Earnings Call: Q1 2019

Apr 25, 2019

Today, I am pleased to present CEO Henrik Jamieson and CEO Peter Wallen. For the first part of this call, all participants will be in a listen only mode. After that, there will be a question and answer session. Good morning, everybody. Welcome to this presentation of Envato's Quarter 1 Results 2019. I am Henrik Jarmasz, CEO of Envato. And with me, I have Piet Ovelain, CFO and Deputy CEO. We will spend roughly 30 minutes presenting some of the highlights for the Q1 performance for the Envito Group, and there will be time for questions after our presentation. Before we start with the actual Q1 presentation, I just thought I'd share a short update on our vision and overall strategy following the new simplifies structure that we went fully in line with on January 1 and which we talked about in the recent reports. As you can see from the vision, we clarified even further that in Vido, we're all about generating increasing shareholder value by leading and developing the strongest companies in comfort, climate and safety that creates better indoor life. In our minds, the most critical component of this is making sure we have talented and inspired employees throughout the entire group, and we see this as a key element of our proposition. Next page, please, Page 2. Also, just very shortly before we go into the Q1 performance, as most of you know, we are the leading window manufacturer in Europe and one of the leading door suppliers. We see ourselves as a natural home to the strongest players in our broader industry to allow both further development and profitable growth of those of those businesses. With Simplify, we have clarified that we work in a decentralized structure that allows entrepreneurial spirit and local decision making with customer focus. We believe that strong local accountability and authority will let us attract the right leaders with the right ownership of the business and the results and therefore achieve better results over time. With that said, I'm going to walk you through some of the market highlights for our past quarter, our quarterly performance for the business as a whole and for the different business areas, a little bit about our market outlook and some of the key priorities for the imminent future. And after that, Peter will shed some more light on the details of the numbers for the quarter. So next page, please, Page 3. As most of you are aware, the first quarter for Enviro with less consumer activity in the winter months. If you look at the overall market development in both quarter 1, but also, I'd say, in the recent quarters, the development is quite fragmented across our different geographies and segments. Looking at the industry markets, in particularly Sweden and Finland, where we actually have some industry exposure of scale, That development is challenging. New built activity is going down across those geographies. Homebuilding starts are down, and we can also clearly see this in the we look, for example, at the market data for quarter 4 in the Swedish market, where total window sales in units was down 8% year over year. As the industrial market softens a bit, we also naturally see some tougher competition in the remaining market, which is also impacting, to some extent, the larger units in those geographies. On the other hand and very positively, the overall consumer demand across basically all our geographies is at healthy levels. And we can see that clearly in all the units with stronger and more prominent consumer market exposure, and which obviously over time with our consumer focused strategy is positive. From a structural perspective, we've also seen some more tendencies of continued consolidation in the builders' markets with a couple of large acquisitions announced so far in the year and particularly so in the Swedish market. Next page, please. Page 4. So what about the results in the quarter? Well, I'd say all in all, sales in the quarter held up pretty well in line with our expectations despite a softer order backlog at the start of the year, which was 7% below last year. Sales in the quarter increased by 4%, minus 2% organically. We are obviously particularly happy with the development in e commerce, which had a very strong quarter with organic growth of 33%. And we are also pleased to note that our long term investment in the e commerce segment is really is paying off nicely. Operating EBITDA at SEK 45,000,000 or SEK 42,000,000 before IFRS 16 impact is also in line with what we expected. The units in South and the Southern business area all performed better than last year. And the Danish units as well as e commerce contributed positively, but particularly a positive profit development in our UK business units. It's supporting a nice margin turnover sorry, nice margin growth in the geographies. Lagging adjustments of our cost base in geographies in the North, where we've lost some sales as well as some IT investments to strengthen our long term competitiveness has impacted the profitability negatively, and I'll come back to that when we look at the northern geographies. Order intake was at +8 percent in the quarter, and we closed the quarter with a backlog order backlog at the same level as last year. But we see a better mix in terms of higher order intake from the consumer or higher order backlog from the consumer segment. Operating cash flow. Our operating cash flow is normally negative in the Q1, but that amounted to SEK51 1,000,000 positive in the quarter. And we can also see that we're starting to see some emerging positive signs from our work with strengthening cash flow, and I'll come back to that a bit more later in the presentation. Next page, please, Page 5. So looking at Enviro South. Overall performance in Enviro South was very satisfactory in the quarter, and actually all business units in the business area improved their result year over year. As I mentioned before, e commerce had a very positive development with strong organic growth at +33 percent and together with a positive performance in the Danish units and an affected profit turnaround in the UK units contributed nicely to a substantial strengthening of the margins in the units. As you can see from the charts on the right hand side, long term sales and margin development continues to be positive in South, and sales in the quarter grew 19% year over year and amounted to SEK 5 52,000,000. The operating EBITA margin strengthened, as I said, considerably at 10.9% versus 5.8%. If you look at the right hand side in the chart, you see a dip in the EBITDA margin. That's completely normal in quarter 1 due to seasonality. As you can see from the ring chart, we have a very strong consumer share in the southern geographies, which is obviously highly supportive of the margin development, and we have clear strategies to continue to grow and support that. Order at the end of the quarter was 31% up versus last year, partly impacted positively by more beneficial weather in these geographies at the and particularly March versus what we saw last year. Next page, please. Page 6. Looking at the performance in Enviro North, I think we'd have to say, all in all, that performance was more challenged in the quarter. We see decreasing volumes in the industry segments and partly then also increasing the overall competitive pressure in particularly Swedish and Finnish geographies. As you can see in the ring graph on the right hand side, we have a substantially bigger exposure to the industrial markets, driven by the Swedish and Finnish geographies. And that's obviously challenging us with the current market development. And the increased competition has obviously impacted us as a result of that. Profitability was impacted by the lower volumes in where the measures to compensate our total cost base didn't fully cover the volume shortfall in the quarter, but also with some planned IT investments to strengthen our long term competitiveness in these key geographies. It's really positive to see that the Norwegian business unit continues its good development in terms of positive sales and margin development. Total sales in the quarter was minus 4% at SEK 848,000,000, and the order backlog at the end of the quarter was 13% down year over year, but with a better mix in terms of higher exposure to the consumer segment. Next page, please, Page 7. So how about the outlook on the market then? Well, overall, we see a continued mixed outlook for the market. Consumer demand remains at a decent level. Consumer confidence is slightly down over the past period, but still at healthy levels. And we also note that household economies across all of our key geographies is strong at the moment. At the same time, the industry market outlook continues to be weak, particularly in the Northern business area where we do have some industrial exposure of scale. And that development in Sweden and Finland would obviously continue to impact us. We see that the underlying e commerce trend continues to be strong, and we predict e commerce growth across all our key geographies actually. And as a result, we obviously intend to continue our investments in the e commerce segment. And actually, irrespective of all of this, with our new simplified structure, we feel that we are better equipped to respond to and also adapt activities and plans to a more mixed or, if you will, fragmented market development. And that positions us better for meeting the more fragmented market development going forward. Next page, please, Page 8. If you look at the short term focus, that remains largely the same as when we spoke a quarter ago. We will continue to fully implement the decentralized and more customer focused simplified structure across the entire group and to make sure that we reap all the benefits of this new way of working. Our long term acquisition strategy still stands, and our work to strengthen the balance sheet to allow for further pursuit of that is ongoing, as I mentioned before. We continue our initiatives to strengthen our consumer proposition and really strengthen our consumer share of sales totally and also strengthen our overall offer to the consumer and renovation market segments. Through digital channels as well as traditional channels. We will continue to work with cost and efficiency improvements, obviously, particularly the units where we have more challenging market development, but in general also across the group. And we will continue to make investments in both IT and digitalization to strengthen our long term competitiveness. With that said, I will hand over to Peter, who will shed a bit more light on the detailed financial performance for the quarter. Okay. Thank you so much, Henrik. We turn Page and we go directly to Page 10, please. On this page, Page 10, you will see the income statement for Q1 in 2019 as well as 2018. You will also see the rolling 12 months now in Q1 2019. For 2019, you can see 2 columns. One column is excluding IFRS 16. The 2nd column to the from my left is excluding IFRS 16. And I will come back on next page how the impact has been for Enviro when it comes to IFRS 16. The gross margin was just above last year. However, last year, we had some restructuring costs in Q1, and that affected the gross margin. So adjusted for restructuring costs last year, the gross margin this year is slightly below last year. Operating EBITA, dollars 45,000,000 and excluding IFRS 16, the operating EBITA was $42,000,000 compared to SEK 56,000,000 last year, a margin of 3.1% in total compared to 4%. The deviation, as Henrik told you before, is related to North. Lower volume in Sweden and Finland due to lower level of newbuilds, and we have not been able to fully adjust the cuts for the lower volume in Sweden and Finland. We have also in the quarter negative mix impact in North and increased the Teggit IT investment, and we have not been able to fully push forward material prices price decreases on the sales prices. In beta, it's €42,000,000 adjusted excluding IFRS 16 compared to SEK 37,000,000 last year. So some improvement due to restructuring costs last year. Last year, we closed down the factory in Werbell back in Sweden, and we took that cost in Q1 2018. Profit after tax is in the same level as last year, and earnings per share is somewhat higher than last year due to minority interest. We have less minority interest this year due to the fact that we acquired remaining shares of Lempelux in Finland in the beginning of this year. Today, we have only a small minority interest in Poland. We turn Page and we go to Page 11. This page is showing the IFRS 16 impact for Enviro. IFRS 16, it means that all operational lease shall be booked and treated as financial lease, and that mainly impacts net debt and assets and the EBITDA. The net debt has been increased due to IFRS 16 by SEK383,000,000 and the EBITDA has been increased by CHF22,000,000 in the quarter, and full year, it has been increased by CHF 87,000,000. So this means that net debt versus EBITDA has been increased from SEK 2.8 billion excluding IFRS 16 to SEK 2.9 billion including IFRS 16, and then we have calculated full year impact of the EBITDA. So this is a rather minor impact for Envigo compared to some other companies. EBITDA has been improved by SEK 3,000,000 due to IFRS 16. The increase of the net debt of SEK 383,000,000 is mainly related to leasing contracts of buildings and offices. We turn page and we go to Page 12. This page is showing sales and the order takes for Q1 in 'seventeen, 'eighteen and 'nineteen. To the left, you can see the sales development and to the right, you can see the all intake development. Sales ended at SEK 1,443,000,000, plus 4% compared to last year. And organic growth when we adjust for acquisitions as well as the currency, it was minus 2%. The order intake was +8% in total, and adjusted for acquisitions, the order intake has been plus 3% compared to last year. The order intake has been positive when it comes to consumer, as we have a better mix, whereas the industry sales or industry segment has declined in the quarter due to the market situation in Sweden and Finland with lower newbuild markets. We turn Page and we go to Page 13. And this page is showing the order backlog for the end of each quarter from 2014 until 2019. And you can see that the order backlog for March this year is on the same level as March last year, and this has caused an improvement because in December, we reported an order backlog 7% behind last year. So the higher order intake in Q1 has improved the order backlog, and the backlog is now plusminus0 compared to last year. And as also Henrik mentioned, the backlog has a better mix with higher degree of consumer sales compared to last year. We turn to Page and we go to Page 14. And this page is showing the operating beta and the operating EBITA margin for Q1 for 'seventeen, 'eighteen and 'nineteen. And also, as Henrik said, Envida has a high degree of seasonality in our business, and driven by lower consumer sales in the winter in Q1, and thereby, the margin is always lower in Q1 compared to rest of the quarters. Industry has a lower degree of seasonality. However, this year, the sales within the industry segment have been impacted negatively by the market situation and also by the lower backlog that we had at the beginning of the quarter. Except for 2017, the margin has been between 0% 4% the latest 5 years. And if we go back even a third in history and we go prior to IPO in 2014, we normally made losses in Q1 or a better breakeven in Q1. The result of 2017 with a margin of 6.1% was a historical high result for Q1. So the result this year was SEK45 1,000,000 compared to SEK56 1,000,000 last year, were up SEK3 1,000,000 from IFRS 16 impact, a margin of 3.1% compared to 4%. As presented earlier in this presentation, the deviation compared to last year is related to North, whereas South has improved compared to last year. And North, as I said before, lower volume, we've not fully we have not been able to fully adjust the cost level for the lower volume, and we also have a negative mix in North as well as higher degree of IT investments. If we then turn to Page and we go to Page 15. This page is showing net debt and net debt versus EBITDA from Q4 2016 until Q1 2019. And please notice that this graph is showing the net debt excluding IFRS 16. If you're going to include IFRS 16 impact, you have to increase the net debt by SEK 383,000,000 and the EBITDA should be increased by SEK 87,000,000. The net debt is always higher in Q1 compared Q4. It's always increased due to our seasonality. However, this year, the increase is lower in Q1 2019 compared to Q1 2018 or Q1 2017 due to improved working capital in Q1 2019. So the net debt versus EBITDA ended at EUR 2.8 billion. And if you then are going to include IFRS 16, it was 2.9% compared to a target of 2.5%. Last year, we had 2.5 in Q1 2018, and then the net debt versus EBITDA was increased in Q2 and was up to 3.2%, driven by the acquisition of Best and Bidders and also the dividend payment in May 2018. We then turn to Page and we go to Page 16, and this is the final page before we open up for questions. This page is the same page we presented in the Q4 presentation, and this is a reminder. We are here showing that the lower margin we have seen in the last 2 years is not a relations or not affected by it's not due to the acquisitions. So this page is showing that the acquisitions that we have made from 2014 until 2017 has had a positive development for Envito. In 2017, the margin of this acquisition was 9.4%, and the operating EBITDA was improved by 38% in 2018 and the acquisition had a margin in 2018 of 11 point 3%. This once again same picture as presented in the Q4 presentation. We now open up for questions. We have a question from Karl Magnusson, Nordea. Your line is now open. Good morning. It's Karl here from Mordea. Hi. Good morning. So I have a couple of questions. We have earlier discussed pricing situation in Finland and Sweden. So can you could you please comment on the current situation and also if you have seen any change just yet? Sorry, Karl, you said the pricing situation? Pricing situation, exactly. Yes. That remains roughly the same as we've seen over the past couple of quarters. So no major change there compared to what we've seen earlier. Also in Finland, with Skaland, OMS and so on? Also in that market, yes. Okay. Great. And also, the margin development year over year in U. S. Was very strong. Can you comment more specifically about what was the main margin driver behind that between Denmark, U. K. And e commerce? I mean, in general, the biggest a big contribution is actually the proper turnaround in the U. K. Geographies with the units in the U. In the UK that is then helping a or substantially contributing to the overall margin development. But we also have obviously healthy development in the e commerce business, both growth wise and profit wise. And the both growth wise and profit wise. And the Danish units continue to contribute in a stable way. But sort of the biggest single contributor is arguably the profit turnaround in the U. K. Units, which is then propping up the overall number. Okay, perfect. And you mentioned that the result was burdened by raw material headwinds and IT investments. Can what can we expect in terms of raw material impact in 2019 full year? And what type of IT investment was it related to? If we start with the first point, we don't expect to see any substantial I mean, the raw material situation is relatively it will probably remain at roughly the same level unless anything unexpected comes up, but that's our current perspective anyway. If you look at the IT investment, it's mainly investments in bottlenecks, sorry, I guess, 2 categories. It's continuing to develop the overall landscape to increase efficiency and competitiveness, But it's also specific initiatives related to further digitalization digitalizing, sorry, the channel landscape. So effectively improving the digital tools in the go to market aspects of the different businesses. Okay. Perfect. And the last one for me. You commented on acquisitions and so on. I mean, looking at your balance sheet, it's pretty stretched. And I just said the ratio comes up in Q1, I know that. But can we expect acquisitions in 2019? Or should we rather expect deleveraging phase? Well, we should expect us to continue to strengthen the balance before we do anything more. The exact timing obviously depends on, 1, how much progress we make on continuing to strengthen the balance sheet and how quickly that goes and secondly, obviously, depending on what type of target comes up. But we will continue to work with strengthening the balance sheet before we do anything more. The next question is from Johan Dahl, Danske Bank. Your line is now open. Yes. Hi, it's Johan at Danske. Just a couple of questions. I mean, hats off for the developments in South, but focusing a bit on the North. Could you help us just bridge results in Q1 versus last year? I mean, you I think you referred to an improving mix, I. E, higher share of sales in North being consumer. So there must be a fairly substantial headwind from pricing and also cost. Is that correct, Rene? In total, you can see that we have high consumer sales in North compared to last year, better mix as I said. However, then we have a mix within the consumer as well. The most profitable consumer sales have a higher decline this year compared to last year. So we also have a mix within the consumer that has a negative impact compared to last year. Then we have some IT investments, and we also had lower volume compared to last year, secondhand utilization in the factories and thereby the results. And also we have not been fully been able to increase the prices and for compensate material price increases. Okay. Got you. But still then it seems as I mean, it's very interesting to know from my perspective at least, what's your strategy sort of to meet this intensified competition and price pressure? And also, what sort of tangible productivity initiatives are you deploying to cope with this? So Henrik here. Overall, the strategy effectively remains the same. So the key driver to address this is continuing the work we're doing to strengthen the consumer proposition, enhance the consumer share. And we've talked historically about, for example, the initiative we've taken in Sweden with EliteFunds to Poplots as a new type of consumer targeted initiative, but there are obviously a number of other initiatives behind that. And that will continue to drive that long term strengthening of that part of the business. Secondly, I think the key short term issue is, as Peter said, the ability to compensate for our cost structure for volume shortfalls is going to be critical if indeed that were to be the case going forward. So and that's where we didn't fully compensate in the quarter, and that's obviously of the max the highest possible attention from our perspective. And then obviously, we believe that long term, the investments that we're making in IT will continue to strengthen our competitiveness and hence, both increase efficiency but also increase our ability to strengthen the offering to the particularly consumer margin development going forward. Okay. I mean in the past, you've talked about Pimriddas being the responsible sort of market leader. Have we reached a stage where you're no longer willing sort of to compromise volume to defend the profitability? Is that the correct reading? I think it's I wouldn't quite dare to say that as a general because that might slightly depend on the difference. I mean, in the North, we have 15 different business units with some sort of different positionings, and that might be slightly different reading. But overall, the long term objective is to increase our margins in the North. With the current softening of the industrial market, exactly how exactly the form and shape that will take and exactly when we will see which margin level and the exact action we take depends, obviously, a little bit on that margin sorry, on that market development and how the industrial side develops. But overall, the objective is to continue strengthening the margin and using our consumer proposition as a key way to do that. Okay. So just finally, you mentioned in the report some results from the simplified project. Could you just talk about what were the results more in detail? And second, I'm also wondering how you're sort of planning your staffing ahead of the HYSYS and if you could provide any details there? So if we saw I mean, we haven't historically gone into any specific details on the exact contributions from the simplified strategy and structure. What we see from sort of a qualitative perspective is emerging positive signs in terms of a higher level of accountability, more agile and swift the decision making, responding to market demands and market changes and overall a higher customer focus, enabling us to better adapt our proposition to the local market and the customers that we're focusing on. And sorry, your second question, I think, a little bit I was wondering how you're planning for the high season. Are you staffing up compared to last year or are you stepping down? Just some anecdotal comments would be good. Yes. Thank you. Sorry for that. In general, it's hard to answer. If you say across the geographies in the north where we have seen a softer industrial market, staffing levels are generally at a slightly lower level than they were last year, and that's mainly to respond to that change in the effectively reflecting the state of the order backlog and also responding to the changes in the industrial market. In the geographies and across most actually of Indevia South, where the order backlog is stronger and the consumer share is higher with, as I said before, overall healthy consumer demand, staffing is then at slightly higher levels than we saw this time last year. Thank you. The next question is from Pieter Hornegy. Your line is open. Yes. Thank you. So just a question on the last slide. You say that the profitability for the acquisitions have moved up nicely between 2017 'eighteen. But the overall margin were down, so that indicates that the old business, so to say, had deteriorating margins. And then we come back to Johan's question a little bit. What are you doing in the short term to improve margins? Do you need to do something more, call it, dramatic in the short term rather than the longer term sort of product development, IT investments and so on? I think I mean, I can start, and Pete can complement it. But I think looking at the so fundamentally, I mean, it's that the underlying fact is, as you describe it, I think the and the key driver, obviously, of that is a combination of the deteriorating consumer market that we saw, particularly in Sweden from 2016 to 2018, which impacted, obviously, our overall consumer share negatively and hence also the profitability slightly as we know there stands a correlation between consumer sales and profitability. And secondly, obviously, more pronounced than the industrial market development. I think the in terms of the so hence, there are sort of strategies and 2 dimensions to that. But the key strategy is to attack the first part of that, which is strengthening the overall consumer proposition and harvesting more than our fair share of the consumer market as that comes back is still sort of the number one priority and the key driver for us going forward. Those activities are in progress and taking steps forward. With relation to the changes in the industrial market and depending on how severe that is, that will might have more dramatic impact in terms of cost efficiency going forward. But given that we're now only in the past, let's say, 4 to 5 weeks really in terms of high season in order intake, obviously, we want to make sure that we can reap every single benefit we can from higher consumer sales that comes through depending on the strength of the consumer market. But again, depending on how that develop and if the industrial market continues to soften, we will have to take we will have to be very active in terms of managing our cost to protect margins we as that industrial market develops. And whether you define that as you can define that as drastic if you wish to. On the hand, you can say that, that's sort of part of the business we're in with quite high with make to order products and quite high volatility in demand over a longer period of time. Okay. Thank you. Okay. Do we have any further questions? We have received some questions through e mail. Handelsbanken. Your line is now open. Please go ahead. We can't hear you at the moment. Perhaps you're still on mute. A couple of follow-up questions on the consumer demand for me. You mentioned better mix in the order backlog. Is it only due to the industry orders falling and consumer demand stable? Or have you actually seen consumer demand growing in March and also now the weeks of April that you have in your books? So total consumer demand for the group is up year over year, and the total consumer order backlog is also up year over year. That's predominantly driven by South. And on if you look at the North, consumer demand is relatively stable and consumer orders situation is relatively stable year over year. And when it comes to the Q2, do you think there is any chance that you will be able to better compensate the falling industry demand by consumer demand compared to the Q1? Have you seen any signals that this stable consumer demand in the Q1 could improve later on? So I think we have to recognize the fact that for us, quarter 1 is from a consumer activity point of view is a very small quarter. So what we're trying not to do is to draw any 2 big conclusions from the consumer the overall consumer demand in the Q1. What we can focus on at the moment and what we're working with, obviously, largely is the backlog at the start of the quarter where we see that consumer demand in the North, as I said, is stable. In South, it's up. And we will obviously continue with all the activities that we have to continue to drive our overall consumer sales and consumer share. And I'd just say it's a bit too early to say to what extent that can compensate for any volume shortfalls in industrial sales. Thank you. And then you mentioned the industry sales falling some 8% in the 4th quarter. What was the decrease in the Q1? And do you expect this to be even more in the 2nd quarter? What I referred to with a minus 8% was actually total market volume in units in the Swedish geography. That's collected by the Industry Association in Sweden, which collects that data. So minus 8% of total window sales in unit. That data is not yet available for quarter 1, and I really don't want to speculate in what that development will be. So I guess we'll see when we have that data where that takes us. And this industry figure for the whole market compared to how it affects your sales, is it in a similar range? I mean, on a total level, we have roughly a market exposure that I think is equal to the total we are probably relative to the total market, a bit stronger on the consumer side and a bit weaker on the end of sales, maybe. But roughly, we have the same proportion in the Swedish market. We have a follow-up question from Johan Sgar, Deutsche Bank. Your line is open. Yes. Hi. Can you just talk about what opportunities and risks you're seeing with the channel changes in Sweden? And finally, also any sort of cash flow guidance on CapEx and possibly working capital for the full year would be appreciated. So Henrik, I'll start with the first part, and I'll let Peter respond to the second one. If you look at the I think it's too early to say any specific details in terms of what the channel landscape development will mean. From our perspective, we have a very conscious strategy in that sense to be with us we're being the market leader, to be very active in effectively most of the segments and having very clear strategies for those and particularly pronounced with localized local responsibility for the development in those different segments. We feel that we're well equipped to effectively handle the effect that we'll see from that. Long term, obviously, we do see a strengthening a macro trend of strengthening and increased e commerce sales, which we think we're really well equipped to do both directly and indirectly. And obviously, with a broad assortment, we have to meet any demand that would come up in those different channels. And the second part, I'll let Peter respond to. When it comes to CapEx, we see the same as we've seen we say the same as we have said before, talking about 3% of the sales, but it's quite a normal level and right level for us right now. When it comes to working capital, our working capital has been increased second half of twenty seventeen and also in 2018. And we have taken actions and we foresee that this can be somewhat improved in 2019. We see a rather large improvement now in Q1, but that is due from different reasons and there will be some back coming back now in Q2, I believe. However, for the full year, we see an improvement 2019 compared to 2018. All right. Thanks. We have another follow-up question of Kinetol Karnegyi. Your line is now open. Yes. Thank you. My questions have been answered. Thank you. We have no further questions. I am back to the speakers. Okay. Then we have received 2 questions over the e mail. And the first question is, if the leverage target is still 2.5 after the effect of IFRS 16. And the answer is that the target of 2.5 percent is excluding IFRS 16. And once again, the IFRS 16 impact is about 10 to 15 basis points when it comes to net debt versus EBITDA. The second question we have received is also related to our IFRS 16, and that is how is the IFRS 16 effect handled in the covenant terms with the banks. And the answer is that there is no immediate impact for us when it comes to IFRS 16 in the bank covenants. Yes. Any further questions? We have no further questions via the telephone lines. Okay. Then thank you very much for your time. And we thereby close this presentation and talk to you soon. Bye bye. Thank you. Bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.