Earnings Call: Q3 2020

Oct 21, 2020

Thank you very much. Good morning, everybody, and welcome to this presentation of Envido's 3rd quarter results 2020. I am Henrik Jallmazsen, President and CEO, and with me I have Peter Whelen, CFO and Deputy CEO. Next page, please, Page 2. For the coming 25 minutes or so, we'll take you through just a brief introduction to Envito for those of you who are new, go through some of the details around our Q3 performance as well as the performance to date, a brief look into our updated sustainability compass, then going into an update on the market outlook, our views on that as well as some of our key short term priorities. Peter will then go through the numbers in a bit more detail. I will wrap up with a summary, and there will, as usual, be plenty of time for questions at the end. Next page, please, Page 3. So for those of you who are new to us, Invito is the largest window group in Europe and a leading door manufacturer. We're a clear market leader in the Nordic region with a strong presence in the UK and Ireland and, I would say, an emerging position in, amongst others, Germany and Poland. We have LTM Q3 2020 net sales of SEK6.7 billion with an operating EBITA margin of 10.6%. And we have approximately 4,200 employees across 12 countries, then predominantly Northern Europe. And we market and sell all the fantastic brands that you see on the bottom part of this slide. Next page, please. Page 4. So summary, quarter 3 for Envito then. I'm really happy to say that the quarter 3 was the best quarter to date for the Envito Group in terms of results. We showed healthy organic growth, the 6th consecutive quarter with strength in margins. Continued strong cash flows in the quarter, and I'll come back to that increased order intake as well as increased order backlog at the end of the quarter compared to the same period last year. Overall, in the quarter, we've seen positive consumer markets. However, the industry markets in general, and particularly in Business Area North, remain a bit more cautious, and I'll come back a bit to that as well. In e commerce, we saw a strong organic growth of 42%, really showing that the long term investments for growth we've been making, coupled with a strong local management, is really paying off. And e commerce was 13% of group sales in the quarter. Next page, please, Page 4 sorry, Page 5. Looking at a bit more of the details in the quarter. Sales grew organically by 4% to SEK1.716 billion. Operating EBITDA grew considerably to SEK247 1,000,000, up from SEK203 1,000,000 last year, which means that the operating EBITA margin came in at 14.4%, 2.2 percentage points up from the same quarter last year. Order intake was healthy, 7% up year over year, which means that the order backlog at the end of the quarter was up 18%. Our operating cash flow continued to be good at SEK358 1,000,000, up SEK 39,000,000 from last year. And altogether, this means that the net debt versus operating EBITDA, excluding IFRS 16, was 1.2, which is considerably down then from the 2.5 at the same point in time last year. Next page, please. Page 6. In terms of COVID-nineteen, we've actually seen, from a group perspective, relatively limited operational and financial impact in total in the quarter. The number of confirmed infected employees still stay at relatively low levels. We have, however, seen some operational disturbances, particularly in Business Area North, and that's been linked to higher than normal sick leave that has impacted our efficiency negatively than predominantly in production. The U. K. And Irish units, following the shutdown early in Q2, has continued to successfully ramp up but are not yet fully at the pre COVID activity levels, although moving in that direction. We've seen robust consumer markets overall and likely actually a positive COVID demand impact on particularly e commerce with more people staying at home. However, in summary, the long term effects of COVID-nineteen still remain hard to predict. We stay very close to the situation on a business unit by business unit level and are ready with actions if and when needed. Next page, please. Page 7. If we look then into the business areas, starting with Business Area South, we saw strong profitable growth in the quarter. If we look at the ring chart on the right hand side, you can see that Business Area South has the vast majority of sales targeting the Consumer segment, which we capitalized well on in the quarter. E Commerce, as I mentioned, grow considerably organically 42%, also with a strong order intake, up 26% and a strong order backlog at the end of the quarter, 13% up. We saw a continued strong delivery in the larger Danish units, really capitalizing well on a robust consumer market. As I mentioned, the U. K. And Irish business units continue to open up towards pre COVID-nineteen activity levels. Reported sales increased by 9% or organically 10% up to SEK790,000,000. And the operating EBITA margin strengthened considerably by 6 percentage points to 24.7% in the quarter. And the order backlog at the end of the quarter was plus 36%. Next page, please. Page 8. If we look then into Business Area North, we saw a slight recovery in the consumer market in the quarter. If we look at the ring chart again, on the right hand side of the slide, we see a substantially bigger exposure to the industrial market in Business Area North, which also impacted the quarter. We saw a strong performance by the more consumer oriented business units in Sweden, really capitalizing on the some of the recovery in their targeted segments. The industry markets overall, however, particularly in Finland, do remain cautious, and we're also yet to see full recovery on the in home consumer sales segment in Finland. We did pleasingly, however, see margin improvement in Norway despite the quite considerable currency headwinds with the Norwegian krona weakening. And as I mentioned previously, we have had some operational disturbances from HiSeqlib, particularly than in Sweden. Reported sales shrunk slightly by 1%, but organically, a slight growth to SEK894 million. The operating EBITA margin strengthened by 0.2 percentage points to 8.2 percent. And the order backlog at the end of the quarter was 7% up versus the same time last year. Page 9, please. Looking then at Envida's development, the 1st 9 months. I think we can summarize that in 3 bullets. We've seen strong e commerce performance, capitalizing on a strong underlying trend with good profit development. We've capitalized well on robust consumer markets overall, particularly in Denmark. And we've shown good cost turbulent period, really bolstering our margins throughout the period coming up till today. Sales has grown organically by 2% to SEK4.882 billion, and the operating EBITDA has strengthened to SEK498 1,000,000 versus SEK435 1,000,000 last year, which means we have increased the operating EBITA margin by 1.2 percentage points to 10.2%. And operating cash flow has been good in the 1st 9 months, up to SEK872 1,000,000 versus SEK532 1,000,000 in the same period last year. Next page, please, Page 10. So just to give you an update on our updated sustainability compass. In terms of sustainability, that's really at the heart of what we do at Invedo, given that a large part of our business is about replacing older, less energy efficient windows with newer, more energy efficient ones, thus contributing to better energy efficiency in homes and offices and reducing energy consumption and consequentially then climate impact. Our motto is quite simple: We give more than we take. And we do that because sustainable business drives sustainable value. Our updated compass has 3 pillars to it, where the first is to be an environmental friend because we need natural resources to do responsible business. This is obviously, to a large extent, about reducing our climate impact, but it's also about making sure that we use raw materials from renewable sources, reducing our air emissions and, for example, also making sure that we reduce waste in our factories. Our second pillar is to be a good place to work because empowered colleagues make a difference. Here, it's also, obviously, to a large extent, about ensuring a safe and healthy workplace for employees to come to every day. But for example, we also invest in leadership to make sure that our leaders as well as the rest of our employees are the best people they can every day at work. And the 3rd pillar is to be a responsible business because aligning with society and society's expectations creates more opportunities. Part of this is obviously about making sure that we're compliant and that we continue to do business in a responsible way. But as an example, we also invest in our local communities to make sure that our local businesses can thrive in their Looking then at our view on the market outlook. We enter quarter 3 and the winter season, which normally has lower seasonal demand, particularly consumer activity. But we do so with a stronger order backlog than at the same time last year. We see in the near term overall positive consumer demand, fueled partially by rising house prices, but also changes in behavior, and we see pockets of potential government stimuli in some of our geographies. We see an industry market in the near term in Sweden and Finland that is still a question mark and a bit uncertain in terms of development. We do see underlying demand potential in Ireland and the U. K, creating some market potential but obviously dependent on the COVID-nineteen development as well as the Brexit negotiations and the outcome of those. And last but not least, we see a strong underlying growth potential in e commerce with new customer behavior starting to cement. Next page, please, Page 12. If we look then at our short term priorities, they remain largely the same, focusing and managing our way through COVID-nineteen while building for growth. So we will continue to strengthen our positions in our key geographies in these quite dynamic market conditions under COVID times. We will continue our investments for e commerce growth. We will continue with proactive cost management in the face of changing demand and challenging markets if and where we see them. We will make sure to have an ongoing screening of and in dialogue with select acquisition targets to also put some more efforts into our inorganic growth journey. And we will continue our actions to drive growth and capitalize on market opportunities where we see them. Next page, please, Page 13. And with that, I hand over to Peter, who's going to take you through a bit more of the numbers. Please, Peter? Thank you so much, Henrik. Then I go to Page 14, please. On this page, we can see the income statement for the group. To the left, we can see Q3 2020 as well as 2019. Then in the middle, we can see year to date. And then further to the right, we can see rolling 12 months as well as 2019. If we start with the quarter, sales was plus 3%. Organically, it was plus 4%. The adjustments then is only within the currency. Gross margin was improving this quarter from 26.6 percent to 27.6 percent. And in combination with higher sales and also with higher gross margin and also lower overhead costs, operating EBITA was improved by 22% from CHF 203,000,000 to CHF 247,000,000. In the quarter, Enviro had restructuring cost of CHF 7,000,000 mainly related to closed sum of Central Project as well as costs connected to COVID-nineteen. So EBITA ended at CHF 240,000,000 compared to CHF 203,000,000 last year. Further down the income statement, we can see that earnings per share was up 19% compared to last year from 2.56 percent to 3.05 percent. If we then look at the year to date figures, sales is plus 1%, Organically, it's +2 percent. Also then, only adjusted for currency. Operating data, plus 40% from SEK 405 to SEK 4.95 million. And earnings per share is up 8% from €5.2 to €5.61. That gives a rolling 12 month sales of €6,695,000,000 and operating beta margin of 10.6%. Envira has now, in the latest 6 quarters, been able to improve operating beta, and thereby we are up to 10.6% in operating beta margin. If we then turn page, we go to Page 15. This page is showing sales for the quarter to the left and the order intake for the quarter to the right, 2020, 2019 and 2018. We can see that sales was plus 3% in the quarter. Once again, the organically was plus 4%. North had the same organic sales more or less level as last year, where South had a growth of 10%, where e commerce was plus 42%. We had e commerce in Denmark, Sweden, Norway and Germany mainly. The other brands in Denmark had also positive growth in the quarter, where sales in U. K. And Ireland had declined in the quarter. In total, we had higher sales within consumer sales, which is also positive for the margins. If we look at the order intake, the order intake was plus 7%. Here, North had a growth of 3% and South had a growth of 13%, where e commerce was plus 26%. But also the other Danish unit had a growth when it comes to order intake. And also in Ireland, we had a positive growth when it comes to order intake. If we then turn Page, we go to Page 16. This page is showing the backlog end of each quarter from Q3 2015 until Q3 2020. NVIDIA started this quarter, Q3 2020, with a higher backlog compared to last year. Then in the quarter, order intake was plus 7% and sales was only plus 3%. Thus, had the backlog continued to grow and was end of the quarter plus 18% compared to last year, equal to CHF 1,308,000,000 meaning CHF 201,000,000 higher backlog compared to last year. And this is the highest backlog ever for Envido. North was plus 7% in the quarter end of the quarter and South is plus 36% end of the quarter compared to last year. If we then turn page, we go to Page 17. This page shows operating beta and operating beta margin for the quarter to the left and year to date to the right for 2018, 2019 as well as 2020. We can see that the margin has been improved in the quarter, 14.4 percent compared to 12.2% last year. And in 2018, it was 12%. And looking at the year to date, it has been improved from 9% last year to 10.2% this year. And in 2018, we had 9.2%. The improvement comes from higher sales. We are in the quarter plus 4% organically and year to date plus 2%. We have higher gross margin, 1% higher percent unit in the quarter, and we have also lower overhead costs. And in combination of that, we then improved the margin to 40.4 percent in the quarter. Looking at the year to date and an operating EBIT of SEK 498,000,000 is the highest to date for Enviro for the period January to September. We sit on the turn page. We go to Page 18, please. This page is showing the net debt end of each quarter as well as the net debt versus EBITDA. And these figures are excluding or are excluding IFRS 16. Net debt has decreased in the quarter and was, end of the quarter, CHF 1,017,000,000 excluding IFRS 16, a reduction of NOK993,000,000 compared to last year. Net debt plus EBITDA has been reduced from 2.5% last year to 1.2%. And in September 2018, the net debt versus EBITDA was 3.0 euros Englid has deferred of taxes and fees of €54,000,000 in Q3 related to COVID-nineteen. If these would have been paid in Q3, the net debt to EBITDA would have instead have been CHF1.3 million and not CHF1.2 euros Including IFRS 16, the net debt would have increased by €361,000,000 and the net debt with EBITDA would instead have been 1,300,000 instead of 1,200,000. The cash flow has been improved also in Q3. You can see it to the right, the cash flow from operating activities year to date for 'seventeen, 'eighteen, 'nineteen and 'twenty. Please notice that 'seventeen and 'eighteen are excluding IFRS 16, whereas 'nineteen and 'twenty are including IFRS 16. The operating cash flow has been improved in 2020, thanks to higher results, less tax payments and improved working capital. For working capital, the main driver has been increase in operating liabilities. This includes the deferral of taxes and fees of SEK 54,000,000 which are related to COVID-nineteen, which will be paid in Q4. And now I hand over back to Henrik. Next page, please. Page 19. So if we summarize quarter 3 then, we saw overall good consumer activity with, again, a strong e commerce performance. We had healthy organic growth and the 6th consecutive quarter of strength in margins, leading then to the best operating EBITDA results to date for the Enviro Group. We saw continued good cash flows throughout the quarter, building on strong cash flow performance earlier quarters, which has now enabled intensified M and A activities. COVID-nineteen impact in the quarter was limited, although, as I mentioned before, it has held back activity and also impacted efficiency negatively in pockets in the group. We entered the 4th quarter with a are still difficult to predict. Next page, please. Page 20. And before I open up for questions, I'm just going to remind you that we have a virtual Capital Markets Day on November 5 between 10 and 12 CET. You're very welcome to register and you'll find the link on our website invido.com. With that, I will leave room for questions, and I'll hand over to the operator. Operator, please? Thank you. Our first question comes from the line of Adeela Dossian from Handelsbanken. Please go ahead. Your line is open. Hi, good morning and thanks for taking my questions. My first question relates to the consumer market. Could you please give us some insight in what's going on in the specific countries that you operate in and especially as it relates to business area north? You mentioned that consumer oriented business units in Sweden are holding up quite nicely, while consumers in Norway and Finland are acting more cautiously. And overall, I noticed that sales within consumer was within this area declined by 2% year over year. But at the same time, your order backlog increased by 7% for this business area. So how much of that is driven by the consumer market? And what are your expectations as it relates to demand for Norway and Finland going forward? So to try thanks, Adela, Henrik here. To try to answer that as succinctly as I can, a couple of dimensions to take into consideration. The first one is the development of the consumer market has been a bit disparate for the different segments. So what we typically call small works, which is smaller window orders in the range of, let's say, ordering 2 to 5 windows, doing smaller repairs and refurbishments on your home. That segment has been quite strong overall, and that's what we refer to as a robust consumer market overall. And we've seen some of that, hence also where we mentioned a slight positive COVID impact on e commerce sales partly due to that. However, the larger projects on the consumer side, big renovations and big additions, That market in general and particularly in Business Area North has been a little bit softer and potentially as consumers have been a bit more hesitant to take on 2 big projects given the uncertainty of the economic outlook. And the situation is such that in the let's say, in the Danish geography, typically, we are stronger positioned against small works, whereas our sort of position in Finland is quite general across the segment. And in Sweden, if anything, we're probably more targeting in our businesses the bit larger project side. However, another factor to factor in is the fact that the in home consumer sales segment in Finland, which is a quite large part of the Finnish market, has still not quite recovered from the limitations put by governments and authorities following COVID-nineteen. So to do in home sales and particularly proactive in home sales, which is a reasonable part of our sales there, has been more difficult. And if we to answer your other question about predictions going forward, it's very difficult, obviously, because there is a lot of uncertainty due to COVID-nineteen. But our short term impression is that the consumer market looks to be quite stable for the coming period. Obviously, we always have a seasonal impact in the winter season. But looks from a if you look at it from a seasonal perspective, quite stable, at least in the near term. In the long term, I would say there's a lot of factors playing in. So I'd say a bit more difficult to predict. Thank you so much. That makes total sense. If I could also move on to the industry market then, I noticed decline in growth in business area north, but pretty solid developments in business area south. So what is driving this development? Is it related to specific region or market or something else? I think growth was up about 44% within Industry and Business Area South. If you look at that, obviously, the base for Industrial Sales and Business Area South is relatively small. So any changes in mix and some more project sales in some of the key business units, they will have an impact. So that's probably more the explanation of that. If you look at Business Area North, where we have bigger industrial market exposure, the market has been quite hesitant. And it was also, to some extent, I think, in terms of pace of work impacted by COVID-nineteen. And we've seen that probably more in more so in Finland even than in Sweden. But overall, it has been impacted negatively, I'd say. So the market the industrial market has been a bit softer. Whether how much of that is a temporary COVID-nineteen impact and how much of that is an impact on building starts is a bit too early for us to say really, but we have seen some of that impact in the quarter. Got it. And then finally on the UK and Ireland, you mentioned that operations have reopened but not running at the same capacity as pre pandemic levels. Could you give us some details on what capacity levels you're currently running at and how customers within these markets are acting given all the uncertainty that's going around? Yes. So I think at the moment, obviously, if we start with the first part of that question, if we looked at that, we are we see that customers are a bit hesitant for 2 reasons. 1 is, obviously, hesitant for two reasons. One is obviously COVID-nineteen and the reopening following that. There is also the second aspect of the Brexit negotiations, which is entering some sort of critical phase, which is partially impacting that. If you look in the quarter in total, I would say that we ran on average at maybe 75% of the pre COVID capacity levels, something like that, 70%, 75%, and maybe even a little bit more of that towards the end. But it's still not at full capacities. And part of it is actually just the timing and resource allocation issue. It takes some time to recover from the full shutdown that we were then us and the rest of the industry were forced to do early in Q2. Okay. That's all for me for now. Thank you so much for answering my questions. Thank you very much. Our next question comes from the line of Richard Hansen from Nordea. Please go ahead. Your line is open. Hi, Henrik. Hi, Peter. This is Victor from Nordea. Thank you for taking my questions. So I'll start off with, is the better Danish and Swedish performance in particular due to the market growth? Or is it good performance specifically for Envido, possibly due to your e commerce or sort? Hi, Vic. I think there were 2 things. And Ric, Ariane, 3 things to keep in mind there. So number 1, we've made some conscious investments to capitalize on the type of market that was the type of market development that we're seeing now. So from that respect, I think that there's probably a slight advantage for us versus competition, given those. The second one to keep in mind is that from a mix perspective and how we're positioned with a strong e commerce position that we've had and that we've consciously built up over time, obviously, we're benefiting from it. I would say that in totality, there is a bit of a mix. But to your question, and I think we are and this is a bit speculative actually because we don't really have full market share data, but I would expect us to do slightly better than competition in some of those pockets. But I alluded to in the presentation, we have seen some positive COVID impact, particularly for e commerce that we're able to capitalize on, but it's also obviously impacting competition positively. Very interesting. Thank you. And for the second question, you talked a lot about upcoming M and A. Can we expect something already this year? And could you possibly elaborate on the characteristic of the acquisition, if it will be within e commerce and new technology, which a new geography or maybe something related to your green profile, for instance? We have so in terms of timing, I wish I could shed more light on that, but it's very difficult, partially because obviously we're doing these processes at the moment is a bit complex with limitations in travel. But secondly, also because it takes 2 to tango and we're going to make sure that the price, the targets and the integration plan is right before we do anything. So we have a number of ongoing dialogues. We're looking at targets actually at the moment across both Business Area North and Business Area South. And I would say that in general, we're interested in continuing to strengthen the positions that we have in the Stork segment, including in e commerce. We're interesting in further expanding our portfolio to take a biggest chunk of our customer sales where we are strong. And we're also interested over time to strengthen the, let's say, the overall sustainability aspect of our offering and to make that further stronger. So not able to shed much more light than that other than to confirm that there are discussions are ongoing and timing will unfortunately have to be when timing will be. Very interesting. And one further question on M and A. Will the acquisition be a bolt on or possibly an additional business unit? And can we expect margins in line with the group? Or maybe it's Quite I mean, we've said normally that we look at acquisitions in 3 levels of tiers, really. So the first one being what's typically then a little bit smaller acquisitions, which would be bolt ons to be used either to strengthen the geographic footprint or to add something onto their portfolio. We're looking at what we call business area bolt ons, which is actually within existing geography, for example. We would acquire something that's big enough to be a standalone business unit, but which would add some sort of dimension or proposition or customer segment to that geography. And the 3rd level then being something bigger that will be more transformational in new geographies or whatever. And I would say, at the moment, we're looking predominantly at those 2 first ones and both of those. So it could be something that would be a new business unit or it could be a bolt on to an existing business unit. In terms of how margin accretive it would be, it's very difficult to say because the both the level of integration synergies and the absolute disparate. So I can't really give a real rule of thumb in that respect. Okay. I understand. Business Area South, the EBITDA margin were 6 percentage points better than last year. Could you please shed some light on how much of the improvement came from lower discretionary spending and how much were from e commerce or other accretive actions? I can't give you an exact number, but there were I want to say that there were 3 clear elements to it. Number 1 is mix, so good performance in the segments and the business units where we have stronger margins. 2 was actually a sheer volume impact. As you see, we've had good organic and absolute growth. And obviously, that growth has then helped us prop up margins because we get better variable contribution with new volumes. And the last one is, obviously, we've done a really good job despite the volume growth and with cost control overall both in Business Area North and Business Area South, but it's supporting margins positively in South. Yes. Okay. And two more questions, if I may. Did you repay any government postponed tax in Q3 that you got from Q2? I'll let Peter answer that one. Yes. Some of them are paid. We have taxes and VAT, especially in Denmark, that were paid in Q3 related to Q2. And then we have another payment of SEK 54,000,000 who are related to Q3 that will be paid in Q4. Got it. And the last question? Yes. Thank you. How are you preparing for a second virus wave? So I think overall, we've been quite, I would almost say, relentless and ultra disciplined. So we've been very clear and have actually done quite a lot of work already coming back after the seasonal holidays in the industry to not let down the guard in this respect. So to most respects, the precautionary measures and the activities that we've taken are in effect. I think the key area, which is the so in terms of protecting our employees and doing our part to limiting the spread, which have been 2 very important priorities for us, We have good experiences from this spring, and we are keeping the pressure high. I think the area which is more unpredictable and in some respect perhaps more difficult is if we see any substantial impact on demand as a consequence of a, call it, 2nd wave or whatever you will. And the thing in that respect, we stay very close to the issue business unit by business units. We continue to be very cautious with cost and particularly not to accelerate cost now because we've had a what we'll have to say is a good quarter, but actually to stay very tight on cost and also be prepared to do more in that respect if we have to. Okay. Thank you very much, Hendrik and Peter. That's all for me. Thank you. Our next question comes from the line of Kenneth Pol from Carnegie. Please go ahead. Your line is open. Yes. Thank you. So I have one question on the overall cost. I mean, the demand has in some areas have been improved by the COVID-nineteen related effect on how we live our lives and so on. But also, I was interested on the overhead costs like SG and A costs and so on. Do you feel that your sales force is up traveling again and that the cost side have normalized after the COVID-nineteen in both North and South? Yes. I mean, hi, Kenneth. On a relative level, I would say that we are there were probably pockets of lagging COVID pickup left. But from a group perspective, almost not on a material level. So particularly at the back end of the quarter, I would say that we're up to more normal levels from an SG and A and overhead perspective. We have obviously been quite good at holding back general activities. And if you look at if we take away sort of business based travel, so as to go see customers and sell, etcetera, So conferences and things like that in general is obviously still being held back. So whether that's the new normal or not, I guess, it remains to be seen. But there, the cost levels are still a bit lower. But on a general level, yes, we are basically up to sort of overall pre COVID activity levels, probably with some exceptions. And that has obviously ramped up continuously in the quarter. So at the start of the quarter, started a bit softer, but activity levels more and more regained over the quarter. So the majority of the improved margins more comes from the business mix that you have more consumers in your business and the growth there rather than costs being very low at the moment? That's correct. Yes. The biggest proportion comes from the business unit and customer segment mix. Excellent. And then I'm again surprised and impressed about the growth in e commerce being very strong. And could you do you can you talk a little bit about that? I'm interested in the drivers. Do you see cannibalization in other businesses you have due to this? And when will you run into capacity problems to produce this? Yes. I mean, if we start with the drivers, I think we're quite proud actually of the work that we've done. And obviously, all the credit should go to where a lot of the creditors should go to the leaders in the business. And we've also made some quite conscious both investments. But obviously acquisitions here in the last 6, 7 years to build their business. Looking at the drivers, I think the drivers are quite similar to the overall drivers of commerce behavior in the industry. We have and so it's about transparency and it's some extent actually about convenience. And not to forget here also, we still have quite a broad proposition. What I think that we've done really well as an industrial player entering this is that we've built a very strong integrated supply chain. So we control the manufacturing of the product, the shipping of the product, the pricing of the product, the configuration of the product. So we talk about this. This is an e commerce business, but it's still very much a window business at heart, which I think is a strength for us in this respect. If we look at the capacity perspective, fortunately, we've made some investments in 2018 into expansions in our Estonian plant that supports the e commerce business. We've also acquired a in 2018, when we acquired a business, we also got through that acquisition a plant in Romania that supports the growth. And I think we've done a really good job here in the period capitalizing on this. And we will likely we have high expectations and plans for this business going forward. So we will likely have to continue with some decent investment levels into these supply chains to continue to support the growth. Okay. But it's more expanding the capacity in the existing plants rather than building a large new plant somewhere? That's correct. Yes. And I think that if we were to increase our capacity, and then as I mentioned, we look at either synergies with our other production sites, obviously. Alternatively, which we as we look at acquisitions in general going forward, there is obviously this is one dimension to take into consideration that we've got an opportunity here to drive volume in an e commerce business that could help us fill factories depending on what type of acquisitions we make. Okay. Okay, great. That's all for me. Thank you. Thank you very much, Koen. Our next question comes from the line of Roland Konen from Vallejo Holdings. Please go ahead. Your line is open. Yes. Good morning from my side. Congrats to the results, very strong. Just one question is left. It's a housekeeping question, a question concerning the tax line. You had considerable lower taxes or tax rate in Hello? Sorry, we lost that. Yeah. Fortunately, the line broke for Roland. So maybe he will dial back in again. In the meantime, we have a question from Julius Raffelli from SEB. Please go ahead. Your line is Congrats on an impressive report. Only one question from my side regarding the competitive situation within the different markets and especially regarding pricing. Could you just comment a bit on the pricing situation in different markets at the moment and what you're seeing and how this COVID crisis is impacting the situation? Thanks. Yes. Thank you, Julius. I mean, in general, it's as normally is in our it's a bit standardized almost the answer, but it is quite disparate as is our businesses and the channel structure in the different geographies. We have probably pockets in the very strong consumer performance, I mean, particularly in e commerce probably, I would say. That there might there is in that type of growth situation, obviously, a lot less price pressure because capacity becomes an almost a constraint. Whereas in other geographies, if we look, for example, at the industrial markets in Business Area North, probably a bit more price pressure in general. So it varies a little bit across the different geographies. I want to say overall, I think in the quarter, in the last quarters, we've done a good job trying to turn our mix to the more favorable pricing developments and try to capitalize where there is opportunity. And obviously, we will try to continue that work going forward. But it's hard to do any sort of real predictions on the development going forward. It's also difficult as the situation is, if anything, unusually dynamic. There are no further questions registered. I hand back to the speakers for any closing remarks. Yeah. Okay. So we have a couple of questions via email as well. Yes. So first question that comes from Sander Intelman is asking regarding government support programs in the quarter, that's been using of costs in COGS or in overhead costs? And the answer is yes. We have received SEK2 1,000,000 in the quarter, and we have booked that as reduced cost in the quarter. SEK2 1,000,000 is answered. Then we see some questions from Joel Borstave. The first question is related to U. K. How would a Brexit without a trade deal affecting Vidu? And I think in general, it's obviously, as for everybody, a complicated question to answer. I think in general, we're in a situation quite a good situation to manage even a hard Brexit deal, mainly as our UK units have the majority of their supply locally and in general quite local supply chains. Then obviously, if there is a hard Brexit deal to get a full view on the end to end supply chain further steps back from yourself is very difficult. But at least in the short term, we're in a relatively good position. Secondly, the UK is, I mean, from our perspective, a relatively limited part of our overall revenue. And the key I guess one of the challenges we have would be then transportation, particularly into our Irish businesses. But I think we have that a relatively good plan for that as well. So it would definitely, as for everybody, be a bit of a challenge, but I think we stand relatively well prepared to manage that compared to other industries and other competitors. The second question for you, Forsberg, is regarding backlog. The sales order backlog is huge. The margin will be a lot higher in the future. Is that a correct assumption? I mean, we don't forecast margins on any level, but the facts are that we have a strong order backlog for Business Area South and we have shown over time a good operating EBITA margin development for Business Area Then now we see the question from Harald Haven. He's asking regarding that we said, we mentioned pockets of potential government stimulus. Could you please elaborate on this per market or in video market? Yes. I think it's actually, it's quite hard to give a summary by market because the situation is a bit different in different geographies. But there have been and are some ongoing discussions to expand partially existing programs or to do new ones. We have seen some in the UK on the renovation supporting renovations. We have seen some discussions in Denmark. The exact status of that, I actually am not fully up to date on, but we have an ongoing dialogue about that. And we have seen some discussions in Finland predominantly. Those are the 3 main ones regarding this. So we wouldn't be we're not banking any of these in terms of our outlooks, but we wouldn't be surprised either if we see in at least one geography some sort of stimuli program. But as I said, it's a bit too early to say exactly what it's going to be and what it's going to mean for us. Then we hand over back to the operator, because I think to Roland, the person who got disconnected is back online again, so he can ask his question. Yes, indeed. The next question comes from the line of Roland Krohnner from Velio Holdings. Please go ahead. Your line is open. Yes, thanks a lot. Sorry for the technical issues. I was disconnected. Thanks for taking my question again. It's just a housekeeping question concerning the tax line. You had a really low tax rate in 2020. What are the reasons for that? And is this tax rate sustainable for the next year? Thanks a lot. If we look at year to date, the tax is 90% of the reason before taxes and the last we were 20%. There's a difference of 1 person. And that is more related to mix. And also that we have some unused losses taxes going unused tax losses that were not used in some countries, especially Norway, that we now can utilize. Meaning, when we now make profit in Norway, we don't have to pay taxes because we have that on the balance sheet. Going into the future, I think the normal or stabilization is around 20%. Okay. Thanks a lot. We have no further questions registered. So I hand back to the speakers. We actually had one last question then also, which was what kind of acquisitions do we aim at, more regular brick and mortar or some kind of specialized company. But I think we've already answered that question in terms of our M and A plans going forward. So with that, we thank you very much for your attention. And we close the call there. Thank you very much. Bye bye, everybody.