Hello, ladies and gentlemen, and welcome to the Bravida Q1 2018 report. Today, I'm pleased to present Mattias Johansson, CEO. For the first part of this call, all participants are in listen only mode, and after, it will be a question and answer session. Mr. Johansson, please begin.
Thank you. Good morning. Welcome everyone to this presentation of Bravida's Q1 report. Today, it's as usual, myself, Mattias, and Bravida CFO is Nils-Johan Andersson, who will take you through this presentation. On slide three, you can see to the right that our LTM sales is now close to SEK 18 billion, and adjusted EBITDA is SEK 1.101 billion. Our share of large projects is now 7%, which is a low figure and is explained by our increased service and our order backlog that consists of mainly small and medium-sized contracts. This is important and will support our low risk profile in the future as well, that we have in Bravida. As you remember, we have small average contract size, and that is explained by a lot of service.
We have a diversified end markets and low customer concentration. Turning to slide 4 and the Q1 highlights. We had an organic growth despite the Easter at 1%. The net sales grew 11% to SEK 4.557 billion. We had growth in all countries. Growth came from both the service and the installation at 11%, respectively. Our order momentum is strong. Order backlog is once again at record high level, at SEK 10.875 billion. That's up 20% compared to last year. We have continued good momentum with order intake +9% to close to SEK 5 billion as well. EBITDA is up to SEK 226 million, and margin is 5.0%.
Adjusted for Oras, our underlying EBITDA margin is unchanged at 5.1% compared to last year. We have improved margin in Sweden, as well as underlying margin in Norway. The cash flow from operating activities is SEK 58 million, and cash conversion is 75%, and that is explained by payment that came in late from customer delayed due to Easter. That gives us, if we adjust the cash conversion at 99%, which is almost spot on our financial target. The working capital is - SEK 837 million or - 4.7% of the sales, net debt is SEK 1.8 billion, roughly, and 1.6x our adjusted EBITDA on LTM basis. We continue to do acquisitions. We completed three in Q1, adding SEK 232 million.
We did those acquisitions in 3 countries, in all countries except for Norway, which are still busy with the Oras integration. We did 1 in Finland, 1 in Denmark, and 1 in Sweden. We have also completed 2 acquisitions in April, adding another SEK 50 million in sales. The integration in Oras is going according to the plan. On slide 5, you can see an update on the market, and the technical installation and service market is, as I see it will remain good in Sweden, Norway, and Denmark, and it will be stable in Finland. Our order backlog is, as I said earlier, record high, and when I listen to some of our customers, but also colleagues in our industry, they say the same.
I don't think I need to go into specific details, but we have some declining production of residential, of course, in the market in some places, but my estimate is that this most likely will be replaced by projects from other types of facilities. Drivers as energy efficiency and renovation has not yet impacted the demand in our market, so my forecast is that this will happen in the coming years, and of course, will be positive for Bravida, and we support the demand the coming quarters and years as well. On slide 6, we present the sales and EBITDA development, and the sales growth was 11%, 1% organic, and 9% from M&A. Sales on last 12 months was up 15%, and we had sales growth in all countries, which is, of course, very positive.
Regarding the margin, we have improvement in Sweden and Norway, if we adjust Oras once again. Reported EBITDA is +7% in the quarter, up to SEK 226 million. Earnings per share is up 12% in the quarter. In last 12 months, adjusted EBITDA is SEK 1.101 billion, or 6.5% adjusted for Oras. On the next slide, we have a picture showing the order momentum. Yeah, we have said this a couple of times already, and I said that the same the last report as well. We have an order backlog that is strong, it's healthy, it's mainly small and mid-sized projects, and we are very positive, and that will support our development in the future, of course. 20% up compared to last year.
thing, this order backlog is that it's small and average size contracts, which also affect the risk profile in a positive way. I also think it's worth mentioning that the order backlog in Bravida only includes our installation business. We have 47% of our sales from coming from service business. These are not included in our own order backlog, that will come on top as well. On slide 8, you can see our order backlog compared to our LTM sales. The red line, we start with that one, shows the service sales development. As we have told you, this has been positive, and that's important for us to continue to grow the service. We not lose focus on the service business while the installation demand is very high in the industry. That's a very good sign, of course.
The green line shows the LTM sales on installation, the blue line is the order backlog. As you can see, the gap between the blue and the green line is stable. It might have increased a bit the last quarter, this is what will support the organic growth the coming quarters or, yeah, or months. I think it could be worth mentioning that the both order backlog, how we win new orders, how the organic growth develops, et cetera, et cetera, can vary from one quarter to another. Overall, the outlook is, of course, quite good, I would say. Now, over to Nils-Johan, who will take you through the financials.
Thank you, Mattias. We start on page 9 and look a little bit deeper into the figures, starting with the sales bridge. As Mattias mentioned earlier, we report our organic growth for 1%. As you know, the Easter have moved between Q1 and Q2 the last years. If you look back to last year, we had an organic growth of 0 in the quarter where we have the Easter, also going back to 2016, where the organic growth in the quarter where we have the Easter was -3. It shows that it's, we have a slight improvement compared to this, but it also have an impact. Looking to the acquisitions, they contributed with 9%, and of course, here is Oras, the biggest driver.
The currency effect was +1. We had a positive effect in Denmark and Finland, but actually a negative impact in Norway, where the Norwegian Krone was quite strong in the beginning of last year. If you look for the earnings per share, it's up with 12%, and looking for the last 12 months, earnings per share, we are now up with 19%, and SEK 4.15. We looking to next slide and start to look into different markets, starting with Sweden. We continue to see a good development in Sweden. Top line sales is up with 4%. This is mainly driven by organic growth, but we also see a continued good service growth in Sweden. EBITDA and EBITDA margin improves from 4.7%-5.0%.
Of course, here we see an impact from the increased service sales at the service sales have a higher EBITDA margin. If you look at the order backlog increased with 6%, compared to 12 months ago. We continue with Norway on page 11. In Q1, in Norway, we continue to have a good growth, and we also improve the underlying EBITDA margin. Top line sales was up with 21%. Of course, here is the main driver of the Oras acquisition. We had the biggest impact from the Easter holiday in Norway. EBITDA margin recorded was 5.4, if just for the Oras acquisition, it increased from 5.7 - 6.0. Looking into the order backlog, up with 49%.
And of course, the biggest explanation is, it's Oras. If we adjust for Oras, we have an, so to say, organic growth in the backlog with roughly 11%. If we look in, give some comments about the Oras acquisition, as Mattias mentioned earlier, integration follow the plan. Of course, we continue to take the integration cost in the operating result. We also expect that we will see more synergies, mainly on the administration side and also on the rental side, during 2018. I think it worth mentioning that Oras was profitable in Q1. We are really happy to see that. Just to remind you that Oras made a loss in 2016, SEK 30 million-SEK 40 million.
We report a break-even result in 2017, and as we said earlier, we expect a profit in 2018. Denmark, next slide. We see also an overall good development in Denmark, and most likely, if you look at the macro perspective, Denmark will have the strongest market in Bravida the coming years. If you look at specific, the first quarter, we had a top line growth with 20%. It's a combination of both organic growth and acquisition, and we see that demand is coming from both the public and the private sector.
We also, if we look at the residential, that has been weak for many years, that the price level now on the residential is back on the level we saw in 2008. We hope, and we strongly believe that also the residential will be a driver the coming years. EBITDA margin stable, we increased the profit from SEK 30 million to SEK 35 million in the quarter. You see that the order backlog was up with 18%. We reported a large order in the quarter, was Turku University Hospital, SEK 140 million. Of course, most of the increase is based on small and mid-size orders. Go to the next slide, Finland.
Growth in Finland was up with 28% this quarter, and it's the main driver behind this is the acquisition we did here in January of Adison Oy. We also had organic growth in the quarter in Finland. We have a flat result, a very even result, and as we said earlier, we expect that the profit in Finland will be better in 2018 compared to 2017. This is based on both internal improvement, but also based on the acquisition we did in January of Adison Oy. Adison Oy is another step to create the platform for us in Finland. We have the critical mass, and we can also serve our customers in even, in a better way.
I think another important thing is to mention that Marko Holopainen joined Bravida as the new Head of Finland in end of March, he will drive the development now in the Finnish organization. If you look at the next slide and give you a quick update regarding the acquisitions, as Mattias mentioned earlier, we did 3 acquisitions in Q1, 1 in Finland, 1 in Sweden, 1 in Denmark, We have signed another 2 here in April. Sometimes we say we have an internal target that we would like to do 1 bolt-on acquisition per month in. So far, we have followed this target. Looking to the price level and pipeline, nothing have really changed.
We continue to have a good pipeline. We have many discussions going on. The price level is still on the same level as we have seen the last years, is that we talk about the multiple of 5 based on 12-month EBITDA result before we've taken over the business. If we look for next slide and look into the net debt and cash flow, net debt ended up in SEK 1.841 billion, giving a net debt to EBITDA 1.6. This is improvement improved from, compared to year-end from 1.7. Looking into the cash flow, it's actually declined if you look for the last 12 months, from close to SEK 800 million to SEK 715 million.
We saw that in the end of March, that we have looking to the receivables, that was and the due were something between one and seven days, was SEK 250 million higher compare with the same period a year ago. Many customers paid after the holiday period, so we have a really strong cash flow the 2 first days in April. Adjust for this, we are back more or less on the financial target. We have a cash conversion rate on 99%. We look into the financial targets, we are committed to grow the business with 10%, combination of organic growth and M&A.
We also would like to see an EBITDA margin over 7% and a cash conversion about 100, and the target is to pay out at least 50% of the net profit. Look into the balance sheet, a net debt, the target for the leverage is 2.5x net debt to EBITDA. I think I hand over to Mattias to summarize.
Thank you, Nils-Johan. The sales, I think we can summarize a good quarter, first of all. The sales were increased by 11%, and we had organic growth, even if we had the Easter in Q1 affecting us this year. The installation order backlog is at record high level, +20%, and we can see a good business momentum for the service, and that will support the organic growth in the coming quarters as well. Underlying EBITDA margin is unchanged at 5.1%. M&A execution is on track with a healthy pay pipeline. We had SEK 232 million added in the quarter. Net debt adjusted to EBITDA, 1.6x .
The cash conversion, if we adjust for the delayed payment, as Nils-Johan just told you about, is close to 100%, which is our financial target. As we see it, we have a stable, good market conditions continued. And yeah, this was all for us, and I think we can open up for some questions if you have any.
Thank you.
Ladies and gentlemen, if you wish to ask a question, please, can you press 0 and then 1 on your phone keypad now in order to enter the queue, and then after I announce you, simply ask that question. If you find that question has been answered before it's your turn to speak, just press 0 and then 2 to cancel. Our first is over the line of Stefan Andersson of SEB. Please begin, your line is now open.
Thank you. A few questions. First, if we look at the Oras operation, I could be wrong here, but if I calculate backwards, looks like it's a 3.5% margin or something like that. If you could confirm that, and also then, that to me, that's impressive to already be at that level. If that is true, is that a clean margin, so to speak, or is there one-offs in there?
If we, yeah, as you know, the first quarter is a quite small quarter. We think the result can vary from one quarter to another. We still have some synergies that we haven't been able to.
I understand.
We are taking them out, but the cost savings are not here yet.
But, uh-
roughly, I don't know.
Sorry, Stefan, there's some noise on your line, so I'm just gonna mute your line.
I think-
Sorry, please go ahead.
Yeah. I think if you do the calculation, you are around the right zero, but we still stay to the guides we have given, that we will have some a better result in 2018 than in 2017. I think the second half will be better than the first six months in 2018, but we're still very early. It follow our plan, and so far we are happy with the development in Oras, also.
Okay, Stefan, I'm unmuting your line.
Yes. Thank you. I'll do all the remainder of the questions together. If you look at Finland, it's back to break even again. Is this due to seasonality or is there something else there? What kind of margin do you have in the acquired business, the SEK 190 million revenues that you're adding? If you were to adjust for Easter, what kind of growth pace do you have? I think you normally, historically, have been commenting on that. What kind of negative to the growth is Easter in the quarter? That's all for me. Thank you.
If we start with the Finland and the break-even result in Q1, I would say that the Finland is a small part of the business, and one single mistake or some single project effect will affect the whole results. I think we are in the right moving in the right direction in Finland, and that will be improved throughout the years. I think that it's just one small mistake that actually have been seen in the results so far. Then you had about the margin in Adison. I would say that that's more profitable than our the rest of the Finnish organization, and that will improve our margin the coming year. They are adding both sales and profit to the business.
The Easter effect, we normally say that that is 3 days- 5 days, and we are depending on the working days. I think that's what we can tell about that part.
We are now over to the line of Siobhan Lynch at Deutsche Bank. Please go ahead. Your line is open.
Yes, thank you. Good morning. Can we just talk a little bit about your staffing and just whether you're still seeing any constraints within any of the regions around employing people? Is that limiting the growth in any of the regions? I think you were talking about looking for people potentially from the Baltic countries or Eastern Europe as a whole and maybe working with companies from those regions. Also around procurement, what are you seeing in terms of prices from your suppliers and in terms of your procurement initiatives? Thank you.
Okay. I would say both regarding staffing and suppliers, there is actually nothing new. Of course, there is a especially a bottleneck in Denmark, I would say, regarding resources. We still see Bravida as an attractive employer, and we attract a lot of resources, of course. I wouldn't say it's worse now than it was six months ago. It's unchanged. Regarding the suppliers, I would say the same. It's always a battle between them wanting to have as high price as possible, and we want, of course, the opposite. We haven't seen a major impact or change in that perspective now, if we look at the whole picture.
Of course, there is some certain suppliers who tries to increase the prices, but what we are doing in that those cases, we actually try to steer away from buying from those suppliers and are very... What you say? We try to buy from our partners, so to say, and if you don't want to work together with Bravida and take out costs from the processes, et cetera, then we rather work with someone else who wants to do that. We don't see that pattern in our real partners, and we will continue to strengthen the partnership with those suppliers that we have today.
Okay, great. Thank you. Then just to follow up, I apologize because I think my line was a little bit poor at the start. Just on the Oras run rate. You still have some cost of integration running alongside the improvement, or, you know, and did you see, let's say, April and the beginning of this month, are you already seeing better profitability? Is it improving as you go through the year? Should that Norwegian margin, presumably you had some Easter in there, and then you had, let's say, Oras, you were still running some of the costs, but that should be getting even better as we go through.
I would say regarding the synergies, there are some costs related to premises and some administration costs that we actually have taken care of in the perspective that we have taken the decision and done what we are supposed to do. We still have the cost within the profit and loss, let's say. In some places, we haven't been able to move together yet because of the type of the contracts we had. It's no change regarding to our plans. When it comes to the margin, I would say that it's still a work. It's not only the cost side, it's still a work regarding the Bravida Way, how we want to do business, margin over volume, et cetera. That will take some more months or quarters in some places in Oras.
While we're having in some other places in Oras, margin that is, well in line with the rest of Bravida. Nils-Johan, I don't know if you want to-
Still, we have a backlog in Oras when the orders that they took before we acquired the company, and we have to produce on this backlog. The backlog, the margin of this backlog is lower than average in Norway. We still see that we have to work a couple of more months before we are working down the order backlog that was acquired.
Okay, great. Thank you.
We are now over to the line of Predrag Savinovic of Nordea. Please go ahead. Your line is open.
Yes, thank you very much. Could you comment a bit on the, maybe the organic growth between service as well as installation and maybe also on the order intake side to get a better feel?
We, you said the organic growth in service and installation. We, you saw the service growth was 11% in the quarter, and it was more or less in line with the total figure. We have, most likely, we have the best service growth in Sweden, where we actually, we start off with the initiative in Sweden. I think that's one of the explanation why we see a better service growth in Sweden. If we look at the installation growth, is good in Denmark, based on the good market conditions, and, we have a couple of larger product that we're now working on.
All right. Do you have any effects from the winter in Q1? What would... I mean, if you would adjust for that, what kind of figures would we have been looking at in that case?
Of course, it, when we look into the, our customers, the construction companies, there could be some delays. For us, mainly it's internal work. We work inside the houses. We, as we see it must be a quite limited figure.
I would say that maybe some in Denmark, but it's nothing that we internally discuss. I would say if that had happened, it will affect us in the Q2, but it's nothing that we have heard or seen. I think from the industry we are working in, that's not having doesn't have any effect impact this year.
Okay. How should we regard Denmark here going forward? You say the macros are favorable, momentum is solid, you have good, I mean, hospital orders, for example, which is very good for your profitability, the resource constraints, et cetera, which may limit the upside here. What kind of potential are we looking at here?
Yeah, yeah, I would say that, we have been telling you for the last 24 months, I would say, that the resources in Denmark is maybe the most important bottleneck, but we have handled it so far. Actually, Siobhan asked us about, some other resources from some other areas as well, and we are working with, serious, subcontractors and try to take our own peaks by using subcontractors and sell out some risks. That's how we try to handle it.
Mm-hmm. Okay.
Of course, to price slightly higher as well. Let's see, you always have a buying side who try to do the opposite, of course.
Yeah, yeah, of course. On M&A, you say the pipeline is solid. Maybe if you could give us a hint on, maybe in terms of both targets and also in terms of revenue, how much is up for grabs here in your scope, maybe for the coming year or two, for us to try to capture the potential here?
Yeah, it's, you know, it's hard to estimate. Because we have discussions going on in all countries except Norway, we sometimes say that you need two to tango, it's more or less in line what we have seen earlier. Price level are also on the same level as I said earlier, we expect that we continue to do these bolt-on acquisitions in both Sweden and Denmark and Finland. When we come towards the end of this year, most likely, Norway can also start for looking for new acquisitions.
Finally, from my side, could you just talk a little bit about the duration in the backlog?
Yeah, we do this, analyze this, couple of times per year, and the duration is more or less unchanged, compared to a year ago. It's not that we have a longer backlog. Please remember that it's only installation projects, and it's all signed contracts. We still have a really good quality in the backlog, and that will support the business in the coming quarters.
All right. Thank you very much.
Thank you.
If anyone has any final questions at this stage, please do press zero and one on your phone keypad now. As there are no further questions at this stage, may I please pass it back to you for any closing comments?
Okay. Thank you, everyone, for good questions and for listening in to this call. I think we say thank you very much, and have a nice day.
Thank you.
Thank you.
See you again.
This now concludes our call. Thank you all very much for attending, and you may now disconnect your lines.