Earnings Call: Q1 2021

Apr 29, 2021

Hi, and welcome to this presentation of the Q1 2021. And as you are aware of, some of you, this is our very first webcast in this performance, and I hope that you will enjoy it. I am Per Valentin. And with me today, I also have Marie Bjorkqvarna, Lund, our CFO. Next slide. For those of you who already know us, you know that we have a a really clear vision, we strive for sustainable and human society through digitalization and innovation. And this is something that will be interesting to talk about both connected to customers and potential employees for the years to come. Next slide. As we see it, we are uniquely positioned for continued profitable growth. We are supported by really strong underlying megatrend connected to, of course, to digitalization new innovative business models. The shift, which is coming quite soon, now connected to 5 5 gs and increased new opportunities. E Commerce, which is already booming and which already has affected us quite a lot. And of course, cloud based systems and cybersecurity solutions and this together are really interesting mega trends that we work together with. And our combined it offers in solutions, experience and insights, we'll together be able to deliver high business well value together with our customers. We also and I think this is really important, have a strong footprint in the Nordics with a great and diversified customer base. We are an attractive employer brand, and this is extremely important in the years to come due to the lack of highly skilled people. Next slide. As I said, a strong employee brand is the key success in our industry. It has been that for quite a few years, and I think it will be the same case for years to come. And of course, one of the most important things connected to this is that we have interesting and innovative projects, but it's also important to continue to recruit, to be clear, connected to our vision to support a sustainable society. And this will be more of a key differentiator in the future as we see. We actively contribute to our clients' sustainability work, we have a clear CO2 target. And as many of you already know, we actively promote gender balance. This, together with a lot of other things, of course, makes NOK's employee brand receiving top ranks in various surveys. Next slide. Brief summary of Q1, we are very satisfied with the quarter. As you probably some of you already have read in the report, our sales and EBITDA increased by around 8%. Now we have an EBITDA for the quarter over SEK 100,000,000. A big contributor to this is, of course, the underlying trend in the markets, but also the successful integration of the digital agency Kreuna, which we acquired in the autumn last year. It's been very successful. And we have managed to both to retain sales and in the same time, actually, improved margins connected to this acquisition. We talked a little bit about this in Q4. But as a result of the market taking off, we also started to recruit again, which is something that we have been it takes time to do that. It's really fast to stop recruiting, and it takes time to start the engine to recruit. But we have been really active in that sense. Next slide. Solutions, our biggest business area. The sales were maintained at the same level as previous years, we were affected by fewer working hours this quarter. We have had higher utilization in Sweden. In Norway, we ended some large projects last year, and they have turned to pick up in the end of this quarter, so we see that we, during the quarter, have increased utilization in Norway. We also see that, as we have been talking about before, many of these big projects connected to tailor made solutions that we build together with our customers far maintained and our customers also start new projects even in this the situation will lock down. Next slide. Experience, really good results, strong performance driven by strong demand in e commerce. We talked about that in Q4, we see continuously in Q1. And as I said before, the acquisition is of Corona so far is a success. Experience is now Experian is the largest digital agency in the Nordic region. We have seen their synergy gains together with Kvaerner, they are really high skilled and had a lot of good customer relationships with them into the new experience. Sales increased by over or around 40%. And still, with this integration, we managed to increase margins in the business area. So we are really happy about that, and I am personally very impressed about the work that our managers have done the Creona managers have done together to make this happen. The smallest business area inside are continuously improving. As some of you probably know, we had some problems in the business area in the end of 2019 and the beginning of 2020. We started to improve results and margin in Q4, and we see that continuously in Q1. And the actions that we have taken to strengthen profitability it's continuously starting to take one step at a time to deliver results. In particular, the offer in security has been very positive. Next slide. And now over to you, Marie, connected to more details around the Q1 figures. Marie, please go ahead if you can hear us. Sorry? Yes. Next slide, please. Thank you, Karl. Looking at the growth as a whole, we delivered a sales increase of 8%, which means that we landed the quarter with net sales above SEK 1,000,000,000. And talking like for like, sales were down by 2.6% or more or less flat in constant currency. And our operating profit increased to SEK 103,300,000 for the quarter, which means an increase of 8%, and it's mainly driven by the improved margins in Experience. And this means, all in all, we landed at an EBITA margin of 10.2%, which is unchanged from last year. And I know I got the question from one of you earlier today concerning the COVID-nineteen effect compared to last year and this quarter. And the fact is that COVID became a challenge at the end of the Q1 of 2020. We did get reduced social charges in March 2020, But no short term work allowances. This became the case in the Q2, which is more affected by the COVID. And this quarter, EBITA was affected by synergies of Kruma of SEK 7,500,000. And of course, even though we do not disclose how much, we did have one off costs related to making these synergies happen. Next slide, please. Looking at the business area split this quarter, We can see that Experience is increasing its share of sales from 24% to 31%. Next slide, please. And this slide shows net sales and our geographic split. And the acquisition of Kruma increased our operations in both Sweden, Norway and Denmark. And the Swedish part of the business accounted for 51% of sales compared to 54% last year. Next slide, please. We continue to have a diversified client base, and this means that we have 38% of sales from the public sector. We do have a number of different sectors contributing to sales with banking, finance, insurance on top at 20%, which is a slight increase from last year. Next slide, please. And as you can see here, the picture on our EBITA development, this quarter is actually our strongest ever. We are now at an EBITA level of SEK 343,000,000, which then is on a last 12 month basis. Next slide, please. Cash flow from Current operations improved due to stronger results, but it was also affected by higher working capital in the quarter, Which is due to increased accounts receivable. And this is normal because the month of March is high in sales and of course, then also in invoicing. We continue to have a stable financial position as before, with net cash amounting to above €100,000,000 at the end of the quarter. And the graph in this picture shows sales development, and our cash Sloatom operation has improved, as I said. Next slide, please. And then I I hand over to you, Kai. Thank you, Marie. And the short summary and outlook. To summarize the quarter, we are really delighted to present this solid quarter. We have managed to retain or increase sales in all our business segments and including Kvaerner sales, as we have talked about increased by 8%. We managed to deliver results in the same level as previous year. Even if we, of course, worked also this quarter really hard, as Marie talked about, to integrate Krumov. I'm also happy that we are able to do this and demonstrate our ability to integrate quite large acquisitions into the Novich system, we have a solid base connected to that we have built for quite a few years now connected to a structure that makes it possible for us to integrate acquisitions in a good way. As Marie talked about, we have improved cash flow. We see good signs of demand, we are resuming recruitment. And I think that, we are very well positioned for continued profitable growth. And yes, that's how it is. So we are quite happy. And I think I will stop there and open up for questions. Thank you. As Our first question is from Daniel Jubei from Handelsbanken. Please go ahead. Thank you very much, operator, and congratulations to a solid start of the year. I was thinking if you could comment a little bit on, obviously, back in the recruitment mood, you talked about that also in Q4. And talk a little bit on the different market, what you see in terms of salary increase and also how your own churn was developed also the ability to recruit given your strong brand recognition in the market. What you could say on recruitment would be great, I think. Yes. Of course, recruitment is as I talked about before, to start recruiting, it takes time. So a lot of the recruitment activities that we do right now will hopefully have effect in Q2 or even in Q3 when we take on quite a lot of new people. So it that's how it is. And I both 4Q1 and probably Q2 will be affected on mainly in experience, where we both recruit and get also a little bit more efficient connected to the integration of TRUNA. So it's both the recruitment side of the situation an efficiency side of the situation. And it has been the same actually in Insight. As you know, we did quite a lot of structural changes connected to Incyte, for example, in Gothenburg and in some other places in last year, and we also see that effect in Insight. So even if we are recruiting quite a lot now, we also in other parts of now, we tried to decrease a little bit to get more efficient. And I think that this will end up in Q2 and we will get back to the net recruitment. Connected, you talked a little bit about the employee turnover. And we see we don't disclose that, but we see that we still are well under the average employee turnover that we have in the business. Perfect. And if you also get some comment on which we should expect on salary increases. I think your Finnish friend talked about 2%, 3% or That's right. And I think that we are I mean, almost all of the people in New York and in our industry are quite well paid. We are now a quite large company. And I think that we will land on average this year as well, so around that. Perfect. Thank you and good luck here in Q2. Thank you. Thank you. And we currently have no further audio questions. So I will hand the word back to the speakers. All right. Well, I think that we might have some questions from you, Katrina, from No, actually, we do not have any questions from the web viewers at this point. So I don't know if there is any more questions, sir. Perfect. I take that as that we have been extremely clear. And say thank you to all of you that attended and hope to see you soon.