Atea ASA

OSE:ATEA

Earnings Call Transcript 2019-Q4

[Steinar Sonsteby, Chief Executive Officer]

Hi and welcome to the Q4 and 2019 results of the Atea Group. Welcome to chilly Oslo. And as you will see in a moment, we also had a little bit of a chilly end to the quarter and the year.When that is said, we did come in, in Q4 with a net profit -- with a growth of almost 7%. What surprises us a little bit, and of course, you too, is that revenue did not show significant growth. NOK 10 billion is a massive number, but is about NOK 500 million shy of our expectations, which would have given us a tremendous Q4 on EBIT. Without it, we came in on NOK 330 million before share-based compensation. The quarter developed a little strange for a person who have been in this business for so many years. We were on target after November, but as I said, behind after December. So the flush didn't come in the public sector, which influences hardware more than anything, as this is what usually happens in December in our type of business. We believe this will be proven also when other vendors in our space deliver their results later. And we believe it's a temporary situation.And then to Denmark. As most of you or probably all of you have seen from our message about a week ago in Denmark -- or about Denmark, we did not see the improvement in Denmark that we had expected for the second half of 2019. And as informed, that led us to change CEO and management in Denmark. At the same time, we had to say goodbye to almost 70 colleagues in the Danish organization. And this, combined with not refilling about 10 positions from mid-Q4, gives us approximately 80 people less in the operations after -- or ending Q1. As the message states, the restructuring cost will be booked in Q1.The lack of or slowness of improvement in the Danish organization are due to too little sharpness in execution, especially on using all our assets in the sales execution. This is what we hope to get in the whole organization with Kathrine.A reflection. In situations like this where you're rebuilding a business or building a business, you will always ask yourself, did I act too late? And my experience is that the answer to the questions almost always is yes. It's in the nature of a situation like this that you wait and hope to see the improvement before you take decisive actions. So the answer this time was also yes.And with that, I'll leave it to Robert to take you through the details, and I'll be back with the status on our strategy after that.

[Robert Giori, Chief Financial Officer]

Thank you, Steinar.We'll now take a closer look at revenue and profit development across the countries in which we operate, starting with our business performance in Denmark where Steinar left off. In Denmark, Atea improved its EBIT from last year, with lower operating expenses offsetting a decline in total revenue. Still, EBIT remained at a low level and did not meet management's expectations.Total revenue in Denmark fell by 12.0% to DKK 1.6 billion. Sales of products were down by 10.7% from last year, driven by a decline in sales to the public sector. Services revenue fell by 16.7% based on lower sales of managed service and support agreements. Outside of this category, sales of consulting and cloud services increased from last year.Despite a sharp decline in revenue, gross profit fell by only 4.8% from last year as the revenue decline was primarily in categories with a low gross margin. Total operating expenses fell by 7.5% as Atea had fewer employees in Denmark compared with last year. With the decline in operating expenses offsetting a fall in revenue and gross profit, EBIT was DKK 17 million in Q4 2019, up from DKK 8 million last year.Moving on to Norway. Total revenue in Norway was NOK 2.6 billion, down 2.8% from last year. Product revenue declined by 4.1% from last year due to lower demand for hardware across all major product categories. This was partly offset by stronger sales of software.Services revenue increased by 2.7% as demand for consulting and managed services remained healthy, particularly within growth areas such as cloud, security and data analytics solutions. Operating expenses were down by 0.4% from last year, driven by lower marketing costs compared with last year. Due to lower hardware sales and pressure on product margins, EBIT was NOK 111 million, down from NOK 118 million last year.In Sweden, Atea reported higher sales in a challenging market environment. Total revenue in Sweden grew by 3.8% to SEK 4.5 billion. Product revenue grew by 3.2% from last year, driven by increased sales of software to the public sector. Services revenue grew by 6.7% based on higher sales of managed service contracts. Gross profit was down by 0.3% as higher revenue was offset by pressure on margins.Operating expenses increased by 1.0% due to higher share-based compensation costs compared with last year. Share-based compensation increased by SEK 10 million from last year based on an appreciation in the Atea share price during Q4 2019. As a result of lower product margins and higher share-based compensation costs, EBIT fell to SEK 147 million, down from SEK 156 million last year.In Finland, Atea reported strong growth in revenue, driven by higher sales of software and services. Total revenue in Finland grew by 7.7% to EUR 82 million. Product sales grew by 6.1% due to increased sales of client software to the public sector. Services revenue increased by 23.0%, driven by higher demand for consulting services and managed service contracts. Gross profit was up 7.7% as lower product margins were offset by strong growth in sales of high-margin services.Operating expenses were up 13.6% from last year as new employees were hired to develop the services business in Finland. Atea's service business in Finland is underdeveloped relative to other countries and is important for Atea's future growth in the Finnish market. The service business is now in an expansion phase, but has not yet reached its full revenue potential. With higher personnel cost to develop the services business, EBIT in Finland fell by 11.6% to EUR 2.6 million.In the Baltics, Atea had higher EBIT from last year based on very strong growth in sales of services. Total revenue in the Baltics fell by 2.3% to EUR 40 million. Product revenue decreased by 9.0% from last year, with lower sales of hardware due to fewer large infrastructure projects to the public sector. Services revenue was up 21.0%, with higher demand for consulting services and for managed cloud agreements. Gross profit grew by 14.0% based on higher sales of Atea's services and lower direct costs on managed cloud agreements.Total operating expenses increased by 15.5% from last year. The increase in operating costs was primarily due to the growth of Atea's services business, with relatively high salary inflation for skilled IT consultants in the Baltic labor markets. With strong growth in the services business offsetting higher personnel costs, EBIT in the Baltics increased from EUR 1.6 million to EUR 1.8 million.Finally, a word on our cash flow and financial position. Cash flow from operations in both Q4 and full year 2019 was an inflow of NOK 1.9 billion. For the full year 2019, approximately NOK 750 million in reported cash flow was generated by a reduction in net working capital compared with last year. This reduction in net working capital was due to a decline in the accounts receivable balance, offset by a decline in the accounts payable balance.The decline in accounts receivable was due to the increased utilization of Atea's securitization facility compared with last year. In order to offset seasonal working capital movements, Atea has entered a securitization agreement on selected accounts receivable with its primary bank. The reduction in the accounts payable balance was due to a change in the revenue mix toward vendors with shorter payment terms and toward services.At the end of Q4, Atea had a cash positive net financial position of NOK 657 million as defined by Atea's loan covenants. This corresponds to a net debt-to-EBITDA ratio of negative 0.5. Atea's loan covenants require the company to maintain a net debt-to-EBITDA ratio of less than positive 2.50, so we're well within this limit.Before we wrap up the financial section of this presentation, I'd like to summarize Atea's revenue trend and profit performance during the full year 2019. During 2019, Atea's revenue has followed a consistent trend across nearly all countries, with revenue growth driven by higher sales of software and services.For the full year 2019, Atea's hardware revenue was NOK 19.3 billion or 53% of the total revenue. Hardware sales were up 1.1% from last year, with slower growth rates and margin pressure across most product categories.Software revenue was NOK 10.6 billion or 28% of revenue. Software sales were up 15.7% from last year, but margins were under pressure in the traditional software licensing business. Services revenue was NOK 6.7 billion or 18% of revenue. Services revenue was up 4.6% from last year, driven by higher sales of Atea's own consulting services and managed service agreements with a high gross margin.In total, Atea reported revenue of NOK 36.7 billion, up 5.6% from last year. Sales growth slowed towards the end of the year with lower demand for hardware from the public sector.While revenue growth was quite strong in 2019, Atea also maintained tight control of its operating costs with OpEx growth of only 2.4%. Based on higher revenue and relatively low growth in operating expense, EBIT increased by 8.2% to NOK 747 million and net profit increased by 13.4% to NOK 530 million.A last comment regarding the dividend before closing 2019. The board will recommend a dividend per share of NOK 6.50 at the AGM in April 2020. The dividend will be distributed in 2 equal payments in May and November 2020.During the past year, Atea has invested significantly in developing its business within high-growth segments of the IT infrastructure market. I'll now hand the podium back over to Steinar to give an update on Atea's growth strategy and business development initiatives.

[Steinar Sonsteby, Chief Executive Officer]

Thank you, Robert.So a little slowdown in the end of the year. At the same time, I'm very, very happy with the investments we've done and are extremely optimistic for the next 3 to 5 years. So let's take a look at -- or a review of what we told you about the strategy and development in the market. Exactly 1 year ago, we introduced you to what we call the 2021 plan. We told you that we would invest in 3 specific growth areas for the next 3 years, these being information management, digital workplace and the hybrid platform, maybe I should say hybrid multi platform. We also told you that we would have 3 different roles in the market with 3 different go-to-market models going forward. This is extremely important as it will give us a larger growth going forward.The first one, the most familiar to us, of course, is the reseller role. We have a clear #1 position. The second one being the integrator where we definitely have an ambition of being #1. And then last but not the least important, the service provider where we deliver everything as a service and where also the hybrid platform is a very important part.So where are we in these 3 growth areas? Starting with hybrid platform, we have invested heavily during the year. And of course, this does go through the OpEx of the company in knowledge and in relationships with partners that can give us the capability of delivering it through multi-hybrid, on-premise public cloud platform for our customers. And we have more and more examples that this is what our customers want. We have signed agreements with Microsoft to move people, we have signed agreements with IBM to move people and the last one with Amazon to invest in their platforms. We have opened our SoC, our security operational center in Sweden for the whole group. And we have doubled our capabilities or size of our data centers in Vilnius in Baltics, which you see have already given us tremendous growth, 21% in Q4 in Baltics of services. It all comes with a cost, of course, when you do heavy investments like these, not least training people which have to be out of their ordinary job.And then, of course, the digital workplace, meaning your and mine workday, the digital workday. And most of this is about the same as we did with the Norwegian Police where you sell the digital workplace as a service, which gives you not an upfront sale of thousands of devices, but a monthly service fee per user in the contract. I would say a win-win. And of course, collaboration in general, video and all kind of collaboration software, which drives the software growth.And then the information management area, an area where we, a year ago, told you -- or actually a little bit more than a year ago told you that we would -- or this would be the area of acquisition. Since then, we have acquired 3 companies and the area is growing. It's all about business intelligence or taking advantage of all the data you can collect or that you already have collected, and how you can automate your processes based on that data, and of course, eventually gain more insight to it and secure the data.So let me give you a glimpse into what some of these technologies can mean for us and for you going forward. Together with IBM, we have developed a solution that actually now are launched worldwide based on the thought that you and I will want to know more and more about the food you eat, not only what it is, but also where it comes from and what's happened to it before it landed on your table.The Food Trust solution that we will -- and sorry, that we have talked about massively and that was in Norwegian newspapers I think this Monday, is with a food or a fish farm, a food production company called Kvaroy, a very Norwegian name. Kvaroy has 6 farms outside [indiscernible] or just south of [indiscernible]. For some of you, Lofoten is familiar. And they are following the food or the fish from egg to the fish disc in Walmart. Walmart is their customer. Walmart want to know, is it true that the Kvaroy fish that they are buying is really coming from Kvaroy? And how is it being treated? And how is it being transported? What kind of temperatures has it been exposed to? Has it actually been frozen when it should be fresh? And all of this is put into, mostly automatically, what kind of food has it gotten, and what is the food -- who is producing that food into a blockchain solution. But before I take you further into the technical, I want to show you why sustainability in production of food is important to the environment. So take a look at this beautiful film.[Presentation]So I wanted to show you the film not because it's full of technology, but because technology or society has become full of technology, and how we use technology will actually change most of what we do and can make things better. How we take care of the environment where the fish farms are in Norway is essential for the industry to be able to keep on growing and producing the fish in the best environment in the world. And to create that brand, Norwegian salmon, is important to keep their price and their market position. And so together with Kvaroy, all the stakeholders in their value chain, so transportation and food production and with Walmart, but especially with IBM, we have generated something that are in production, and that we now have more than 30 prospects of doing the same around in Norway.But what is even more interesting is that this technology, as I said, based on blockchain, meaning a non-compromised chain of transactions, can be used in other food import and food and beverage production areas. So later this week, we will announce a deal in Sweden for import of food to Sweden, so Swedish customers can know how that meat was produced and what kind of CO2 impression it has on the world.And we have cases in all countries. And one of the others, which maybe you can laugh a little bit, but alcoholic beverages import to Finland. It seemed interesting when you dig into something like this that a lot of the alcoholic beverages that we consume is not really what they lay out to be. And this is from whiskey to wine. And the blockchain solution that IBM has and that we've built on can follow that production until it reaches your table.This is truly IoT, analytics, AI and blockchain run in the cloud. And we see no limitations to how many of these use cases, not only on Food Trust, but on these technologies that we will see in the future.So we have massively invested in 2019. We opened our new central warehouse, data centers and trained thousands of people to take advantage of these technologies. The future looks pretty good.And with that, I'll leave the word to our Chairman for the last remarks of '19.

[Ib Kunøe, Chairman of the Board]

Thank you, Steinar. Yes, very interesting, Steinar, with all these new things, especially the Finnish, I liked a lot so people won't get blind anymore. Dear colleagues, dear fellow shareholders and all participating -- all participants coming here or watching online, as you know, it's a tradition that I, at the presentation of Q4 and full year, show up and give some comments on the major events of last year and answer questions. And as you heard in 2019, we grew revenue with almost NOK 2 billion or 5.6% to NOK 36.655 billion, and EBIT from NOK 57 million or 8.2% to NOK 747 million, and a net profit increase of 13.4%. So all in all, we can be satisfied, although fourth quarter was not as we had hoped. However, the turnaround in the Danish company moved too slow. So we decided to take some drastic measures last week. Here, we said goodbye to the CEO and the 67 employees. Denmark lost DKK 48 million in 2019, less than in 2018, but still a bad result. If Denmark had performed as it should, the group would have had an extra EBIT of DKK 200 million. But now we are ready to see some black figures for 2020. Maybe not in the first half, but we'll see it, I am sure. The market reacted, of course, to our actions, and we saw the share price was down for a couple of days. But now we are up again because the market knows that we have been doing the right thing to correct the Danish situation. We closed 2019 with a share price and NOK 128.6, significantly higher than in 2018. And our suggestion is or set to the general assembly to pay NOK 6.5 per share in dividends in 2 installments of NOK 3.25. And that will give you an -- a return on investment of about 5%, more or less as usual. So I'm pretty sure that my fellow shareholders, all 7,000 of them, are satisfied with their investment in Atea. Because Atea's market is at the center of all IT, the development is fast and ever changing. New areas are emerging all the time. The market continues growing as IT is essential element in all business. But the complexity and importance grows with it. From delivering hardware, software and infrastructure to the IT director, we are now at the core of our customers' competitive challenges. The customers' choice of IT solution and digitalization strategy are business-critical decisions, and we are and have been in the middle of that for years. So as the biggest player in the Nordic, we have a unique position to deliver the right solution to our customers because we have the size, we have the expertise and we have the right people. When you see all the new things and the new areas that we are working with, we also still have to work with our core business, the things that we have been doing year after year. And to be able to motivate your people, still doing the hard work while some new guys are doing the new and exciting things, that's not so easy because we change all the time, but we also have to deliver quarter-by-quarter. So that is a challenge for us to take in or to train our people because it's obvious, but it still becomes more and more important year after year that all business is people business, from the youngest consultant to the top manager. Our strategy is still simple. Atea is the place to be, both for our 30,000 customers, our shareholders and our strategic suppliers, but first, for our managers and employees. If we can attract and attain the right people and develop their skills in a fast-moving business environment, we'll be the winner. And that is why it's the most important issue to us. We want to be the place to be. We are ready for 2020. We have been investing, and we have been thinking about 2020 and we are looking forward to another great year. I will end by thanking our 7,500 employees for a job well done. Your efforts are much appreciated, so keep up the good spirit and your dedicated work. All shareholders should be happy with your achievements. And you can be proud of yourself and your colleagues. So friends, we'll meet again on April 22 at 8:00 for the Q1 presentation, and after that, the general assembly. Thank you. Any questions, gentlemen, then just come forward. I love to answer questions.

[Ib Kunøe, Chairman of the Board]

Yes?

[Steinar Sonsteby, Chief Executive Officer]

For everyone or?

[Ib Kunøe, Chairman of the Board]

Everyone.

[Steinar Sonsteby, Chief Executive Officer]

[indiscernible] Okay. Yes.

[Ib Kunøe, Chairman of the Board]

For everybody, and we'll do -- this is online, so you need to do the microphone here. Just a second.

[Robert Giori, Chief Financial Officer]

Also remember to state your name and the bank.

[Christoffer Wang Bjørnsen, Analyst]

Yes, Robert. So Christoffer Bjørnsen here from DNB Markets. So I was just wondering if you could start off on the weakness that you talked about for December. Could you elaborate a bit on what was driving that weakness during December? Especially in hardware, which geographies were the most hit? And why we should not expect it to continue into Q1 in 2020?

[Steinar Sonsteby, Chief Executive Officer]

Okay. So -- or we're talking about Norway, Sweden and Denmark when we talk about this, and it's public business. It's a little different in the different countries, but it's all public, and it's all regarding hardware. So if you look at the last 30 years in our business, our industry, public sector has every year ordered hardware at the end of the year to be used in Q1. And that simply didn't happen. In Sweden, it was mostly municipalities. In Norway and Denmark, it was central government, but it was still public business. Of course, predicting the future is not easy. But it's difficult for us to sit with these customers almost every day to believe that they suddenly are not going to digitalize or stop digitalizing their processes with -- where they mainly just have started. So we have no other reason to believe that this is a temporary situation. But of course, we'll give you an update on that as we go forward.

[Ib Kunøe, Chairman of the Board]

And don't forget that we missed a number of working days because of Christmas, and that's very crucial. People think, well, 5, 6 days over Christmas and New Year, that's not important. It is very, very important because we don't have the time to do it. But it's a bad excuse, of course, but still, it is an excuse.

[Christoffer Wang Bjørnsen, Analyst]

That's fair. My next question is on the services growth. I guess so the missing number of days there are also some kind of explanation, but if you compare your then 2 percent-ish growth in the services business this quarter to the market, which is a lot faster, it seems, for your peers, is there any reason that we should not expect that to kind of come up? Or why is it only 2% when there's such a high demand in the market?

[Steinar Sonsteby, Chief Executive Officer]

Well, it -- our service is divided into several different areas. But one -- and the one which is the biggest one, is the one drive -- driven by the product sales. And so when the product sales slows down a bit, that part of the services business would also lack. But again, we don't see this as anything else than temporary. And then on the other side, the services that are not product -- or driven directly by the products side are the services that are growing the most, if you look at the whole year -- or actually, the last 3 years. So managed services, cloud, software-oriented services and solution like the one I showed you earlier.

[Robert Giori, Chief Financial Officer]

I want to add something to that answer as well. It's critical when you look at services that you not only look at revenue, but you also look at the gross profit from services. What we consider to be services is a basket of many different things, including subcontracted services, which may come in and out of a quarter but don't generate much gross profit for us, that lead to volatility when we take a look at the services revenue. What we have this time around was the sales of our own services, where we make the money, our consulting services, our managed services with a high gross margin were up significantly year-over-year. So our gross profit was up 7% year-over-year. That's the number you need to look at. That's the number that's not disguised by fluctuations and selling very low-margin subcontracted services. So the 7% is the core number you need to look at when you look at our services performance.

[Christoffer Wang Bjørnsen, Analyst]

Sure. That's fair. And then last one before I jump in the back of the queue again. Now so the free cash flow, if you look excluding the factoring agreements and the reselling of receivables is quite significantly down year-over-year. So I'm just trying to understand, for example, one of the drivers seems to be that there was at least end of period, a quite significant downtick in payables, so around 15% despite your growing top line. So you mentioned shift in business mix, but this also -- it seems like some of your vendors are more kind of eager to get their cash faster, or is there any changes there driving that significant headwind for your cash flow?

[Robert Giori, Chief Financial Officer]

Yes. There's 2 big impacts there. One of them is bigger than the other one. The most important one is the shift in the mix that we've had of our revenue from vendors with longer payment terms, typically are hardware vendors, to vendors with shorter payment terms, which would be software. Then in our services business, we don't have payment terms. There, the cost ends up coming -- we pay a consultant, they get their salary and then we collect from the customer afterwards. So a change in the vendor mix, when you're talking about a payables balance of NOK 6 billion, small changes in the vendor mix can have a big impact when it comes to our total payables. So one of them is the change in the vendor mix, the change in our business mix from vendors with longer payment terms to vendors with shorter payment terms. There was -- a relatively small amount of that had to do with changes in the vendor payment terms, what you're referring to. That was smaller than the total impact, which was more of the change in the vendor mix. Another impact on the payables, which was where the working capital changes came from, was just the change that Steinar was referring to with the slower deals at the end of the quarter. So it means that typically, where we'd get a big prepayment upfront, we get the money, we get the cash upfront, and we would pay the vendors later with a budget flush that would typically take place at the end of the quarter, we had less revenue that came from the budget flush. More of the business took place in October and the vendors were already paid by quarter end. Those are the 2 big impacts that we had on working capital.

[Christoffer Wang Bjørnsen, Analyst]

Sorry, really last one. It's -- if you then just look at the forecasts in the market from the likes of Gartner, IDC, and stuff, they say like software is about to grow 10%, 11% over the next few years globally. And I guess, the Nordic is somewhere around there. And you're seeing hardware, including data center infrastructure, all that is about flattish. So should we then expect that your net working capital should, over time, be kind of a headwind going forward because you're going towards software, which is shorter payment terms with vendors?

[Steinar Sonsteby, Chief Executive Officer]

Let me first comment on the market prediction. As we said after the last -- or after Q3, where some, including us, had software growth in the 25 to 28, 30 area -- percent area, we said this is probably not sustainable over time because, yes, more is solved in software. And some of that will be solved as a service. So there is an understanding in the industry for why software is growing faster than hardware. But when vendors like us had that kind of growth, like 28% like we had in Q3, there is also a consolidation going on. And consolidation can't go on forever. So we actually explained to you this very, very thoroughly in the Q3 presentation. We believe that the prediction, for once, we agree with the prediction that software will grow faster than hardware. And that 10% is a good starting point to believe from. When it comes to the hardware, some of that hardware, the fact that it's not predicted not to have the same growth is because some of it is sold as a service or there is payment terms. And so it's a different mix of not only hardware, software services, but also deal types. So hardware will be set on-premise to customers but they will pay consumption based. And these solutions are developed. It's slow, it's small today, but it is developed, and that will influence the numbers. So 0% to 3% growth from hardware doesn't mean there are sold less hardware. It's just sold in a different way. It will influence our cash flow, though.

[Robert Giori, Chief Financial Officer]

Any shift in the business mix from vendors with long payment terms to vendors with shorter payment terms is going to impact [ CTO ]. That will have an impact on our payables.

[Hans Rettedal Christiansen, Junior Analyst]

Hans Rettedal, Carnegie. Could I maybe just elaborate a little bit on the -- or you guys elaborate on the revenue trends? Because you're mentioning in Sweden a tougher market conditions in 2020. So I was just wondering what you're referring to there. And then in Denmark, maybe just a little bit on your visibility because you're saying you have -- you've increased your market share in the private sector or regained your market share. And you're also -- you've got new frame agreements on the public sector. Sort of how is your visibility on these contracts? And how sure can you be that revenues will increase?

[Steinar Sonsteby, Chief Executive Officer]

Okay. So starting with Sweden. I think there is a couple of things going on in Sweden. First of all, we are not losing market position or steam in Sweden. So there has been some changes to the environment in Sweden. This is probably the market where we're the most or have the most visibility into market conditions. It's a very specific situation where a lot of municipalities in Sweden spent a lot of money in the first half of '19 to take care of all their tasks, and we're not -- and some of them were inflicted on them by the central government without funding more money. So there were less money from the municipalities in Sweden at the end of the year. We believe this will solve it or find a solution during first half of 2020. That's all the signals we get. So that's one -- that's the reason why we're saying that Sweden, which is by far our biggest market, that this will come back. And we have all the agreement, we have all the capabilities needed to do that. When it comes to Denmark, as I said earlier in the presentation, it is our own execution. That hurts the most, but it also what gives you the best visibility when that is the case. So we do have, as you said, the frame agreement with public, but we need to execute better. And as you saw on my slide, we changed the Sales Director on public in Denmark in November or we got the new one in November. So it's all about sales execution. The market is there, it's -- the market is competitive, and we have to win. And so it's up to us to execute in a better way.

[Hans Rettedal Christiansen, Junior Analyst]

Could I maybe just follow up? In the frame agreements, I guess you have more than one vendor who's -- who can deliver on them. Is there a problem that the other vendors are sort of gaining or delivering on these frame agreements and you're not getting...

[Steinar Sonsteby, Chief Executive Officer]

It's always a problem to me when someone takes an order from us. We have only 20% market share. That means that 80% is that way. And yes, we have not won the fair share the last 3 to 6 months. And that's why we have done the changes we have and that's why I'm calling this an execution problem. We have the agreement, and we haven't gotten our -- or the predicted share that we should have had on some of them. Some of them, we are the only vendor. So there's a ton of different ones that we showed you after, I think, after Q1. But on some of them, there are several vendors and we haven't gotten our fair share. So that's what we have to do something about. So what we have done short term, so to speak, is change some of the tactics. We have lowered the cost base to take less of that hit, and we've changed some of the key players in the game.

[Unknown Executive]

I have a question from Henriette Trondsen from Arctic Securities. So 2 questions. About Denmark, do you aim to be somewhat aggressive on price to improve revenues in Denmark? And do you see any changes in competitive landscape?

[Steinar Sonsteby, Chief Executive Officer]

So from Henriette in Arctic. I'll take the first one and then you have to repeat the last one, I didn't hear what you said. But let me take the first one. I have seen that a lot of people think that we are changing the pricing and that we're doing a ton of different things. It's -- this is more of being close to the customer, understanding exactly what they were asking for and pricing correctly to win. And these are mechanisms that are decided on in most of the contracts. So we don't believe that -- which I think she implies in her question that we lower our margin massively to come back or anything like that. Margins for us is mainly decided by mix. The price in the market to win is something that we quickly understand where the price level is.

[Unknown Executive]

Second one was -- sorry, second one -- question about Denmark is do you see any change in competitive landscape.

[Steinar Sonsteby, Chief Executive Officer]

We -- well, there aren't really any new players, but the change in the competitive landscape is that we have lost a little bit more than what we wanted. So there's someone else that have won a little bit more than what we would have wanted. But there is no new game, no new players. So in that way, there isn't really a new landscape.

[Unknown Executive]

And one more question from Henriette on Norway. It was a weak Q4. And do you have an -- can you share any expectations about 2020 on Norway?

[Steinar Sonsteby, Chief Executive Officer]

I think that if you look at Norway, '19 wasn't fully what we expected. And we have been very transparent on this. We took down the number of people in May, around about 50. We've changed some of the key players. And this has all been out there. And the budget and the forecast from Norway is completely different '20 than '19.

[Christoffer Wang Bjørnsen, Analyst]

There's still 10 minutes left. So Christoffer here from DNB Markets again. I just wanted to give a question on the dividend and since EBIT is there, it's also helpful. So this is another year where earnings per share is not covering the dividend. And if you do kind of a calculation where you assume that Denmark would deliver in -- according to your [ DKK ] 120 million target, you would still be at around NOK 6 per share. So do you have any view on when we should expect the earnings per share to come up to a level where it covers the dividend that you're currently paying out?

[Robert Giori, Chief Financial Officer]

Well, if you're asking basically when we're going to have a net profit, which should be approximately NOK 710 million it's a question more about the P&L than anything else. That's rather than...

[Christoffer Wang Bjørnsen, Analyst]

When is that? Next year, or?

[Steinar Sonsteby, Chief Executive Officer]

Well, we're not giving that type of detailed guiding, but we're comfortable with this dividend. There has been discussions that we would start raising it a little bit. And because of the reasons that we have discussed, that is the timing for that is not now, but we're comfortable with both the dividend, the cash flow and also the opportunity of doing the investments that we need to do.

[Christoffer Wang Bjørnsen, Analyst]

Very quickly, maintenance thing. There was a sale of some hardware something in the CapEx this quarter of NOK 70 million or something. Was this...

[Robert Giori, Chief Financial Officer]

Yes, we owned a warehouse and that was NOK 70 million. We owned a warehouse in Denmark, there was no reason for us to be owning this warehouse. So we sold the warehouse, so we entered into a lease agreement. We're not moving from there. Over the longer term, we may consolidate warehouses into try to be moving more of the volumes that would be flung through that warehouse into the introduction into Sweden. But there was no reason for us to be holding onto that asset. So we decided to sell it. We got a good price.

[Steinar Sonsteby, Chief Executive Officer]

Okay. So that will conclude this session. And of course, we will be around here in the room in Oslo. But to everybody out there, thank you.