Projektengagemang Sweden AB
STO:PENG B
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Projektengagemang Sweden AB
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Good morning, and a very warm welcome to this presentation of the second quarter and the interim report of Projektengagemang. My name is Helena Hed. I'm the CEO. And together with me today, I have our CFO, Peter Sandberg. And today, I'm very happy and I'm proud because we're going to talk about our way forward. We're going to talk about Projektengagemang and our position on the market 2025. We're also going to talk about the new financial targets which we set and we announced this morning.Although, first, we're going to talk about the agenda for today. I'm going to start with the financial summary for the quarter and the half year. We're going to talk about the development in our 3 segments. And then we're going to talk about PE 2025. We will be Sweden's largest, the best consultant firm focusing on buildings. We're also going to talk about our new financial targets. And finally, questions and answers. And I already now want to say to you, please come with questions. We're going to answer everything that we can. So I look forward to this time together with you.I want to start with the most important thing, the clients and our employees. Every year, we help more than 4,000 clients with more than 13,000 assignments. Each month this year, we've been increasing our order intake. And these are a few of the new contracts that we have. We're going to build and design a facility for Castellum and RISE. We won a framework agreement for several disciplines for Jernhusen. We will look for the environmental conditions in a school for SISAB. And we also won a framework agreement for several disciplines within Wihlborgs properties in Malmö, Lund and Helsingborg. And these are just a few of all the assignments that we do every year.Let's go into the group financial summaries for the second quarter. I would like to say hi to Peter. Welcome.
Thank you, Helena. Well, looking into the second quarter and the group financial, we see that we have a solid margin of 8.5%. And due to the pandemic and the market conditions in 2020, we are fewer employees entering this year, and that is reflected on the revenue that you see has decreased compared to last second quarter on -- in 2020. We, however, see a strong development within Architecture & Management. And we also see a month-by-month increased order intake, and that is within all segments.We have a solid financial position with a sound cash flow, and we have decreased the net debt exclusive IFRS 16. And the cash conversion makes that possible that we have a good cash conversion.And now looking into the different segments. If we look into Architecture & Management, as I said, we have a strong EBITA development. It is the record-high quarter for this segment, and that is due to sales activity and the strong team and leadership effort that has been taken in this segment throughout this first half year and reflects in the quarter. And we also see an increased market activity within this segment.Looking into the Civil Engineering & Infrastructure. We have lower margin versus last year, and that is due to weak performance within infrastructure and also due to some fewer employees, but we still believe we have healthy margins within the core business with civil engineering and building environment and we have a solid demand for our services.Looking into Systems. We have margins in relation to last year's second quarter in the same level, so they are stable. And Systems was affected quite heavily by the pandemic, and we made the measures to meet the market situation in the second half of 2020 and also on the focusing on the core businesses. And we see now that our focus is to strengthening and growing the business and recruitment is essential, and we are going forward with that.Looking into the EBITA bridge between this year's second quarter and last year's second quarter. It's affected, of course, by the measures taken on meeting the market situation and also the focusing on the core business. Nevertheless, we see a strong development, as I said, within Architecture & Management.And then also some summary for the first half year. We see that we now have had a stable margin for the last 6 quarters, reaching a margin of 7.5%. And we see now that we have a good platform for further growth.And with that, I hand back to Helena, that will explain a bit about how that journey will go.
Thank you. So looking into 2025, we are the leading consultant. We are focusing on buildings. We already have a unique position, and we're going to take a larger part of the market. So this is, for me, very interesting, very important. So for the last 7 months, I've been working together with the management team and with the Board looking into the future, and I'm very proud to talk about this with you today.Before I go into this, I want to start in our history and the journey that Projektengagemang had since start in 2006. Our journey actually started already in the 1950s, where a few of our companies that we acquired started. So we are a multidisciplinary engineering consultant. Our mission and vision is to create innovative and sustainable solutions for our clients. And since start, our engineers, our architects and specialists, they've been shaping the future. They've been shaping cities, infrastructure and industries.And looking at this chart, you can see that we had a growth of 16% over time since 2006 until 2020. And we have been working, first, in the start-up phase. We've been building the critical mass. And the last couple of years, we've been doing a lot of measurements to have a strong and stable platform, which will enable future growth. Looking into 2020. I say we have this platform in place. For instance, our employee satisfaction is increasing all the time, and this is in the level with our peers in the industry. We also see that our turnover per consultant is increasing as well as the earnings per consultant. And one important measurement for us is the utilization rate, which is increasing by time. So we have this platform in place. We have this stable platform to enable long-term profitable growth for PE, Projektengagemang.I've been here for 7 months, 7 fantastic months. I have such a great job. I just love it. And what I see is we have an excellent competence base and 95% of what we do every day is within or around buildings. So excellent base within buildings.Our company is very agile. I can feel the entrepreneurship with all my employees. And we have -- are in a sweet spot. We're small, but still large. We're smaller in the local market, and we can be very fast in all the decisions we make. And still, we're so big we can take all the different assignments that our clients need.I see this great potential going forward, and I really look forward to the journey that we're on. And one of the important things for us is that we consolidated during '19. We have this stable platform in place, which will enable long-term profitable growth for Projektengagemang.I've also seen during this last couple of months we've been affected by the pandemic. And during '19, '20, a weaker market. So what we've done during this last couple of months we've been focusing on the clients. We've been focusing on going to our business. We've been focusing on recruiting and with sales initiatives.What I also see is the need for P&L responsibility in all levels in the company. And I also see that we need to focus on our strengths, build on our strengths, which is within and around buildings. And I also see that we today we have a unique position, and we want to make this position even more distinct.By 2025, PE is Sweden's leading technical consultant specialized in buildings. This is our ambition. We will be Sweden's leading technical consultant, and we are focusing on what's in and around the buildings. And when we look at this, our offer is wide, it's high and it's sustainable.And when I say wide, I talk about all the skills we have. I talk about all the clients we have. We work with all different kind of clients. We work with hospitals. We work with schools. We work with buildings -- with commercial buildings. We work with everything from -- everything buildings.And we also -- when I say high, I think about our competence. We have such a high competence in the company, and we also work with high buildings. We work with a lot of the largest and highest buildings in Sweden. That's amazing.And when I say sustainable, every day, as a consultant, as an adviser, we need to come with creative and innovating solutions to help our clients and to form the future cities of tomorrow. It's also important that our workplace is sustainable for all the employees. So wide, high and sustainable. That's Projektengagemang.Our focus forward, it's 5 simple but very important steps. We are a committed and a long-term partner. We develop and we grow in our core areas. We are a creative and learning organization. We contribute to climate change. And we use digitalization and new technology.And why do we do this? We are a committed partner because we want to create the highest client and customer value, and we do that every day. We develop and grow our architects, our specialists every day to be able all again to create the highest customer value and also to be the best workplace. That's what we want to be. And that's also why we always work with learning and to be a creative organization.Plus, it's very important that what we do is sustainable, and we want to work with climate change and to be a very important part to reduce the climate change. And to be the best, to ensure the high quality to our clients, we also need to be in the frontline to use digitalization and new technique. So this focus going forward will enable long-time profitable growth. It will enable values for all our clients, for all our employees and also for all our shareholders.We've already done a lot of things. So for this first half year, a few of the initial measures we've been taking is focusing. We're focusing on Sweden and the Nordic region. We're focusing on this market. And that means that we are ending our involvement in India, where we are a partner, a part owner of a company. So focusing on Sweden and the Nordic region, that's important for us.We also took a decision to divest our part of infrastructure within railways. So from the 1st of September, our employees will be in another consultant firm. And the reason for this is because we see the employees and the clients will develop more in an environment where focus is infrastructure. Our focus is in and around buildings.Another step we've been taking is a more decentralized organization, more customer-focused organization. So from the 1st of January, we took the decision to take away 1 management level. And now we have an even more decentralized organization. And during this last couple of months, we also decided to consolidate to fewer business areas, and everything is aiming high customer value and to be the best workplace.And we also decided to still focus on Industry, but we took away the part which is focusing on process development and production. So we still work with buildings within Industry.So these are 4 additional measures we've been taking during this first half year. We are ending our involvement in India. We have divested infrastructure part within railways. We have decentralized the organization by taking away 1 management level, and we also decided to moving out part of the industry projects we're doing. Everything is focusing to take us to our full potential going forward.Today, we announced new financial targets set by the Board, and these reflects our way going forward. We're raising the EBITA margin. We will have a 15% revenue growth. We are raising the net debt at 2.5%. And the dividend is unchanged, 30% to 50%. So these targets, they will be achieved over time, but at least in 2025 -- at the latest in 2025. So these new targets, they really reflect the high potential that I see and the management team and the Board see together with me.I could take a short summary and outlook. Today, we have a stable margin. As Peter said, for the last 6 quarters, we have had stable margins. And in this quarter, 8.5%. And for the first half year, 7.5%. We improved our order intake every month during this year, and I see that this will continue forward because we have a market activity which is good.We also can see that our revenue is impacted by the fact that we were fewer employees in the beginning of 2021. But during this year, we've been focusing on recruiting, and we will continue recruiting and welcoming new employees to Projektengagemang.Our focus on profitable growth is important and will get result during the coming years forward. This new strategic decision that we've taken it's because we want to strengthen our offer. We want our clients and our employees and we want the investors to know what we are best on. And we are best in and around building. So that's what we're focusing on. And we have such a wide competence base with all the architects, all the engineers and all the specialists. So we will continue to get better and better every day.Already today, I want to say that Q3 is usually our lowest quarter in terms of revenue. And the new targets that we set, the new financial targets that we set, they are focusing on the future and the great and full potential in this company.So if I want to sum up, by 2025, Projektengagemang is the leading technical consultant in Sweden, and we are focusing what's in and around buildings. We are specializing in buildings, and we will be the best.So with that, I would like to open up for questions, and I do hope we have a lot of questions. And Peter, please welcome and help me here.
Thank you, Helena.
[Operator Instructions] We currently have no audio questions registered. I will hand back to Arvid for any web questions.
All right. Thank you, everyone. We have a lot of questions online. My name is Arvid Linder, and I'm the Head of Communications here. And I'm going to ask all your questions that you have sent to us to Helena and Peter here. [Operator Instructions] So let's see what we have here. From when can you see organic growth?
What we do, we work with organic growth as our focus, and we will see organic growth in the beginning of 2022.
All right. We're moving on here. We don't have really an order. We just read them by the way they came in. What did you receive for the railway business sold to another partner in the business? What did you receive for the railway business?
As you know, the railway business we sold was 18 consultants, and we will have a takeover of 1st of September. And there are some variable parts in that, so we'll come back to the final situation in the Q3.
During the quarter, we also identified new synergies in our organization and decided to merge a number of business areas to further boost synergies and generate greater customer value. How large impact and when will it hit the P&L?
How large impact, the new organization?
Yes.
We decided to focus our business. And what I see and what we see together is, when we work together as a team, we will get better environment for all the employees. So we will see a profitable growth, thanks to this new organization.
All right. You will also be ending your involvement in India. How will that impact your P&L? And how will that impact your organization?
Well, the organization in India is around 40 employees. And of course, the net revenue and the EBITA reflecting that in India is not that significant. And during the year, we see that the effect will be minor on the overall profit and loss and on the balance sheet.
All right. A follow-up on employees. How much will the divestment of railways and ending involvement in India affect Q3 in terms of employees?
So it's 18 persons in the railway sector, as Peter said, and also 40 employees in India.
And we got a lot of questions about recruiting. You mentioned improved market conditions. However, the net recruitment from Q1 was still negative. Can you discuss this development further and how it developed during the quarter and what you see in the beginning of Q3 as well?
If we go to the history, already in 2019, Projektengagemang started to consolidate the business, and we took a lot of measures to enable growth, but it also affected the amount of employees. In 2020, we were affected by COVID, and we had people in short-term work and also ended some of the employees.But now since the 1st of January, our focus is really on recruiting. We see the market is driven by urbanization, by the globalization, by climate change. We see digitalization. And we also see that our clients really need our consultants and the help. So during this couple of months, 6 months, we already recruited 100 new employees. So we will continue.
Yes. And how will it look in the beginning of Q3?
In the beginning of Q3, the amount of employees?
How -- what is -- what do you -- how will it develop? How will you see it develop during the year?
We will continue recruiting, and we will continue to create the best workplace. And as I said before, we will see organic growth in the company in the beginning of 2022. So Q3 is on the journey to 2022.
All right. What is your perception of the recruitment on the market currently? Is it hard to recruit?
It has -- it's always hard and -- but we think and believe we -- we see that we have focused on recruitment, it is a bit of a backlog, to have it ongoing. But as Helena said, we have, throughout the first half year, recruited 100 new competent employees. And it is constant work, but we believe, with our offer and the interest for our company, that we can drive that forward.
And what we also see is that it's a big interest in the company. We hear from potential employees that PE is a very interesting company. And at this point, a lot of people -- every time we put on a new ad, we see that we have a lot of people looking into the home page and actually employing -- applying. So we'll continue employing. And it's hard, but very important and very fun way of growing.
Do you see any inflation in market salaries?
Well, we are currently within an agreement that is covering 2022. But of course, it is a competition of the good consultants, but we see that we are in this overall agreement that is covering also 2022. And of course, it's also the mixture of consulting, recruiting that would see the -- will hit the personnel cost on the P&L.
[Operator Instructions] Net recruitment development looking into Q3, you answered that. Do you expect number of employees to start increasing from Q3?
We see from -- the organic growth from beginning of 2022.
Yes.
How many of the 100 recruited employees have already started in the company?
More than 50.
All right. I have some more questions here. When do you expect to reach the new financial targets?
Well, as stated by the Board, it is a long-term goal and target. And we have stated that it is this -- at the latest, 2025. But of course, with this focus on the building and services surrounding buildings and also that we are building on the core businesses that have good business and development, of course, we strive to do it as fast as possible. But as we stated, at the latest, 2025.
What can you say about the market conditions, if we go through the segments?
If you go through the segments, we can see, for instance, in Architecture & Management, we can see that it's an increased activity, and that is very good because that's usually a sign of a better market. So we've seen a better marketing during the second quarter, and we also see a better market going forward in the third and fourth quarter in all our segments both in buildings -- sorry, in Architecture & Management and Civil Engineering and in Systems.
You have an annual growth target over time by 15%. How much do you expect to be organic? And how much is to be acquired?
Looking at the journey we had, we've been both acquiring companies and we've been growing organically. That is our focus forward. We will start with organic growth, but M&A and acquisitions is a very important part of this growth journey.
Nothing further. You already said it so...
And you stated that organic growth will start in 2022?
Yes.
Well, right, I don't think I have any more questions. So without further ado, Helena, do you have any final words? We leave the stage to you.
You'll leave the stage? Thank you. I had great time so far at Projektengagemang. This potential I see, it's great going forward. And with this new focus on specializing on buildings, we will take a leading position. I really look forward to this journey together with all the employees, with all our clients and with all shareholders. And I want to say [Foreign Language]. I hope you all will have a really nice summer. So thank you, and see you soon again.