Ladies and gentlemen, welcome to the Bravida Q1 report 2019. Today, I'm pleased to present CEO, Mattias Johansson. For the first part of this call, all participants will be in a listen only mode. Afterwards, there will be a question and answer session. Please begin with your meeting, sir.
Thank you very much, and welcome to the presentation of Bravida's Q1 report of 2019. Today, it's myself, Mattias Johansson, CEO, that will lead you through this presentation, and I also have support from IR, Peter Norström, to answer your questions, if needed today. As usual, I want to take the opportunity to explain our risk profile on slide two. First, and important to remember, is that we have a very low customer concentration with more than 55,000 customers. Second, we have a diversified end markets with many different types of customers in different markets and in many different locations. Last, we have small average contract size. Around 30% of our order is below SEK 1 million, and in total, around 70% are contracts below SEK 10 million in order value.
Turning to slide 3 and the highlights for the quarter. In the quarter, the net sales grew 10% to SEK 5 billion, and we had an organic growth at 5%, and M&A contributed with 3%. I'm very happy to say that we had growth in all countries, and service sales is developing in a positive way with 7% growth, and installation growth was 12%. We have a very good order backlog at the level at SEK 13.5 billion. Continued good momentum in order intake, and the order intake in the quarter was close to SEK 6.5 billion, and we had strong order intake in all countries. The EBITDA is up 11% to SEK 251 million, compared to SEK 226 last year, and the margin is stable at 5%.
The EBITDA margin is improved in Sweden, Denmark, and Finland, and in Norway, it's lower, the margin is lower due to write-downs in two old Oras project, as we have told you about earlier. The cash flow is strong, and from operating activities, it's SEK 440 million, compared to SEK 58 last year, and the cash conversion is 131%, and that is with the new IFRS principles. If we compare to the old principle, we are very high as well, and at 124%, which is something we are really happy about. The working capital is minus SEK 1 billion or 5.33% of the sales, and net debt is SEK 2.1 billion or 1.6x adjusted EBITDA.
If we exclude IFRS and compare to how we calculated this before, it's actually 0.9 x the EBITDA, so the debt level is low. On the acquisition side, we have done five in Q1 and another five so far in Q2, adding in total SEK 625 million in sales, and we think we still have a good pipeline to continue to do M&As. Turning to the market on slide 4 and the market trends, we still think we have a good market, and the service and installation activity is good in Sweden, and the main growth drivers are public investments in buildings and infrastructures. The declining production of residentials, mainly in the capital areas, is replaced by projects from other type of facilities, and the construction confidence indicator is at normal level.
In Norway, the drivers are mainly public investments and energy efficiency projects. Overall, the service and installation activity is good. We also can see the decreasing activity in residential construction, mainly in the Oslo area. In Denmark, there is a still is a good market. It's supported by public investments and residential construction, actually. Healthcare and education buildings are also driving the volumes. The construction volumes of commercial buildings increases as well as data centers. In Finland, as I said before, we think the market is stable. Refurbishment and public investment is at good level. We have a stable service and installation market. On slide 5, I will take you through the sales and EBITDA development for the group.
The sales growth was 10%, as I mentioned earlier, and 5% of this was organic, and 3% was contributed for M&A. We had sales growth in all countries and organic growth in Norway, Denmark, and Finland. EBITDA is improved with stable margin, and EBITDA is up 11% in Q1 to SEK 251 million, and the margin is unchanged at 5%. We had an EBITDA margin improvement in Sweden, Denmark, and Finland, and in Norway, it's lower, mainly due to write-down to two old Oras projects, as we have mentioned a couple of times before. On the next slide 6, you can see that our order backlog is at a very good level at SEK 13.4 billion.
It's actually up 24% compare year -to -year. The increase in order backlog in Q1 was close to SEK 1.5 billion. We have an increasing order backlog in Denmark, Norway, and Sweden. One, and as usually, we have some example of slightly big projects to mention, but mainly, it's very many small and mid-sized projects in the order backlog. We have one large order in Sweden, the Stockholm Bypass Project, a hotel in Copenhagen, at the Kastrup Airport, and one large hospital in Stavanger in Norway. I had mentioned it before, but I think it's important to say that the service is not included in our order backlog.
That means that half of our sales, 46% of our sales is service, and they are not reliable on the order backlog in the same way. Now turn to slide 7 and the acquisitions. We have done 10 bolt-on acquisitions so far in 2019, adding SEK 625 million in sales. Approximately SEK 200 million of these are in Sweden, and SEK 430 million in sales is coming from Denmark. We have a continued strong pipeline, and we are doing the acquisition, attracting multiples. No change in the pipeline or in the prices or multiples we are paying for the targets. Turning to slide 8 and the financial performance for the group.
We had a net sales growth 10%, as I said, organic growth 5%, EBITDA increased by 11%, and the margin is unchanged at 5%. The finance net is SEK -24, compared to SEK -9, and there are some negative currency effects and some effects from IFRS 16 as well. Earnings per share increased by 6%, and it's +15% the last twelve months. On slide 9, I will take you through the performance of the different countries, and we start with Sweden in nine. In Sweden, sales growth was 3% in the quarter, and we had stable activity in both service and installation, and the margin is up to 5.6%, and this is explained by improved gross profit margin.
The market is still good, and the order intake is 39% up year-on-year, and many small and mid-sized orders in the order backlog, and the order backlog is up 49%. On the next slide, we have our second largest market, Norway, and I'm on slide 10 now. Sales growth 15% in the quarter, very good activity in service and installation, and as I said before, we have some write-downs in two low-performing projects in Oras that had a negative effect on the EBITDA margin. These two projects will be closed and finalized in the quarter. We will have some impact in the second quarter as well. After that, this will be ended, and wouldn't have any impact on the Norwegian margin after the second quarter.
The EBITDA margin stops at 3.5% for the quarter. The existing or the originally Norwegian business is at the same level as last year. This is only due to the Oras project I mentioned. We have strong order intake, 26% up year -on -year, as well in Norway as well as in Sweden, we have very many mid-sized orders, we have one large order in the hospital in Stavanger. The order backlog is down 2% year-on-year, increased in Q1 by SEK 424 million. As you have learned and seen, the order intake or order backlog can vary from one quarter to another. Sweden was up in Q4, slightly lower in Q1, the opposite in Norway.
This is quite natural. We have a seasonality in this as well. The order backlog is at good level in Norway. Turning to the next slide and the update on Oras. I mentioned the projects, the two projects we have had some problems with. I think it could be well-spending time to have an update on Oras and how the situation is in that acquisition. Before we bought Oras, they were the largest player within service and installation in heating and plumbing in Norway. We had a very, actually, very weak position in heating and plumbing in Norway. This was one of the reasons why we wanted to do this. After the acquisition, Bravida has the position one in the market, which is important for us. We can now offer cross-selling in many locations regarding both service and installation.
We have synergies from procurement and cost synergies as premises and group functions, of course. All in all, with these write-downs and the price we paid for Oras and loss carrying forward, we have some taxes, we have paid 0.70 x of the sales, and I think this is an extremely good acquisition. I just wanted to mention that. We're really looking forward to develop Oras together with the rest of the Bravida team in Norway. Turning to slide 12 and Denmark. 90% in sales growth, good activity in both service and installation. EBITDA is improved by 24%, and the margin is up to 5.2%. This is very much due to relative lower administration costs. The order backlog is at strong level.
Order intake is +24%, and the order backlog is up 7% year-on-year. We have as well as in Norway and Sweden, we have very many small and mid-sized orders, and then I mentioned the hotel at the Kastrup Airport in Copenhagen. On slide 13, we have our smallest market or segment, which is Finland, but they had a good growth, 34%, explained by both organic growth and the acquisition of Hangö Elektriska. Hangö was acquired on the 1st of October, 2018. In total, the EBITDA was improved SEK 3 million, and the margin was improved to 0.9% in Finland. On a running basis, the last 12 months margin for Finland is 2.1%. The order intake was up 24%, and again, many small and mid-sized orders.
The order backlog is down 9% in the quarter. Now over to the net debt and the cash flow on slide 14. Our strong cash flow, as I mentioned before, was 131%, has taken down our debt level to 1.6 x LTM EBITDA. This is the calculation with the new rules for IFRS. If we should compare how we have calculated this before, it's actually down to 0.9 x LTM EBITDA. To the bottom left, you can see that our operating cash flow was SEK 1.4 billion, which is very good. There are many numbers that is good in this report, but maybe the cash flow is the best. On slide 15, we have the financial targets.
We have said that we will grow this business 10%, a mix between organic growth and acquisitions. The margin on 7% is another financial target. We make it slightly different for us when we continue to do M&A in the pace we're doing for the moment, but we think that we can over the time reach this target for the whole group. The cash conversion and the target for that is 100%. This quarter is not in line, it's very much above the target. We have said that we want to pay out at least 50% on the net profit. We are slowly getting closer to that target.
We have increased the dividend with 29% this year, and I think it was 26% on average, since we did the IPO. The net debt target is 2.5 x the net debt EBITDA, and we are below the target for the moment. On the next slide, you can see what we have done the last years. I think it could be great to actually look back what has happened with the company. We have a business model that creates a lot of cash, and this cash flow can be used to consolidate a very fragmented market through M&A, and also pay dividends at the same time, as well as we're taking down the debt level. This is, of course, very good. We have always a focus on margin.
Margin is always more important than volume, but we have proved that we can grow our business in a balanced way with improved margin as well. We have doubled the volume the last couple of years and kept the margin on high level. We have improved the margin as well, at the same time as we have grown the business. On this next slide, I will summarize this presentation. A good increase in sales, 10%, organic growth was 5%, and the installation order backlog is at record level, SEK thirteen and a half billion. We have a continued good business momentum for service that will support the organic growth in future. The EBITDA margin is stable at 5%, and it is improved in Sweden, Denmark, and Finland.
Phasing out two low-performing projects in Norway in Q2. We have the M&A execution on track with a healthy pipeline. We have done 10 acquisitions so far in 2019, adding SEK 622 million in sales. The net debt is 1.6 x the EBITDA, and I mentioned the IFRS effect a couple of times now. The operating cash flow was strong at SEK 1.4 billion, sorry. The cash conversion is above the financial target of 131%.
Uh, and before I, um, uh, open up for question, uh, uh, I have learned in this business that it's important to just mention the Eastern, and, and I, I think you all know this by now, but, uh, we are slightly- we are r eliant on the amount of working days, and especially in Norway, and the Eastern in, in this year is actually affecting or impacting the second quarter. Uh, and, uh, we will, of course, see that hit the numbers in Norway, but not more dramatically than usual. It's, uh, just the same as it always is. So thank you very much, and I think we can open up for some questions now.
Thank you. Ladies and gentlemen, if you do have a question for the speakers, please press zero, followed by the one on your telephone keypad. Once again, to register for a question, it's zero, followed by the one on your telephone keypad. One moment for the first question... Thank you. Our first question comes from Henrik Mawby from Nordea. Go ahead, your line is now open.
Thank you very much. Starting with Oras, could you maybe quantify how much in figures the two bad projects, say, impact the numbers in Q1? How much do you expect them to impact numbers in Q2 when they are completed? Could it be that the figure is higher, considering we are approaching completion of those projects?
I think, you can say that the difference in margin from this year compared to last year is actually close to everything is coming from that, those two projects in Oras. I would say that the impact in Q2 would be the same.
Okay, super. Do you have any more old Oras projects in the backlog now, in order or is everything behind us? Also, what level of profitability is Oras operating on now when it gets new projects?
Yeah, I would say that this is the last projects from the old order backlog. Those two projects were started quite late as well, so that is why it's happened now. One of those projects started actually last summer, so that was very late in the order backlog. Otherwise, we have implemented the same control regarding new tenders in Oras. We have the same tendering meetings, the same levels of limits where they are allowed to submit tenders as we have in Bravida. In and in some one branch, we actually have a tendering office, where we are steering and signing all tenders, not only slightly big ones, but we are actually controlling and signing all of them.
That's related to that branch that have had some issues in this matter now. We have said before that we think that Oras will be around 2%-4% in 2019. If we exclude those two projects, I see no reason to change that estimate for the future.
Okay, super. You have been quite acquisitive this year. I mean, you bought 10 companies already, versus I think it was 12 last year in total. I think also you said in the last conference that you're strengthening your M&A team. Should we expect much more M&A here going forward? Or what is your reasoning here?
I think, first of all, it's always a process when you do an acquisition. It's two sides who need to agree. As you said, we have strengthened the M&A team, which means that we want to do more than we have done before. I would say that 10 so far in this year, it doesn't mean that you take 10 times 4, it makes 40. We want to do more than we have done before, but it will vary from one quarter to another. We'll continue to do M&As, yes.
Super. It's been a while since we talked about pricing and wage inflation. Could you update us a bit on the trends there? Also considering maybe now that the market isn't growing in the same pace as it maybe did two years ago, what kind of effects can we, can we see from those two?
If we start with the market, I would say that we don't see any differences in the market today as compared to last quarter. The changes that we have seen for a while is that there are lower demand for residentials in the Stockholm area, which you know is a small segment for us. No change in that. We can also see that those that market is replaced by renovation. Our market is. We usually talk about the macro, but our market is very local. We have 300 addresses or 280 different branches, which means that the local market is important for us, but no changes in the market.
Now we only have two of the big four construction companies that has to report, but what we can see from those companies' order backlogs, they are quite okay or good, even in the first quarter. No changes in the market. Wage inflation and no changes as well. We are in a market where we have a union, central agreement in unions, and everyone get the same increase regarding the salary side. No changes, and we think we have been doing the new negotiations on the supplier side in a decent way as well, during this spring. I think this is status quo.
Okay, super. Finally, just on the calendar effect, in Q2, you said it's a normal level. Is it like 1% on sales or so we should expect that you get hit?
In Norway, I would say that, I guess one week is off. If you count the working days, I think that's a good way to estimate it, actually, and in Sweden. Finland and Denmark, you don't have the same effect, more than you have some red days, of course. In Sweden, you might have, the red days plus, maybe one or two days, on top of that. You have a week plus a day off, in Norway.
Okay. Yeah, super. Thank you. Thank you very much. That's all for me.
Thank you very much. Thanks.
Thank you. Our next question comes from Lucas Ferhani from Deutsche Bank. Please, your line is now open.
Hello. My first question would be on the competitive environment in Sweden. Like it was said before, the market, part of it is slowing down a bit. Also, I would say Caverion might be coming back as more of a competitor. Do you see that response overall in the market? With the slowdown, do you see any issue in terms of pricing?
Actually, not or no on all questions. I think Caverion is acting quite rational. They are focusing on, as I see it, I don't have the correct answer, of course, but my feeling is that they are focusing more on margin today than they did a couple of years ago. The environment in total, I think that's the same. Of course, there are some competitors who have been doing residentials and trying to do other things. We are quite small in the Stockholm area anyway. The market is still big enough for us to be able to find the projects in the same way or to the same extent as we have done before.
Okay. Again, on the leverage, it's at a very low level. Historically, you accelerated on the bolt-ons. Are you also looking at potentially making a larger deal, the size of Oras, for example, something a bit bigger? Also, if that's not the case and you continue to do bolt-ons and the leverage stayed around 1 x, would you consider starting a buyback program? Thanks.
First of all, I think the bolt-on acquisition is something we prefer to do. Of course, one reason why we think it's good to take down the leverage is, of course, that we are get ourself into the position to do a slightly larger acquisition, if we think it's a good way to develop Bravida as a company. We are ready to do that if the opportunity comes. A buyback program, we have, of course, discussed with our biggest owners, what they want us to. What they prefer us to do with the cash. As long as we can buy on those, buy acquisitions or do acquisitions on the multiples we are doing today, which means that that's lower multiples that we, than we actually buy ourselves from.
If we buy our own stocks, it's more expensive than buying other companies. We prefer to invest, continue to invest in new acquisition before buyback program. You have the opportunity maybe to give some extra dividend, but I think that's up to the board to decide as well. We think, me as CEO, think it's good to be in the position so we can do slightly bigger M&A if the opportunity comes as well.
Okay, thanks. The last one, again, on Sweden. The organic growth, in this quarter, was maybe a bit disappointing. Do you expect it to accelerate a bit in the rest of the year, or should we see pressure continue in 2019? Thanks.
It's always hard to forecast the organic growth, but what we know is that this always varies from one quarter to another, depending on how the large projects is finalized, executed, and produced, where, how the timing is in those projects. What we can see is that we have a good order backlog in Sweden, so I think that we will have a good performance in Sweden in 2019, definitely. If that means 5% organic growth, 0% organic growth or 3%, it's hard to say, but we will have a good year in Sweden in 2019. That's something I strongly believe in.
Thanks a lot.
Thanks.
Thank you. As another reminder, to register for a question, please press zero, followed by the one on your telephone keypad. The next question comes from Robin Nyberg from Carnegie. Please go ahead. Your line is now open.
Hello. A couple of questions from me. First, when do you expect to reach critical mass in Finland? Is it kind of two- to three-year journey for you? What critical mass level do you refer to?
Good morning, Robin. Yeah, I, we have said before that critical mass is somewhere between at least SEK 1.2 billion and SEK 1.5 billion, and I think we are in the bottom range of that span now. Of course, it's getting better and better the closer we get to SEK 1.5 billion or even above SEK 1.5 billion. We've seen the margin development in Denmark, for example, and I think one reason why we have improved the margin the last year is actually because we have actually reached a volume that is around SEK 2 billion instead of below SEK one and a half billion in local currency. I think we are in the bottom range. SEK 1.5 billion is definitely better.
Then we will reach this in a mix from organic growth and acquisition, and of course, we need to do more acquisitions. That we can't grow the business that much organically without taking too high risk. We want to do acquisitions as well. When we are ready to do the next acquisitions in Finland, we will do that. It's very important for us to consolidate and integrate the acquired company that we did last year first. Soon we are ready to take the next step, and we're looking forward to it.
Okay, thanks. One question related to organic growth. You had quite good development also in Q1, and the backlog is at good level. Should we expect kind of similar level for the full year? I know it's quite difficult for you to forecast that, but could you give us some kind of indication?
No, but I think first, margin is always more important than the volume. I think you need to balance this because if you focus too much on the growth side, you take risk that actually impact the margin, which is something we don't want to. I think we will have organic growth, definitely. If it's, as I said earlier, if it's 2%, 3%, or 5%, I don't know, but 5% is something we have been delivering the last years, which also is a quite tough target. We haven't changed the financial target yet, so we are actually positive about the organic growth.
As said, it's hard to estimate, but if you look at the long-term perspective, we think we can continue to grow the company through both organic growth and acquisitions, of course.
Okay. That's all from me. Thank you very much.
Thank you, Robin.
Thank you. There appear to be no further questions. I'll return the conference back to you.
Okay. Thank you very much, and thank you for listening, and thank you for the questions. I hope you get a beautiful day out there. Thank you very much. Bye-bye.
Thank you. This now concludes today's conference call. Thank you all for attending. You may now disconnect your line.