Good afternoon everyone and welcome to this presentation of Sweco's Q2 report. With us today we have Sweco's President and CEO Åsa Bergman and CFO Olof Stålnacke. They will take us through the results of the second quarter of the year, and after that we will open up for questions.
Please, Åsa,
welcome everyone to Sweco's Q2 presentation. Before we present the second quarter result, let me give you a quick overview of Sweco. Sweco is Europe's leading architecture and engineering consultancy with operations in eight geographical business areas across 15 markets in Europe. We are a well-diversified business operating across three different segments with a good balance of private and public clients. The foundation for Sweco's long-term success is our mix of competencies spread across 22,000 experts, our focus on organic and acquired growth, as well as our efficient and decentralized operational model. With a strong financial track record and a financial position, we are focused on continuing our growth journey and build on Sweco's success. With this introduction, let me start the presentation of Q2 2025. Sweco delivered a stable performance in a quarter marked by a significant negative calendar effect.
Net sales were SEK 7.8 billion and the organic growth rate was 2% adjusted for calendar. Net sales were down 3% in the quarter, affected by a negative currency effect and the negative calendar effect. EBITDA amounted to SEK 750 million and the EBITDA margin was 9.6%. EBITDA increased by 15% or SEK 115 million adjusted for calendar. We continue to see further improvements in average fees and billing ratio. We are also executing on our M&A agenda with the announcement of several new acquisitions during the quarter. I will get back to the acquisitions later in this presentation. Altogether, this was a stable quarter and we continue to execute on our strategic priorities. Let us now dive into some of the operational highlights from the quarter. In the quarter, six out of eight business areas reported EBITDA improvements and five out of eight reported positive organic growth.
We continue to be active and successfully navigating the market, resulting in an increase in both orders received and the order backlog. We are also seeing a continued solid operational trend across several business areas, with three business areas reporting double-digit margins and the UK as well as Germany and Central Europe continuing to improve their performance. The efficiency measures taken are having.
Effects with higher internal efficiency and a higher billing ratio. All in all, we are pleased to see that we are making steady positive progress across most business areas. Let us now move over to the Market Overview. The demand for engineering services remains generally in line with previous quarters, with some variations between segments and markets. Demand remained good in water, environment, energy, and infrastructure segments, as well as in security and defence. The generally weak demand continues in residential and commercial real estate, as well as in parts of the industry segment. The green transition, resilience, demographic changes, and digitalization and AI are and will be key drivers for our business, and our well-diversified business continues to be a strength for us and provide stability. With that, I will hand over to Olof to walk you through the numbers, please.
Olof,
thank you, Åsa, and hello everyone. Starting then again with a summary of the result. Net sales was SEK 7.8 billion with 2% calendar adjusted organic growth, 1% from M&A, and a significant negative FX impact. EBITDA at SEK 750 million and excluding the negative calendar effect. As you just heard, we are SEK 115 million or 15% up, and the margin is at 9.6%. Leverage down significantly from last year at 0.8. Looking then at net sales, we see organic growth in 5 out of 8 BAs. UK, Germany and Central Europe, and the Netherlands has the strongest growth. Finland continues to show negative growth. The Finnish market remains challenging in the quarter. We also see slightly negative growth in Belgium with a weaker industry segment and in Denmark where we see a slightly slower energy segment and have more vacation absence in the quarter.
Sweden grows 2% and Norway 5%. The growth drivers continue to be average fee increases and higher billing ratio. These are partly offset by vacation absence and lower sub-consultant revenue. On the EBITDA side, we see a 15% increase despite the negative top line growth, and excluding the calendar effect, the margin would have been 11.4%, a 1.6 percentage point improvement versus Q2 last year. Sweden, Denmark, and Belgium delivered double-digit margins. UK delivers 6% in another quarter of significant improvement. Germany and Central Europe improves margin, whereas Finland and the Netherlands are slightly down, and in Norway you see the reversal of the large positive Easter effect from Q1. Looking then at the EBITDA bridge by business area, overall higher average fees continue to be a positive driver together with higher billing ratio and a net positive of SEK 47 million from restructuring costs.
Higher personnel expenses and vacation absence had a negative impact. Looking at the BAs, six out of eight deliver increased EBITDA. Sweden and Germany and Central Europe saw significant EBITDA improvements. UK also improved significantly, but again this was versus a relatively weak quarter last year. Still, it's a positive sign that the turnaround in the UK is on track. The other five BAs are more or less in line with last year, and it's worth noting that Finland and Belgium would be positive excluding the negative FX effect. Significant calendar effect from Easter with 11 fewer working hours corresponding to a negative SEK 159 million in net sales and EBITDA impact. It is also worth noting that the FX effect, which normally is limited on EBITDA level, this quarter was as high as -28 million. The financial position remains strong.
Net debt at 2.6 billion is significantly down versus Q1 last year. Leverage at 0.8 is also significantly down versus last year and well below our target. We remain financially very strong with available liquid assets of 4 billion. Finally, on the numbers, the calendar effects after the big Easter effect, we now have limited calendar effects for the rest of the year, and for the full year the total is minus eight hours, which basically corresponds to the leap day we had in 2024. With that, back to you Åsa.
Thank you Olof and as said in the beginning, acquisitions are one of Sweco's key growth drivers and we are pleased to have announced several new deals over the past two months. In the Netherlands we have announced three new civil engineering company Joost and security and building technology expert Reynaert Building. They were both announced in Q2. On July 4 we also announced the acquisition of Volantis, an expert in engineering and architectural services for the industry and healthcare sector. Together these companies will strengthen our offering and geographical presence on the Dutch market, adding SEK 350 million in net sales and over 200 experts to Sweco. On July 2 we also announced two new acquisitions in Luxembourg, PROgroup and ImpaKT+, and they are experts in data-driven project management and circular economy services and they will add SEK 58 million in net sales and some 40 experts.
We also made a major announcement in Sweden during the quarter. On June 4 we announced a recommended cash offer for the listed company Projektengagemang. It is one of Sweden's leading architecture and engineering consultancies with net sales of approximately SEK 800 million and some 650 experts. This is a great match for Sweco to strengthen our combined engineering and architecture offering while also extending our geographical footprint in Switzerland. On July 14 we announced that we completed the offer for the shares in Projektengagemang and that the offer had been accepted by shareholders representing approximately 97.9% of the outstanding shares and 99.2% of the outstanding votes. All conditions for the offer have been fulfilled and the offer is now being completed. We are pleased with the increased M&A activity with the new acquisitions I just mentioned. We are really looking forward to welcoming all these new colleagues to Sweco.
The projects won in the quarter highlight Sweco's vital role in the transformation of societies and industries. Sweco was awarded a major long-term contract by Deutsche Bahn for a significant infrastructure project aimed at doubling the capacity and efficiency in the S-Bahn Munich. Sweco was also selected to be part of a framework with UK National Highways focused on sustainable and digital transportation solutions. The city of Antwerp selected Sweco to redesign the Meir , one of Belgium's most well-known shopping boulevards, services including landscape architecture, mobility expertise, design of day and night time experience, and public engagement. Finally, we were commissioned to provide design services to support establishment of the new data center for Litgrid, the electricity transmission system operator in Lithuania. These client projects show the wide and deep expertise offered by Sweco across markets and segments.
I will conclude with our key priorities and focus areas going forward. To summarize, Sweco delivered a stable performance in the second quarter of the year. We continue to execute on the priorities communicated over the past quarters. By accelerating the pace of acquisitions and further improving efficiency and margins, the quarter demonstrates the strength of Sweco's well-diversified business and operating model. Going forward, we will continue capturing growth opportunities and navigating in a mixed market as well as further improving our efficiency. We will also focus on integration of our latest acquisitions to realize synergies and optimize output. We remain focused on our M&A strategy to support future growth and strengthen our position in core markets and segments. Thank you.
Thank you, Åsa and Olof, and we will now open up for questions. I just want to remind you of our Q3 report that will be released on October 29, 2023. Now, Heidi, if you can please give us the instructions for the questioning session.
Thank you. If you wish to ask a question, you will need to press Star one one on your telephone and wait for your name to be announced. To withdraw your question, please press Star one one. We will take our first question, and the first question comes from the line of Adela Dashian from Jefferies. Please go ahead. Your line is open.
Thank you and good afternoon. A couple of questions from me. First on the efficiency gains, especially with respect to the billing ratio improvement. Could you highlight what further internal efficiency measures you have planned for the remainder of the year, and maybe also specifically as it relates to the Finland weakness, what actions you're taking here to stabilize the performance?
Yes. Hello Adela, we have. As we have done historically, if we have any large plans that we know we will execute during the coming quarters, we tend to announce them in the quarterly report. We will continue with any adjustments needed. There are no specific big plans. We will continue to review management layers and overhead functions, and we will continue to look at areas where we have lower demand and lower billing ratios. It will be continued actions as needed, nothing specific big planned right now.
Okay, thanks for that. Maybe also on M&A, I appreciate all the color around the recent deals, but it's also been, I guess you could say, a pretty front-loaded M&A pace so far in the year. What are expectations for H2, and could you remind us of what exactly type of deals you are looking for? Maybe fundamentals also would be good to know.
Yeah, I mean as you know we have an active M&A agenda in all our business areas that we work continuously with. Last year was slower and that was mainly due to the transaction activity in general being lower on the market. What you see now is the result of lots of dialogues and lots of work on each market, so to say. As said before, this is more about when we get the opportunity and when we have done our, you know, the way we work on the market, then we will announce and then we will acquire companies. What we're looking for is expertise spearheads when it comes to those competencies. We see that we need to be able to take on the growth in specific segments.
I mean you have some good examples here in this quarter: circular economy, we're talking security, we're talking, you know, broad in the different energy segments. We are also talking architecture because we want to combine architecture and engineering in all our different business areas. It's also about making sure that we can broaden our portfolio in each area, so to say. In our architecture portfolio we would like to have both private and public clients. We would like to make sure that we have healthcare, we would like to make sure that we have those segments that make us resilient over economic cycles. We have kind of a blueprint for what we aim for, but it's more about the timing. When we get the opportunity, then we will buy and integrate companies. I hope that answers your question.
Yeah, no, it absolutely does. Thank you for that. Lastly, on the end market trends, I think you've mentioned previously that so far you're seeing pretty limited disruptions from the geopolitical instability or the trade conflict. Does this still hold true, or is there anywhere in your project portfolio where you are seeing maybe investment decisions are being impacted by this?
No. I mean, we see, as we said before, a mixed market between countries and segments. Even if the European economic growth remains generally a bit slow and that there are geopolitical uncertainties, we see good growth opportunities in green investments, energy transition, defence and security, digitalization and infrastructure, as I mentioned before, and our ambition is to capture those opportunities. We have seen some slowness in the decision making in parts of the industry segment, but no major changes in this quarter compared with last quarters.
Perfect. That's all for me. Thank you.
Thank you.
Thank you. We will take our next question. The next question comes from the line of Dan Johansson from SEB. Please go ahead. Your line is open.
I hope you can hear me.
Yes.
Hi, Dan.
Hi. Hi.
First of all, I'll take the opportunity and say thanks to you, Olof, for the good collaboration here throughout the years. Also, best of luck now on your future endeavors.
Thank you very much, and thank you for the collaboration.
Don't.
Two questions. Dan, maybe I'll start a bit on what you highlighted in the report with the higher personnel expenses across quite a few of your geographical markets. Have you reflected that higher wage cost already in terms of pricing? Is that something you will push through harder now in Q3, Q4, and also what was the price component in organic growth now in Q2, if possible?
Thank you.
Yeah, I think I'll answer the same as I've done before. So far we have managed to balance the personnel cost increase from salary revisions with price increases. It remains a challenge for us and an important priority to continue that. So far we managed to balance.
Understood.
Maybe one more question also on UK and Germany, quite encouraging to see that you continue to produce much better results now there and I guess supposed to take them towards the next level. Correct me if I'm wrong here, but you still have a challenge there that you are a bit subscale in your market positioning in those countries. How do you plan to resolve that? Are you close enough to also consider M&A in those markets or is it still Benelux and the Nordics which will take the lion's share in terms of M&A now going forward?
Yeah, I mean, first of all I am really happy to see the development both in Germany and in the UK, and that is due to the long history of Germany implementing the Sweco model and also getting back on track and expanding ourselves on the market. We see we have a higher hit rate on the market, and we strengthen our order backlog and so on and so forth. There is more to it as you refer to. There is potential to take on more growth and focus the M&A agenda and try to be part of consolidating that market. That is what we have in our plans. We want to do it step by step. That is Germany, and the same goes for the UK. After a weak 2024, we are seeing a good development and stronger result in the UK.
We have focused our business in a good way. Long term, we see opportunities on the UK market as well.
Yeah, and I would add that UK, as I said in the presentation, good progress on the turnaround, but we are still a bit away from sort of when we will start making M&A, et cetera in the UK again.
Yeah, makes sense.
Maybe a final one from my side, if I may. Following up a little bit on the demand situation, you say your reserves increase, then you also strengthen the order backlog here. Can you say something about the split? Is it mainly larger orders or do you also see better opportunities in the small and mid-sized projects coming in? Would you say you see more signs of a market recovery now, perhaps compared to the beginning of the year, or are we still in this sort of wait and see mode due to general uncertainty?
I would say the order book for us will always be mostly small projects because that is the bulk of what we do, and no big change in there. I think it's, I mean, still good organic growth, but we don't see any increase. The order backlog and the orders received are a good foundation for going forward. I think it's still too early to talk about any break in trends in the quarter.
Okay, thank you.
I think those are my questions for now, so I'll jump back into the line. Have a good summer.
Thank you.
Thank you. Thank you.
Thank you.
Thank you. We will take our next question. The next question comes from the line of Raymond Ke from Nordea.
Please go ahead.
Your line is open.
Hi Olof, a couple of questions from me as well. First, regarding these acquisitions. You know, from the outside it can look like you decided to push the M&A button here, of course, but in reality that's rarely so simple. Could you just help us understand maybe how long you worked on landing these three deals? Especially whether you made these acquisitions now because the sellers were ready or was it more on you guys feeling that the timing was right on these deals that you announced?
I mean, I don't want to comment on specific cases, but a dialogue with a company could take years. For us, it's about having a clear strategy of what we aim for country by country and also reaching out to the companies that we think have the right quality and the right match with us culturally and would create value in the combination with us. In some cases, it's about that we have really massaged the owners. It could have to do with that, you know, someone is ready. There are many different cases in the reason why it happens in this volume and pace. For sure, we are focused on succeeding with M&A, but that doesn't mean that we could expect that we keep this pace quarter by quarter.
Again, it's about making the right deals when we get the opportunity and we're not making deals for the sake of making deals. I think that is really important. I think I've said it before. For us, it's really to make sure that we can create value. The value needs to be a great combination with us because otherwise the value will walk out the door. That is not a situation which we would like to see. We really need to make sure that we can create something really, really strong in the combination with the company that we acquire.
Thanks Åsa, loud and clear. Just a question on Denmark. I get that, you know, calendar had a negative impact of SEK 23 million. There was currency headwind and you were 1% fewer people. When I add those up, I still don't really get the sort of -5% organic growth drop here year over year. Could you just help us understand, is there anything related to maybe a shift in the market or was it like you mentioned, just energy being slightly weaker and more vacation being behind this?
No, the two big. I mean you always see a bit of fluctuation between quarters. The big explanations were some slowness in decision making and in sort of starting projects in the energy sector. We also had quite a big vacation effect for the whole group, but it was largest in Denmark. A lot of vacation mostly around Easter. We don't see any shift in the market otherwise. Those are the main explanations and it remains to be seen if the energy market is just temporary or if we are seeing a shift there.
Yeah, got it. One more on UK. Maybe UK now delivered its third consecutive quarter of year over year growth. It's looking stable. Could you just help us understand, like where are you in your repositioning here? Are you where you feel like it's stable? Yeah, just help us understand that.
No, I think just like with what you've seen with the turnaround in Germany, we want to see a little bit more time of growth and of strength in margins before we consider the turnaround done, so to speak.
Okay, great. I also take the chance to thank you, Olof, for collaborating over the years and wish you all the best out there. Thank you very much.
Thank you very much, Raymond. Same to you.
Have a nice summer, Raymond.
Thank you. We will take our next question. Your next question comes from the line of Fredrik Lithell from Handelsbanken. Please go ahead. Your line is open.
Thank you.
Thank you for taking my questions as well. Many have been answered, but maybe a bit on Finland, sort of struggling a little bit continuously. You did actually, you took actions last year in Q2 as well. Following that, we saw a further drop in calendar and adjusted organic growth in Q3 of 2024. Should we sort of expect your adjustments to have the same type of effects on organic growth in the coming quarter? That's really one question. Maybe in Netherlands, if you.
Could.
Explain a little bit behind the margin that took a step down. Is that also then only seasonality and calendar effects that's behind that compared to what you had in Q1? Thank you.
Yeah, Netherlands is mostly Easter. That's the big explanatory factor for the Netherlands. On Finland, I mean, we say that the market is still challenging. I think we've done a good job in Finland in terms of adjusting to the market circumstances, but we don't get any help from the market. Hopefully it has or will bottom out, the Finnish market. Since we try to avoid forecasts, I won't say anything about expectations for Q3, but our management team there is really doing a good job of adjusting to the market circumstances.
Thank you. I noticed you had a section in the report talking about that you have started a captive insurance company. Is that something we should put some time on as analysts, or is that a small thing for us?
It is truly a small thing for you. As we write in the report, it is a so-called fronted captive with an insurance company that runs the insurance operations towards the Nordic countries, which this covers. Financial impact is limited and the reinsurance is also capped. We will have very limited financial impact apart from lowering our insurance costs, which has been the reason we have put that in place.
Okay, all right. Perfect. Understood. Again, Olof, thank you for the time and a nice summit to both of you.
Thank you very much. Thank you very much, Fredrik.
Thank you.
We will take our next question. Your next question comes from the line of Tom Guinchard from Pareto Securities. Please go ahead. Your line is open.
Thank you.
Good afternoon. Question on the billing ratios and margin dilution, I guess primarily related to Sweden, but 75% billing ratio is a very high number here in Q2. Should we expect you to compensate for the margin dilution with continued organic billing ratio improvements, or what sort of lag are you seeing there? Looking into the end of the year and beginning of 2026,
the margin dilution.
is, as it is for the group, entirely an effect of the Easter and the calendar effect. Taking out the calendar effect, we don't have a margin dilution in Sweden.
Referring to the forward looking, with Projektengagemang AB coming into the books.
Okay. As with all acquisitions, I can talk about acquisitions generally, and most acquisitions we do are margin dilutive, but then with sort of synergies and also opportunities on the revenue side, we normally turn that around quite quickly. I won't give any specific numbers for this acquisition, but that's normally the pattern you see.
Organic billing ratios and margins should be relatively intact here into Q3, Q4 with seasonality in mind, of course. However, reported figures on billing ratio should come down here toward the end of the year.
Again, we avoid making any forecasts, but I mean, you should assume the usual pattern for more significant M&As. For example, a good comparison is when we made the VK acquisition in Belgium a couple of years ago.
Perfect.
Thank you. And thank you, Olof. Also, special thanks to Olof for great collaboration. Have a good summer.
Thank you, Tom. Have a great summer.
Thank you.
Thank you.
We will take our next question. Your next question comes from the line of Johan Dahl from DNB Carnegie.
Please go ahead.
Your line is open. Johan Dahl, your line is open. Please ask your question. Johan Dahl, your line is open.
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Via the webcast, please type it in the box and click Submit. Please stand by for your next question. The next question comes from the line of Johan Lönnqvist from DNB Carnegie. Please go ahead. Your line is open.
Hi, Olof and Åsa, a couple of questions on my side as well. First one is a little bit curious to hear about your planning for net recruitment. Looking into the fall, giving the higher M&A pace, should we expect that you kind of pause your recruitment activity, more focus on kind of integration in, say, Sweden and the Netherlands and those geographies that have been more active on the M&A side, or do you still have ambitious recruitment plans ahead?
For sure we have ambitious recruitment plans, and we will not see a slowdown when it comes to the pace of recruitment. In the right areas, we will really continue to be making sure that we do what we can to recruit, and that goes for all business areas.
I think it's a follow up also to Tom's questions on utilization or billing ratio. How much respect do you think we should have for the kind of quite good progression you had on the billing ratio in Q3 Q4 last year? Looking at the business as we see it in the books as of today without the impact, how do you mean.
How much respect should you have?
Do you think you had quite big uptick already second half last year, do you think still room to improve? Because we saw a slightly lower uptick in the utilization in Q2 this year.
Yeah. Now we are going against, I mean the comparables are with sort of after we started the real improvement of billing ratio. As I've said before, there is definitely more room to improve, but of course it will be more difficult to have sort of large improvements we have had. There is still room to improve as we've said before and we.
I said we will continue to focus on efficiency. I mean to do what we can to strengthen.
Perfect, a little bit more color there. A final question from my side, and it's been more broader. Just also curious to hear where you are. You mentioned in the presentation also you're working with kind of more digital solutions and trying to incorporate that in your day to day work. Where are you in the kind of process of incorporating more digital tools, say AI and those kind of things?
We have worked very much, I mean a very long time to integrate digital ways of working in all parts of the business to bring both efficiency value towards the clients, new services into the business. It's kind of part of our operations today. When it comes to AI, we built a ChatGPT platform early 2023 really quickly, meaning that we utilize AI across the whole of Sweco. We measure how much usage there is, and we are testing new AI tools all the time to see what we would benefit from to make sure that we are in front when it comes to AI development, and all kinds of opportunities and consequences for us are integrated into our business.
Is it possible to quantify any kind of efficiency gains taken out this far, or is it too early?
Too early, I would say.
Too early.
Perfect. Those were my questions. I also want to thank you all for a great collaboration over the years. Thanks a lot, and have a good summer.
Thank you, Johan. Thank you.
Thank you.
Thank you. There seems to be no further audio questions at this time. I would like to hand back for webcast questions.
Thank you, Heidi. We have one question through the chat function from Anders Knudsen, and that question concerns the security and defense market. The question is, could you detail a bit more the drivers? Give the drivers a better backdrop in security and defense. Is this driving growth at this point?
To what magnitude?
I mean overall the defense and security and resilience has been really high or are really high on the EU agenda. It's high on the different governments' agenda, meaning that it drills down to investments in the different areas. This is project that we have across Sweco linked to the different segments of infrastructure and energy, water and so on and so forth. We of course have specific security projects into the direct relation to defense and the defense industry. This is nothing that we measure and communicate outside. It's embedded, it grows in importance for us and we are well positioned to take on that growth going.
Thank you.
There are no more questions at this point. With that, we would like to say thank you and a special thank you also to Olof for his last Q report for Sweco, and we wish you all a nice summer.
Yes, I wish you all a nice summer. From my side, a special thank you to Olof for great collaboration, and I wish Olof good luck and a really nice summer when he walks out into his next chapter in life. Thank you, Olof.
Thank you very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.