Good morning, everyone, and welcome to Sweco's Q4 and full year report and presentation. My name is Lars Torstensson, and I'm heading up communications here at Sweco AB. It's good to see so many familiar faces. With that said, I would like to take the opportunity to also welcome everyone that has joined us via the telephone and web conference as well. With me today, I have, of course, our President and CEO, Åsa Bergman, but also, of course, Jonas Dahlberg, CFO. With that said, I would like to hand over to Åsa Bergman to take us through the presentation.
Thank you, Lars, and good morning, and welcome, everyone. I can imagine that you are curious to look into the numbers, so let's jump into the details. To start off, I'm very pleased to announce another record year for Sweco and record quarter, which is the strongest quarter for Sweco so far. We are delivering a full year with delivering 11% growth, and we are delivering 9% EBITA improvements. We're also back in organic growth with 5%, and if we add acquired growth, we can put on 3% more. Last year, we also showed that we have good operational momentum with all our business areas, seven out of seven contributing to the operational development. That feels really good.
So a good year and a record quarter. Looking in more details, we can see that the positive development in the Netherlands and in Denmark continued. They continued to grow, and they improved profitability. If we look at the Netherlands and Denmark, I think it's a good example showing Sweco's ability to integrate and develop acquired businesses. If we look at Sweden, Finland, and Norway, we see a stable development, a stable year. And Norway. Also Finland, a steady development throughout the year, and Sweden delivered a solid 2018, and they improved in Q4. If you recall, the start after the summer, we had a weak start in Q3, but they gradually improved throughout Q4. In Western and Central Europe, we see a good growth.
So all together, positive growth and operational development, showing that we have a strong foundation, and we have a strong footprint throughout all our markets. And with that, it's also so that I can end this 2018 in a good way. But I also see that we can do more. We need to put focus now, and our top priority is to ensure that we have a focus on efficiency, and that we ensure that we implement the Sweco model the way we want to work across all our markets. And with that, I will jump over to Q4, the strongest Q4 for Sweco so far. And we also in the quarter see a good growth.
We also see here that we have a good momentum with five out of seven business areas contributing to the performance in the quarter. We see that Sweden, Norway, Finland, Denmark, and the Netherlands is performing well. Central Europe and Western Europe is a bit more mixed picture in the Q4, but all in all, a strong Q4. We have a long history of growth, and Q4 is not an exception to this. Our long-term strategy is to continue to grow on all our markets, both with organic growth and acquired growth. Therefore, I'm pleased to see that we are in Q4, but also all through 2018, we are back on the historical average of 5% growth. This is what we're gonna aim for going forward.
Looking into Q4, it's also nice to see that all business areas is growing, and strong growth in Norway and in Western Europe. So, and this growth is really supported by positive development of prices, hourly rates. It's supported by our ability to continue to hire new employees into Sweco, and it's backed up with a solid order backlog. So good growth, and I'm very pleased with that. And with that, I will hand over to Jonas to walk you through the numbers.
Thank you. More numbers, starting with the net sales. So, we grew with 12% on the top line in the quarter, which is just north of the 11% we had for the year. Very much similar picture in the Q4 as we've seen throughout the year. Organic growth 6%, acquired growth 3%, and currency effect of 3%. Looking into the organic growth, this is to a large extent driven by strong recruiting. We also see a tendency of lower employee turnover. We had a very high turnover last year, and this is edging down a little bit right now.
So we have welcomed more, close to 900 new employees to the group in the quarter, out of 550 organically. And moving over to EBITA in the quarter, SEK 46 million higher than the same quarter last year. Adjusting for the calendar effect, actually SEK 54 million. And if you look margin-wise, nominally it looks like we're slightly edging down on margins, but actually if you adjust for the calendar effect, it's the same or even better than last year. And this is the same story as we have on the full year. This improvement in absolute numbers of EBITA is mainly driven by the growth. So it's strong momentum in the market, bringing in new people, and on top of that, fee development.
And though still there is an opportunity to elevate efficiency, actually in the quarter, we have 1.3% lower billing ratio, which we mainly see as a potential going forward to further elevate profitability. If we look at the development more on business area level, the numbers you see here are calendar adjusted, while the margins are the reported margins. And so we see in Sweden an improvement of EBITA of SEK 12 million, mainly driven by growth, but also positive fee development, although billing ratio is lower than last year. Norway, improving in many dimensions, lower product write-downs compared to fourth quarter last year. On top of that, solid fee development, and in particular, very strong growth.
Finland, lower adjustments in products, and also higher fees and some growth contributing to the improvement. Denmark had a tough Q4 last year with issues in water environment. This is now a much better situation in water environment in Denmark. Still, we see more potential in Denmark, landing out on 3.7% margin in the quarter; they can do better. Netherlands, improving also, mainly due to fee development and growth. And as also said, if you combine Denmark and Netherlands, they're actually doubling the contribution to group EBITA in the quarter. Still, as you can see from the margins, more potential going forward. Now, moving into Western Europe, this is a mixed picture.
We have in Western Europe, we have Belgium, which is doing very well, strong growth, margin improvements, price improvements, basically improving on all dimensions. At the same time, we have the U.K., and the U.K. is, communication-wise, a difficult story, so pay attention now. Fundamentally, we see a satisfactory development, or sorry, market in the U.K. But we have issues currently with billing ratio. This is mainly driven by the mix of products we have in the portfolio with a few very large projects and frameworks, which means that we become vulnerable to changes in handovers in projects. So we have a few large projects that's been stopped in the U.K., but we've also won in the same segment. It's just that there is a gap between the projects.
And then, of course, on top of this, there is an uncertainty on Brexit, but that's not the dominating factor. So, we are looking forward to the development in the U.K., but currently, and also expected in the beginning of the year, it will be a difficult journey. Central Europe, this is mainly Germany, where we had in the quarter higher costs. So, you know that Germany has grown a lot during the last few years. We're now investing in that platform, taking costs in the quarter, which also belongs to the full year, to develop Central Europe and Germany. Moving on to cash flow for the quarter.
Very strong cash flow, close to SEK 1.1 billion, second operating cash flow for the quarter. And this is driven by, of course, the profits in the quarters, which is solid, but also the normal seasonal cash release we have in fourth quarter. And in this Q4, it's even stronger than what we had last year. And this brings us to a solid financial position, net debt to EBITA of 1.0, slight increase of net debt. But we have this basically unchanged leverage ratio, despite spending SEK 1.4 billion on share buybacks, M&A, and dividends. So we're very pleased with that.
Still, having a position which enables us to make moves in the market if we find the right opportunities. And with this background, the Board of Directors proposes an increase of the dividend with 10% to 5.50 SEK per share, on the back of a solid financial position and our dividend policy, which says that more than 50% of net profit should be distributed to shareholders. And we have now a payout ratio of 55%, which is slightly below the historical average the last 10 years of 67%. And with that, Åsa.
Thank you, Jonas. Let me talk a little bit about where we are and where we're going. We are expert on the built society. We are planning and designing the cities and the future, cities for the future, the sustainable future. We have attractive expertise that works in segments that is supported by strong underlying trends such as urbanization, growing population, and environmental change. We have a clear geographical focus, focusing on our eight core markets. And we are aiming to take market leading position on all those markets by growing organically and with acquired growth. And thirdly, we have a strong track record supported by our proven operating model, the Sweco model, the way we want to work.
The Sweco model is based on having the best people, the highest efficiency, and ensuring that we have the closest relationship with our customers. We operate really decentralized with a local, close relationship with our clients, and all this is connected. Going forward, our top priorities is to ensure that we execute on this strategy in all our markets. And that is what we have on the agenda, and that is what we are focusing on going forward. In line with this strategy, we announced some changes in the business area structure. First of January this year, we split the Business Area Western Europe into Business Area Sweco U.K. and Business Area Sweco Belgium.
We also renamed the business area of Central Europe to Germany and Central Europe to really put focus on Germany, which is about 75% of that business area. This is in line with the strategy, and this allows us to focus more on these specific markets and ensure that we can continue to grow and that we can develop the operations in those countries. With that, a bit of my reflections on the market right now. Overall, the demand for Sweco services is good, and as I said before, supported by the underlying trends in the built society or in the society. The market remains good, with some variations in countries and in specific segments. If we look at the demands of our services in infrastructure, water, and industry, they are good.
If we look at the real estate market, it's overall good with some variations. Zooming into the commercial buildings market in specific London, U.K., and also in the Nordics, when it comes to residential construction, we see a slowdown. And then zooming into Sweden, especially, as I always get questioned about that market here, it's still on lower level, but again, that is a minor part of Sweco's portfolio. So overall, a good demand for our services. And to conclude, last year and last quarter was record for Sweco. We have a good operational momentum. All business areas is contributing to the operational development, and we have a strong financial position. We have solid increase in earning, leading to a dividend of SEK 5.5, which means increase of 10%. Thank you very much.
Thank you, Åsa. Thank you, Jonas. That concludes our formal presentation, and we are now ready for any questions that you might have, both here on the floor as well as on the telco and web conference as well. So, who would like to be the first to ask some questions? The gentleman in the front, please.
Thank you. Victor Lindberg from Carnegie. Thinking of Denmark, you have an uplift in revenue, very much thanks to acquired growth. It's more than SEK 100 million up year-over-year. But if we adjust the earnings both for calendar impact, but also project impairments that you had last year, earnings is actually down year-over-year still. So can you just help us understand the earnings development a bit more, and maybe provide some flavor on what is going on in Denmark?
Yeah, and so what we saw in Denmark was a lower billing ratio during the fall. And this is part of the market development when it comes to residential in Denmark. And we think still we're on the right development trajectory with Denmark. You know, still another difficult Q4 for Denmark, but sequentially, we think it's a solid development in Denmark.
I think it's important to add that if you look at Denmark's development, it has been a turnaround case. What we now see is that we, as Jonas said, is, you know, we're developing step by step. We have a good traction on the market, but there is much more to do. So again, we need to implement the way we want to work, and that will take some time connected to that their ability to really work efficient is not 100% there yet.
Årstiderne, the acquisition, is it accretive to the margins as of now, or is it diluting? Is that an explanation factor if we look at the
No, Årstiderne is definitely accretive.
It should be accretive, okay. And then maybe thinking of Sweden, it's a difficult market to model going into 2019. But maybe having 2017 and 2018 as a reference, you were at EBITA, EBITDA margins of 11.5%-12%. And just looking at where we are and how reality looks, what's your best guesstimate? Should we be somewhere in between, or you think you can accomplish the 2017 levels that we have been at, given the outlook?
The momentum we have right now is the same as we had in Q4. I say that we have, you know, we have a strong operations in Sweden. I can't give you any forecasts, as you know. But we have we have a good market position, and we have a strong order backlog, and we work in all areas to secure that we, you know, work towards our customers and ensure that we focus on efficiency. As everyone else, we are on our toes when it comes to the market development to really ensure that we are out there and performing.
Thanks.
Thank you very much. Another question from the front row in the middle.
Yes, hello, Erik Ekelund from Handelsbanken. So I have actually six questions, so, it will hopefully don't take too long, but I will start off with the first one. So you said you incurred costs in Germany to increase further growth. What is that?
So if you look in Germany, what you see is basically an unchanged gross margin throughout the year. What you saw in Q4 was a combination, and what you saw throughout the year was a combination of increased fixed costs. And in Q4, you saw some accrued costs, which, you know, to be fully transparent and honest, should belong to the full year. And in addition, we've made some organizational changes in Germany. So that's what you see on cost.
Okay, thanks. And also, what are the project adjustments in Sweden? Can you just give an example on that?
As in general, what is a project adjustment in Sweden? Well, as an example, that could be if we're working on a project and we're delivering something to the customer which is not exactly what they were asking for, that becomes a write-down of our spend. And Sweden is predominantly a time and material country, so the project adjustments are quite marginal compared to revenues. But given the size of Sweden, in some cases they can add up.
So that's why you, you state that in the report, for instance, that it's diluted the margins?
Yes.
Yeah. When do you expect Sweden to catch up with the lost billing ratio momentum that you saw post the summer?
As I said, we had an gradually improvement from the weak start, and we are not on the levels that we want to be yet. I don't want to give any forecast, but we really focus on efficiency and ensuring that we develop over time.
And you spoke a little bit about that organic growth was mostly from net recruitment, but how much of the 6% is from prices versus recruitment or billing ratio? Actually, billing ratio declined, but from prices and recruitment.
Order of magnitude is 50/50. You have a negative impact from the billing ratio also.
How do you see the new recruitment situation? Because you have enough peak in net recruitment. It's going good for you, and personnel turnover is decreasing as well. How do you view the recruitment of new personnel, the situation out there, the recruitment market? Is it the same as previously, worse or better?
It's, I would say that it's the same. We have an attractive brand, and one of the reason that we aim to take market leading position in all our countries is that when we have a market leading position, we actually get the traction, not only from the customers and the potential projects, it's also that we get the traction, being attractive, towards the potential engineers and architects on the market. So, depending on what kind of market position we have, it differs a bit, but we have a strong brand, and we are attractive, and the situation there hasn't changed. So we are capable of recruiting new people into Sweco. And as you say, the personal turnover is there, but it's stable.
But also what you could say also that, we are seeing a slightly better, recruitment market for, from a Sweco perspective
Yeah.
for Sweco Sweden.
Yeah, yeah.
Great. And just the final question for me. You mentioned that the personnel turnover had, has decreased. How much of that is a market situation, and how much is it due to your job at actually retaining the personnel?
It's t hat is a tricky question. Of course, the market affects this in some areas, but it's also so that we have, you know, worked a lot with ensuring that we have the right leadership and the right circumstances when it comes to development of individuals, ensuring that we have the most attractive projects. So we have done a lot to ensure that we are really attractive as an employer, but we also have the market effect.
Thank you very much.
Thank you. That was good questions. Do we have any other questions from the floor? Don't be shy. This is a great opportunity to ask some questions.
Hi, Tobias Aurelius, M&A Founder. Back to Germany, any w hat can you say, when will you be back on track or where you want to be in Germany? Is this over for this quarter or a couple of more quarters?
I think, if you look at Germany, we've grown very fast for, for a long time. I don't think, we want to promise, an immediate recovery in Germany, in, in the very short term. But, what I would like to say is, Germany is definitely, a market we believe a lot in. It's a you know, strong market. It's more, you know, for us to catch up and, and build a platform and, and maybe take a breather before we take the next step.
To emphasize that, the demand for services in Germany is good.
Thank you. Do we have any questions from the telco web? No, we don't have that. So, there's still room for a question or two, if there are any on the floor. We have, of course, the opportunity to have some informal discussions with Jonas and also after this presentation. But in that case, I would like to thank you all for joining today's presentation and telephone conference. And we look very much forward to staying in touch now from here on until our first quarter. Speaking of the first quarter, that will be presented the tenth of May, so stay tuned for that occasion as well. But with that said, thank you very much. Thank you, Åsa. Thank you, Jonas.