Bravida Holding AB

STO:BRAV

Earnings Call Analysis

Bravida's Q4 Achievements Amidst Challenges

Bravida's Q4 report heralds strong performance in Norway and Sweden, although organic growth dipped by 2% with installation business shrinking. Service business grew by 6%, with 4% growth from acquisitions. The EBITA margin faced impacts from Denmark's challenges, yet Bravida managed an impressive 29% improvement in cash flow and a 25% increase in order intake. Total growth for the year stood at 12%, with an EBITA margin facing one-time expenses from IT investments. Order backlog remained stable at SEK 17 billion, sustained by large infrastructure projects. The dividend increased for the eighth consecutive year to SEK 3.50. The company completed 17 acquisitions, contributing to sales growth and featuring a promising pipeline for future expansion.

Anticipating a Turnaround in Denmark with Strategic Projects and New Leadership

The company has reported strong order intake, which is significantly bolstered by a substantial SEK 300 million Nordhavn Tunnel contract. Despite recent disappointing performance in Denmark, a comprehensive evaluation is underway. Interim leadership adjustments have been made, with a permanent head expected to take charge in May. It is anticipated that the first and second quarters will display modest but positive financial results, with a return to normal margins by the fourth quarter.

Challenges and Opportunities in the Finnish Market

Finland exhibited a modest 3% increase in sales, with service growth offsetting a 14% organic contraction. The market in Finland presents a weaker prospect relative to other Nordic countries. Despite a 35% decrease in order intake, the company's order backlog has increased by 11%. A single problematic school project has adversely influenced margins, but this impact is expected to cease in early 2024.

Strong Cash Flow and Debt Management Positioning for Growth

The company celebrated a strong quarter with cash flow surging to SEK 1.4 billion, up from SEK 1.1 billion, driven by considerable improvements in working capital. The cash conversion rate for the quarter reached a year-high of 73%. With a low net debt-to-EBITDA ratio of 0.9, the firm retains the flexibility to pursue strategic mergers and acquisitions. Looking forward, there's an optimistic view regarding the resolution of about SEK 1.1 billion in unpaid receivables. Furthermore, the company has successfully refinanced, securing a new Revolving Credit Facility (RCF) of SEK 2.5 billion valid until 2027.

Market Outlook and Financial Objectives

Despite a complex market, stable demand for service activities persists. The company recognizes geographical market variations, with stronger performance in northern Sweden compared to the south. It continues to target favorable sectors such as infrastructure and defense, maintaining a strategy focused on selective projects, cost control, and prioritizing margins over volume. Financial targets remain unchanged, aiming for a medium-term achievement that includes a 5% sales growth and a commitment to share profits with stakeholders, as evidenced by eight consecutive years of dividend increases.

Investor Queries and Denmark's Path to Recovery

In response to investor inquiries, the company clarified the situation in Denmark, where several project write-downs contributed to reduced margins. Management changes are in place and the Danish unit is expected to post profits in the first two quarters of the year, with normalized margins anticipated by the fourth quarter. These future forecasts are foundational to the confidence expressed by both the interim head of the Danish branch and the executive leadership regarding Denmark's recovery path.

Earnings Call Transcript 2023-Q4

[Mattias Johansson, executive]

Good morning, everyone, and welcome to this presentation of Bravida's Q4 report 2023. And as usual, it's myself, Mattias Johansson, CEO and --

[Åsa Neving, executive]

Asa Neving, CFO. Good morning.

[Mattias Johansson, executive]

-- who will take you through this presentation. So welcome very much and we start immediately. So Bravida is the Nordic leader with a broad diversified footprint. We have a lot of different customers in lot of different places in lot of different segments. And actually, climate smart solutions is already in Bravida above SEK 1 billion in sales and that is mainly energy services and building automation. And in turbulent time like this, it could be worth recapping why Bravida is an attractive investment and a safe haven for you as investors.First, we have shown that we have stable and profitable growth with strong cash flows over the years. We are leader in the Nordic region, well positioned for the future and we can capitalize on the climate and energy megatrends that are in society. We have stable sales with good risk diversification, which I just told you about, a highly diversified business model and a footprint and we have approved bolt-on value creation regarding M&A.So a lot of shareholder value creation is possible. And that's why we also in challenging times can improve the cash flow with 29%, present an increased order intake with 25% and also for the eighth year in a row increase the dividend to SEK 3.50. And during -- since we did the IPO, we have more than doubled the EBITDA and more than tripled the dividend. And I think this is the proof of the resilient business model we have regarding growth, profitability and cash generation.So into the Q4 highlights. We see strong performance in Norway and Sweden due to both organic growth as well as margin. We are minus 2% organically due to that the installation business is shrinking a bit, but we are growing the service business with 6%. We also see another 4% added from acquisitions. We have a margin at 7.4% impacted by the challenges we have in Denmark for the moment. We are conducting a thorough review of the Danish business and have implemented management changes and other mitigated actions to turn this around.We have an increased and a strong cash flow at SEK 1.4 billion in the quarter. And it's very great to see that we are soon back to normal levels again and we have seen an improved KPI regarding the cash flows. And also, of course, we are happy to see that the actions we have been taking is supporting the cash flow.So if we look at the full year of '23, the highlights is of course 12% growth. We are growing the service business. We have 4% in total from acquisitions. We have a very strong order backlog at SEK 17 billion. We have done 17 acquisitions and we have an LTIFR that is down with 3%, which is of course very good and the cash flow has improved in the last period of the year.Looking at the EBITA, we have already -- I have already spoken about the Danish turnaround and you know that we have successfully used the same playbook in 2019, when we turned around the division Stockholm at that time. So we know what to do. We are doing the same thing here.Other impact on EBITA margin is nonrecurring OpEx from IT and digital investment for sustained profitable growth. We also see that the peak of this investment has passed and we will benefit from this in the end of this year. We have also identified some other savings opportunity or cost efficiency of some central functions that will support the margin going forward as well.So the order intake and the backlog, it's quite interesting to see when we are discussing about a tricky market that we can continue to increase the order intake and also create a very stable order backlog. The order backlog is growing in the quarter with more than SEK 500 million. We have a stable order backlog year-on-year. And the order intake increased by 25% mainly in Sweden and in Denmark and that is because of 3 large infrastructure orders in total of SEK 1.6 billion.The trend with big investments in infrastructure projects is of course, very good for a company like Bravida. We are one of the few who have the competencies, the knowledge, the historical track record of delivering on this and the customer is a type of customer that is looking for competence more than the price. So we see that the order backlog is stable and will give us good support for the coming quarters and years as well.Going into the sustainability. As I mentioned, LTIFR on group level is down with 3%. It's significantly lower and improved in Finland and Norway, but higher in Denmark. Norway is well below our target on 5.5% and they are showing the way. They are doing a really great work. And the rest of the group has to learn from Norway regarding this and this is an important KPI going forward as well.Today, we have 25% of all our 8,700 vehicles that are electrical driven and this of course leads to a lower CO2 emission as well. I'm really proud about the work our organization has done in this. It's not a very easy thing to do, but we have actually lowered the CO2 emissions with 9% compared to the net sales now and I think that is fantastic.We have a target that is higher, but we are well on our way to reach that target. And this will of course, defend our position as the market driver and market leader in this segment and this will of course, be seen by our customers and that will also support the business going forward.So acquisitions. In '23, we have done 17 acquisitions, adding close to SEK 1.4 billion in sales. We still see a strong pipeline and a good acquisition opportunities. You normally ask about the prices. It hasn't been very big changes, but we see that the price is going down a bit. We have a strong pipeline. We will continue to use our balance sheet in the challenging time for many others. We have -- we see opportunities and we will take the opportunities when we think it is the right timing to do it. Maybe a bit more selective due to the fact that the market condition is a bit different.So we really need to be sure in the -- and do the due diligence in a more thorough way to be sure to doing the right deals. But the pipeline is strong and we know how to do it. And this will, of course, be a support to our organic growth going forward as well. So a good way to continue to develop shareholder value and that is something we will be able to continue to do.So with that, I hand over to Asa who will take you through the different countries.

[Åsa Neving, executive]

Thank you, Mattias. So as always, let's start with our largest country, Sweden, where we have grown the top line with 4% in the quarter to SEK 4 billion and the growth is coming from installation. The organic growth was 2% and then we had growth from acquisition on another 2%. Had a very strong and robust EBITDA margin in Sweden. Same level as last year, so 11.3% in the quarter and 7.7% for the full year.Order intake was plus 47%. This is mainly due to 2 large contracts that we got on the extension of one of the subway lines in Stockholm. These 2 contracts are amounting to SEK 1.3 billion and that gives us also an order backlog that is plus 5% year-on-year. So good and stable business in Sweden.Then if we look at Norway, we also had a growth in sales of 4%, so growing to SEK 1.7 billion and SEK 5.9 billion for the full year. The organic growth was 7% and the growth from acquisition 4% and then we had a negative impact -- negative FX impact. We also included one large acquisition was included in our December figures. That's the Thunestvedt Group that has a yearly turnover of around NOK 500 million, NOK 600 million. We included in December with roughly SEK 50 million in turnover and a flat zero margin.The EBITA margin in Norway improved to 5.9% compared to 4.8% last year's fourth quarter and also improving for the full year to 5.4%. Order intake, minus 1%, if you look at it in local currency, it was plus 5%, but negative minus 5% on installation. And that is according to our strategy where we actually want to take down the volume on installation somewhat. Order backlog then was declining with minus 25% year-on-year.So then moving to Denmark, where we had a negative growth in sales, minus 5% and that is related to the installation business that went down minus 25%. And this is very much in line with the strategy where we want to take down the installation volumes. Organic growth was minus 12% and we were growing from acquisitions by 1% and FX effect had also a positive impact of 6%.The EBITA margin decreased to 0.1% compared to 6% and this is as Mattias said, due to the challenges that we have had in 3 regions out of our 8 regions that we have in Denmark and the resulting write-downs there. Order intake was plus 29% and the backlog was plus 30% year-on-year. And the strong order intake is mainly due to this or it is due to this contract that we have gotten with Nordhavn Tunnel, which is a SEK 300 million contract and this will be managed by the Danish organization together with our PMO Special Project organization that we have in Stockholm that is running also the large Stockholm Bypass project.And as Mattias said, we are not happy with the performance in Denmark of course, but we are doing a thorough assessment of Denmark and Mattias is now also interim acting head of Denmark, until we will get the new manager in place 1 of May. So we're doing an assessment. We have identified the issues and we are now addressing and taking actions. And we believe that we will have a softer Q1 and Q2, but still positive figures and then we will be back on normal margins in Q4. So we are positive about that outlook going forward.Then moving on to Finland. Finland had a growth in sales of 3% and the growth was coming from service. The organic growth was negative 14%. And if you look at our Nordic countries, Finland has the weakest market outlook going forward. Growth and acquisition was plus 11% and FX plus 6%.The EBITA margin declined to 6.1% compared to 6.9% last quarter and 3.9% for the full year. And this is mainly explained by one project and we talked about that before. It's a school project that has affected the margin both in the quarter and for the full year and that is ending now in the first part of 2024 and we don't believe that it will have any more impact on the P&L. So order intake decreased by 35% and the order backlog was plus 11%.Then moving on to net debt and cash flow. And I'm very happy that our efforts and our focus on net working capital is paying off. And as you can see on the chart in the middle, we have had a strong cash flow improvement and this is to SEK 1.4 billion in the quarter compared to SEK 1.1 billion and this is driven by a strong improvement in working capital. And the cash conversion improved also in the quarter to 73%, that is the highest level in 2023.Net debt on the left-hand side remains low. So we will be able to continue to do M&As going forward. As you can see, we have a net debt-to-EBITDA ratio on 0.9. We still have, as we have talked about before, these 3 unpaid receivables on our balance sheet. We believe that we have very -- these -- there are 2 in Denmark and 1 in Norway, and they are amounting to roughly SEK 1.1 billion. We believe that we have a strong case. It will be resolved in 2025 in arbitration, probably all of them. We have a strong case. It will have a neutral impact on our P&L and it will have a positive cash flow impact.We are also happy to announce that we have refinanced, so we have a new RCF in place on SEK 2.5 billion, same level as before, with the same banks as before. So it's Danske, SEB and DNB. The maturity on this RCF is in 2027, with an option of another 1 plus 1 year. It is -- our current RCF is linked to sustainability KPIs. And we will -- this new one is not linked to that to begin with, but we are working with setting up science based targets, so those KPIs will then be linked to our RCF when we have gotten those in place -- into place.Yes. That's it. We have a commercial paper program with also SEK 1.5 billion and EUR 50 million and a 3 year loan of SEK 500 million that is maturing in 2025.And by that, Mattias, very happy with the strong improvement in cash flow, I will hand over to you.

[Mattias Johansson, executive]

To talk about the market? Yes?

[Åsa Neving, executive]

Talk about the market.

[Mattias Johansson, executive]

I will do my best. Thank you, Asa. And the market outlook is, of course, a tricky part to discuss, but what we see is an overall stable demand for service activities. There are some challenges in installation, of course, that continues, but we also see some positive areas in those regarding installation as well. There are some differences between different geographies. For example, in Sweden, the north part is better than the south part.Asa mentioned Finland, Norway are some variations within the country as well. So there are variations, meaning that we need to adjust our working force and our organization due to the fact if it's good demand, strong demand or if it's slightly lower and that is something we do continuously. But what is very clear is that we see very favorable conditions for projects in, for example, infrastructure, industry, defense facilities and civil engineering. And that is, of course, providing business opportunities for a company like Bravida with the competencies we have as well as the geographical footprint and the knowledge and the references we have in those type of projects from before.But said that, we will definitely maintain our project selective strategy with continued focus on cost control and margin over volume. That is important. And I think it's shown in Denmark how important it is to actually be very thorough on what type of customers you are choosing, what type of projects, how you execute on these projects. So that is something we will continue to do, of course.Over to the financial targets, no changes and we are confident that we will reach those over a medium term as well. Cash conversion, we want to be back at 100%. The net debt is something we already deliver upon. Sales growth, 5%. Of course, it can vary from one quarter to another, but over a longer cycle, we will be able to continue to deliver a stable growth. A combination of organic growth and acquired growth, that is something we have shown for -- yes, for the whole period since 2015.And that also in combination with the strong cash flow, the cash generative business model we have, gives us the opportunity to pay out some dividend to you and the ambition is more than 50% of the net profit. And as we mentioned in the beginning of this presentation, we have been able to increase the dividend for the eighth year in a row, that is the suggestion for the annual meeting.And then the margin, of course, I think we need to be honest and say that we need to probably have a more stable market all over the group to be able to deliver upon those 7%. But both myself, Asa and the whole management team are confident that we are able to meet this in medium term.So by that, we have another slide that we might show, just the upcoming events. Next report is in May. We have the annual -- yes, the AGM at the same day and then we have the interim report in July and October.So by that, I think we can open up for some questions.

[Operator]

[Operator Instructions] The next question comes from Carl Ragnerstam from Nordea.

[Carl Ragnerstam, analyst]

It's Carl from Nordea. A couple of questions from my side. Looking first into Denmark, inevitably, as you said, you're not super happy with the margin project write-downs, one reason. I know that, I mean, the smaller project write-downs is sort of part of recurring business. I mean, but is it possible to quantify them in the quarter to see what the sort of underlying level really is, sort of putting them into context to Q3 or year-over-year?And the second part of that question is a bit on what Asa said. You said that the margin recovery path in Denmark is to see positive, what you said, positive, soft, but still positive margins in Q1 or Q2 with the normalization in Q4. So should we interpret that as Q1, Q2 sequentially unchanged and what is also a normalized level in Denmark?

[Mattias Johansson, executive]

Okay. That's a tricky question to start with. But if we start with the quantification of the down-writing, I think you can do the math yourself and see what we had in Q4 last year. We also have one poor acquisition that is adding some losses in '23 and in the quarter as well.Regarding the margin, I think if I take the operational part, then Asa, you may add something in later. But I've now been actively working together with the Danish organization since Christmas. We are doing a change in the management. I think that is really good to see what we can do together with the new Head of Denmark when he arrives in May. Until then, I'm preparing to onboard him as efficient as possible.But I already have seen due to my experience in -- from 25 years in this industry and companies that we have, we are quite low -- many low-hanging fruits that we can do better to make sure that we are improving the margin operationally. And -- but I also think that we are now doing an assessment of the underperformance units. That is something ongoing.We really don't have the full picture yet, but we are confident that we will have black numbers in Q1 and Q2, as Asa said. We think that it will take until Q4 before we are back at normal margin in Denmark again. And I think normal margin is definitely at the same level as we had in Q4 '22 then.So -- but customer selective, be very selective about what customers we're working with. Make sure that we are executing in a better way. Easy said, use our processes Bravida way and focus more on margin and on volume. Could be some more challenges, but black numbers, definitely Q1, Q2, back at normal level again in Q4. So Asa, do you...

[Åsa Neving, executive]

No, I think you described it well.

[Carl Ragnerstam, analyst]

Very clear. And Mattias, in your review of Denmark, is it -- I mean, should we expect maybe discontinuation of these 3 regions out of 8, or is it may be just the downsizing, or where are you in those discussions currently?

[Mattias Johansson, executive]

First, I want to say that and actually underline that we have many regions that are performing strongly, well or strongly. They are really good. So we are doing a lot of good things in Denmark. The other ones has been growing a bit too quick. And then at the same time, I think the inflation has maybe impacted Denmark more. So we are double down on the margin in that perspective.So shrink to quality is one way to say it. And it's about choosing the right type of customers and execute in the way we are supposed to execute. That is the solution. And Carl, I don't remember when you started to follow us. But in 2019, we did the same with Stockholm and they were back at normal margins again the year after.

[Carl Ragnerstam, analyst]

Yes, sure. It's impressive, for sure. But looking at the order intake, a little bit in this context, I mean, quite strong orders, obviously driven by a few larger projects as well. But you say that the market for installation might be down somewhere 9% in the Nordics, right? You're prioritizing margin for volume. But orders are trending massively upwards, meaning that you're gaining market share. It's probably underlying as well when I try to adjust.How certain are you that these projects you're taking now today are also in the right sort of pricing, given that when we talk to companies in the industry, it's still quite a fierce pricing sentiment, right?

[Mattias Johansson, executive]

Yes, but I think...

[Carl Ragnerstam, analyst]

So should we be worried about the newer ones as well or...

[Mattias Johansson, executive]

No, no, I don't think so. And one important difference is that when we are talking about the market, the numbers are down 9%. The infrastructure industry is not included in that number. So that is another market. That's more referring to housing, offices, et cetera. And I think that is maybe the thing that we have difficulty to explain for all you analysts, that for example, we have SEK 800 million less residentials in turnover last year, I think and we are still growing the business. So we have replaced a small -- residentials, that's an example, that is a small part of our business.But taking out that on the business and we have been able to replace it with other things. For example, the infrastructure projects in Sweden and Denmark and Norway. I think we are building the 10th hospital, for example, in Norway or something. So it depends what you consider as the market. But I'm not worried about that we are winning projects with too low margin. Not what we can see today. Definitely not.

[Carl Ragnerstam, analyst]

Okay. Very good. And also a final one from my side is a bit on -- if I look at sales by competence area, we saw that installation grew 6% -- or, sorry, service grew 6%, installation down 1%, right? Could you say something about the margin mix in the quarter? I mean, historically, it should be at least on the favorable side with higher sales of installation. But on the other hand, we also have, I guess, what we heard in industry, lower alteration and additional works, which might hamper margins as well. So is it relevant to talk about the mix between service and installation nowadays or...

[Mattias Johansson, executive]

That is not a number we normally disclose. But I think you can also see that due to the fact that we are having a big part service, we are able to deliver a very stable margin. If you allow me to adjust for Denmark for the moment, we are very stable on the margin. And I think we have some headwinds in the installation business. But we have some positive margin mix due to the fact that service is growing. And I think that is balancing for the moment, if you exclude Denmark.

[Operator]

The next question comes from Karl Noren from SEB.

[Karl Norén, analyst]

A couple of questions from my side as well. Maybe if we start off with Denmark. I don't think you fully quantified maybe the write-down impact. But is it fair to assume that somewhere around half of the margin decline year-over-year comes from write-downs?

[Åsa Neving, executive]

I would say that a bit more, actually. If you look at the margin that we had the year before and then you do the math and see that a lot of it is write-downs and also coming from a poor acquisition or a result in a poor acquisition. I think, yes, we don't want to quantify it, but it's more than half.

[Karl Norén, analyst]

Yes, I see. And then also on the digital investments here, quite higher in the quarter. And you're saying they have peaked right now. Can you give us some kind of indication of where this figure should land for 2024, the digital investments in the IT platform?

[Åsa Neving, executive]

Yes. We will take down the investment pace in this year. We will -- the strategy is now to focus on what we have invested and to harvest and take out the benefits from those investments. So we forecast another, say, SEK 45 million for the full year in the investment portfolio for 2024.

[Karl Norén, analyst]

So quite heavily down there from SEK 40 million, I think it was in Q4?

[Åsa Neving, executive]

Yes. Yes.

[Karl Norén, analyst]

Yes. Okay. That's good. And then it's the question of Sweden. I mean, very strong development, as I see it and it's mainly driven by the installation where services are relatively classified, so it's right in your report. Can you just give us a view on the -- updated view on the market? I mean, it seems like orders are still at good levels for you. Is it for [indiscernible] for Stockholm, or the Bypass Stockholm, that is showing good or impacting the installation in the quarter? Or what is really driving the strong installation sales in Sweden in Q4?

[Mattias Johansson, executive]

Yes. Interesting question. And I think we are -- you can say that the overall demand in the south part of Sweden is lower. And we shouldn't only see that the Bypass Stockholm is adding sales on the rest, because there is a lot of other investments in many other places in Sweden as well. So of course, Bypass Stockholm has started to add, but not a lot in the fourth quarter.The production has recently started and some of you were actually down in the tunnel and visited the project. But I would say it's many small, average-sized projects in combination with a handful of slightly bigger projects that are supporting the installation business for the moment.So it's not -- I think it's important to understand it's not only 1 or 2 projects. It's in many places. And I think that is also showing some kind of diversification. So it's -- and that goes to the order backlog as well. Now we won 2 contracts in the subway in Stockholm, for example and that production will probably start in the end of this year or in the beginning of '25 or something. So that is something we are -- will support us in the coming years, not only in '24.

[Karl Norén, analyst]

Yes. No, I was just a bit surprised. I think you grew 9% installation in Sweden, which I must say --

[Mattias Johansson, executive]

Yes.

[Karl Norén, analyst]

-- it's very strong in this tough market. But just the last question from my side there on the receivables outstanding or the overdue receivables. You said you expect to collect them in the coming 12 to 24 months. Is it possible to give any more kind of guidance on when you see this coming into the cash flow?

[Åsa Neving, executive]

It's very difficult to say. These 2 Danish ones are really old. They were taken before 2019 and 2016, one of them. And so they should have been sold already. We thought they should have been into arbitration in 2022 and then in 2023 and then it has been postponed and so now it's up in 2025. So hopefully, it will be then there. On the Norwegian one, we're more confident that that will be resolved in, yes, end of 2024, '25. So that will at least -- at least we are confident that that will come in. So it's a timing question, but they will definitely be a strong cash flow impact.

[Karl Norén, analyst]

Yes. And in the result, I think you said cash flow trend should continue to improve here. So we should see a relatively strong cash flow also in the first half of 2024. Is that how we should interpret that, your communication?

[Åsa Neving, executive]

That's what we -- yes. That's what we expect.

[Operator]

[Operator Instructions] The next question comes from Karl-Johan Bonnevier from DNB Markets.

[Karl-Johan Bonnevier, analyst]

I always feel good, Mattias, when I hear that you are going in and taking day-to-day responsibility for units that doesn't seem to be working for the moment, as you're doing in Denmark. But could you just allude to --

[Mattias Johansson, executive]

Thank you so much.

[Karl-Johan Bonnevier, analyst]

-- why do you think you ended up in this kind of situation in Denmark and to be forced to do these kinds of more extreme measures, if you put it? So what went wrong in the model?

[Mattias Johansson, executive]

No, but I think I've said it before in many different occasions, growing in this industry is very easy. It's just to lower the prices. That is not what we have been doing in Denmark. That's important. But when you get -- are winning too many projects at the same time and are supposed to deliver projects in a very structured way and you have to hire and onboard a lot of people, then you struggle with execution.And handling this correctly, Denmark should have been winning less -- fewer projects and instead increase the prices. That's the Bravida way and that's what they should have been doing.When we saw this, we have acted decisively and we have taken actions and done some mitigations, mitigated actions.

[Åsa Neving, executive]

Mitigated actions.

[Mattias Johansson, executive]

Yes. Sorry. And that is what we are doing. We are changing the leadership in Denmark. I'm going in to support the Danish organization. And as I said before, being in this industry for very long, it's quite clear what we should have done differently and what we will do differently going forward. And -- yes. I think [indiscernible].

[Karl-Johan Bonnevier, analyst]

Yes. The acquisition that you are struggling slightly with in Denmark is that electrical installer that you acquired. That was quite big in size, spread out over the whole country, but then also, when you already took it over, was struggling a little on the profitability. What went wrong in that analysis and that acquisition?

[Mattias Johansson, executive]

Yes. But you can say the same. The organization, in that case, hasn't followed the processes and principles. And if they have done that, we haven't ended up in this situation, so it's very clear. We need to stay to our strategy. We need to follow the playbook, as we say and follow Bravida way. And if we have done that, in this case, it will never happen.

[Karl-Johan Bonnevier, analyst]

Sounds good. And just on -- looking at the 2023 development, could you allude to how it's gone in your priority areas looking at building automation, building up that franchise and the hard FM portfolio?

[Mattias Johansson, executive]

Yes. We can say that it has been some positives development and some more weak development. I think if we start with the weak part first, I think the energy services, that market has -- when the interest rates has gone up, the energy prices has gone down a bit. I think the interest and the willingness to invest in slightly bigger energy savings projects is not as big as we expected it to be, so that part has been growing least.On the other hand, we see that smaller energy services that we are delivering in all our local branches is growing. We don't have the ability to measure that, but that's my clear view that we are doing a lot of that type of services, small contracts, small orders that we really can't follow. That is part of our daily business now. But then slightly bigger ones that we thought should, to be honest, explode when we had the high energy prices and the willingness to invest hasn't really came out as expected, so that is something we adjust now.On the other hand, we see that the technical facility management part is around SEK 0.5 billion, SEK 400 million -- yes, close to SEK 500 million in sales. And the really good thing is the building automation part that is around SEK 1 billion in sales. And that is something that we are really happy to see and that is supporting all the other segments as well and that is driving the service business going forward as well.So we have the energy part that has been a bit negative development. Yes, if we exclude the fact that we are delivering the local branches a lot more today, then we have the technical FM that are in an okay space and then we have the building automation that has developed really, really well.

[Karl-Johan Bonnevier, analyst]

Good mix here. One final from me as well, looking at the acquisitions you have done over the last 12 months or so, a lot of industrial piping operations. How big is that part of your operations today? And how do you see that as an opportunity for the future?

[Mattias Johansson, executive]

I don't think we have disclosed that numbers. But of course, that is growing. And I think that is a smart thing to do. That is because of the investment trends in the Nordic area and that is growing positively and that has a good margin as well. So we're looking forward to continue that development.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Mattias Johansson, executive]

Okay. Thank you so much, everyone, for listening in and I guess we'll meet some of you during the day, looking forward to that. And I think that we have a lot of interesting topics to discuss. But I think, yes, maybe increased dividend and improved cash flow is something that I want you to take away from this presentation. So thank you very much for listening.

[Åsa Neving, executive]

Thank you.