Sweco AB (publ)

STO:SWEC B

Earnings Call Transcript 2019-Q1

[Lars Torstensson]

Good morning, everyone, and welcome to Sweco's First Quarter 2019 Interim Report Presentation. My name is Lars Torstensson, and I am Communication Manager here at Sweco. It's good to see so many of you joining us today here at our headquarter, but I would also like to take the opportunity to welcome everyone that has joined us via the web today as well. I should mention that it's also today possible to ask questions via the telephone conference. So please prepare yourself for that. With me today, I have, of course, as always, our President and CEO, Åsa; and also our CFO, Jonas. And I would like with that say, Åsa, please take us through the formal presentation.

[Åsa Bergman, President, CEO & Director]

Thank you, Lars. Good morning, everyone, and welcome to all of you. I'm really excited to present this quarter. I'm also really happy to welcome you to Sweco's headquarter for the first time here in Marieberg, Stockholm. Here you get a glimpse of what we are working with, how we combine the expertise of architects and engineers. We redesigned this office ourselves, 2012. And when you walk around, you will see the work done by our architects, our interior designs and our engineers. And we think they have created or we know they created a really sustainable, and we think it's really beautiful and it really supports the way we work. So with that said, really welcome. And with that, we jump into the first quarter.And the first quarter is the best quarter to-date. And what we are seeing is that the trends you saw in Q4 is continuing into Q1. We have a positive momentum in most of our markets and an overall positive fee development throughout the group. We hire new talents, and we have a good demand for our services, a solid order backlog. And then I would give you some highlights from the quarter. The net sales increased with 10%. We delivered a solid organic growth of 5% in Q1. And look at EBITA, I am really happy to say that we now are delivering a new milestone in Sweco's history. We are above SEK 500 million in one quarter. And Norway and Finland more than doubled their result compared with last year. Also Denmark and Belgium is showing strong improvements. And I would also like to highlight that we see continued development in the Netherlands. So overall, we have a good momentum in all our markets. We are also seeing improvement in the margins in the quarter. We delivered 10.4% in this quarter, and it's really nice to see that 4 out of 8 business areas is delivering double-digit margins in this quarter.And Sweden, continuing on industry-leading margins. A little bit behind is Finland, and then Belgium and Norway is followed -- following them. And again, continued improvements when it comes to the margin in Denmark and in the Netherlands.So regarding the market situation, we see good demand in all our markets. So altogether, I am really pleased with this quarter. And we are showing strong growth, and we are showing a strong result. So let us take a closer look at the quarter.So overall, we delivered 5% organic growth adjusted for the calendar, and this is in line with our historical average and this is what we're aiming for. And particularly strong delivery from Norway and from Finland and Belgium, and I really would like to highlight these 3 markets in this quarter because they are showing good improvements across the line, good growth, strong EBITA and good margins.So overall, organic growth is good in 7 out of 8 of our markets. And the exception is U.K. In U.K., we are not where we want to be. And this is partly due to the market and partly due to how we operate. We are working hard to implement Sweco's model in U.K. to strengthen our business there and that is to ensure that we actually work with the right clients and the right project in that market.So despite the weak performance in the quarter, we are seeing a more stable situation in U.K. But it would take us some time to get where we want to be in U.K. However, our long-term view of U.K. is positive. And as you know, we recently announced an acquisition in the U.K. and I will get back to that shortly.So to summarize, we see good growth in the quarter. Development is supported by positive fee development, a solid order backlog and recruitment continuing in the quarter. We recruited 600 new employees that started in this quarter. So with that, I will jump into 2 new topics.As you know, at Sweco, we have a clear strategy and we have a strong platform for future growth. And we plan and design the sustainable cities and communities for the future. We are acting in segments that is supporting by strong underlying trends. We have a clear geographical footprint with 8 core markets in Northern Europe, where we're aiming for a market-leading position and that we strongly believe that we -- and we see room for organic and acquired growth on all those markets.And we have a proven operating model, the way we operate. And that is based on the decentralized organizational model; a strong customer focus on all our markets, ensuring that we have the most efficient internal processes and that we have the best people in our business.And therefore, in line with the Sweco strategy, we accomplished 2 important events this quarter. And first out is the change of the business area structure that I informed you about in Q4. But now you see it for the first time in the report, and this is in line with our strategy.So just let me walk you through the logic. We're focusing on 8 core markets, and we are aiming for market-leading position on those markets. So business area, Western Europe, is split into U.K. and Belgium. And the business area, Germany -- Central Europe is renamed to Germany and Central Europe to reflect the importance of Germany. So this is in line with our strategy. And it also is connected to the focus we want to have when it comes to the way we want to operate, to focus on growth on those market, but also focusing -- implement Sweco's model to even more grow on those markets.One of the new business areas, as I said, U.K. and here we announced the acquisition of MLM Group last week. This is a very good opportunity for Sweco and MLM Group has a strong and long track record in the U.K. market. And this step is taking us further to the market position that we want to have in the U.K. market. And the combination of Sweco and MLM on the U.K. market strengthened our portfolio of services. It gives us a stronger geographical footprint on the market. MLM is mainly working in the fields of buildings and infrastructure -- transportation infrastructure, they've 460 employees, 13 offices and they have a turnover of 5 -- approximately SEK 500 million and a margin of 10%.So in line with our strategy would take us closer to the market-leading position. With this acquisition, the size of the U.K. business grows with 50%. And the strategic rationale here is very clear. Firstly, again, a solid step towards the market position. Second, it strengthened our position in the fields of building and infrastructure on the market. And thirdly, MLM and Sweco has complementary footprint, meaning that we will have a more local presence on the U.K. market. And this is a key factor for how we want to operate on all our markets. And thirdly, there is excellent cultural fit with strong focus on clients and a decentralized way of working. So good and important step for Sweco in U.K., and this will take us to a mid-player on the U.K. market and then we will challenge top 10 on the U.K. market.And with that, Jonas?

[Jonas Dahlberg, Chief Financial Officer]

Thank you. So -- thank you, Åsa. I think you said it most. But I'm going to take the opportunity to rub it in again in some more detail as well. Starting on top line and in this quarter, we grew with 10% and organic growth is 6%. What you don't need to understand is that we also have more working hours this quarter, 6 more hours. So if you compensate for that effect, which is SEK 53 million on top line and EBITA, then the underlying organic growth is 5%.And this underlying organic growth is mainly supported by fee development, which is positive and also with more FTEs. And that, of course, is supported by a solid order backlog, an order backlog which is basically development in line with revenues.So now if we look at where this growth is coming from, it's fairly broad-based. Most businesses are contributing to the growth. In particular, Norway is worthwhile mentioning here staggering 13% growth, delivering this through good recruiting, but also a positive fee development and improved billing ratio. But you can see also, Finland and Belgium growing strongly, Finland with 8% organically; and Belgium, 9% mainly with the same drivers in slightly different mix. But also Sweden growing 4%, and we think this is strong given the discussions on the residential market in Sweden. And this just proves that we have a portfolio in other attractive market segments like infrastructure and in the industrial sector, et cetera.In all 600 more colleagues joining Sweco since 1 year back. Important to understand here also that there is a seasonal effect in recruiting, so you can't really compare Q4 to Q1. We see a positive development here, and we think the year-on-year development is what to look at.Moving over to EBITA. As also said, first time passing SEK 0.5 billion in a quarter. Worthwhile celebrating just that, but we also want to celebrate the strong development of several business areas and I'm coming back to that.So nominally, the improvement is more than SEK 120 million, but here also, again, you need to look at the calendar effect of SEK 53 million. But even if we adjust for that, the underlying improvement is SEK 70 million. And SEK 50 million of this is purely operational and the remaining 20% is combination of M&A and FX effects, so SEK 50 million operational improvement. And this brings us to the best quarter-to-date for Sweco.It may be interesting to go back to quarter 1 2017, where we were very close to the SEK 500 million mark. The difference is that quarter had 10 more hours and that alone is an effect of more than SEK 80 million. So in 2 years, the first quarter underlying improvement is SEK 120 million. We think that's worthwhile mentioning.Now having this said, we think -- we're slightly concerned that not everyone understands the calendar effects fully of Sweco. So just a heads-up when it comes to quarter 2. In quarter 2, we have 12 hours less for the group and that is an effect of about SEK 100 million on top line and EBITA compared to 2018. So please remember that. And in particular, Norway, they are extremely good at celebrating Easter. So that effect is 40 hours alone for Norway, approximately SEK 40 million in Norway.And also, year to go from now on 8 hours less compared to last year. And also remember, Q3 is normally a seasonally weak quarter due to the holiday period. Having that said, this is strong. This is very strong, but do the math on the calendar going forward.Now on business area level, walking through some details on the business areas starting with Sweden. And these numbers that you see are calendar adjusted, $6 million less compared to last year. Positive contribution to EBITA is the growth, but we also have slightly lower billing ratio due to uneven market demand. Some segments are doing extremely well, but we have some segments, in particular, in residential, which has somewhat negative impact.Norway basically achieving an improvement of SEK 16 million due to growth, improved billing ratio and improved fee levels, so very solid. Finland, and this is amazing, alone contributing to more than half of the improvement calendar adjusted in the quarter. And this comes from several drivers improved fees, but also lower product write-downs. And so we are very happy with the results in Finland. Denmark, increased billing ratio is an important contributor. Netherlands, increased fees and growth in FTEs contributes. Belgium, basically firing in all cylinders, it's fees, it's billing ratio, it is more FTEs. And then we come to U.K. and Germany. And here, they are not fully performing as we would like them to do. U.K. is partly Brexit related in the buildings area, but then there is a public tender cycle in the water sector, a 5-year cycle and we're now in the trough of that cycle. And then we have some unfortunate product stops in infrastructure, which are not, in general, market related, but it's specific for us. But development in U.K. is stable and as MLM improves, you can deliver very solid margins in the U.K. market. And that's what we're aiming for also in the future. Then Germany, the ones who have followed us for some time know that we've grown a lot in Germany. And now we're doing a little bit of catch-up aligning the organization, strengthening the organization. And in this period, we take some additional costs. We also have slightly lower billing ratio due to this organizational change and quite frankly, we have some product write-downs as well.With the calendar effect, this brings us to the SEK 531 million and the 10.4% margin. And a couple of more comments because we really want to celebrate this. 4 business areas above 10% margin in the quarter, and what we're, in particular, proud of is achieving this strong result even though U.K. is not fully performing, even though Germany is not fully performing and they're not saved by Sweden. So this quarter is the quarter of Norway, Finland and Belgium who drives the performance of the group.Cash flow. I won't talk much about cash flow. It's a solid operating cash flow. We are having a little bit more working capital in the quarter, but this is perfectly normal in the seasonal pattern. And so overall solid cash flow, which brings us to a strong financial position with a net debt to EBITDA of 0.8, and this is strong position that we can use to further enhance our market leadership through acquisitions as we have done after the quarter with the acquisition of MLM.And with that, Åsa, please?

[Åsa Bergman, President, CEO & Director]

Thank you, Jonas. So as I said, the Sweco model is a proven key to our success and making sure that all our markets is operating towards the Sweco model is my key priority going forward. And it's about that this model is the foundation for us to be attractive, working really efficient on each market and working really fast-moving on each market. One important thing with the Sweco operating model is our customer focus to ensure that we are the most approachable and committed with recognized expertise on all our markets.So let us then move on to the market situation. Overall, good demand for Sweco's services and supported by the underlying trends of sustainability, urbanization, digitalization. The market situation is almost similar to what we talked about last quarter. We see good demands in infrastructure across all markets, good demands in industry and water. When it comes to U.K., commercial markets in U.K., especially London area, also residential market in the Nordics, focusing on the large cities, it remains weak. But overall, good demand for our services.So with that, I would like to conclude. This quarter, I am really pleased with this quarter. This is the best quarter-to-date. We delivered solid organic growth of 5%. We are hitting a new record level of SEK 5 million in one quarter. We are improving our margins, and 4 out of 8 business areas is delivering double-digit margins. And we could announce the acquisition of MLM Group to further strengthen our position in the U.K. We have a solid financial position and the demand for our services is good in an overall perspective.Thank you very much.

[Lars Torstensson]

Thank you, Åsa, and thank you, Jonas. That concludes our formal presentation. And we are now ready for some Q&A. I see you're already eager. Should we start with the gentleman here down in the corner? We have a little bit of a pause here. Excitement.

[Johan Dahl, Analyst]

Johan at Danske Bank. Just a question on the SEK 50 million, Jonas, you referred to as operational improvements in the quarter. Is that possible sort of to split up? What is projects, what is sort of fees? And I am mainly at -- in terms of the project adjustments in this quarter, were they exceptionally good? Was it the matter of easy comps in the first quarter? Or how would you rate it? Is it sustainable or more of a one-off?

[Jonas Dahlberg, Chief Financial Officer]

If it's sustainable, that remains to be proven. But it seems pretty sustainable. And if you look at it, it's mainly in Finland we have a lower level of product adjustments. And they've been working really hard with their product adjustments. And you can see that in those units where they have -- they had issues in the past and they worked on it in Finland. They are now delivering on a much higher level. Of course, we would like to see a longer track record in those units to be fully comfortable, but it really looks promising.

[Johan Dahl, Analyst]

And on the topic of fees, is that -- in the first quarter, did that -- I mean it's a positive trend you've had for some time. Was it accelerating in Q1 or stable?

[Jonas Dahlberg, Chief Financial Officer]

It's on trend. It's on trend, the development, so it's not exceptional in any way. And it's not any significant positive adjustments because we're ending product or anything like that. Fee development is on trend.

[Johan Dahl, Analyst]

Then just to follow up on the U.K. acquisition. I was wondering how long do you expect it to take for you to get that sort of leading position in the U.K. And secondly, also should we view this acquisition in the U.K. as a sort of platform acquisition fairly priced in that sense sort? Could you put any more color on that?

[Åsa Bergman, President, CEO & Director]

As I said, we have a positive view of the U.K. market, but we have a position of #16 on the market before this acquisition. Now we are in position 13. So this brings us closer to the top 10. And we are looking for potential more companies and targets on the U.K. market. But again, it's about finding the right match. But of course, we will -- we combine those businesses on the U.K. market and we grow from there. So it's the combination of MLM and Sweco both when it comes to project, client relationship, and then we use that platform for further growth. But we also look at finding, of course, potentially more companies on that market. But again, timing-wise and that's about finding the right target.

[Jonas Dahlberg, Chief Financial Officer]

And to the second part of your question, Johan, the valuation here is in line with historicals that we paid for comparable earnings and potential. So it's not particularly price in that sense. It's not particularly cheap either, but it's normal Sweco range, if you will.

[Lars Torstensson]

Thank you, Johan. I should also remind that it's possible to ask questions via the telephone conference. But before we see if we have any questions, we will take Predrag. Question, please.

[Predrag Savinovic, Analyst of Consumer Goods]

Just following on the U.K. theme here. I noticed it's a good overlap with where you're positioned in the U.K. with MLM now as well. What kind of synergies do you expect to see from this acquisition in terms of -- I mean office space, et cetera?

[Jonas Dahlberg, Chief Financial Officer]

So typically, the synergies we see in these types of acquisitions are in administration, IT and offices. And we're not quantifying or disclosing the amount of synergies in this case. And then longer term, we see a lot of joint commercial opportunities also to further boost growth and profitability. And in particular, in the buildings sector, in the London area, there is a lot of complementarity between their structure design capabilities and our building service capabilities.

[Predrag Savinovic, Analyst of Consumer Goods]

And if you put the U.K. in perspective to Germany, so Germany is very important. You grow considerably now in the U.K., but to my knowledge, there are more tangible targets in the U.K. market. If you would say which one you'd prefer to grow in through M&A going forward? Which one...

[Åsa Bergman, President, CEO & Director]

So we are focused on both of the markets. And again, we need to work different in U.K. than we work on the German market because it's, as you say, the German market is more fragmented, it's smaller targets. But we are working with that market in the way we need to do, and we are handling U.K. in the way that we need to handle U.K. But we will not prioritize. We work on both markets at the same time. But of course, it would take longer time to grow in Germany, but it's also more demanding to find the right targets in -- on the U.K. market.

[Jonas Dahlberg, Chief Financial Officer]

In addition, we are looking at growth in Denmark, in Finland and basically the entire footprint to build the long-term leading position that we know is driving success in the local market.

[Lars Torstensson]

We have another question from Ola.

[Ola Soedermark, Equity Research Analyst]

So Ola Soedermark, Kepler Cheuvreux. Coming back to the good development in several business areas, Belgium, how sustainable is it and what can we expect going forward?

[Åsa Bergman, President, CEO & Director]

The market is good and the demand for our services is good. There is a need for more engineers on the Belgium market. We have a very good operation in Belgium. So it is sustainable.

[Ola Soedermark, Equity Research Analyst]

And you also mentioned in Germany that maybe taking a step back and working with the organization and so on. And you also mentioned that you had a small write-down. Is it possible to quantify it?

[Jonas Dahlberg, Chief Financial Officer]

Well, it's a combination. If you look at -- compared to last year, what drives the decline in margin is lower billing ratio, it's product write-downs and some additional costs. And it's that mix.

[Ola Soedermark, Equity Research Analyst]

And number write-down, is it material or less? So you get the feeling what the -- it's a one-off.

[Jonas Dahlberg, Chief Financial Officer]

Well, I think now when we do the changes in Germany, our expectation is that it could take some quarters before Germany is fully up and running performance-wise again.

[Lars Torstensson]

Any further questions from the floor? Viktor in the front.

[Viktor Lindeberg, Financial Analyst]

Continuing on the U.K. and just thinking about this in a Brexit perspective. It's maybe the increased uncertainty factor that has played in favor of you being able to close this acquisition. And secondly, when you now think of the opportunities there, would you say that the pipeline as such has improved or the pricing in these acquisitions has improved in favor of Sweco?

[Åsa Bergman, President, CEO & Director]

As I said, we strongly believe in the market in a long-term perspective. What we see is that the Brexit is affecting the commercial market and the London area. If you look at MLM, for example, they're making margins of 10% in their business and have done over a long period of time. So it really shows that the market is actually -- it's a good market if you have the right mix of projects and the right clients in your portfolio. So I -- we have been working for this for quite a long time and that's how we do when we acquire companies. So if it has been easier or harder, this is the normal kind of process we have and we have a long view of the U.K. market.

[Viktor Lindeberg, Financial Analyst]

Your pipeline as such in the U.K., how many targets have you crystallized? Is that possible for you to comment?

[Jonas Dahlberg, Chief Financial Officer]

Look, we're working actively with the pipeline throughout the entire footprint. And even if I would disclose what that look -- would look like, it is a bit unpredictable when actually these acquisitions materialize. Sometimes it moves fast, sometimes it takes years. What we're looking for are high-quality organizations in terms of engineering and architecture capabilities, and then it takes time to understand if there is a fit for both ends, both from the target's end as well as our end because there has to be a cultural fit and there has to be a belief in a joint future. And that discussion can take some time.

[Viktor Lindeberg, Financial Analyst]

And then maybe following up on organic growth, looking at recruitment and thinking of the environment not least in Sweden. Now we hear from some smaller peers of yours struggling a bit in the Swedish market. And we also have a bigger peer of yours merging with a Finnish peer. Thinking about the market and looking at recruitment is -- how do you see the market right now? Has it changed in any way?

[Åsa Bergman, President, CEO & Director]

We have the same market situation as we reported in Q4, and our order backlog is growing in Sweden. And I think it's really important, again, to emphasize that we have a broad project portfolio and a broad client base, so we can use our resources in different areas. And we really, of course, try to do that and work more closely towards the market. But that's our view and that's what we see in our figures, in our business.

[Viktor Lindeberg, Financial Analyst]

But it's not like you see an elevated employee turnover potentially in other companies that you have been able to attract in any way?

[Åsa Bergman, President, CEO & Director]

We are attracting and we recruited -- or 600 new employees started in Sweco. So we have a good trend there and we are attractive, and we're also seeing more stable personnel turnover in the Swedish business, which is good. But -- so we continue with that focus.

[Lars Torstensson]

Any further questions from the floor? We have a follow-up question from Johan.

[Johan Dahl, Analyst]

Yes. Very quick follow-up. Just on group order. I think you mentioned they were in line with revenues. Do you notice some sort of trend shift there? I think we've always talked about previously higher order intake. Secondly, on the billing ratio in Sweden, how do you feel about that? I think you said it was down slightly in the first quarter. Is that something you're addressing sharply? Or does it have other explanations?

[Jonas Dahlberg, Chief Financial Officer]

To the first question when it comes to order backlog, it is solid. And from my experience looking at order backlog, you need to see -- pick the dramatic swings in the order backlog to have any certainty about how that will impact revenues going forward. So the order backlog is solid and develops in line with revenues, whatever that will mean for the future. We feel comfortable because it's on a high level. What's more important is the shape of the order backlog. You don't want a Swiss cheese type of order backlog. And there -- it is solid, but in some areas, in the Nordics residential area, as an example, the order backlog is weaker. And that is what is partly explaining the lower billing ratio in Sweden. Even though we are not super exposed to residential in Sweden, we have exposure.

[Åsa Bergman, President, CEO & Director]

And to comment on the billing ratio in Sweden, it's on -- I am not satisfied with the billing ratio in Sweden. We can perform better. But we are stable on this level, but we are working with strong focus on the market and the customer and with the internal efficiency in Sweden to ensure that we focus on the billing ratio.

[Lars Torstensson]

Okay. Erik as well from Handelsbanken.

[Erik Elander, Research Analyst]

So I also wonder about net recruitment because it was 158 people coming into Sweco in this quarter. And you say that personnel turnover is declining or flat year-over-year, so is gross recruitment becoming more difficult?

[Åsa Bergman, President, CEO & Director]

No. We are attractive, and we can recruit as many as we want to. Yes. That's the situation.

[Erik Elander, Research Analyst]

Okay. And also regarding the billing ratio because it was quite good, the improvement, at least quarter-over-quarter because for some quarters now you have lost around 1 percentage point year-over-year in billing ratio and now it was just 30 basis points. Can we -- should we expect billing ratio to come up year-over-year also for the coming quarters?

[Åsa Bergman, President, CEO & Director]

I will not give you any forecast of the billing ratio, but looking at the billing ratio, we see improvements in 5 out of 8 of our business areas. It's Sweden, it's U.K. and it's Germany that is behind when it comes to our billing ratio. So we are focusing there to securing the right focus and driving more efficient operations.

[Erik Elander, Research Analyst]

And also regarding MLM, the acquisition that you did, 10% is quite high margin at least compared to your U.K. business. Is this company already working according to the Sweco model?

[Åsa Bergman, President, CEO & Director]

Yes, more or less, but not fully. So they have a local presence. They believe in the decentralized organizational model, and they are very driven by focusing on projects and doing business, so in that sense. But of course, we can do even better.

[Jonas Dahlberg, Chief Financial Officer]

One thing that we appreciate a lot with MLM is the very local nature of the business and the local market leadership they have in Southeastern England. And they have a very nice mix of projects in terms of product sizes, and this is something that we have been working on in our U.K. operations where we had, quite frankly, too much large projects. And then when you get -- maybe some projects are stopped and this is quite natural, this happens. It becomes very difficult to mitigate that from a utilization point of view. And this is something when our U.K. business came into Sweco through the Grontmij acquisition that we've been working on, but MLM is already there with a very nice product portfolio. And this is important for performance.

[Åsa Bergman, President, CEO & Director]

And to add on that, it's the same when it comes to private and public. We work more public, and they work more private.

[Erik Elander, Research Analyst]

Okay. And then just a last question for me. The financial position is now very good at 0.8x EBITA in terms of net debt. Are there many companies like MLM for -- up for sale? And where, in that case, should we expect them to come in the future? I'm talking about like 450, 500 employees with that type of margin.

[Åsa Bergman, President, CEO & Director]

And back to the same answer with -- there are companies of that size, but it's again to find the ones that have the right fit for us. So we are working on that constantly.

[Lars Torstensson]

Thank you, Erik. We are not done yet. Predrag, you have to hold on. I am just going to check if there are any questions from the telephone conference. So operator, could we have the question if there is one?

[Operator]

[Operator Instructions]

[Lars Torstensson]

There are no questions. But -- then it's very good that we have another one from the floor. So we have time for a last one from Predrag, Nordea.

[Predrag Savinovic, Analyst of Consumer Goods]

For some time -- I mean if you look back a couple of years, your price increases have always been leading to wage increases. Then you had a couple of years where it was the reversed scenario. And to my knowledge now if you look at aggregated data, also based on previous comments, it seems like staff churn is down, wage growth has really slowed, but you still increase your prices and manage to push them through it seems. Are you kind of in a sweet spot now when it comes to margins? I mean it may be hard for you to answer, but it seems we can get some expansion from here.

[Åsa Bergman, President, CEO & Director]

So we...

[Jonas Dahlberg, Chief Financial Officer]

I'm bringing -- I'm picking up my crystal ball now. Okay.

[Åsa Bergman, President, CEO & Director]

So...

[Jonas Dahlberg, Chief Financial Officer]

It's very crystal so you can't see it really.

[Åsa Bergman, President, CEO & Director]

So you could take a crystal ball. And then I -- again, we are focusing really strongly on the relationship with the customer and to be customer oriented. So we really deliver the right quality. We make right -- try to make the right choices on the market, and we are focusing on develop the prices and get paid for the value that we'd bring towards our clients. That's what we're focusing on and that -- we continue to do that.

[Jonas Dahlberg, Chief Financial Officer]

And setting the crystal ball aside, your analysis is correct. That's what's going on now. How this will play out in the future, I think it's difficult to predict. We see pricing potential. Achieving the pricing potential, harvesting the pricing potential, that is the trick. And this is on the gross margin. Where we see the potential is on billing ratio, but that's also about execution. So potential is there, it's about harvesting it.

[Lars Torstensson]

Okay. I'm going to check last time. Operator, are there any questions from telephone conference?

[Operator]

No questions over the phone. Thank you.

[Lars Torstensson]

So that concludes our presentation for the first quarter 2019. We look forward to stay in touch, of course, until the next quarter. So don't be a stranger. We're always here for you. With that said, second quarter 2019 will be presented at 16th of July. So you have a great day, and see you soon. Thank you.

[Åsa Bergman, President, CEO & Director]

Thank you.

[Jonas Dahlberg, Chief Financial Officer]

Thank you.