Ladies and gentlemen, welcome to the Coor Service Management Q1 report for 2022. For the first part of this call, all participants will be in listen-only mode, and afterwards, there'll be a question and answer session. Today, I'm pleased to present President and CEO AnnaCarin Grandin and CFO and IR Director Klas Elmberg. Please go ahead with your meeting.
Good afternoon, and welcome, and thank you for listening to our Q1 report at Coor. As always, we will start by giving you a brief intro to Coor and then continue with a business and market update, followed by some more details around the financials before a sum up and a Q&A. Yeah, Coor is the Nordic market leader in integrated facility management, providing our customers with a broad range of services through our customer-centric business model and a decentralized organization. We have a clear ambition of becoming truly sustainable, and we are constantly taking new positive steps in that direction. We drive and steer Coor from a triple bottom line perspective, meaning that we are taking a business, social, and environmental responsibility to future-proof our company and making a positive impact in the society. The total turnover of Coor can be sliced in different ways.
In the geographical perspective, Sweden is our largest country with 51% of total turnover. Norway accounts for 22%, Denmark 21%, and Finland 6%. From a contract type perspective, we see that the split continues to be stable with 60% IFM contracts and 40% single service contracts. Slicing the turnover by service line, we see that cleaning is the largest service line with 37%. Property is the second with 32%, and workplace includes several services like reception, conference service, and office supplies, and together that adds up to 19%, and food and beverage is at 9%. Our top three customer segments are public customers by 28%, manufacturing by 24%, and energy by 18%. All in all, a well-balanced portfolio.
Going into our business sustainability, we are very pleased to present the first quarter with high growth, both organic and acquired. In addition to that, a strong EBITA margin and good cash conversion, all in all adding up to a strong start to the year. Looking at the organic growth, that amounts to 11% with Sweden and Denmark as the main contributors. Acquired growth is 13%, and it's driven by the acquisition of Inspira and Veolia Technical Management in Sweden, but also a small positive contribution from the R&K acquisition that we made in Norway early 2021. The EBITA margin for Q1 is 6.3% compared to 6% last year, driven by very strong margins in Sweden. Cash conversion is an LTM number, and it continues to be strong at 93%. Leverage is also an LTM number.
With 1.7%, we are slightly above Q1 last year and well above our target of staying below 3%. From an LTM perspective, organic growth is 8%, and acquired growth is 6%. The LTM EBITA margin is also 6.3%. Klas will provide you with some more details around the financials later on. Going into our social and environmental sustainability, we see that we continue to improve our DRIFT levels. As of Q1, that number is down to 8.1% compared to 9.8% one year ago. That's good improvement, but still work to be done in order to reach the target being below 3.5%. Gender balance continues to be stable at 50/50, and we are very happy that our focus on gender equality is also recognized outside of Coor.
Let me get back to that in a short while. We continue our efforts to reduce our CO2 footprint. In addition to presenting progress of the Scope 1 and 2, we have, for the first time, also included Scope 3 within our food and beverage service line. This is where we have our largest CO2 footprint in our company. From now on, we report on this on a quarterly basis as well. Our ambition is to reduce CO2 emissions from purchased food raw materials by 30% by 2025 compared to our baseline. As of now, we have reached an 18% reduction through increased focus and competence, leading to more environmentally friendly menu planning, in addition to our work to reduce our food waste. Over to our business and market updates. Yeah, in Q1, we have won a number of mid-sized contracts.
For example, an IFM contract with Skanska in Sweden, cleaning contracts with the City of Gothenburg, Normal in Norway, and Energinet in Denmark. We are also pleased to have secured the prolongation with SAS, which is a Nordic IFM contract. In Sweden, we have also prolonged the IFM contracts with Tele2 and Hitachi. On the property side, we have signed prolongation with Hemsö in Sweden and DNV in Norway. The integrations of the acquired business of Veolia Technical Management and Inspira is successful and progressing well. On the sustainability side, we have submitted our targets to the Science Based Targets initiative. We just received the approval by the initiative, meaning that we will update our targets and communicate more around this in the near future. We are also piloting a tool for calculating climate impact on individual customer service deliveries.
This has been very well-received, and we are scaling up this ability to meet what we expect to be a higher demand from customers in this area. Yeah, I mentioned earlier that we have received external recognition for our work on gender equality. In March, Coor received an award from SHE Index, powered by EY, as the most equal company from a gender perspective. In this index, 36 questions within six areas of equality and diversity are evaluated. Coor received a total score of 92 out of 100 and ranked as number one in Sweden. Even though we have been seeing great numbers in the quarter, we continue to see growth opportunities ahead, both from a solid pipeline across Nordics as well as additional M&As. As you might have seen from the press release yesterday, we made an acquisition in southern Sweden.
It is a cleaning company called Centrums täd with an annual turnover of approximately SEK 50 million that will provide us with a better platform for future growth in the region. With that, I let Klas continue with some more details on the financials.
Thank you very much, AnnaCarin. Q1 is yet another quarter where it's really nice to talk about the financials of Coor. Net sales is up by more than SEK 600 million compared to Q1 last year, and that takes us up almost to SEK 3 billion for the quarter. As AnnaCarin mentioned before, the organic growth is strong at 11%, acquired growth 13%, and on top of that, a small positive FX effect of around 3%. The adjusted EBITDA amounted to SEK 187 million, which gives us a really strong improvement compared to Q1 last year. Net income is SEK 84 million, and adjusted net income when adding back the amortization, that adds up to SEK 134 million.
On the LTM numbers, we see that net sales is slightly above SEK 10.7 billion, which means that we're now above the pre-pandemic record level of SEK 10.3 billion. The LTM organic growth is 8%, acquired 6%, and the FX effect is around 1%. The LTM adjusted EBITDA level is now at SEK 679 million, and that gives us an LTM margin of 6.3%. The adjusted net income for the LTM period is now up to SEK 485 million. Moving then on to a country-by-country view, we can see the strong positive organic growth in Sweden and Denmark, but also in Finland, while Norway, despite the phased-out Equinor office contract, is only down by 2% in terms of organic growth.
That is partly due to the continued high levels of variable volumes from production sites, maintenance works within the oil and gas industry. The organic growth in Sweden comes from new contracts, for example, PostNord, Mikasa, and Borealis Security. We also see a partial recovery of variable volumes within property, food and beverage, and also conference services. As mentioned before, we also have a substantial contribution from the acquired growth coming from the acquisitions of Inspira and Veolia made in the second half of 2021. In Denmark, we see a similar pattern as we see in Sweden regarding the organic growth. We have new contracts contributing, mainly DSB, and we also have a partial recovery of variable volumes, both within food and beverage as well as property. In Finland, we also have a organic growth, and that's driven by better variable volumes.
From an EBITDA and margin perspective, Sweden is delivering a very strong result, mainly through a strong underlying profitability across many of the contracts. There is also some positive impact from the COVID sick leave compensation granted by the government, and that amounts to approximately SEK 10 million in the quarter. It's also nice to see that the acquired businesses are also providing a strong contribution, even better than expected initially. Norwegian margins are down versus Q1 last year, and the main driver for that is the change in the contract mix being the result of Equinor offices being phased out. Also that we have some margin pressure when integrating a large prolonged contract as we have with the Equinor production sites. Denmark is improving its EBITDA in absolute numbers, driven by the high volumes, but margins are down compared to last year.
That is actually expected when integrating large contracts, and we are in the beginning of the contract with DSB, and we're also in the integration phase when it comes to the Danish Building and Property Agency, which actually starts on Monday next week. In Finland, we are experiencing somewhat lower margins, and that's mainly related to higher personnel costs due to some resource challenges driven by COVID-related sickness in the beginning of the quarter. Looking then at our cash flow. We had an ingoing cash balance of SEK 373 million. Operations have contributed with almost SEK 800 million, a very strong contribution. The financing flows, that reflects the interest, loans, and leasing. That adds up to SEK 255 million. Taxes paid is SEK -85 million.
Cash out from M&A, that's of course related to the acquisitions last year, and that's Veolia and Inspira, and a very small part also related to R&K actually. Dividend, that equals the ordinary dividend that was paid out in May last year, and the extraordinary dividend that was paid out in October last year, and that added up to SEK 417 million. And this gives us an outstanding cash balance of SEK 331 million, thus let's look at some of the details from the balance sheet. Cash conversion continues to be strong at 93% for the interim period, CapEx is still low and we continue to improve our working capital. From the customer paying perspective the positive situation that we have experienced continues with no changes in customer payment pattern.
They still keep paying us on time. Net working capital is negative by SEK 910 million or - 8.5% of net sales. Net debt, approximately SEK 1.5 billion, and leverage, 1.7%. With that, AnnaCarin, back to you.
Thank you, Klas. We will shortly go into Q&A, but before that, I would like to sum up our first quarter in 2022. Our first quarter has been characterized by high growth, improved earnings, and strong cash flow. Our growth comes from new contracts and COVID-19 recovery together with acquired volume. EBITA is at a strong level with stellar performance from the Swedish organization. Given our strong financial positions, we see continued opportunities to carry out value-adding acquisitions in the Nordic region, and you just heard that we did a new acquisition yesterday. I would like to extend my warm thanks to my colleagues at Coor, who together have contributed to a strong start to the year. With that, we will open up for questions.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero-one on your telephone keypad. Our first question is from Robin Nyberg of Carnegie. Please go ahead.
Hello, Robin here from Carnegie. Few questions. Could you comment what kind of cost inflation you are seeing and if you are able to compensate for higher costs by raising prices?
All right. Let's start with that, cost inflation. I mean, first of all, one should remember that the vast majority of our contracts have an index clause, meaning that cost inflation from labor cost increases and things like that could be passed on to the customer. You should also recognize the fact that if that becomes a fairly large increase, customers might take other actions, so to say, to reduce the scope and so on to protect their own FM spending. In general, we have a good possibility of actually passing on cost inflation. At this point, we will not give an indication on the levels and things like that. It's still early days, and it varies a lot between different items that we purchase.
Thank you. How much of the 11% organic growth in the quarter was related to the price increases?
That is actually not a large part. The index regulations made so far haven't really captured the latest development, so it's only a normal couple of percentage points. It's mainly related to the new contracts and variable volumes coming back after the pandemic.
All right, thanks. The final question related to M&A pipeline. Did I hear correctly that you have a good pipeline, unchanged pipeline for the rest of the year?
Yeah, that's correct. Absolutely. As we have said before, our number one priority is of course to have organic growth, but we also have focus on M&A, try to find value added acquisitions. Yesterday we acquired Centrumstäd , which is an example of a smaller acquisition that we did. It's a good contribution to our business we are having in the southern part of Sweden.
Thank you. That's all for me. Have a great weekend.
Thank you.
Thank you, Robin.
Thanks, Robin.
Thank you. Our next question is from Karl-Johan Bonnevier of DNB Markets. Please go ahead.
Yes. Good afternoon. Fantastic numbers as usual, so good to see. Looking at variable volumes, you say they are coming back. How would you describe this? Are we back to a normal level or are we back to a higher level than you that you would see normally in this kind of quarter?
We are not back to the level of pre-COVID. We can see that, for example, when it comes to food and beverage. I mean, pre-COVID, that amounted to around 13% of our total turnover, and now we're at 9%. We're not back. We're not back when it comes to property services either, the two largest service line where we took a, let's say, a negative impact during the pandemic. We're moving in the right direction, but we're not fully back, so to say.
Looking at the profitability, it seems like you are able to handle most of the variable volumes with people that are already on site. Is that a good assumption?
At least with people employed by Coor, we use our own employees for the variable services. Sometimes we move them between sites and so on, but yes, we manage to do that in a good way.
This SEK 10 million that you indicated in the Swedish operation from COVID-19 compensation, would you describe that as a little of an extraordinary, or is that something that just as balanced costs that you also had in the quarter?
I would say it's a little extraordinary, positive one-off, you could say, because we have been reimbursed for the cost when people are home sick. That of course takes care of all sick leave that we have had, not only the COVID-related one, because you can't really make a difference. That means that we're being compensated for all sick leave. That will not continue. That was, you know, a time limit on that support from the Swedish government. It's not something that we expect going forward.
When you look at how you have been able to handle, say, the challenges of Omicron at the start of this quarter, was it a big impact on the operation?
Yes. It has definitely been an impact, and it has created challenges. I think we have managed quite well, but it has been challenging in certain parts, perhaps mostly in Finland. It's more challenging when you have a smaller operation and it's more difficult to move people around and so on, compared to a large country like Sweden, with you know, really good density on your volumes.
I guess all of us have been a little surprised how you've been able to keep volumes up in Norway. As you pointed out, it's a lot of variable volumes. How do you see that playing out for the rest of the year? Are you getting close to finishing these extraordinary projects or is that something that we should expect to continue?
I'm sure it can continue for a while, but it's not something that will be sustainable over time. They are very high right now.
High, but not coming to an end basically, at least then, so. Just
Not today, but.
Not today?
They will probably not continue at this level in the second quarter at least in the second half of the year.
Good to know. Just looking at the new contracting pipeline, how do you see that, AnnaCarin? There's still a lot of ongoing discussions out there or has it started to ease a little?
No, actually we can see quite a normal pipeline of new possibilities. I think it's many opportunities actually for future.
Good to hear. In those discussions, have they, say, what's happened during the last two or three year impacted the way that the potential customers are trying to send out their RFPs in the sector and what they are looking for and similar things?
I think it's too early to just say that there are coming new possibility because we have had a pandemic situation. We have seen a really strong pipeline during 2021, and we see that it continues to be strong even during 2022. Maybe we can see a bit more of a smaller opportunities in the pipeline for 2022 compared to 2021. There was a lot of large cases in the pipeline for 2021, for example, the Danish Building and Property Agency.
On that, you said you're now going live on Monday. Have you managed to staff it to the level you were looking for and so you get a keen start for it?
Yeah. As we mentioned in our report, we try to spend quite a lot of time and resources on starting up our contracts. We are quite confident that we will start up the contract in a very good way. In a large contract, there will always be challenges, but I think we are quite staffed to take on the challenges as well.
Excellent. One final from me. Looking at these extraordinary deep cleaning kind of volumes that we had during the COVID period, do you still see that out there, or is that now gone basically out of the numbers?
It has more or less gone out of the numbers. We don't see that to that extent at all, actually.
Thank you very much. Have a good weekend.
You too.
Yeah. You too.
Thank you. Just as a reminder, if you wish to ask a question, please press zero-one on your telephone keypad. There'll be a brief pause while we register any further questions. There are no further questions at this time, so I'll hand back over to our speakers.
Thank you. Thank you all for listening in, and we wish you a very Good Friday and a good holiday.