Thank you very much, and good morning, everyone, and welcome to Bravida's Q1 report. As usual, it's myself and it's Nils-Johan who will present this report for you. Slide two, please remember our risk profile, our low-risk profile, dividend and markets, low customer concentration, and small average contract size. I think that's important to remember. On LTM basis, we are today at a sales level at SEK 15.5 billion, and we have an adjusted EBIT at SEK 988 million, and we say on this slide that we are more than 9,800 employees or FTEs. Actually, last Monday, we closed the deal with Oras, and we are now today more than 10,000 employees, and I think that's a great milestone to reach, actually.
On slide three, we have the highlights for the first quarter of 2017. Net sales is up with 20% to SEK 4.1 billion, compared to SEK 4 billion last year. We had an organic growth at 12%. M&A contributed with 6%. We estimate the calendar effect around 5%-6%, depending on the Easter, moving from Q2 last year to Q1 this year. Well, the opposite, I mean, sorry. Service sales growth with 14%. The sales is impacted by organic growth in Norway, Denmark, and Sweden. Our order backlog is again at a record high level, SEK 9 billion. Actually, exactly, it's not a fake figure. It's SEK 9 billion in our system. It's up 26%. We can see continued strong momentum in the order intake.
It's up 29% to SEK 4.4 billion. This is an effect of strong order intake in Norway and Sweden. EBIT is up to SEK 209 million compared to SEK 175 million last year. The margin is unchanged at 5.1%. The EBIT margin is affected by change in net sales mix toward more installation with lower margin for this quarter. The cash flow is up to SEK 381 million, an excellent figure, compared to SEK 13 million last year. The negative working capital is at -6.9% of sales. Net debt is at SEK 2 billion. This is 2x adjusted EBITDA on LTM basis.
We have done one acquisition in Q1 in Denmark that will add DKK 130 million. This is also approved by the competition authority in Denmark in April. Oras in Norway, we actually closed last Monday, also approved by the competition authority in Norway, closing 8th of May. On the next slide, you can see the comments about the market, and we still think we are in a good market. We can see good order backlog in the construction companies that have reported so far. There is another one coming up today and tomorrow, I think. In Norway, overall, construction activity is up, driven by public investment. There is a decline for commercial building, but again, a strong market in Norway.
In Denmark, infrastructure and housing is driving the volumes, and in Finland, construction market is improving from low level. Overall, a good market. On slide five, you can see the group sales and adjusted EBIT development. As I said earlier, we have seen a strong sales. Sales is up 20%, 12% organic, and we have a strong sales growth in all countries, positively supported by calendar effect, mainly due to Easter. EBIT margin, 5.1%. EBIT is in figure, up 19% compared to Q1 in 2016. 20% up in sales and EBIT plus 19%. Slide six, order momentum. Our order intake in the quarter, year-on-year, is up 29%, and the order backlog is up 26% to SEK 9 billion.
This is a result out of intake in all countries, but in Sweden, we can see some contract wins in hospital, industry building, public transport building, and housing. In Norway, hospital as well, and the museum. In Denmark and Finland, there are more small and mid-sized projects that actually contributed to our order backlog. Intake growth, order intake is up 29%, and again, the order backlog, SEK 9 billion. I've said it seems like I've said it every quarter now, but this is the highest order backlog we have ever had. That's positive, of course. On slide 7, you can see the analyze between... The red line is the sales service development. It's up, as you can see, and the green one is the sales in installation on LTM basis.
The blue one is order backlog. The gap between the blue and the green one is going to be delivered sometimes. We still have a gap, which will support the growth ahead of us. We have had a positive calendar effect in Q1, but we will, of course, have the opposite in Q2, and I think that's important to remember later on this year. If we look at slide 8, we have done some changes in the organization in Sweden. We have created a new division that we call Division National. In Sweden, we call it Division Riks. This is established in Sweden from April. This new division, including security, sprinkler, technical service management, tooling, project management, and power supply. This division will operate on national level, with branches all over Sweden and report under segment Sweden.
We are currently 6% of Bravida's net sales in this division. We can see growth and profitability potential in these segments, and we want to take out more advantage of the synergies we have, and which we haven't realized enough in the earlier organization. This all will also strengthen Bravida's offer as a multi-technical service provider in the local market as well. The head of the new division is going to be Sven Klockare, former Regional Manager for Security Sprinkler, and a part of project management. He will also be part of the group management from April this year. On slide 9, we have a slide about acquisition in Norway, Uvås.
This, the first contacts we had and the first discussion we had on this one was actually, in 2014 when I was working in Norway. I'm very happy about the fact that we actually managed to do this deal. Uvås is the leading installation and service company within heating and plumbing and HVAC in Norway today. As you know, we are the leading company on the when it comes to electrical. This is, of course, a good match for us. Uvås has more than 700 employees, and the annual sales of approximately SEK 1.2 billion. 10 heating and plumbing and HVAC branches throughout Norway, a good fit to our own footprint today.
Since a few years back, Uvås has delivered a weak result, mainly, as we see, due to high cost levels and losses in some projects. Overall, the underlying business is strong. Acquisition makes us, Bravida, to the market leading an integrated supplier in the Norwegian industry. This will generate a clear cost and purchasing synergies, of course. That's the rationale behind this deal. EV is SEK 152 million, and equity value, SEK 122 million. The acquisition cost of approximately SEK 10 million will be included in Q2 2017, and the total restructuring cost of approximately SEK 20 million will be included in Bravida's results for 2017. This is, of course, quite early, the last SEK 20 million, but that's a quite good estimate for now. Now, over to you, Nils-Johan.
Thank you, Mattias, we start to look a little bit deeper into the figures on page 11 and start with the top line. As you have seen, we had a good quarter. The currency impact this quarter was 2%. Acquisition improved contributed with 6%, up in good organic growth with 12%. As you heard Mattias said earlier, we had more working days in Q1 this year compared with last year, we estimate the impact to be roughly something between 5% and 6%. Even if we adjust for this, we have organic growth in line or above the financial target.
If we look for the earning per share, you have seen in the report that the operating profit increased with 19%, and the earning per share with 23%, and this is explained by improved financial net. If you look for the LTM figure for earning per share, it's an increase with over 100%, explained by when we look into the LTM 2016 in Q1, that we have still a couple of quarter when we have the old financial package, and that's the reason why we have such a high increase. We go and start to look for next slide and start to look into the countries. Sweden, we see a good growth in Sweden in the quarter, up with 17%.
If you look at the EBITDA, you could say it's flat in the quarter. As Mattias said earlier, there is more installation sales this quarter, and you know that there is a difference between the margin. Roughly, we have 1% higher EBITDA margin in service compared to installation. Also, you know that we have had a quite weak growth, mainly in the Stockholm area during the end of 2016. Now we see that this, the growth is coming back, and we are in a quite early stage in a couple of projects. We also quite conservative when we look into the profit generation in this project.
Of course, the installation growth, 25%, and the service growth, 14%, is a little bit exceptional figure. Normally, we should see that both installation and service are growing on the same levels. If you look into the future, look into the order intake and order backlog, both figures are increasing more than the actual sale. The order backlog in Sweden is up with 25%. We continue with Norway. Next slide, please. Norway, we had a really good first quarter sales it up with 38%, and the impact from working days is more working days is higher in Norway. Even if we adjust for this and the acquisition, we have a strong organic growth in Norway in the first quarter.
EBITDA is up with 32% in the quarter. Norway continued to have the highest margin in the group. We're looking the order intake and order backlog, we also see order backlog is up with 44%, higher than the sales. We have one big order here. That's the hospital in Oslo, Tønsberg Hospital, that's roughly NOK 250 million. We also have coming down quite quickly to high number of medium and smaller projects. Just to mention something that we have the National Museum in Oslo. We also continue to receive good orders in North Norway. Next slide is Denmark. As you see, we have had a good start in Denmark, top line up with 16%.
Margin is increasing from, I will more like say normalizing in Denmark, increasing from 3.5% up to 5%. The first quarter last year, we had a couple of write-downs in the region infrastructure that explained the low 3.5%. Also, in Denmark, we are increasing the backlog, and this quarter, it was up with 14%. If we finally, Finland, sales increased with 13%, and we also improved the EBITDA. Last year, we made a small loss, and now we can report a break-even result. The acquisition, Asentia, that we did the 1st of December last year, are now fully integrated in Bravida, and we are happy with the development so far.
Of course, we talk quite a lot about the Bravida Way in, in Finland, and now it's, the focus is on the productivity that we have, that we have more or less educating everyone in Finland, in our productivity program, and this will continue now in Q2 as well. Next slide is I would like to summarize the acquisition we have done so far. You heard Mattias talking about the acquisition in Denmark and the one in Norway. Totally, we have added SEK 1.3 billion sales by doing this to M&A. Just so you remember that we will have acquisition costs related to the Oras acquisition, and this will be reported as specific costs in Q2, and we estimate the cost to SEK 10 million.
Of course, we are starting working with Oras and integrate the company and also make in some way, restructure the company, and that will generate cost. You heard Mattias talking about SEK 20 million that we will take in the ordinary business. This will not be as a specific cost during 2017. Looking for the cash flow and the net debt on next slide, there are many good figures in this report, but I think this is the best. We have an excellent cash flow, more or less since September last year, and the cash flow in Q1 was strong, taking down the net debt to SEK 2.058 billion, the net debt EBITDA, 2.0.
If we also signed an agreement with SEK, Svensk Exportkredit, during Q1, we have used SEK 500 million to we have repaid the term loan with the current bank group. Of course, it has also reduced our cost, but also increased our flexibility. If you look at the bottom on page 17, you see the operating cash flow, and this is mainly driven by improved working capital, and the negative working capital is down now to 6.9.
We have also added, the, when we look for Q1 and Q4 together, we, as I said, we have had a strong cash flow the last six months. The operating cash flow for Q4 2016 and Q1 2017 is SEK 796 million, an increase with 13% compared with the same period the year before. Please remember also that we, in this figure, we including tax payment, this have been more or less double during this period. A year ago, we paid SEK 37 million, now it was SEK 71 million. The operating cash flow is even stronger than we showed in this figure. Next slide, yes, a quick update regarding dividend.
As we communicate in the Q4 report, we have a proposal to the Annual General Meeting today, that we should pay out SEK 1.25, an increase with 25%, and we will totally pay out SEK 252 million, if the Annual General Meeting later today, we'll decide on this proposal. Yes, financial target, you have seen them before. We are committed to grow the business with top line, with over 10%, divided by organic growth and M&A. We are also would, taking this, would like to take this business with it to an EBITDA margin of over 7%. Cash conversion over time should be 100%, and the target is to pay out 50% of the net profit.
We've looked for the balance sheet and net debt. The target is that we should be around 2.5 when we look net debt to EBITDA. Okay, Mattias?
Thank you, Nils-Johan. To summarize this presentation, we can say one more time that we have a stable and good market, that we're actually acting in. The installation order backlog and the momentum we have in the service business will support organic growth and cash flow over the coming quarters as well. EBITDA improvement on track, and we have support by our initiatives and the implementation of Bravida Way. Acquisition of Uvås in Norway makes Bravida the market-leading integrated supplier in installation and service in the Norwegian market. This will, of course, generate clear cost and purchasing synergies. M&A execution on track with a healthy pipe pipeline, that's also why we, as you know, suggest slightly lower dividend than we have in our financial targets.
I think that's the perfect way to handle the strong cash flow we have in the business, to continue to develop Bravida as a company. 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 01 on your telephone keypad. You will enter the queue. Our first question comes from the line of Andrew Frampton from Morgan Stanley. Please go ahead. Your line is open.
Morning, everyone. Can you just talk through, so you've mentioned working capital, but can you just talk about how you'd expect that to evolve going forward?
Yeah. Normally, we have a seasonality in the working capital, over the year, we're working with negative working capital, something between -4% to -7%. Now, we work closer to -7%, and we are, we have been on this, in this level quite a long period now. Of course, we try to work both with the payment plans towards the customer, but also that the payment conditions towards the supplier. We think that we are, we will, we don't see that we can see huge improvement. Of course, when we do M&A, in many cases, we see that we can improve the cash management, should say, in the acquired companies.
We are in a range between 4% and 7% negative working capital.
Do you think it will remain at this level?
Yeah, there is a seasonality, as I said in the beginning, that we are. It's good. It's changed over the year, and, but we should be able to keep these levels, yes.
Okay, fine. Can you just talk about the competitive conditions by market? I mean, you mentioned Sweden improving in Stockholm, but can you just talk through pricing conditions and competitive dynamics?
I think the pricing conditions are a bit unchanged. We have seen my estimate, so how I see it, is that it has improved a bit in the Stockholm area. Otherwise, we have a good market, but the prices won't come up. I think that's the situation we are in our industry as well, in all our industries, that it's hard to get up the prices. We have so many things we can do to work with our own efficiency and deliver the services, use our scale advantages more in a better way. The purchasing initiatives we're having can add some more value, and so on. I think we need to, the market is what it is. We need to find the right projects.
We need to work with the right customers and avoid the bad projects to and continue to price the risk as we think we are, and avoid projects where we can't price the risks. I think the price, the market is good, the prices are quite stable, and some people say they are low, some people say they are okay, but I think they are what they are. We need to work with our internal efficiency to deliver on those in this market. But again, we have so many things we can do internally to increase our competitiveness and increase our margins. Yeah.
Okay, fine. Then just finally, just pipeline for M&A, just focus by region and market, you know, you've mentioned leverage. Can you be more aggressive now around M&A, given where you are?
I think the reason why we have suggested a slightly lower dividend than the financial targets is that we have a healthy pipeline where we actually can act on. Of course, we signed Uvås. That was part of that thing. That's quite a large M&A in Norway. We are continuing to work with pipelines for the future, but I think by doing Uvås and now this week, and then we did Moelven just before Christmas, I think we are going to focus a lot on integrating those companies in the Norwegian business. On the other hand, we have plenty of things we can do in the other markets we are in. We will continue to do M&A, and we have a strong pipeline that we are working on.
Okay, great. Thanks.
Thanks.
Thank you. Our next question comes from the line of Tom Sykes from Deutsche Bank. Please go ahead, your line is open. Tom, if your line is on mute, please unmute your line.
Sorry, thank you. Morning, everybody. A couple of questions, please. Just on the comment you've inserted into the commentary on Sweden about labor market bottlenecks, could you maybe talk about, is that actually affecting you now? Are you actually seeing any delays? Then just on the installation margin, or the effect of the installations on the margin in Sweden, was that skewed by any larger installations, that were at a lower margin, or was that sort of across the board in the installations completed in the quarter, please?
Yeah, Mattias here. About the resources and the bottleneck, I think what we see is it's not a major change. It has been quite tough to hire new resources for many years in Sweden. We still see us as a very strong brand and a positive place to actually be at. We see that we have a positive net of employees. Of course, it's the unemployment rate is low, and the one who is unemployed today is probably not the one we want to hire. We have a potential, and we are working with subcontractors. In some places, we are hiring people. For the moment, we haven't had any major impact that is a higher impact than we have had earlier, I would say, in Sweden.
When it comes to the margin in installation, it's, as Nils-Johan said, first of all, a quarter is a quite short period. Nils-Johan said that we have a slightly higher margin in service than in installation. Of course, when installation grows at 25% and service at 14%, we have a shift in the mix that will impact the margin of, on, in Sweden, for example. Secondly, we are have had some growth problem in Sweden, meaning that we are quite in an early phase in those projects, and we have always tried to be a bit conservative in the project prognosis in the early phases. My estimate is that we still are that.
We haven't seen anything in the order backlog that shows us that we have been taking projects with lower margin than earlier. I think it's the explanation is the sales mix and early phases in the project. I think we will see a slightly better margin throughout the year.
Okay. Thank you. If you look at your installation margin in Sweden this year versus last year, that's down year-on-year, is it?
You see the, yeah, the margin is down in Sweden, yes. The normally, you can say that the over the, over time, normally, the installation margin has been 1% lower than the service margin.
Right. Okay, if you just look at the installation margin.
Yeah, but I think-
-this year versus last year.
I think that's a result. Depending on that, we have had slightly lower growth in Sweden. We haven't had that many projects that we actually finished.
Okay.
We try to have a positive hockey stick instead of a negative hockey stick in the end, of course.
Sure.
When we are starting a lot of projects and not closing that many, of course, you have a negative effect, momentarily.
Okay.
I think that will change over time, yeah.
Okay, thank you. Just a final one, is it possible to give the working day impact on organic growth at all, please?
I think we said something around 5%-6% in the quarter.
Okay.
The net mate, yeah.
Okay. Thank you very much.
Thank you.
Thanks.
Thank you. Our next question comes from the line of Niklas Holmer from Nordea. Please go ahead. Your line is open.
Yes, good morning. Most of my questions have been answered. I would like some more flavor on the mix issue. You're talking about a percentage of completion of contracts, the duration in the ongoing projects, mainly related to Sweden. You're also pointing out that you have a record high order backlog. Isn't it fair to say that the dilution of margin most likely will continue since all of the orders are linked to the installation? Could you please also give us a favor of this is in line with your planning?
Yeah.
Thank you.
I think our target is, of course, to have a balance between service and installation. As you see on, you can see the slide around the order backlog, you can see we have a growth in service as well. Of course, when the market is like this today, it probably will be mean that we have going to have a slightly higher growth regarding installation. I think the most important thing is not to have 50% service all the time. It's important that we continue to grow the service even when the installation might grow faster.
When we come a bit further in that project, we will close some of them as well, which will mean that we, as we see it, or estimate it, that we will have some positive effect in the end of the project as well. Of course, you are right. If we don't increase the margin in the project business, if that still will be the 1% difference between the margin in service and installation, of course, there will be a kind of dilution. On the other hand, we think by the initiatives we're having internally and the market, I think we will see an improvement in the margin in installation as well. It's not that easy as you actually says, you have some, there is something in it, but we, it's hard to estimate.
I assume it's easier in Excel. When you look at the finalizing of products, and you're talking about there are very few projects that are being finalized in the quarter, should we expect somewhat of a rebound already in the next coming quarters, that the sort of dilutive effect related to...?
Yeah
the duration in products will improve? Is that what you're trying to say?
Yeah, I think a rebound in the next quarter, I think that's very early because medium period for a project in our world is probably around 9 to 12 months. I think that's a little bit early. Hopefully in the end of this year, you might see that, but we will be able to guide you a little bit on that one when we get it closer, so we can see. It, it's too early for us to say.
Coming back to cost issues and the bottlenecks, do you have capacity now to sort of execute, or should we expect more of a delayed impact on growth related to the order intake? Is it that the also the backlog duration is increasing and will be a little bit back-end loaded?
I think the order backlog will be delivered, if we have the resources and not. We will have the resources, and we will use subcontractors if needed, and we will hire some resources. The trick for us is to make take down the risk and maybe improve the margin by doing this. Of course, that's easy in the theory. Some costs will of course have might be increased. On the other hand, if you use subcontracts in a smart way, you can take down your own risk and maybe sell out some parts of projects instead. The growth regarding to the backlog will be delivered.
About the cost, we need to focus to make sure that we can keep the margin and not get diluted by higher costs in the project, but we are not there today yet, at least.
Yeah. My final question. You're talking very positively on productivity and procurement opportunities. Would you say that in this a little bit of a more of a booming market, that opportunities have increased for you to sort of support your underlying earnings growth by productivity improvements, and also that your competitive strength towards peers on procurement has increased?
When it comes to procurement, we work very consistent and consequent by educate people. We follow up on our KPIs. It's important that we use the scale advantages. I think, of course, the opportunity when we get higher volumes, we are seen as a very preferable buyer today by the suppliers because we have the cash, we are a stable company, we are a growing company with high order factors. Of course, our position when it comes to negotiation is actually better today than it was a year ago. When it comes to productivity, you need to remember that we buys a lot of companies that we need to educate. We also hire new persons that we need to have to educate because this is quite unusual in the industry.
I think we are the only one who is working with the productivity internally in the installation industry in this way. We continue to educate, train, and follow up on the productivity program and trainings we have had, and we just can see that we have just started this work. It's just about continuing to do this, and this is, of course, making us better as, yeah, it gives us competitive advantages, but it will also be the, one of the most important things that will support the margin in the future.
Great. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Marius Heyerdahl from Danske Bank. Please go ahead, your line is open.
Good morning. I wondered if you could comment about order size and risk. You've been winning some large orders lately, so I wondered if you could quantify the percentage of the order stock, which can be sort of labeled as large, and basically, if the risk in Bravida is increasing.
Okay, yeah. Thank you. First of all, I would say that the large project we have won is the kind of project that we are used to do. It's still, the order backlog is still very much built up by small and average-sized contracts. We have won some hospitals, and hospitals in Norway and Sweden and Denmark, we are used to do. We know the risk profile, and they are also quite nice projects when it comes to the competition, because it's not only price, you need to add the resources and the competence to just be able to bid on those projects in the most cases. I don't think we have increased the risk profile at all.
We are at the same level as earlier, and we really looking forward to deliver those services and projects to the customers, because we think this is what actually we are best at doing.
Okay, thank you very much.
Thank you. Ladies and gentlemen, as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. Our next question comes from the line of Johan Hilgert from Handelsbanken. Please go ahead. Your line is open.
Good morning. I would like to start off with another question on the margin. I have difficult to see that the mix change should have a big explanatory effect for the margin, given that you're a stable company in this quarter. If you look at Sweden, installation was 54% of sales, then I would assume, a year ago, maybe it was 52%. The split is low. I have a hard time understanding how that could have an impact on the margin this quarter. Given that you had a big boost from the Easter, I just struggle to understand how your margin could drop year-over-year in Sweden and also in Norway. Could you give us some more explanation?
Yeah, yeah. We will try to at least. First of all, Norway, I think that's a normal variation in the margin. You should remember that Norway comes from very high levels, and I think that you, over time, will have some changes in the margin. I think the most important thing that is that you can see the trend over a 12-month cycle. That's what matters. When it comes to the mix change, I think it's not only the mix change that is affecting the margin, it is the mix change and the fact that, and I said it earlier, that we have had a weak growth in Sweden, Stockholm area earlier.
Now when the growth has come, we are in a very early phase in the project, meaning that we are cautious, conservative in the project accounting, because we don't want to have a negative hockey stick in the end when we're closing the project. Of course, when we are in early phase in many projects, that are quite high volume of, let's say, for example, in Stockholm, that will of course, impact the margin as well. We are not, we are focused on the margin, of course, but we are not concerned or worried today.
I think that's, of course, a lot of theory, and it's very hard to, we can't see into the future, but this is the explanations we can see in our system and figures.
Okay, there's no element of project write down or.
No, no. Not at all. Of course, we have some project write downs, but that's on levels that are extremely low. Of course, we have a lot of write ups as well, and the write ups is many, many more than the write downs. I would say definitely no on your question there.
Okay. then the opposite question is on Denmark, where the margins surprised positively. What happened in Denmark?
Yeah, yeah, I think, Johan.
As I said, during the presentation that we last year, we had a couple of write downs in region infrastructure. We didn't have this year. I think that we are more or less coming back to a normal level, going from 3.5 to 4 to 5.
Okay. Final question, coming back to Marius' question from before. If it was possible to get the % share of large orders in the backlog, please?
Yeah, I think, slightly higher than earlier because of that, it is a lot of public investments in Denmark, Sweden, and Norway regarding infrastructure and mainly hospitals. Hospitals is a good area for us. Slightly higher, but maybe a little bit more larger projects, but not a significant difference.
Yes, the actual figure, how much of the SEK 9 billion?
Well, you have to define what is a.
Yeah
... large order. I think.
As you define it, is it plus SEK 50 million or?
If you take about SEK 100 million, I think we have a hospital in North Norway that we are in the middle of the project. We now, the new one, Tønsberg Hospital in Oslo, that's we said, SEK 250 million. That will, we announced a tunnel. I think it's not in Stavanger earlier. We have hospital in Denmark. There could be one in Sweden or... It's less, it's, call it around or not more than 10 projects that are over SEK 100 million in the group.
Okay.
that I think it, nothing have changed in this case.
Okay. Thank you. Those were my questions.
Thank you.
Thank you. Ladies and gentlemen, if you do have any final questions for the speakers, please press zero one on your telephone keypad now. As there appear to be no further questions, I'll return the conference to our speakers.
Okay, thank you very much. A lot of questions. I think that's good and interesting start and interesting day. By saying that, thank you very much for listening, and see you soon again.