is affected by high inflation, of course, also the high growth rate. I've said it before, when we are growing as fast as we have been doing, it is actually tough to do that with increased profitability. We have been growing too much. We have preferred to grow slightly slower and instead have grown the margin a little bit more. In the last quarter, we haven't really been able to transport all the cost increases to the customers, and that is the first quarter in many, many years that that has occurred. Non-recurring costs for implementing the new digital solutions and IT systems is SEK 31 in the quarter. It's SEK 56 year to date.
Important investments, of course. We can see the forecast for the full year regarding those investments are somewhere between SEK 115 million and SEK 125 million. Of course, EBITDA is affected by investment in new capabilities. We're hiring people that are not adding any volume today. Of course, sustainability, our efforts regarding sustainability and a modern IT platform according to plan, is also something that add to the cost side. This is a slide that are showing what the initiatives actually means that we are talking about. We have some increased recurring costs for strengthening the IT platform, digital development capabilities, increased sustainability focus, and improved HR support. We have some initial costs for investments in the new businesses, and that is regarding technical facility management, automation, and energy management.
This is pretty much about hiring new resources to be able to deliver the future demand for the customers. This is expected to add positivity to the margin in the end of 2023, so no changes regarding that. We have some non-recurring costs connected to the new digital systems. That is procurement management, project management for all the initiatives like CRM, technical facility management, et cetera. Order intake, as you can see, order intake last 12 months are going up. The trend is positive, which is gladly, of course. We have stable order backlog in Sweden, and it's growing in Denmark and Finland.
You can see that the order backlog have been very stable for the last 2 years. We are happy with the actual situation in the order backlog, and it's more about actually execute on existing orders on the installation side. That is something we think that we will handle, of course. Some challenges regarding the cost increases to transport them to the customers. There will be some smaller pressure on the margin the coming quarters as well. Sustainability. As I said, a couple of minutes ago, the injuries is going down on group level with 2%, which is, of course, something we are very happy about. You can see to the right that the improvement is best in Finland, going from 16 down to below 12, but outstanding is Norway.
They are close to 2 and have improved from 3.5 to 2.1, and that is, I guess, pretty. I guess that is some of the best numbers in the whole industry. We also have actually replaced fossil-powered vehicles year to date with 600 electrical cars, which is something that will add positively to the KPIs the coming years. We see that this is meaning in the change in CO2 emissions from vehicles from 0.096 ton. It's easy to say it in kilogram, maybe. 960 kilos compared to 820 kilos instead, per SEK 1 million in sales, and that is a decrease with 15%.
We can quite often see when we're doing acquisitions, that we are actually also acquiring a fossil-driven car fleet or fleet, and that is something that we are adding positively to the whole society when we are putting them into our car policy, and over time, changing those fossil cars to electric cars as well. Acquisitions. I've done 10 so far this year, adding SEK 345 million in sales. We have a smaller one signed in Q3. We definitely see a strong pipeline, and we will continue to do acquisition. We have a strong balance sheet, as you know, and this is a way of creating value for you as a shareholder and investors, of course, and we still see acquisitions at attractive multiples. You will probably ask about if the pipeline is the same as before.
I would say, for the moment, it is definitely at the same level, at least. It's a lot of interesting discussions going on. The multiples hasn't gone down. It's still at the same level, very stable. On the other hand, it hasn't increased very much the last year. We see companies that are willing or forced to actually divest some parts of their businesses, and we have been contacted more frequent the last quarter by companies who is asking us if we are interesting to buy. Let's see. It's about timing, it's about the quality of the business, it's about our own local footprint, and it's about price, of course. Regarding acquisitions, it is something that we will and can continue to do.
Now it's time for Åsa to take you through the performance by all the countries. Please.
Thank you, Mattias. As always, let's start with Sweden, as this is our largest country. In Sweden, we have grown the top line to SEK 3.7 billion. That is a growth of 12%, and the growth is coming from both service and installation. We've had an organic growth of 5%, and acquisition has been growing by 7%. EBITDA has grown to SEK 248 million, and that is an EBITDA margin of 6.7%. That has increased, even though we even also in Sweden, have had some challenges with high cost inflation, we've managed to improve margin from 6.5% to 6.7%. The order intake is -6%, and this decrease is coming from installation.
We can see that the order intake is pretty unevenly distributed throughout Sweden, where we have a good intake in the mid and northern part of Sweden, and where we have a decrease in the southern part. The order backlog is -8%, but at SEK 8.7 billion this quarter, but still on a good high level. Moving on to Norway. Norway has if you're looking in local currency, it has been growing in growing the top line with 5%, but the currency effect makes it negatively -1%. Norway is growing in services. The organic growth is 4%, and growing from acquisition by 1%. We have to remember that Norway had a really strong organic growth last year with almost 30%. Strong comparable, comparative figures, but still growing this quarter as well.
The EBITDA margin is unchanged to 5.7%, and this is a good performance. Also here, we have had tough some tough challenges with cost inflation. Order intake is +6%, and it's an increase in services. The installation projects are decreasing, and this is according to plan. We want to be more restrictive here when we're taking on projects, and because Norway has been growing really fast, and we haven't really been able to keep up with the margin. This is according to plan, and this is why the order backlog is down than -26%. Denmark. Denmark had a high growth, 26%. In local currency, it's 15%, and the growth is coming from both service and installation.
The organic growth is 6%, and from acquisition, 9%. Also, Denmark had really strong comparative figures in 2022, with a bit more than 20%. The EBITDA margin declined to 4.0%, and this is due to some project write-downs that we have had, and that we have had also the previous quarters, and that we talked about before. The order intake is +72%. Then you can say, "Yeah, well, you want to take down the growth because you have been growing so fast, and then you still have a good order intake." We do actually, we are being very restrictive on what kind of projects we take on.
Here we have one larger sprinkler project on around SEK 230 million, which we are very comfortable with, and we also have a couple of projects with DSB, so the Danish railway company, amounting almost to SEK 240 million in total. This is a customer and a region that is producing these projects that we really believe in and have comfort in. Order backlog is then increasing by 13%. Finland, our smallest country, is growing sales by 33%, and it's 22% in local currency. Here, the growth is coming from both service and installation. The organic growth is +8%, and from acquisition, +14%. In Finland, we had a lower margin on 3% compared to 5% last year. We are not satisfied with this.
Here, we have had some project write-downs, not been able to pass through costs, to the extent that we have been wanting to. Order intake is +13%, coming both from service and installation, and a strong order backlog on +49% year-over-year. That is our countries. Moving into our financial position. If you look at the middle here, you can see the operating cash flow. It has been improving, as Mattias said, during the quarter to SEK 134 compared to SEK 62 last year. Year-to-date, it's still on a lower level, SEK 193 compared to SEK 404. This is due to a lower or a worse working capital compared to last year.
Looking at our financial position on the left-hand side, you can see that we have a cash balance of SEK 879 million. We have loans, it's term loans, SEK 500 million RCF, we're drawing SEK 200 million, commercial papers on SEK 1.5 million, that's adding up to SEK 2.2 billion. We have leasing on SEK 1.1 billion or SEK 1.2 billion. Net debt is SEK 2.5 billion, the LTM EBITDA is SEK 2.3 billion, that leads to a net debt LTM EBITDA ratio of 1.1. On the right-hand side, you can see the finance structure that we have and the loans that we have. Last, our financial targets.
As you know, we have an EBITDA margin target of more than 7%. We are right now on an LTM figure of 6.3%. We still believe that we will reach this target in not too far time, but It will be difficult to reach it this year with the challenges that we have. Cash conversion is 69%, so a bit lower than we want it to be. We want it to be on more than 100%, and this is due to a low due to the working capital. net debt/EBITDA ratio should be below 2.5, and it is on at 1.1.
Sales growth is 20% year to date, and compared to our growth target of 5%, and the net debt EBITDA we paid out was about 50% for this year. I will stop there, Mattias.
Thank you, Åsa. Yeah, when you can see the financial targets, you can see that we think some kind of optimal balance between the margin development and the sales growth is 5% sales growth, and we have been way above this.
Yes
... a couple of quarters. Of course, that is one reason why we are struggling a bit with the margin. Still, EPS is going up, and that is the most important for you in the end of the day. A summary. Sales increased in all countries 14%, compared to the target of 5%. Organic growth, 5%. Organic growth in all countries. We are growing from acquisitions with 6%. We have talked a lot about the margin. I guess we will get some questions about that as well. It is affected in the quarter by high inflation and the high growth rate as well. Some investments, of course. We have not been able to pass on all those costs to the customers in the quarter.
We have handled that really good for a number of quarters, years, actually, through the inflation, logistic challenges, et cetera, but now it is, it wasn't possible. I said the cost to develop the business as well is, in fact, impacting the margin, and earnings per share is up 5%, injuries is down with 2%. Before we open up for questions, it is, after the summer, finally time for the production to start in the Stockholm Bypass as well. You have been asking that question a number of quarters before, but after summer, it is starting. By that, we are opening up for some questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Karl Norén from SEB. Please go ahead.
Yes, good morning, Mattias and Åsa Neving. One question here on the organic growth. Quite a deceleration from previous quarters. Now, now we're seeing tougher comparables year-over-year again. I was wondering if you think organic growth could be negative already in Q3. What do you see there?
It's of course a good question, good morning, by the way. It's tough to say, high comparable numbers, definitely. That, the combination that we have tried to be a bit picky about what kind of customers and projects, et cetera, we are willing to work with. The high comparable numbers, in combination with our actually, what to say? That we have been trying to take down the growth a bit, of course, can mean that we have a slightly negative organic growth in the quarter. Could be the case. We really don't know, it should still receive stable order backlog. It shouldn't be too steep, too much down at least. That's the best answer we can give, I guess.
Okay. Yeah. My question: You started to mention increased price competition already in Q1, maybe if you look on the margins, maybe we saw already some of that in Q2. Do you expect the price competition to be even more fierce here going forward, or are we kind of now in a, in a tough price competitive market or how is it?
Yeah. I think that it can, of course, be even worse, but I also think that the players who have been trying to move from the residential market into new markets, they have done that for a while. It's still an okay demand overall, but if the overall demand will go down, I guess that will have even more impact on the prices. I think as we see today, the market is as good or is good enough to make us do the right choices in what customers we want to work with and how we want to price their projects and services, et cetera.
Our strategy is that we are pricing the way we think the different services should be priced, and then if we're winning them or not, that is up to the market to decide. If we are not winning enough business to the right prices, then we are scaling the top line down. We are not there today, I guess. We have some places already now that we are scaling down, but that is the same case in all years. Now we are searching for problems more than we are looking for more problems today than we did two years ago. I think there can be somewhat higher price pressure, but not very much more. It's very difficult to say, of course.
Okay. If we just look on Q2 here, is it possible to give any indication of the price impact on the growth? Was it slightly positive, you would say, or?
We haven't.
We haven't looked at Q2. We had around 4% or 5% in Q1, so I would believe that.
Similar to that level?
Yeah.
Yeah.
Similar to that.
Yeah. Okay.
Not, not more-
Just one last... Okay. One more question on the order side. I think order was quite strong here in the quarter, and just wondering about the Denmark order intake, which was strong, even adjusting for the sprinkler order you mentioned, and maybe other, the DSV one. Can you say anything about the underlying market in Denmark? Is that similar development in, as the other Nordic markets, or is there anything standing out there that's where we're?
Yeah, the million-dollar question. We hear that the market is going down everywhere. We are pricing more cautious. We are pricing at the same level as we have done before, even a little bit higher, and still the order intake is this high. It must mean that the market demand is quite strong in the market.
Yeah, it must.
Yeah.
I mean, if you take out those projects that I mentioned, it's mostly, smaller projects around, you know. They have a couple of between SEK 10 million and SEK 20 million, but, yeah, so it's, it seem to be a good demand.
Yeah.
Yeah. Sounds good. Thank you for answering my questions, and have a good summer.
The same to you.
Thank you.
Thank you so much.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
No more questions, or are there?
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you so much. It seems like we covered some of the questions you normally have in the presentation. Yeah, thank you for listening. We still think that we have a solid order backlog. We are increasing the earnings per share with 5%. Let's see what the market will bring, but still, quite okay demand, and we are looking a bit positive to the new market trends regarding the Green Deal, energy transformation, energy efficiency, et cetera, in the market. We hopefully will see an even better demand for that kind of services when the energy price is going up in the, yeah, after the summer again. By that, I think we say thank you so much.
Yeah, have a nice summer.
Have a nice summer. Thank you so much.
Thank you.