Alimak Group AB (publ)
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Earnings Call Transcript

Earnings Call Transcript
2019-Q4

from 0
Operator

Ladies and gentlemen, welcome to the Alimak Group Interim Report for October to December 2019. [Operator Instructions] Today, I am pleased to present Tormod Gunleiksrud, CEO; and Tobias Lindquist, CFO. Speakers, please begin your meeting.

T
Tormod Gunleiksrud
President & CEO

Thank you for that. And a good morning. And welcome to all of you for dialing into this Q4 and full year 2019 result call for Alimak Group. And I think we just dive straight into it. And if you move to next page, takes us into Page #2, starting off with a glance at the full year 2019, and starting with some of the trends that we saw during the year 2019. I think we saw 3 main trends in total during the year. First of all, it was a weak market on Construction Equipment, and we've seen that basically throughout the year and maybe even stronger so in the mid and towards the second half of the year. So I should say that it's been a challenging 2019 for the sales force that went out with the aim of selling Construction Equipment to that market in 2019. We also experienced some changed market conditions for tower internals on the Wind side, and that started very early 2019. And I think the first time we reported on that was after Q1, and it didn't really pick up or improve during the year. So if you look on the top line for -- on the order side for 2019, where we ended up just slightly north of SEK 4.3 billion versus the previous year at SEK 4.6 billion. That number was also hit by, if you compare it to the previous year, with some SEK 300 million coming from the Wind tower internals. On the more positive side, After Sales saw a good growth on the top line, also very much driven by activities that took place in the Wind side and on the BMU side. And I think I've said it a number of times before, I'm very positive to the opportunities that are out there when it comes to upgrades and developing the field service business on the BMU side. On the revenue side, we ended up the year with a 6% increase on reported revenue, 6% growth, of -- which left us with 2% organically. And it's nice to say that, that was also an all-time high in 3 out of 4 business areas, and we're also coming back to that a bit later. Earning-wise, EBITA adjusted ended up for the full year at SEK 629 million versus the previous year, SEK 555 million, and that left us with an EBITA adjusted margin of 13.7% versus the previous year at 12.8%, an improvement of 0.9%. And you probably all know that was not quite according to the ambition level that I have set for that quarter, and we will also touch upon that at a later stage in the presentation. Cash flow from operations, I should say it ended up on a strong note, SEK 502 million versus previous year at SEK 240 million. So a strong improvement on the cash flow side. I think it's fair to say that with the growth that -- or the less growth that we saw, also had a positive contribution, but still, I think it was a good result on the cash flow side in 2019. Board of Directors, they have proposed that the dividend for the fiscal year of 2019 should be SEK 3.25 versus previous year, SEK 2.75. That leaves us with another year of a good increase on the dividend side, and increase from previous year as proposed by the Board is 18%. So in total, I should say, yes, I was not happy with what I saw on the order side. I didn't quite manage to reach up to my own ambition on the EBITA margin side for the last quarter. Still a year that we are doing better than previous year. So all in all, I think it's also important that other people in the organization feel that they have delivered another strong year, although we didn't quite reach up to the ambitions that we as management had for the full year. Turning down the page to Page #3 takes us into the more highlights of the quarter, the Q4 as such. And looking at the group, we ended up with the order intake -- saw a decrease of 12%, took us to just north of -- or just close to SEK 1.1 billion versus previous year just north of SEK 1.2 billion, and that left us with an organic decrease of 16%. And I think I've already touched upon some of the reasons from that, challenging market conditions on the Construction Equipment side, also tower internals certainly had an impact on that, while we saw a strong development for After Sales, which, of course, is on the really good side. Revenue-wise, we saw a decrease by 1% to -- or leaving us with a revenue of SEK 1.14 billion versus previous year at SEK 1.15 billion, and that, again, is an organic decrease of 5%. Here, I'm happy to say that we had growth in all business areas, except for Industrial Equipment. So still some BAs did really well on the revenue side of the quarter. EBITA adjusted for the quarter ended up at SEK 151 million versus previous year, SEK 159 million, and that corresponds to a margin of 13.2% versus previous year of 13.8%. And I guess this is also where I'm probably the most disappointed, because my ambition for that quarter was to deliver a run rate of 15%. And what did we see that made this not coming through? We had lower margins on the Industrial Equipment side, and we had lower margins on the After Sales side. Industrial Equipment, we made the adjustments on the Wind side. We had a closing of the factory in Tianjin. In addition to that, during that closing period, we still had a few orders that were to be delivered, and the time and cost we then spent on those project deliveries didn't quite end up according to what the project calculations had told us. And probably that was something that we should have expected with the activity level that was in the factory at the time. So it's probably a learning also for the organization. While on the After Sales side, margins came lower, mainly as a result of the mix between what is services, i.e., hours that are being invoiced; and what is parts or refurbishment. And I should say that for the, at least the latter 2 months of the year, that ratio was biased towards services, i.e., hours, and that also has a hit on the overall margin within the business area as such. So that is the main reason for why we ended up as we did for Q4. Moving then to next page, Page #4, takes us into Construction Equipment. And the order intake decrease of 48%, that's a hefty number, down 55% organically, meaning we ended up at SEK 129 million versus previous year, SEK 248 million, still in line with what we saw in Q3 last year. And within a lower order intake throughout the regions, but maybe, in particular, in Europe. Revenue-wise, we had an increase of 15%, up 11% organically, meaning we ended up at SEK 204 million versus the previous year of SEK 176 million. Here we had a strong contribution from the U.S. side, a lot of deliveries went out to U.S. during that quarter. And again, nice to see a year with -- a full year [ our ] all-time high on the revenue side in Construction. EBITA adjusted ended up at SEK 31 million versus previous year, SEK 34 million. That leaves us with a margin of 15.4% versus previous year, 19.5%. This is an effect of high volumes and the product mix. And we also made some volume adoption measures in the factories in China. We rightsized with taking out some 15 full-time employees, plus some temps. So that also had an impact on that, but did not qualify for any XOs in that respect. And also in Sweden, we have made adjustments to the capacity, but that is, first of all, going into the use of temporary workforce. Moving then to next page, Page #5, takes us into Industrial Equipment. Here we had an order intake decrease of 7%, 11% organically, leading up to order intake of SEK 559 million for the quarter versus SEK 600 million for the previous year. Decrease on the order side in the year is really coming from tower internals for Wind. I think I've touched upon it already, that the Wind side -- or tower internals on the Wind side, the previous year, had orders in the range of SEK 300 million. So I guess that is also what it would represent for the Wind side, while we have seen good development on the BMU side, and we have seen good development on the general industry side when it comes to orders in the quarter. Revenue-wise, we had a decrease of 11%, 15% organically, which then left us with SEK 517 million versus previous year, SEK 580 million. Again, that drop is coming from the Wind side, while the other business units are up from last year. EBITA adjusted ended up at SEK 25 million versus previous year, SEK 32 million, and that left us with a margin of 4.8% versus previous year, 5.5%. And the main contributor to this margin picture is the closing and the consequences of the assembly plant being closed down in Tianjin in China. Turning over the page again, takes us into After Sales. Happy to see an increase in order intake, 18% reported and the 14% organically left us with an order intake for the quarter at SEK 299 million versus previous year at SEK 254 million. Happy to see a strong recovery in Southeast Asia during that quarter, also strong development in Australia on the After Sales side. So all in all, a quarter that was strong on the order side in After Sales. Revenue-wise, we had a 4% reported growth on the -- basically meaning that we were flat from an organic perspective, leading up to a revenue number of SEK 316 million versus previous year, SEK 303 million. While on the EBITA adjusted side, we ended up at SEK 79 million versus previous year at SEK 78 million. That left us with a margin of 21 -- sorry, 25.1% versus the previous year at 25.7%. And already been touching upon the margin picture, but main picture here is coming from the mix. And we had an increased share of revenue coming out of the Wind and the BMU side, in addition to the general services part of it was -- side and the parts and refurb part of the business or the revenue side, and that left us with a margin that we saw coming through in Q4. Turning down to next page, takes us to Rental. And the Q4 numbers on Rental went, I should say, quite okay, although we had a decrease on the order side with 23% that left us with SEK 86 million for the quarter versus previous year, SEK 113 million. That is down 26% organically. But I have said this before, we're still enjoying some nice market conditions on the Rental side. We have been able to be sort of picky on orders that we're taking. We're not really chasing orders with a short duration. We're aiming for the ones with longer duration, and that has left us with a solid backlog still adding to that, a promising pipeline. And if you then look at the revenue side of it, the business saw a growth of 17% in the quarter, 15% organically, meaning we ended up at SEK 107 million versus the previous year at SEK 91 million. It left us with another quarter of high utilization, and also here, an all-time high full year revenue for the business. So still a strong business that had a good momentum. Earning-wise, we delivered an EBITA adjusted of SEK 16 million versus the previous year at SEK 15 million, and that left us with a margin of 15.3% versus previous year at 15.9%, still, I would say, within the sort of [ wind ] of the margins that we can have between the quarters. And all in all, I'm still quite happy with what came through on the Rental side in Q4. Then I will hand over to my colleague, Tobias, CFO, who will take us into slightly more details on the earnings side. So Tobias, I hand it over to you.

T
Tobias Lindquist
Chief Financial Officer

Thank you, Tormod. So then let's turn to Page 8 earnings summary. So our EBITA adjusted results for the quarter was SEK 151 million, a decrease of SEK 8 million, largely coming from Wind business within Industrial Equipment. As we highlighted since Q1, the lower volume for tower internals has an impact on top line as well as the results side. And also led us to close the Tianjin plant in December, where we -- for which we incurred a nonrecurring cost of SEK 18 million in the quarter. Our financial net was minus SEK 18 million versus minus SEK 12 million last year. SEK 4 million of that, of the increase, comes from the implementation of IFRS 16 and the remaining is higher interest cost. Our tax expense for the quarter was minus SEK 17 million compared to a tax income of SEK 22 million last year. And the tax income in Q4 2018, that was for a onetime effect of recognition of deferred tax assets of SEK 45 million. That led us to a result for Q4 2019 of SEK 88 million and a reduction then of SEK 56 million compared to 2018, largely -- with the decrease largely coming then related to the tax impact. If we look at the year as a whole for 2019, we had an EBITA adjusted result of SEK 629 million. All business areas recorded improvement in the result-wise. So overall, we improved the EBITA adjusted with SEK 74 million, out of which SEK 33 million comes from Industrial Equipment, largely coming from improved margins; and SEK 23 million come from Construction Equipment, an effect of both higher revenues and margin improvement. In addition to the Tianjin plant, we also had a nonrecurring cost for the acquisitions on -- for Datalines. For the year as a whole, we had a nonrecurring cost of SEK 21 million compared to SEK 64 million last year, so that was a reduction of SEK 43 million. For the year as a whole, also when it comes to financial net, the impact of IFRS 16 was SEK 11 million, leading us a negative financial net of SEK 56 million compared to SEK 43 million last year. Taxes of SEK 115 million for the full year and whereas we had SEK 53 million last year. And as mentioned that this last year was largely affected by the deferred tax assets. That ended up with a result on SEK 394 million, an improvement by SEK 50 million, where we can see higher EBITA adjusted result and also lower nonrecurring costs, whilst we have a higher tax cost. So an improvement year-over-year, even though we had a soft quarter Q4. Move to the next page, Page #9, tax expense. So we had a result before taxes of SEK 105 million in Q4 and the tax cost of SEK 17 million, so we had a tax rate of 16% in Q4. For the year as a whole, we ended up on a tax rate of 23% versus 13% in 2018. And as I mentioned, 2018 and Q4 was then impacted by the deferred tax asset recognition of SEK 45 million. Looking ahead, we expect that 2020 being on the same range as we were for full year 2019, i.e., around 23%. If we move to next page, Page 10, result for the period and EPS. So with our result for the period of SEK 88 million, we had an earnings per share of SEK 1.62. And for the full year, we had an earnings per share of SEK 7.28 compared to SEK 6.35 in 2018, so an increase of 15%. And the proposed dividend from the Board is 3.25% (sic) [ SEK 3.25 ], representing 44 percentage points of earnings per share, and that is an increase then by 18% compared to 2018. If we move to next page, cash flow and net debt. So we had a strong cash flow from operations in the quarter of SEK 226 million compared to SEK 148 million in 2018. For the year as a whole, it went up on SEK 502 million compared to SEK 240 million in 2018. We have had a high focus on working capital, where we can see improvement by SEK 85 million in the quarter. All business units had improvements and -- both in terms of inventory, lower inventory, lower receivables, but also higher advances from customers. With a positive development of cash flow, we were also able to reduce our net debt, ending up just above SEK 1 billion by end of 2019 compared to SEK 1.262 billion in Q3. If excluding the impact from IFRS 16, we would have been at SEK 740 million by 2019 compared to SEK 867 million in 2018. With the reduced net debt, we also improved our leverage. We ended up at 1.33, and if excluding the IFRS impact, we would have been at 0.97 compared to 1.55 in 2018. So overall, we have a strong balance sheet and improved our financial position further in -- throughout the year. Moving then to next page, Page 12, our midterm financial targets. In terms of revenue growth, our target is 6% average annual organic growth. We were at 9% in 2017 and flat in 2018. We were up 8% in the first half of 2019, whilst we had a negative growth of 5% in latter 6 months of the year, ending up on 2% for the year as a whole. And this was largely coming then from Industrial Equipment, which had a negative organic development of minus 2%, whilst the other business areas had improvements. After Sales improved their growth -- had a growth of 2% organically; and Construction, 9%; and Rental, 12%. In terms of EBITA margin target, our target is 15%. We have been at 12.8% in 2017 and '18, and we ended up on 13.7% in '19, where we could see good development for all business areas, except for After Sales, which reduced their margin. Industrial Equipment, as mentioned before, improved their EBITA adjusted margin with 1.5 percentage points. For the leverage targets, our leverage target is 2x; and we are currently then on 1.33; and without IFRS, 0.97. So well within the range of the leverage target. So for us to achieve the midterm financial targets, the focus is continuing strengthening the growth for After Sales businesses and especially then for the installed equipment for BMU part, and also continue improving our margin for the Industrial Equipment side. We improved 1.5 percentage points in 2019, but need further improvements going ahead in order to reach the targets. Those improvements will both come from top line as well on the cost side. With that, I hand over back to Tormod.

T
Tormod Gunleiksrud
President & CEO

Thank you for that Tobias. And if you now turn the page, with the Page 13 I thought we should try to sum it up a bit, both the quarter as well as full year. And starting with the quarter, I think we've said already that it was a soft fourth quarter, and in particular on the order side, as well as we didn't quite reach up on the margin side. Still, full year improvements, as I see it, on the revenue side, and on the earnings side came from SEK 555 million in 2018, we delivered SEK 629 million in 2019. So still an improvement on the earnings side. It was, of course, not so good to see the order decline, in particular on the Construction Equipment side, and also then the Wind side, on the tower internals. Good, however, was the momentum that we have seen in After Sales, continued to grow their order side and continue with a good pace of penetration also into the [ maybe ] BMU side in particular. So there are some good things for the quarter, and there are some negatives for the quarter. Full year, happy to see that After Sales, Construction Equipment and Rental, all 3 end up with an all-time high on the revenue side, and that's a strong achievement, I should say. So there has been an organization that has been stretched also to deliver the numbers that were delivered in 2019. Looking then a bit forward, and also now having in mind that where we ended the 2019 on the backlog side and in particular, then on the Construction backlog that we went into 2020 with. That leaves us with then already a challenging first half of 2020. I think with the knowledge that we have today, with the outbreak of coronavirus in China, that adds further challenges to that picture. We had the Chinese New Year in January, and we were supposed to open the factories again the 2nd of February. We were not allowed to open factories, and we were only allowed to open the factories on February 10. And although we have opened the factories, it doesn't mean that the supply network is all up running. I think as of today, roughly 50% of the supply base is up running with a capacity of around 50%. We expect the remaining supply base to get online with a similar capacity as that during the next couple of weeks. But I think it goes without saying that this will have an impact on Q1, and I also expect it to stretch into Q2 before we have normalized the operations in China. And it's not only the supply base, because the logistics side is also a challenge. Truck drivers are hard to get hold of right now in China, meaning that road transport is difficult, whether that is just inland goods or whether that is also to the harbor, so it is both parts. And also on the cost of logistics, we have seen both sea freight, land freight and air freight really taking a peak. So it will have an impact on the quarter as we see it today. And if there should be anything particular to -- related to that, we will, of course, get back. Good thing is that none of our employees have been infected. It has been a great leadership of the businesses throughout the period of the outbreak. They have monitored all the employees. There are good measures in place to make sure that nobody here could potentially be infected or getting into the factories. So I think it's a good regime in place to minimize the impact both on people as well as on the business. So that is, I think, what we see as of today. Moving then to next page, Page #14. A little bit about the focus areas that we see ourselves having, our main focus in the year to come here. Market expansions, After Sales growth and also having a stronger view and some measures on optimizing the operations. On the market expansion side, it's really about product portfolio, both for new products that is covering new areas or new applications where we can deploy that portfolio. That is being worked on for sure; but also the services side of it, the more digitalized services that we can offer to customers with product solutions being connected to any field management system that would service a vehicle for that purpose. Also on the acquisition side, I think it's time to drive up the agenda on that side, so it will certainly have a stronger focus in 2020. After Sales growth is instrumental to taking the business to where we want to have it, meaning that the penetration level that we have on the installed base, that needs to continue. So I think we both need to go wider, meaning that getting our hands on a broader part of the product portfolio that serves that installed base out there; as well as going deeper; i.e., developed services that we are offering for the installed base also further, so it brings more value also to the customer part of it. And I think I've already said that continue the focus we've had on the BMU installed base. So I think there are huge opportunities out there. There's a lot of lot of BMU sitting on rooftops that have an age that makes them really mature for being either refurbished or even replaced, or certainly being serviced to the level where it should be serviced. Utilization within After Sales. We are about investing in a new field service management systems that allows us to have a system in place that our service engineers and the back office can use containing all the assets sitting out there, i.e., the installed base. Speeding up the process of specifying what we're doing. Speeding up the way that we are invoicing the customer. So After Sales will have a lot of attention also in 2020. Optimized operations. We've been looking at common platforms for quite some time, that is valid for the BMU design, coming out with a common platform on that side. Today, we are running 2 brands on that side. We have to maximize the sort of common parts between them. Already mentioned the field service management system. That will also streamline the After Sales part from an operational point of view. We decided last year on a new ERP system. We've just gone live in January with the first part of the deployment here in Sweden. So we expect some good benefits coming out of that as well, bringing the whole group closer to the operations, with a more state-of-the-art following up on the ERP system to support the business. And of course, continue to streamline the organization, both from an operational excellence point of view, but also from -- or taking advantage of the legal structure that we've been putting in place now over the last 2 years and the last ones have been put in place late last year. So these are the main pillars that will be our sort of focus areas in 2020. And with that, I think we have arrived at the part of our presentation where we open up for questions. So I think I will just hand it over to the facilitator to facilitate that part of it. So thank you for dialing in.

Operator

[Operator Instructions] Our first question comes from the line of Mattias Holmberg from DNB Markets.

M
Mattias Holmberg
Analyst

Starting on the Construction side, could you please give us any flavor at all on the lower backlog that you're talking about? I know it's hard to comment in detail. But I mean is it, if you compare to end of 2018, down 50% or 10% or what approximately is the magnitude we're looking at?

T
Tormod Gunleiksrud
President & CEO

I mean we haven't given out any backlog numbers. So I'm pretty sure that you have modeled this out in a fairly good way. But it's a significant drop in backlog on the Construction machines, so that is hurting also. That is also why I'm saying that it is a difficult or a challenging Q1 that is -- that we are having ahead of us and that we are in the middle of. And I guess that is what I would like to say in that respect.

M
Mattias Holmberg
Analyst

All right. And on the After Sales business, could you elaborate a bit on what you think a reasonable long-term margin is for this division? Even though you don't have a divisional margin targets, but just thinking about your earlier comments of 27%, I think, given the mix comments that you're making here, good growth in the acquired businesses, but obviously lower share of spare parts. So is there any reason to challenge that earlier assumption?

T
Tormod Gunleiksrud
President & CEO

I think it's fair to say following: I'm -- first of all, I'm quite pleased with -- as long as we are increasing the absolute number on the EBITA, I'm quite happy to see that increase coming through. I think what it is fair to say will happen with growth, if the growth on the, let's say, the new businesses side, like i.e., Wind, BMU, if that one will see a much faster growth, then you will see on the -- maybe the more traditional Alimak part of the business. That will have an impact on the margins, at least for a couple of years. Because it is still so that when you look at the installed base that we have out there, it's still so that a lot of the parts, electrical, mechanical components that are sitting on those installations, can easily be seen as commodities; i.e., it's less room for keeping those up to a level so that you cannot replace them one by one with a commodity. So you have to be sort of reasonable in terms of what you're going to the market with in that respect. When we are now ending up having a common design, common components, and we can start vertically integrate those components into more of our kits, that makes us able to replace a number of components with a completely new kit, then I think we will see a shift also on the margin side. But until we really have that in place, we will still have a picture where that part of the business will come in with a lower margin also on the parts side, compared to what we see on the traditional Alimak business.

Operator

Our next question comes from the line of Johan Dahl from Danske Bank.

J
Johan Dahl
Analyst

I was just interested to know a bit how much of the sort of cost-out actions in Construction, how much will you be able to offset, do you think there? What's your plan for 2020 given the status of the order book in Construction?

T
Tormod Gunleiksrud
President & CEO

I mean as we said -- I mean, measures, we have -- measures have been taken -- or we were putting measures in place in the quarter. And we took out 15 full-time employees in China in December. We have not been specific on any number because there is no XO related to that, so -- because it's really a rightsizing of the organization as part of a continuous business. So that just went into the costing, and of course had an impact on the margin as such. So I guess, if you will find out -- if you want to find out what effect that had, I think it's, the closest you can get to that is sort of using the ratio that you saw from what we did in Tianjin with -- where we had an XO of SEK 18 million, and that had also a consequence for 48 people that lost their jobs in that case. So I think that is as close as you can get to that. And other than that, we will always put measures in place to adjust the size of the operation to the backlog that is due to be executed.

J
Johan Dahl
Analyst

Okay. Just on China, I appreciate the difficulty in sort of putting numbers on it. But you have around 10% of your employees, I believe, there and you're talking about the 50% approximately capacity utilization. Is that sort of the way to think about it? Or is it a much bigger impact for the group, given the status over there?

T
Tormod Gunleiksrud
President & CEO

No. But I would be -- I'm a bit cautious to apply any sort of number of employees to it. Because I mean, we have both business that goes into China as deliveries from outside of China. So because -- I mean, both SkellefteĂĄ as well as Spain on the BMU side and Germany on the BMU side, they have deliveries into China. So we certainly do shipments into China on factories on the outside, and we certainly do a lot of business in China for export. So it's not giving the right picture to sort of take the employee number and sort of trying to calculate the size of the business. So I think the business that could potentially be sort of delayed or be hit by -- or I should say, it's slightly -- somewhere between 10% and 15%, I should say.

J
Johan Dahl
Analyst

Yes. Very clear. I thought it was a bit more problematic than that. Just finally, excluding the problems you had in Wind in 2019, is it correct that you were sort of flat or slightly growing in Industrial, excluding the problems that you isolated in Wind?

T
Tormod Gunleiksrud
President & CEO

Yes.

Operator

[Operator Instructions] We have a question from Kenneth Toll from Carnegie.

K
Kenneth Toll Johansson
Financial Analyst

So with the closure of this plant for Wind industry in China, are those problems over now, you think? And would you have more normal profitability and sales development for the Wind side?

T
Tormod Gunleiksrud
President & CEO

Those -- that site is closed, and those challenges that were related to that closure, they are over. And I do not expect any further consequences coming out of that.

K
Kenneth Toll Johansson
Financial Analyst

So no spread-over effect to other parts of your Wind business in China as it looks right now?

T
Tormod Gunleiksrud
President & CEO

No, no, no.

K
Kenneth Toll Johansson
Financial Analyst

Okay. Great. Great. Then I believe that the U.K. is an important market for your construction hoists. And after the elections, there have been some positive comments for some building materials suppliers that the U.K. market is sort of coming back to life again from -- on the construction side. Have you seen more interest and more activity in the U.K. regarding your Construction program [ with that ]?

T
Tormod Gunleiksrud
President & CEO

Yes, yes, we have also seen that. And I think I was referring to the uncertainty in U.K. throughout the, nearly the whole 2019. And I said it before, that -- and I also said it in the report that I think whether we like the conclusion or not doesn't really matter. But I think having now the conclusion in the U.K., I think it has also taken away a lot of the uncertainties. And I think it has also impacted the government because they want to increase the spending. And I expect also to clear -- see clear signs of that in the Construction business as a result of that. We know that there are large projects in London, at least, that were put on hold based on uncertainty in the market. And we have seen early signs of higher activity also on the bidding side for -- the U.K. market. So it's, of course, one of those elements that we expect is going to contribute to better market conditions on the Construction side in 2020.

K
Kenneth Toll Johansson
Financial Analyst

Okay. Great. And then finally, you talk about acquisition as being on top of the agenda for 2020. But you have also announced that you are stepping down, and there will also be a change of the Chairman of the Board. So do you still think that it would be possible to make an acquisition despite the management changes that are coming up?

T
Tormod Gunleiksrud
President & CEO

Yes, I mean I think there is a scale also on acquisitions. And it's not so that me leaving and the Chairman leaving leaves the group without a strategy. We have a strategy that we have been executing on for quite some time. I've said for a long time that we are -- of course, we do have an acquisition or an M&A agenda in place. And I certainly hope that given some changes in the market conditions in general in quite a few of the businesses in recent time, I think also there have been some calibration on expectations on price, and there are many areas to make acquisitions in. So although there is a change, we still have a capable management team that are fully committed, and there is still a Board in place. So I expect that they'll really run smoothly.

Operator

There are no further questions registered at this time. So I hand back to the speakers for any closing remarks.

T
Tormod Gunleiksrud
President & CEO

Thank you for that. And with that, I think it remains for us only to say thank you to all of you that dialed in for this conference call. And yes, have a good day. And by that, it's over from us, thank you.