Earnings Call: Q4 2018

Feb 6, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 Report Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Wednesday, February 6, 2019. I would now like to hand the conference over to your first speaker today, Mr. Henrik Jarmersen. Thank you, and please go ahead, sir. Thank you, Maria. Good morning, everybody, and welcome to the presentation of Enviro's Q4 and full year results 2018. My name is Henrik Jallmasohn, and I am the President and CEO of Invedo. We will give you a short summary of the quarter. I will talk a bit about the overall market development, some key highlights from the quarter the year and a short perspective on the outlook. I'm also joined by Pieter Velhane, CFO and Deputy CEO, who will then give a bit more of a deep dive into the financial performance of the quarter. As Maria said, we should spend about 25 to 30 minutes presenting, and then we will open up the line for questions. Could we please shift to Slide 2? Just before we get started, I'd like to say a few words about my predecessor, Hakan Jeppsson, who several of you have either met or talked to or known well. Joakhen was instrumental in building the Envido we have today and his strong drive, great business acumen and not the least his considerate leadership to a large extent growth as where we are today. We will miss Hakan as a colleague and as a friend and as a great boss. But fortunately, one of Hakan's key strengths was to build capable teams. And we all feel we stand well prepared to take over and lead Envato to further success in creating more shareholder value going forward. Could we please shift to Slide 3? I also just want to take the opportunity, given that this is my first earnings call, to say a few words about myself. I've been with Envido about 1.5 years and have, during that period, run the businesses in Sweden and Norway. In that capacity, I've obviously also been a member in the group management team and worked closely together with Hakan and the rest of the management in defining the strategy, simplify that we're now rolling out and starting to gain some positive impacts from. Before I joined Invito, I spent the past 10 years in the food business, Findus, laterally as CEO of first the Swedish and Danish business and then the entire Nordic business. I've had the good fortune of working myself through most of the functions and being responsible for supply chain, sales, marketing, etcetera. I'm a mechanical engineer by training, and I live just outside of Malmo in a town called Luma with my wife and 2 wonderful boys, albeit maybe sometimes a bit lively. Next slide, please. So just summarize some of the market conditions then, Envato's performance in the quarter and for the full year and also some of the key priorities going forward. So next slide, please, Slide number 5. So what do we see in the market then? Well, I think it's worth highlighting that we are obviously active as the lead Europe's leading window supply and one of the leading door players in a quite fragmented market in many ways, both obviously with geographical differences, but also more importantly by channel differences in the geographies. But I think there were a few key themes that we can see in the market in quarter 4. One of them is obviously that we see an industry market that's turning down in some geographies, and we see that both in terms of building starts but also new permits for new builds. This is particularly true for the markets in Sweden and in Finland. However, on the positive side, we see a continued healthy consumer demand, but we also see that we have some local variations in that. We are in the Swedish market, for example, we've had a softer consumer market development for a while, whereas in Denmark, we have a very healthy consumer demand. And in fact, and I'll get back to that, we're doing a really good job in capitalizing on that development as well. Based on these 2, we see varying competition pressures. And but particularly in Sweden, we see quite strong competition, and it's an impact of obviously the 2 former bullets. Although we are our home market by choice is the consumer market, in Sweden and also in Finland, we have are the 2 markets where we have some industry business of scale. What we also see when we see a turndown in the industry market is temporary disturbances on the consumer mind consumer side, sorry, as competitors who are normally more active on the industry side try to go in and fight for deals on the consumer side. And that tends to create some temporary disturbances there as well. Consumer confidence is turning a bit down, but it's still on very healthy levels. And we also know that we have and we see that we have some underlying renovation demand in some of the markets. And we have seen that raw material prices on some of the key input materials that we use, we've had some inflation, and Peter will actually come back to that a bit later in presentation. Next slide, please. Slide 6. If we look at the at our performance in the quarter, I think when we look back at quarter 4 2018 with some reflection, I think we'll be able to say that it was a, in a sense, a quite dynamic and almost, in some respects, a bit turbulent quarter, but that we managed those circumstances quite well. And overall, we're happy with the performance in quarter. Sales development continued to hold up well. And the key and we have some really strong segments, which we'll come back to. The key deviator, which led to a slight organic top line deterioration was actually Elite Fund Store in Sweden and Pila TV in the Finnish market. One of the key contributors is the e commerce operation we have, with e commerce growing organically over 30% and with good margins, which is really contributing to the overall margin development in the business and also showing that the conscious e commerce investments we've made over time is actually paying off in a really nice way. We show the 2nd highest operating EBITDA so far in the quarter 4 with an improvement year over year as you see. The Danish businesses are delivering well. I think we have to say that we're really happy with the way we the Danish market, yes, is a strong market, particularly on the consumer side, but we're doing a really good job in capitalizing on that development, particularly in terms of managing our overall business portfolio and our margin mix. And the key deviator based on what I talked about before in terms of the market developments and the competitive pressure is EliteFunds doing the Swedish business. The order backlog at the end of the quarter is 7% down, and I'll Peter will come back a bit more to that later. Nice to note is that the consumer share, which is a very, very conscious strategic move from our side, is growing. And it's actually growing not just in the geographies where we have a strong consumer sentiment with us, like, for example, in the Danish business. It's also growing, for example, in Elite, some of the other key Swedish businesses where we see a growing consumer share, which is exactly in line with our long term plan. The cost efficiency initiatives and the savings program we've initiated is starting to pay off. Peter will talk a bit more about that later. And we're in progress with implementing our simplified strategy. Obviously, not starting to see any major impacts in business performance yet. We're still in early days, but adaptation is great, and we see obviously clear potential from this as we've communicated before. Next slide, please, Slide 7. Looking at the full year development. We have to say that 2018 has proven to be a tougher year, competition wise, than we had anticipated when we started the year. We and that's particularly true then in Sweden and Sweden and particularly true for the industry segments in those markets. Overall, I think we've managed those challenges well. And we are obviously, particularly with what we've done in terms of capitalizing on the strong market in the Danish companies and not the least, as I said before, the great development we have in our e commerce operation. Net sales overall for the year increased by 5%. We are strengthening our EBITDA, and the operating EBITDA margin is a slight deterioration versus last year. We're carrying some poor performance from earlier in the year. So despite our nice recovery in margin in quarter 4, we still see a slight deterioration over the year. But overall, very healthy levels. And I think we should also note that, particularly in a tougher climate, we are an absolute standout in the industry in terms of our ability to, over time, generate healthy returns. I talked about the fact that the competition is tougher in general. The picture is a bit scattered, however, and but in general, that's the case and particularly true for the market for the geographies in Sweden and Finland. We have a new governance structure, Simplify, for with much better customer and consumer focused decision making closer to the market. And improved efficiency was launched in quarter 4, and we're starting to see impacts of that. And we can also note very satisfactory turnarounds in both the companies in the U. K. And the companies in Norway going back into profit for the year. The Board is proposing a dividend in line with the dividend policy, taking into account both the net profit and our capital structure and of SEK 2.5 and which is obviously then also taking into consideration the net debt to EBITDA situation, which Peter will come back to later. Next slide, please, Slide 8. Looking at the operating segments. Inveido North, as I mentioned a little bit before, where the key geographies are the companies in Finland and in Sweden, had a tougher year with more demanding competition than we'd expected early in the year. We see some decreasing industry market volumes, as I talked about before, which means that competition is increasing. We obviously have a large number of mitigating actions to meet this, and we are really focused on also taking some of the key structural decisions that deliver both, let's say, manages some of these challenges and competition short term but creates a stronger standing in Vido and these geographies in the long term. Simplify will definitely generate some benefits in these markets. We see a number of consumer growth initiatives, so I'll come back just to mention a couple of those a bit later. And we're also taking efficiency measures. As I said, Peter will come back to some of that, which is impacting positively. I talked about the fact that the Norwegian business is back into profits and displaying that actually in a quite remarkable recovery in the quarter. Sales is down by 1% in the quarter, and operating EBITDA margin as a consequence of the tougher competition is also slightly down. And the order backlog at the end of the quarter is 14% down. Next slide, please, Slide 9. If we then look at the other operating segment in Leila South, to some extent or I mean overall a really strong performance. The markets in the Danish geography, where we have some of our bigger companies in this operating segment is stronger, particularly the consumer mind the consumer part. But I have to say we're also doing in the market and in those companies a really strong job of capitalizing on that stronger market. And that's showing really positive results and for some time now. I mentioned before, e commerce has a really strong growth, over 30% organic growth. And the profitability development is also very satisfying. So the long term investments that we're making in this area is paying off nicely, and we see good potential there, obviously. We've achieved the turnaround in U. K, as I mentioned, and we're seeing that very clearly in quarter 4. Reported sales was 16% up. The EBITA margin is strengthening healthily, now at 19.1%. And the order backlog is actually 40% up year over year. Next slide, please, Slide 10. Just briefly looking at the outlook and pretty much in line with what I mentioned before when we look in the rearview mirror. Overall, the industry market is softening. It's not dramatic, but it's noticeable. The newbuild volumes are still on relatively strong levels, but it is coming down in relative terms. The consumer confidence is trending slightly down, but it's still on healthy levels overall. And particularly for the longer term, we clearly see that the renovation demand in several of the key markets in Northern Europe is actually is there. So there is an underlying demand. We are yes, I think that pretty much summarizes it. The markets in Sweden and Finland based on the sales development, industry market development is still a bit challenging, but there is a consumer market opportunity. The e commerce segment is expected to continue to grow, both in terms of increased share of wallet, so to speak, but also an increased offering overall online as in many other industries. So we see that trend continuing. But we also know that, that quarter 1, which we're stepping into now, is low season, and there is lower consumer activity in the quarter. And in the very short term, that's obviously a consideration to keep in mind. Next slide, please, Slide 11. Looking at the key priorities in the short term. Obviously, getting full implementation across the industry and leveraging the new Simplify enabling customer focused and decentralized decision making and making sure that we're close to the market in decision making, get that implemented and leveraging results from that across the group. Continuing to strengthen the balance sheet to allow for further acquisitions. Obviously, the initiative, Battery, that we have across Elite Farmster, which has been one of the key challenging companies in the operating segment north for the quarter and partner for the year, both in terms of efficiency initiatives but also critically in terms of consumer growth initiatives, one of those being Elitfonster Proplatz, a new convenience focused and consumer focused proposition that's being rolled out in the market. We will obviously continue with cost and efficiency improvements across several of the geographies and several of the companies and also continuing investments in IT and digitalization. And particularly in a simplified model where decision making and, let's say, developing the proposition to the customers on increasingly locally closer to the market, continuing to find the right tools and business support to grow in their respective focus categories and focus markets is going to be critical going forward for us. So with that, I'm going to hand over to Pietro Wallin, CFO and Deputy CEO. Pietro? Thank you so much, Henrik. We then turn Page and we go directly to Page number 13. On this page, you can see the income statement for Q4 2018 2017 as well as the full year result for 2018 2017. Sales increased by 5% in the quarter and organic growth was minus 2%. Gross margin was improved compared to last year. However, in Q4 last year, we had some restructuring costs connected to the cost saving program that was launched end of last year. It's therefore just some unjustified only to compare it to last year when looking at gross margin. The underlying gross margin adjusted for these restructuring costs was a little bit behind this year compared to last year. However, when we look operating EBITDA and operating EBITDA is adjusted for restructuring costs, the operating EBITDA was improved this year by 7% in Q4 from €201,000,000 to €215,000,000 Further down in the income statement, the improvement compared to last year in the quarter is higher due to the better operating results and also due to the restructuring costs. Envida had some restructuring costs in Q4 this year, mainly connected to PROJECIMPLIFY launched end of 2018. On the other hand, we had some positive onetime results related to revaluation of the earnouts and net results on the restructuring cost was thereby 0 in the quarter. When it comes to simplify, all cost has been taken now in Q4 2018, and we don't foresee any new restructuring costs to project Simplify in 2019. Earnings per share ended at $2.31 for the quarter and operating EBITDA as well as earns per share was the 2nd highest result in Q4 for Enviro. If we look to the right and we look at the full year, sales was improved by 5%, and organic growth was also for the full year minus 2%. Operating EBITDA ended at $657,000,000 compared to $649,000,000 last year, and EBITDA was 90% above last year and earnings per share ended at 7.47 dollars which is actually the highest ever for Envido. If we turn page and we go to Page number 14. This page is showing the cost saving program that we launched end of last year. We launched a cost saving program in Q4 2017. The program had a target to reach €100,000,000 with full impact from January 2019. And in Q4, net savings within expenses was €35,000,000 adjusted for currency and acquisitions. Total expenses were last year €307,000,000 dollars and expenses have been reduced by €35,000,000 and therefore, acquisitions and simplified costs have been added and FX impact ending to a level of $291,000,000 in Q4 2018. The cost savings of €35,000,000 is a result of the cost saving program launched last year plus other savings within expenses when comparing to last year. Envida has decided savings and expenses also has savings within installations teams in U. K, closures of our back end Sweden, restructuring of Austria and closure of loss making businesses in Denmark. If we then turn page, we go to Page number 15. This page shows sales and order intake in Q4 for 2016, 2017 2018. You can see sales development to the left and the order intake to the right. Sales was improved by 5% in the quarter. The organic growth was minus 2%. NVIDIA North had a negative growth of 7%, whereas NVIDIA South had a positive organic growth of 8%. Enviva succeeded to fill up sales in Q4 with consumer orders in beginning of the quarter with rather short levered times and could thereby mitigate the impact of the lower order backlog in the beginning of the quarter. We look at the order intake to the right, you can see that order intake was improved by 4% in total. And when they're taking away acquisitions, it was more or less in line with last year. The lower order intake in the quarter adjusted for acquisitions compared to the sales in the quarter is normal for the season. We have a lot seasonality. So order intake was €1,500,000,000 where sales was €1,900,000,000 That is quite normal for NVIDIA looking at our seasonality. If we turn page and we go to Page number 16, and this page shows the order backlog end of each quarter from 2013 until this year. The backlog has decreased in the quarter compared to quarter 3, which is normal for the season. However, the backlog end of December was 7% behind last year. The backlog of EMEA North was 40% behind last year, whereas the backlog of South was 40% above last year. In Middle North has a higher degree of industry sales. If you look at the sales, you can see that 39% of sales within North are industry sales compared to only 6% of South. So in Vida North has thereby been more impacted by a turn down with the industry market as Henrik mentioned. Envida has positive order intake on the consumer orders in Q4, which gave a positive result impact in Q4. At the same time, we also know that consumers are guided strongly by season. Few want to replace winters sorry, few want to replace winter windows in the winter. And thus, we cannot expect to see the same effect in Q1 of 2019 as we had in Q4 2018. The lower order backlog within North will have a negative impact on the start of Q1, everything else equal. However, when then comparing to Q1 2018, we also had a negative winter impact Q1 last year, affected the performance end of Q1 last year and also affected the performance of the beginning of Q2 in 2018. If we then turn page and we go to Page 17. This page shows operating EBITA and operating EBITA margin for Q4 and the full year for the year 'sixteen, 'seventeen and 'eighteen. The margin was improved in Q4 this year from 11.3 last year to 11.5, thanks to higher degree of consumer sales and the cost savings. The operating EBITDA of $250,000,000 was the 2nd highest result for Q4, and the result was in 2016 the record was in 2016 with an operating EBITDA of $227,000,000 The margin of the full year 2018 was just below 10%, ending at 9.9% and also slightly behind last year of 10.2%. Year 2018 had a tough start, mainly due to the cold and long winter, which impacted the result and profitability end of Q1 2018 and also beginning of Q2 2018. The result has thereafter been improved in Q3 and Q4 with high results and the result ended above last year. The margin, however, could not be fully compensated in the second half compared to the first half. If we then turn page and we go to Page number 18, This page shows the development of the acquisitions in 2018. To the left, you can see the accumulated operating EBITDA for 2017 for those acquisitions that we have made since 2014 since we made the IPO. In 2017, the acquisition had an operating EBITA margin of 9.4%. In 2018, the results of these acquisitions have been improved by 38% and the margin has been improved by to 11.3%. The cost saving program, synergies and the performance within e commerce are the driver behind the improvement this year compared to last year. With this page, we want to show and explain that the margin decrease in 2018 is not related to acquisitions. The late acquisitions are more or less developing according to plan and contributing positive to the beta margin. And if we then turn page, we turn Page 19. This is the final page for the presentation. We will thereafter this page open up for the questions. This page shows net debt and net debt versus EBITDA latest 2 years. Net debt has decreased in the second half of twenty eighteen. This is normal for Enviro. The seasonality of the business can also be seen in net debt development. The net debt versus EBITDA ended at 2.7 and was an improvement by 50 basis points since June. Last year, net debt versus EBITDA was improved by 20 basis points in the second half. The effort to reduce net debt and improve the cash flows has given effect. However, the level is still above the target of 2.5% regarding net debt to EBITDA. I just received an e mail saying there were some problems when it comes to the telephone conference, some have been disconnected. But we open up for questions and hope that we have someone on the line. Thank you. Ladies and gentlemen, we will now begin the question and answer Can you just talk briefly about you talked about the Northern operations, tough market conditions going forward. Both it appears if you're both betting on driving volumes and efficiency savings. If you were to focus only on efficiency saving, cost out initiatives, what are you actually doing here in the North? Yes, Johan. Henrik here. I think to be not to make this too complicated, but I think both of those are critical for us because we're specifically talking about challenges in the Industrial segment. And we have a very as you know, we have a very conscious strategy over time to drive the consumer share up, which is both positive in terms of a more stable overall demand profile and also positive in terms of a higher margin potential. That's been ongoing throughout this year with the closure of the plant in Valvaca, as example. And it's also about overhead efficiency and particularly investing in automating, let's say, overhead and back office activities in general, which will support that. I think also worth secondly worth mentioning is, ongoing, should I call it, manufacturing optimization, at the lack of a better phrase, to make sure that we continuously improve our conversion efficiency. I would say those are the critical aspects at the moment. Of these cost out measures you mentioned, how much of that is what was completed in 2018? And what is sort of new actions? I actually cannot give you a firm straight answer on that. Some of that has been delivered in 2018 and some remains to be delivered in 2019, but we'll have to come back with a more firm answer on the exact split of that, unfortunately. Okay. Would you be able to provide a number? I mean, you talked about €35,000,000 positive impact Q4 from cost savings. Could you just talk about what was that for the full year 2020? What's sort of comping over into 2019? Not the number that I can give you now straight off the bat, but it's we can make a bit clearer estimate and come back with that at a later point. Yes, please, Stu. Final question, just on working capital. Can you just get the describe where we stand now, year end 2018, initiatives ongoing to improve the situation and what's the opportunities or potentially headwinds on that area? We have some increase in net working capital in 2018, mainly related to the restructuring. I think there's a problem we had last year when it comes to our production this delta 2019 when it comes to working capital. And if you look especially in December, you can see that the liability, short term liabilities was a little bit higher than what perhaps we see for the future that can be improved. But are there any particular reasons for that improvement in working capital next year that you're seeing? I think we can reduce our inventory. And mainly, it's connected to the inventory that we can take down the inventory during 2019 comparing to 2018. Okay. Thanks. Thank you. We will now take the next question. Please go ahead. Your line is now open. Please go ahead. Your line is now open. Please ask your question. Hi, it's Karl Anderson here from Nordea. Can you hear me? Yes, we hear you clearly. Okay, great. Can you perhaps quantify the negative earnings impact from raw materials and pricing in Vido North in the quarter? And also, is it possible for you to implement further price increases, I mean, due to the increasing competition? If we look at more historic perspective, Indeed has been very good to increase sales prices in relation to the material prices. So when we had material price increases, we could mitigate that impact to increase the sales prices. However, this year, especially now in Q3 and Q4, this has not been the case. And I cannot give you a strong figure here, but it does it is the reason why the one of the main reasons why the margins has been declined in North comparing to last year. Going into future, of course, it depends on what's going to happen on the market. If we can see that the Finnish market has been very having very much during this winter, we have one of our competitors went into bankruptcy, Domus, and let's see what's going to happen with them when it comes to the future. Right now, the production is closed. And we see, of course, that if the competition is a little bit we cannot if you take Finland as an example, we don't believe that our competitors can be so tough when it comes to prices as they have been in 2018 because they are not making any money. So looking at their income statement and their cash flows, it will be hard for them to continue with this price pressure. Okay. So we can expect some price increases to be materialized in 2019 or further? In a perfect world and in a normal world, I would say, yes. Okay, great. And one more for me. Can you also comment on the split in the order backlog between consumer and 14% per hand of last year, and it's mainly related to the industry orders, whereas the consumers is more stable compared to last year. And in the South, is it e commerce driving the order backlog currently? It's not only e commerce. It's also the other units are having higher backlog. Also if you look at companies in Denmark and if we look further down in U. K. Has also a little bit higher backlog when comparing to last year. So it's not only the e commerce. Thank you. We will now take the next question. Please go ahead. Your line is now open. Hello. Hello. Hello. It's Rasmus here, Panas Banken. Is it my time to ask you a question? Yes. Good. You are welcome. Welcome back. I was disconnected from the call in the middle of things. So excuse me if this has been said, but let me first start by expressing my condolences as the tragic events at the end of last year. Thank you. Thank you. Thank you. I wondered if you could help us understand the dividend cut here. How should we see that really? Is it a functional acquisitions that you made in the middle of last year? Or is there anything in the outlook that has changed materially during the Q4 that we should sort of be aware of? Yes. I mean so I think that fundamentally, as I said when I commented the dividend in the presentation, it's a the dividend proposed by well, first of all, it's a Board issue rather than a management issue. But the proposition proposed or sorry, the dividend proposed by the Board is in line with the dividend policy, which takes into consideration net profit and takes into consideration the capital structure. And given that our despite the nice improvement in net debt to EBITDA during the quarter and in the latter half of the year, we are still on the high side of our targets. And as such, as I said, very much in line with the policy, the Board proposed a slightly reduced dividend versus last year. And obviously, the net debt to EBITDA situation that we are in is partly a consequence of some very strategic and elaborate acquisition decisions that we made throughout the year. So yes, I think that answers your question. That pretty much does not relate to anything in the Q4. That's what I was wondering. And then I had another question. Like as we look into Q1, I know it's a really small quarter and you have less consumer sales normally and it's quite a lot of winter right now and there was quite a lot of winter last year. So it's hard to say anything. But as we look into Q2, should we then sort of expect a continued increase in the share of consumer order as the decline you see is coming from industrial? That's a pretty reasonable assumption, I guess. Yes. So if we look at the situation as of today, the answer to that question is yes. And also when comparing to last year, what happened last year was not only there was a winter, it was a long winter and cold winter. So the oil intake end of Q1 impacted sales end of Q1, but especially the beginning of Q2. So if we don't have the same long cold winter as in last year, we see a positive trend when comparing to 2019. Thank you. We will now take the next question. Please go ahead. Your line is now open. Please ask your question. Good morning. This is Emmanuel from LVV Asset Management. On your presentation, you mentioned in Slide 6 that e commerce sales had good margins. Can you maybe just help us understand whether when you mean good margins, are they in line with the group? Or they are a bit higher or lower than the average of the group? That's one question. And the second question is, given that some of your competitors are struggling in Sweden, and I believe this is nothing new, Does this mean that you have more ability to do M and A? Or actually, there could be opportunities in countries like the U. K, for example? Thank you. If I take the first question, when it comes to the margins, the margins of e commerce is above the group margin. So they are actually positive impact to the group. And when it comes to acquisitions Yes. I mean fundamentally, obviously, changes in the capacity landscape, whether it be struggling competitors or others, is in one sense always an opportunity for some sort of structural activity, whether it be M and A or something else. But that said, nothing specifically in, I think, to say on the Sweden, Finland note at the moment other than that. And obviously, the fact that we're continuously evaluating our best options from that perspective. And can I maybe just ask a follow-up, which is on your outlook, you say that Sweden and Finland is challenging, and you've already explained that it mainly comes from the industry part? And you claim that there is a consumer opportunity. When you say there is a consumer opportunity in Sweden and Finland, what do you mean by that? Is you think you're going to get market share because of the way you sell your product? Or maybe if you can just give Welcome to the conferencing center. Calls may be recorded for the purpose of quality and training. First one would be on your Q1 and you're highlighting the low seasonality and lower consumer sales in this quarter. Is this just a hint of the seasonality? Or is new because last year there were also the low seasonality and lower consumer spending? No, it's only reflecting the seasonality we have within the business. Sorry. The second question would be on your U. K. Business. You talked about the turnaround, and it's great to see. Have you any remarks on the outlook for the next month concerning the Brexit? Are there any comments from you? So far, we have not seen any major Brexit impact. When you look at our performance in U. K, that the sales have declined very little. However, the result has been improved mainly related to the cost saving program that we initiated last year. So the result impact is related to the cost saving program, whereas the Brexit impact, so far, not seen any impact, but of course, it's impossible to foresee exactly the future when it comes to Brexit. Yes, of course. Thanks for that. 3rd question would be on your depreciation. You had an average of or you had the creations of 39.3 at average of the 1st 3 quarters in the 4th quarter is what was 46.5%. Is this the new run rate for the next quarters? Or were there some special effects in the 4th quarter, SIMPLIFY program? No, it was not anything special when it comes to SIMPLIFY in the Q4. It was extra depreciation Q4 2017, but nothing extra in 'eighteen. Okay. So the €46,000,000 would be the new run rate for the next quarters? It depends on when the CapEx was launched. But it's a higher we have increased the CapEx during last year compared to 4, 5 years ago. So thereby, it's a we foresee a little bit higher depreciations for the future. So now the depreciation is kicking in. I was wondering because depreciation in Q3 was only €37,000,000 So it's a step up of nearly €9,000,000 to €10,000,000 quarter on quarter. Okay. I can't give any further answer on that specific question. Sorry. Okay. Then my last question, also an add on question on the dividend and dividend policy. Would you confirm if you come back to net debt level below the 2.5%, would you come back to a payout ratio of 50%? I think actually, we'd have to defer that question to the Board and in the end to the AGM. I mean, we will refer to the dividend policy and then and the dividend policy says that the net profit the dividend share of net profit should be around 50%. So given that, yes, somewhere along those lines. But as I said, it's a Board and AGM issue more than a management issue. Okay. I think the dividend is a disappointment today. If you look at the share price, you cut the dividend by 1 SEK and the share price is going down 4 to 5 SEK. So I think this is the most disappointing point today. Okay, many thanks for your answers. Thank you. There are no further questions at this time. Please continue. Okay. Yes. Thank you very much, everybody. And we then close this earnings presentation. Thank you, everybody. Bye bye. Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.