Projektengagemang Sweden AB
STO:PENG B
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Projektengagemang Sweden AB
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Good morning, and welcome to this interim report for Projektengagemang. My name is Helena Hed. I'm the President and CEO of the company. Together with me today, I have my colleague and CFO, Peter Sandberg, and we will take you through the first quarter of 2021.But first, I would like to start with my journey at Projektengagemang. It started last summer when I was recruited to the company as new CEO and President. I entered my position on December 1, and what I've seen during these 5 months, what I've seen is a company with very high-qualified employees. I see that we have clients that are satisfied with our business and what we are doing and helping with them -- them with. And I also see, I say, great potential going forward.So if we would go to the next slide, please. If I start to talk about some of the business headlines during the first quarter, I will start to say that we're still in the middle of the pandemic and even though the pandemic we stabilized the results, and we are getting closer to our financial targets. 2019 was a year for us where we had a negative result. We made great changes, big changes in the company, and we were affected by 2020 and the pandemic year.But still, now we have a stable margin in all our segments. And during the first quarter, we had an EBITA margin of 6.5%. We have a strong improvement in our Architecture & Management area. And we do see increases and increased activity at our clients, especially if we talk with the Architecture, in the early stage of projects, we see more projects going on. And we also see that demand from the market are still great since we are working with services, we're then creating a sustainable society, our architects, engineers and specialists are needed.The 1st of January, we made a change in our management team. We took away 1 management level, which give us -- have given us a decentralized organization and organization, which is more efficient, more client-focused and more business-focused.So if we go to the next slide, please. During these 5 months, I learned to know the company. And due to the pandemic, I have not been able to visit our nearly 1,000 employees on 23 different locations in Sweden. So I chose to talk to them instead. I had almost 200 calls with person-to-persons talking with them, having walk-in talks, so I have a really good view of what we are doing in the business.Me and the management team and the Board, we also have been looking at our strength, our market position and how and where we will grow in the future. And what I can tell you is that we are very strong coming to buildings. More than 90% of our revenue is within business, within buildings and around the buildings. Looking at this picture, it's actually a view from our headquarter in Stockholm, and we've been designing some of these buildings, designing these really amazing buildings.If we go to the next slide, please. What we do in Projektengagemang? We work with different clients, more than 4,000 clients. We do more than 13,000 assignments every year. And all projects are important to us because they are important to the clients. So we did the small lots. We did the medium lots, and we did really big lots, the amazing lots. This lot, for instance, it's the Citygate in Gothenburg, a really prestige project, 144 storages, where we are main constructors.If you go to the next slide, please. This is a nursing home in Täby. And we've been involved in the whole society and the planning of this part of the city. And at Projektengagemang, we work with, for instance, hospitals. And in this case, we've been involved with as architects and also the landscape architects.And going to the next slide, please. This is another amazing project where we are involved, it's Platinan in Gothenburg. We've worked together with Peab at Vasakronan and this will be a main big house in Gothenburg with offices, hotel and also you can find stores. And here, we've been working with both the construction, HVAC, cooling, sprinklers, fire, climate, energy, simulations. It's a really fantastic project where a lot of our employees have been involved.Go to the next slide. This is a school, a school which needs to be renewed, and we are a part of making this project, part of being responsible for the installation, for systems and also here cooling and other simulations and fire. So this is for me very -- it's very impressing how our employees help our clients. It's impressing to see how we can do our vision. It's about creating a sustainable society. We work with them to improve the society.And to go into our financial numbers, Peter, you are very welcome.
Thank you, Helena. So looking into the group financials, we can see that we are still affected by the pandemic and COVID-19. And the revenue is lower, and that is, as expected, due to fewer employees entering into this quarter.When we come from year 2020, where we were affected by the pandemic from Q2 and going forward and to a higher degree, and there, we have the objectives and strategy to secure the margins. And we did some redundancy in the Q4. And therefore, we enter into this quarter with fewer employees. And we see that we have secured stable margins, and they are approaching targeted levels.Then if we change to the next slide, we see our financial position. We have still a solid financial position, and we have a cash conversion of 97%. We see that cash flow from operation is SEK 1 million, and it is mainly due to effect of the working capital, where we, in the quarter, has had payment in the payroll taxes from 2019 and also increased work in progress in relation to December. We can see that our net debt year-on-year has decreased in around SEK 60 million.And then if we go to the next slide and see the bridge on the segments. They are also affected by the lower EBITA due to the pandemic, but we have and see a strong improvement in Architecture & Management. And we have, as we see, stable margins in all segments.And with that, I hand over to Helena to walk us through the segment each power.
Thank you. And if we start with Architecture & Management. Our segment really had a good development, good EBITA development with increased sales activities, which improved our results.I also want to mention that this first -- this is the first time in 3 years where we have this EBITA margin within the Architecture department. We can also see that we have indication of an increased market activity. As I said before, we see that our clients are taking new steps, starting projects for small ones and big ones. And this makes us convinced that we will see a better market condition going forward, especially in the second quarter. And we have this net revenue of SEK 72 million and EBITA margin on 5.2%.So if we go to the next slide, please. Our segment, Civil Engineering & Infrastructure is very strong. We have strong earnings and we have strong margins. What we can see though is we have a decrease within our Infrastructure department, where the performance was low, and the infrastructure part is very small in our business, and the decrease is due to a few projects. So civil engineering and design is very, very strong. And we can also see a solid demand within both building environment and civil engineering in the market, both today and going forward, and we can see a nice order backlog and also received orders. We have net revenue on SEK 107 million and an EBITA margin on 9.4%.And if we go to the next slide on Systems. We still, in this part, too, have solid margins, and it's in line with our targeted level. Our long-term target level is 8% during a cycle. We can see that our revenue and profitability is impacted by pandemic. And as Peter said, we are fewer employees entering 2021, both cost -- to the cost savings we did 2019, but also due to cost savings in 2020, where we put our business into the market situation, we had fewer employees.Looking at Systems, we have focused on strengthening and growing the business on this market, which is recovering. So in this quarter, we had revenue on SEK 108 million and an EBITA margin on 8%.So if we go to the next slide, please. Looking on our priorities ahead. I want to say that engineers, architects and specialists are needed. We are needed to ensure sustainable development of cities of the future.What we do every day is to renew the society. And we do it through innovative and sustainable solutions. And I really feel that this vision we have, I feel it in the whole company, I feel it when I speak to my employees and my colleagues and I really sense it in all the projects we do or we help our clients as their top consultant.I can also feel and sense entrepreneurship in the company. I see that we have very committed employees, and they take great responsibility, great responsibility for the projects we are making, but also for the future and the development of the cities.So what we'll do, what we do today and will do in the future, we'll really focus on delivering the highest customer value. And our clients are satisfied. We can also see that they come back to us. We also see that they recommend us to other clients. And we will continue. This is really a main focus for us to be develop and deliver the highest client value.We also drive profitable growth, and we do that. We do that since we develop the best workplace, a workplace where me and my colleagues we can develop, we can find new solutions and find a good way to have a satisfied workplace. So very important priorities, and this will deliver profitable growth and in the end also shareholder values.So if we go to the next slide, please. If we make a summary and look forward, we have, as we told you, stable margins in all segments, the best margin for 3 years in architects, and all of the business is going strong. During the last 12 months, we had a margin on 6.1%, [ following 12. ] We have, as I said, a strong development within Architecture & Management, and we want to tell that to you because that's a sign of the market being in a better condition.We do have an impact on the revenue due to fewer employees, and that is due to COVID-19, where we entered the year with less employees than last year. As I told you, we see an increased market activity, and we believe that we will have a stronger market during the second half year. And we see it both because there are always need of architects, engineers and specialists. We also see that because the big market trends, which are still impacting us, the globalization, urbanization, digitalization and the sustainable development of the society.We have a really good picture of Projektengagemang. We know where we are strong. We know how we need to develop to take greater market position and to be a leader in our segment. What we will do is to deliver a strategic plan for us, and in the second quarter, I will tell you more about this strategic plan, which will deliver profitable growth and shareholder values.And with this short presentation of the first quarter and summary and outlook, we will open up for questions. And Peter, welcome back.
Thank you.
We had a few questions. We start with this first one. In the first quarter, you achieved solid revenues and profitability despite lower workforce on top of the lower overhead cost. Was there a positive underlying mix in the quarter with more profitable projects. Peter?
Yes. And it is also that we have adjusted the organization throughout the 2020 to meet the market situation that we have now entering in the new year.
Yes. And the next question. There's a large number of employees -- sorry, there's a large drop of number of employees during the quarter, could you give us some insight of these employees? Was this overhead staff or idle employees to better the billing ratio?What do you say about that Peter?
Yes. We -- during the fourth quarter, we made a project in environment around 70 employees. They are in the workforce in the first quarter, but it is a situation to handling, and we have now built the platform for further growth.
Yes. And I'll go to the next question. It's also about our growth. You ended the first quarter with 889 employees, should we expect the decline in number of employees during the second quarter? And when are you anticipating the trend to turn to growth?What we've done is that we now have a stable platform, a stable platform for growing further. What I see and what we in the management team see, we have a lot of growing -- what you say, we do a lot of things to ensure the company to grow, and we expect to see this growth in the -- around the year 2021-'22. So you will expect growth from us.We have a question in Swedish, and I translate. We write in the report that we have a lower billing ratio, can you talk about that and compare it 2020 and 2021. Peter?
Yes, looking into the billing ratio, we have around 75% in the first quarter, and on the first quarter 2020 were higher, that is also to meet the market situation and also worth to mention that we -- in comparison to the last quarter 2020, we do not have any short-time work from the 1st of January.
Yes, that's important. So despite the pandemic and despite the market conditions, we are now really going forward, focusing on growth.And we have another question, and it's related to our clients. Can you tell us a bit more about the framework agreement with Stockholm stad. Was it contracts you've already had before? Or will it have a positive impact for you?This will definitely have a positive impact. We get new assignments all the time. This framework agreement that we talk about is for 4 years. It's about SEK 10 million each year, and we have held the first position, we're #1 in 2 of these very important contracts with the city.So Stockholm City is one of our clients. We work with more than 4,000 clients ever year. We do more than 13,000 assignments every year. And what we see now in the first quarter, we have an increased order backlog and increased order received and Stockholm stad was a really good example.And how do you see employee cost inflation at the moment? And how do you expect it to develop during 2021?
That is an interesting question regarding how we -- how the mixture of employees are. And we are currently in a cost, what is the call, in the agreement regarding employees and employer is a program that is from 2020 to 2022. And we have currently met that revision during this quarter.And of course, it's -- we are focusing on growing the business and recruiting, and it is the mixture that is the effect on the cost base. And of course, that is something that is essential to work really and see how the best mixture will be to meet our objectives.
Yes. We also have a question here. We write that the growth will come in midterm, can you say more about the short term?I want to start to say that in 2020, we were affected by the pandemic. In the fourth quarter, 70 employees left us. So we still are affected by being fewer employees. But now the market situation is better, but also, we have so much more focus on clients, on being close to them, making more business. So I believe and what we see is that we will get the growth, but it will be during the second half of the year. And as I said before, I think that we will see the growth by end of the year.Let's see here. I think that was -- no, it's actually -- we have a question about the revenue and results and also about acquisitions. Really interesting. Peter, if we start with the revenue and our result?
Yes. The question is, during your revenue and EBITA per segment, you also have the thing that is others that has actually a negative result of SEK 4.3 million. And in others, it is the common services for the operation that varies some over the year, and it is also affected by the number of employees and also the calender effect, but it is higher this quarter than last quarter -- Q1 2020.And then it was a question regarding acquisitions.
Yes. And our focus today is organic growth, but we also look at M&A and acquisitions. But today, organic growth and in the future, definitely, you will see acquisitions.We also have this final question. Can you tell us more about activities we do to enable growth? First of all, from December -- January 1, we have a more decentralized organization. We're focusing a lot to be close to the clients. We have a lot of sales activities.We also work a lot with our leadership, the leadership within the assignments and the leadership within our teams. We also focus a lot about telling everyone, telling the market more about who are Projektengagemang, so we take more of the market position and take more of our market potential.Let's see if we have some more. If we round up, I would like to say that this company, Projektengagemang, has a great potential going forward. Today, we have a solid ground to stand on, which will enable profitable growth and also, as I said, shareholder value during the long term.Our architects, engineers and specialists are really needed. The market is getting stronger and stronger. And despite the pandemic, we've really made a good quarter with stable results, 6.5% margin. And I want to tell you all, we are needed. What we are doing is creating the cities and societies of tomorrow.So I'm very, very proud to be the CEO of this fantastic company, and I really look forward to this continuous trip together with all of you: the owners, the Board, the management team and all the employees at Projektengagemang.So thank you very much for listening, and I hope to hear from you soon again, and see you in the second quarter, the 16th of July, where we present the second quarter, and also our strategic plan forward. Thank you.
Thank you.