Good morning, and welcome everyone to this presentation of Sweco's Q1 report that was published earlier this morning. My name is Marcela Sylvander, and I'm the Chief Communications Officer here at Sweco. With me this morning, I have Sweco's President and CEO, Åsa Bergman, and CFO, Olof Stålnacke. They will take us through the results from the first quarter, and after their presentation, we will open up for questions. Please, Åsa.
Welcome, everyone, to Sweco's Q1 presentation. Before we move into the quarter, let me give you a short recap of Sweco. Sweco is Europe's leading engineering and architectural consultancy with 18,000 experts. We have eight geographical business areas in Europe, and we do business in many countries across the world. Let us now start the Q1 presentation. We had a positive start to the year. Net sales increased to SEK 6 billion, with organic growth of 3% and acquired growth adding another 2% in the quarter. EBITDA increased to SEK 640 million, and we improved our margin to 10.7%. We have a strong financial position and low net debt, which allows us to continue to act on opportunities in the market. We made two new acquisitions in the first quarter, and I will get back to those later in the presentation.
Among the projects won in the quarter, I would like to highlight some projects related to the growing demand for sustainable mobility and public transportation. Sweco won three out of four assignments connected to the development of Stockholm's new metro line, which you can see here in this picture. We also won a ten-year railway project in the Öresund region in Sweden and a tram project in the city of Ghent in Belgium. These projects reflects our proposition as the European leader in railway design. With that introduction, let me move over to the market situation. The demand for Sweco services remained good in the quarter, but there is a mixed market outlook. While the negative impact from COVID-19 is diminishing, the Russian invasion of Ukraine is causing market uncertainty. We are monitoring the situation closely and have not yet seen any significant impact of Sweco's business.
In turbulent times, Sweco's highly flexible business model is a core strength as it allows us to quickly adapt to the market situation. With that said, we continue to build and strengthen our order book in the quarter. The long-term demand for our services is driven by strong trends in society connected to sustainability, digitalization, and urbanization. One example of this is that Fortum has assigned Sweco to design Finland's largest air-to-water heat pump plant, which will provide zero-emission district heating and cooling to residents. Now, let us take a closer look at the first quarter. Our organic growth is 3% in the quarter. We have positive organic growth in six out of eight business areas. As you can see here, Norway, Denmark, and Belgium deliver good organic growth.
The positive development is supported by higher average fees and improved FTE growth, while high levels of sickness absence had a negative impact. Let me now move over to the result. EBITDA improved by 2% in the quarter. The positive development is highly supported by higher average fees, while high sickness absence and higher operating expenses had negative impact. In total, four out of eight business areas report EBITDA improvements. We also improved our margin in the quarter. We have strong margins in Sweden, Norway, and Belgium, and a positive development in Denmark. I'm also pleased to see that Sweco Germany continue to take steps in the right direction on its long-term turnaround journey. We see the improvements in Germany as a sign that the actions we are taking continue to have positive impact. I am pleased that we continue to execute on our acquisition agenda.
In Q1, we announced two new acquisitions. Stema Rådgivning, a Norwegian consultancy specialized in project and construction management. This acquisition strengthens Sweco's offering and enables us to capture an even larger share of the Norwegian market. We also earlier this year announced the acquisition of Swedish Net Engineering, focused on physical and technical protection and security. This is a good example to our expertise within buildings and well-aligned with the increasing demand for security solutions. I would also like to mention that we last week acquired Arcasa Arkitekter in Norway with 70 employees. They are mainly active within sustainable residential development. This acquisition makes Sweco a leading player in architectural services and the largest in residential architecture in the Norwegian market. In terms of the entire group, Sweco is today the world's fourth largest architectural company.
With that said, I will now hand over to Olof to walk you through the numbers. Please, Olof.
Thank you, Åsa, and good morning, everyone. Starting with net sales. Net sales in the quarter was SEK 6.1 billion, taking LTM net sales to SEK 22.3 billion. Adjusted for calendar, the organic growth is 3% despite significant negative impact from higher sickness rate. A significant positive calendar effect goes in the other direction, and we have 10 more working hours in the quarter. With positive impact from M&A of 2% and from FX of 3%, this brings total growth to 10% in the quarter. Looking at EBITDA. EBITDA is SEK 648 million in the quarter, and LTM EBITDA thereby close to SEK 2.2 billion. Reported EBITDA is SEK 108 million or 20% up, but adjusted for the calendar effect, we are SEK 8 million or 2% up.
The sickness rate in the quarter increased by 1.8% compared to last year, having a negative EBITDA impact of approximately SEK 95 million. In the other direction, again, the positive calendar effect, which has a positive EBITDA impact of SEK 99 million. Looking then at the EBITDA bridged by business area, we see positive contributions from Norway, Denmark, Belgium, and Germany. Germany, obviously against a loss making Q1 last year, as you know. Norway has a very strong quarter driven by higher fees, increased billing ratio, and also the effect of Easter falling entirely in Q2 this year. Denmark maintains the momentum we have seen for some time now, and Belgium continues with consistent strong performance. Sweden is down versus last year, and this is mainly driven by high absence. Sweden maintains a high margin.
The Netherlands is up against an all-time high Q1 last year and was impacted by absence and by reversal of COVID cost savings from last year. This impact from sickness absence and from higher operating expenses can be seen to some extent across most business areas. In the other direction, EBITDA is positively impacted by continued fee increases and also by increasing FTE growth. Finally, on the numbers, our financial position, which remains strong. Net debt is just below SEK 1 billion, in line with last year, after a stable Q1 cash flow. We maintain roughly the same trade working capital position as we had before the pandemic. Leverage is at 0.4, which is less than a fourth of our target maximum. We have available liquid assets of SEK 4.1 billion, and we thereby remain well positioned to continue to capture any opportunities that may come.
With that, back to you, Åsa.
Thank you, Olof. Let us now conclude the first quarter. As previously said, it was a positive start to the year despite high sickness absence. Six out of eight business areas delivered organic growth, and four out of eight business areas improved EBITDA. We have an overall good demand for Sweco services with a stable inflow of new orders that continue to strengthen our order book. One example of a project during the first quarter is that Sweco was selected to deliver landscape architecture and engineering services to Ankeret, one of several apartment buildings in Havneparken in Norway. We experience a mixed market outlook with diminishing impact from COVID-19, but with uncertainty due to the Russian invasion of Ukraine. With that said, Sweco's decentralized business model and strong financial position creates flexibility going forward. I would like to conclude with some last words.
As always, our focus is to continue our profitable growth, and this will be made through a combination of organic and acquired growth. We continue to actively look for interesting acquisition targets while we, at the same time, focus on increasing our recruiting to support our organic growth. We are also focusing on implementing the Sweco model across all our markets. We continue to focus on staying relevant, and close to our clients. Yet another example during the first quarter is that Sweco Belgium was selected to outline a strategy for low emission mobility and phasing out combustion engine vehicles in the Brussels Capital Region. As a final word, and as I mentioned earlier, we live in an uncertain time.
The short and long-term consequences of the Russian invasion of Ukraine, together with the major changes brought by digitalization and climate adaptation, will challenge and place new demands on society and businesses. It is clear to me that Sweco has both an important role to play and an ability to contribute and grow with these challenges. It is more relevant, challenging, and inspiring than ever before. With that said, let us open up for questions. Thank you.
Thank you, Åsa and Olof. As Åsa said, now we will open up for questions, and it will be possible for you to ask them either through the phone line or through the chat function. Please, Anne, if you could give us the instructions, please.
Thank you. Ladies and gentlemen, if you would like to ask a question on the phone, that's zero one on your telephone keypad now and wait for your name to be announced. Again, that's zero one for those who are dialed in. Your first question is from Johan Sundén from Carnegie. Your line is now open. Please go ahead, Johan.
Thank you so much. Thank you for taking my question. Two questions from my side. The first is on U.K., and you highlighted in the report that you took a significant provision for bad debt. Can you please give some more color on the situation in U.K. and just ballpark how big that provision was in the quarter and how we should think about the situation going forward? The second question is regarding OpEx headwind during the quarter. How much of the OpEx cost savings that you had in Q1 last year is wind back during this quarter? Thank you.
Okay. Maybe starting with the U.K. market quickly. As we write in the report, there is a bit of a sort of a two-sided market in the U.K. where we see strength in the London area and in buildings, whereas we have weaknesses in some of the other markets. The bad debt provision was around SEK 8 million, and it's one case on Ireland of a construction company. So, it was SEK 8 million. We see no other sort of any other development on bad debt provisions, so it's one single case. Sorry, yeah, you asked about the operating expenses as well. What we see is that the positive impact with which we had last Q1 of about SEK 60 million that has been reversed.
It doesn't mean that we are back to the same traveling or training costs as were before, but the total costs are roughly back where they were in Q1 last year. We have some cost savings remaining, but we also have some cost increases in other areas.
Perfect. That was clear. I get back in line. Thank you.
Thank you, Johan.
Thank you. Your next question is from Dan Johansson from SEB. Your line is now open, Dan. Please go ahead.
Thank you so much. Good morning, Åsa and Olof.
Good morning.
Good morning.
Good morning. Three questions from my side. Perhaps I'll take them one by one. First one, is it possible to share how the organic growth developed throughout the quarter? I guess you started on a slow note due to the high sick leave. So my question is, was your growth in March clearly above January and, yeah, at least the beginning of February? Or how did it develop sequentially?
It became a little bit better throughout the first quarter, as you say. Not sort of in any big way, but it became better in, as we saw, sickness absence decline, over the quarter.
Perfect. Thank you. Perhaps follow up to that. Out of your markets, were there any specific ones you can highlight where you experienced more of a headwind from high absence or sick leave? Or was it more of a broad impact across all markets as you see it?
It was a broad impact across all our markets, but I think most markedly, probably in Sweden and the Netherlands a bit above the other ones.
Perfect. Thank you. Perhaps a bit on the market situation as well. You write a bit about it in the report. Are you already now seeing larger projects being postponed or stopped due to the material shortage or inflationary pressures? Is it more of a risk for demand going forward if this situation continues throughout the full year? Are you seeing some projects already being pushed now? What's your feeling on the market right now?
That is really uncertain and lots of discussions related to everything that is going on. In Q1, we don't see any, you know, postponed stock project or anything. There is no implication on the Sweco business during this first quarter. This is more about for us being prepared, staying close to our client and really monitoring the situation going forward. As said before, and also shown in the previous, I mean, market changes, we have this portfolio of both private and public sector, as you know, and quite many legs to really operate within, meaning that we are quite quick. We can quite quickly shift our competencies into different segments. Yeah, that's the situation right now.
Great. Thank you. Maybe a final one, if I may, and that's on the labor market. Are you satisfied with the recruitment situation right now? I guess you're recruiting a lot, but at the same time, churning, I guess, could come up now also after COVID. What do you see in terms of wage inflation on new recruits coming in and perhaps a few words on your ability to compensate that through higher prices? Thank you.
Yeah, I mean I'm never satisfied though, but what we see is and I have been, you know, quarter by quarter talking about that we now are focusing on recruiting, and we would like to see FTE growth. What we now see in the figures is that we see FTE growth coming. We will continue to focus on that. I would like to see a bit of a more result of that in some of our business areas. We also have to handle the personnel turnover that we have all of us on the markets, meaning that focusing on being the most attractive employer on each market is very important for us in times like this.
With our strong brand, our recruitment process, and that focus together with making sure that we attract and keep the best people, I know that we're gonna succeed with this, but it's really hard work because it's a high competition on the market.
I think on salary inflation, what we have been saying is that we see increasing salary inflation that continues, but I think we are also still quite confident that we can compensate for that with higher prices. I think this first quarter is also a good sign that we are able to do that.
Okay. Thank you so much. That was all questions from my side. Thank you so much, Åsa and Olof.
Thank you.
Thank you, Dan.
Thank you. Your next question is from Johan Dahl from Danske Bank. Your line is now open, Johan. Please go ahead.
Thanks, good morning.
Good morning.
Just a question on, you know, you talked about this headwinds of the SEK 90 million something from COVID-19. You talked about operating cost up SEK 60, and, you know, still, earnings are flat, you argue, on a sort of year-on-year basis excluding the calendar effects. These are fairly big numbers. Can you just help us bridge, you know, that?
Good morning. Good morning, Johan. Yeah, I think it just shows that the FTE growth is starting to have more positive effect than it had during 2021, so we see a bigger net effect from that. We also continue to see quite a big positive effect from average fee increases. I think, and if you look at it, the higher sickness leave roughly balances out the calendar effect. The rest comes basically from pricing and from FTE growth.
If you look on that price component in particular, it seems to be a bit of a step change compared to previous quarter or is that incorrect or?
No, I think we are roughly on the same levels as we saw in Q4. Not a step change, but a continued good trend on the pricing.
In terms of, you know, trying to locate in the report to see that FTE growth, I mean, we can see a sequential increase in employees, not on an organic basis, but still an increase. Would you argue that this is sort of a gross inflow that has improved or is it more sort of stopping outflow?
It's more the gross inflow, I would say. We don't see any significant downward trend on the outflow yet.
All right. Can you say anything else regarding the order book? You argue that it continued to strengthen, I think it said in the report. Is it possible to put it a bit more in a sort of sequential perspective how that looks?
I mean, we as you know don't forecast our order book and talk about details, but it has been stable, and the inflow of orders in all segment has been good in this quarter. As linked to the previous question here is that, I mean, the feeling within the whole order book is that it's stable and no you know postponed or stopped projects so far.
All right. Just finally, can you say anything regarding your assessment of the business in Germany and Central Europe, whether, you know, is that stabilizing and prospects for growth going forward? Thanks.
You know, as you know, we implemented this turnaround plan last year, and it takes time. I mean, we have implemented new leadership, shifted out parts of the leadership within the Sweco Germany organization. We have implemented new processes, and now we're working hard to making sure that we're really relevant to the client and select the right products on the market. It also takes time because you need to build up the capability within the organization. One thing is processes and shifting out leadership, but it takes time to build up the way we would like to work. We are continuously implementing the Sweco model, and we continuously are creating capability within the Sweco Germany organization. With that said, I see this quarter as positive signs, as said before.
If I would say that we are stable for the future, I think it's too early to say. We are monitoring the situation in Germany closely and working hard. I'm looking forward to you know continuously see the development of Sweco Germany. I don't think we should expect that Germany will you know be up at the levels that we would like to see for a business area in the near future. We're really happy for this quarter.
Okay, sorry, one more. On the repurchase mandates on the AGM, is there any reason we should do that differently how that will be utilized now versus previously? Any messages you can send there?
No, there is no message. This is sort of the same purposes et cetera that we had before. It doesn't reflect anything on our sort of how we see our capital allocation going forward. It should not be interpreted in any way different than previous years.
All right. Thanks.
Thank you. There are currently no questions in queue. As a reminder, if you have any questions for your speakers today, please press zero followed by one on your telephone keypad and wait for your name to be announced. Again, that's zero one on your telephone keypad now. As there are no more questions in queue, I'd like to hand the call back to your speakers today. Speakers, please continue.
Thank you so much, Anna, and thank you for your questions. In the chat function, we just received a question concerning Germany, but I consider that you just answered that one. One more question about the comment if you could give on the sickness absence going forward since this was mentioned in the report.
Yes. I mean, if we look at April, we are still above last year's levels. We are at about 1.8% above last year's level. The trend is downwards, so we hope that it will normalize later in Q2.
Thank you so much. With that, we have no more questions. I want to thank Åsa and Olof and all of you for participating, and I wish you all a nice day.
Thank you very much.
Thank you very much.