Sweco AB (publ)

STO:SWEC B

Earnings Call Analysis

Strong Sales Growth Amid Challenges

In a challenging macroeconomic environment, we delivered a strong full year, with an increased net sales of 17% and an organic growth rate of 8%. EBITA improved by 18% for the year, and our 10 new acquisitions bolstered our position as the European leader. In the face of a tough quarter mainly due to the UK performance, resulting in a 4% EBITA decrease from last year and a margin at 8.5%, we've taken actions that are expected to show effects as we continue our growth journey into the following quarters. Notably, services linked to the green transition show robust demand, signaling the influence of our expertise around Europe's push for sustainable developments. Our solid financial standing enables us to propose a dividend increase of 9%, reflecting a 63% payout ratio. Looking ahead, our primary focus will be on the UK business's repositioning and improving efficiencies, especially in underperforming segments, to harness market growth opportunities and execute our ongoing M&A strategy.

Sweco's Solid Year Amidst Macro Challenges and Mixed Q4 Results

Sweco, a leading European architecture and engineering consultancy, showcased resilience in a tough macroeconomic environment, delivering a strong performance for the full year. The company saw a robust 17% increase in net sales and an 18% uptick in EBITA, achieving organic growth of 8%. This was complemented by strategic acquisitions that fortified Sweco's European leadership. A key aspect of Sweco's strength lies in its diversified business operations across various segments, boasting a balanced mix of 22,000 professionals serving both private and public clients. Sweco's growth is deeply rooted in its role as a facilitator of the green transition in Europe, which is a noteworthy narrative for investors interested in ESG-focused companies.

Quarterly Performance and Strategic Decisions

The fourth quarter, however, presented a mixed picture. While Sweco continued to experience growth with net sales rising by 15% and organic growth of 6%, EBITA dropped by 4%, primarily due to challenges in the United Kingdom. The company's decentralized model and emphasis on cost-efficiency failed to offset the negative impact of the UK market's downturn on Sweco's profitability. Despite these hurdles, the company declared a 9% increase in the proposed dividend to SEK 2.95, reflecting confidence in its financial position and commitment to rewarding shareholders.

Regional Business Analysis and Restructuring Efforts

Belgium, Denmark, Sweden, and the Netherlands reported stellar quarters, with four of the eight business areas achieving double-digit margins. Sweco's conscious efforts to restructure the underperforming UK and Finnish segments include layoffs and cost reductions to align with the challenging market conditions in those regions. These adjustments are expected to bear fruit in the upcoming quarters. In particular, the UK's difficult transport infrastructure and real estate segments prompted significant negative project adjustments and further necessitated operational realignment.

Financial Health and Market Dynamics

Enduring financial health with a leverage decrease to 1.1 from Q3 demonstrates Sweco's capacity to release cash efficiently, maintaining a sturdy position to capitalize on acquisition opportunities. The demand for services linked to the green transition, especially in water and energy sectors, stays strong. However, the building sector experiences mixed demand, with public structures faring well but residential and commercial segments weakening. Sweco's strategy appears to pivot more towards renovating existing buildings given the dip in new construction demand.

Looking Forward: Operational Adjustments and Market Expectations

Despite encountering setbacks in certain areas, Sweco's leadership remains proactive, initiating measures that will begin showing results in Q1. The focus is set on a return to healthy organic growth and margin improvement. With the imposed restructuring costs in Finland and the UK totaling approximately SEK 55 million, Sweco is positioning itself to navigate through and adapt to market adversities while continuing to leverage its strengths, particularly in business segments tied to Europe's green transformation.

Earnings Call Transcript 2023-Q4

[Unknown Executive]

Good morning, and welcome to this presentation of Sweco's Q4 and year-end report. With me this morning, I have Sweco's President and CEO, Asa Bergman; and our CFO, Olof Stalnacke. They will take us through the results of the quarter and the year, of course. After the presentation, we will open up for questions. Please, Asa.

[Åsa Bergman, executive]

Welcome, everyone, to Sweco's Q4 presentation. Before we move into the presentation, let me give you a short overview of Sweco. Sweco is Europe's leading architecture and engineering consultancy with operation in 8 geographical business areas across our 15 markets in Europe. We are a well-diversified business operating across 3 different segments with a good balance between private and public clients. And the foundation for Sweco's long-term success is a mix of competencies spread across our now 22,000 experts.Our focus on organic and acquired growth as well as our efficient and decentralized operating model. With a strong financial track record and financial position, we are focused on continue our growth journey and build on Sweco's success.If we look at 2023 as a whole, it was a strong year. Despite the challenging macroeconomic climate, we continue to grow and improve, supported by our well-diversified business and a strong position as an enabler of the green transition in Europe.Net sales increased by 17%, and the organic growth rate was 8% for the full year. EBITA increased by 18% and 6 out of 8 business areas improved their results compared to last year. We also did 10 new acquisitions that strengthen Sweco's position as the European leader. And I'm pleased that the Board has proposed a dividend of SEK 2.95, which is 9% up from last year.Our financial position remains strong and enable us to continue to act on acquisition opportunities and execute on our strategy to reach top 3 positions in all business areas.In the past 10 years, we have delivered a solid improvement with a CAGR of 13% for net sales and 14% for EBITA, growing net sales with SEK 20 billion and EBITA with more than SEK 1.8 billion over the past years.With this summary, let's move over to the fourth quarter. The fourth quarter was somewhat mixed. Our growth momentum continued in Q4. Net sales increased by 15%, and the organic growth amounted to 6% driven by continued FTE growth and increased average fees.EBITA decreased by 4% compared to the fourth quarter last year and the margin amounted to 8.5%. The decrease is mainly related to the U.K., and this had a significant negative impact on EBITA in the quarter.We are also taking measures in specific underperforming segments in Finland, and I will get back to this more in detail later in the presentation. I'm [ not ] satisfied with the result in the quarter. But if we set those 2 businesses areas aside, the rest of the Sweco business delivered a solid result.Looking at the operational highlights in the quarter. We continued to deliver solid organic growth with 6 out of 8 business areas reporting positive organic growth in the quarter. 4 out of 8 business areas also reported solid double-digit margins. We continue to have a clear focus on growth, and we improved our pricing.Belgium, Denmark, Sweden and the Netherlands also reported a good quarter, and Germany continued to improve. As I mentioned, the result was negatively impacted by the situation in U.K. and Finland and the actions we're taking there. The action that we have taken in Q4 will have effect in Q1. We will also continue with further actions when necessary. We foresee that the market remains challenging, but the actions we are taking now will help us adjust to the market situation.As communicated in the Q3 report and during Capital Markets Day, the market situation in the U.K. is challenging, especially the transport infrastructure segment is tough, with the government having canceled major projects. Within the real estate, the weakness in the residential and commercial segments remained. In Q4, we have made significant negative project adjustments, mainly related to public infrastructure and building projects.EBITA was also impacted by a lower billing ratio. In light of the weak market and the significant impact on the business, we have taken several restructuring actions during the quarter. We have carried out the layoffs announced in the third quarter and also took additional layoffs, bringing the total to 100 FTEs. We closed underperforming departments, and we took additional actions to also reduce office space.As we have talked about earlier, we have taken steps to reposition our U.K. business towards existing and new growth segments, and this work has been intensified. Although the U.K. market overall is challenging, we are seeing good demand in energy, environmental service and parts of the building segment. Our focus is to get back on track to healthy organic growth and margins.The demand for services connected to the green transitions remains good, while areas that are more exposed to the macroeconomic situations were weaker, especially in parts of the building segments. The demand in water, energy and most part of the industry remains good, powered by demand connected in Europe's green transition.Transport infrastructure remains good in most markets, driven by large needs to update European infrastructure. In the building segments, the demand for public buildings remains good, while demand in residential and commercial buildings is weak, with variations across markets and subsegments. With lower demand in new construction in those segments, more of our business is being focused on renovations and improvements of existing buildings.And now I will hand over to Olof Stalnacke to walk you through the figures. Please, Olaf.

[Olof Stålnacke, executive]

Thank you, Asa, and good morning, everyone. Starting with a summary of the results again. Net sales in the quarter is SEK 7.7 billion with 6% organic growth, 7% from M&A and 2% from FX. EBITA is SEK 654 million. Excluding the negative calendar effect, we are at SEK 30 million or 4% down with the margin at 8.5%. With the large cash release we see in Q4, leverage decreases from Q3 to [ 1.1 ]. Compared to last year, the increase is primarily M&A driven.Looking then at net sales, we see organic growth in 6 out of 8 BAs, but with bigger variations than we have seen in the previous quarters. Norway and the Netherlands are slightly positive. Sweden and Denmark are at around 5%. Belgium continued very strong momentum and close to 30% growth.Germany and Central Europe shows even higher growth in Belgium. They have a good momentum in the business, but it is also supported by significant positive project adjustments. Finland is slightly negative, driven by the weakening demand in some segments that Asa just talked about. U.K. has negative underlying growth, but it's also impacted by negative project adjustments and write-downs of close to SEK 40 million.Across the board, the growth drivers have been continued price increases and FTE growth. We continue to have good momentum in recruiting and personnel turnover has continued to decline in the quarter. Project adjustments and the billing ratio have contributed negatively.Looking then at EBITA. On the EBITA side, we see a 4% decrease adjusted for calendar. We are, of course, not at all satisfied with the development, even if we are up against a very strong quarter last year. We see margin improvements in Netherlands, Belgium and Germany and Central Europe despite the negative calendar.Sweden, Denmark, Netherlands and Belgium have double-digit margins and Germany and Central Europe are very close, delivering 9.8% in another very strong quarter. Finland and Norway at 5% is not where they should be. But the big negative is, of course, U.K. showing a significant loss in the quarter.Looking then at the EBITA bridge by business area, we see bigger variations than we have seen for some time. Belgium and the Netherlands make significant EBITA contributions in the quarter with strong organic development, supported by M&A contribution. Germany and Central Europe has another very strong quarter. Again, the result includes positive project adjustments. So one should not expect 10% every quarter, but this is another very good sign that the turnaround in Germany is progressing well.Sweden, Denmark are more or less flat versus strong quarters last year. Denmark had some negative project adjustments in the quarter, but still has a 12.4% EBITA margin for the full year. Norway was impacted by a slowdown in growth and lower billing ratio, but the big declines come from the BAs we have highlighted previously, Finland and most significantly U.K.The development in the U.K. has been covered by Asa, but it's worth mentioning that we have the SEK 40 million in project write-downs and also SEK 15 million roughly in restructuring costs in the quarter.If we look at Finland, EBITA is impacted by a weakening market and negative organic growth in Q4. And in Finland, as you may have seen in the report, we have SEK 15 million in restructuring costs in the quarter. And what we have done there is that we have concluded the redundancy negotiations that we talked about in Q3 with 50 permanent layoffs and a maximum of 175 temporary layoffs, and we are currently utilizing around 75 of those 175.Overall, for the group, higher average fees continue to be a positive driver, again, together with the contributions from acquisitions, higher expenses, higher negative project adjustments and lower billing ratio had a negative impact. And the calendar effect, relatively small, too less working hours, which corresponds to a negative SEK 25 million in net sales and EBITA.Looking then at the financial position. After working capital release of close to SEK 900 million in Q4, net debt is slightly below SEK 3 billion, and the increase versus last year then primarily explained by outflows for M&A, especially the larger acquisition of VK. Leverage is at 1.1, well below our target. We remain financially strong with available liquid assets of SEK 3.9 billion.And then finally, on the financials, the dividend, as Asa said, based on the financial position, the Board has proposed a dividend of SEK 2.95 per share, a dividend growth of 9%, in line with what we have seen historically and a 63% payout ratio versus our policy.And with that, back to you, Asa.

[Åsa Bergman, executive]

We concluded 2023 with a total of 10 acquisitions, adding approximately 1,200 new experts to Sweco and extended our market presence and expertise in 7 markets. These acquisitions are in line with our strategy to reach top 3 positions in all business areas with a broad and a multidisciplinary offering. The companies acquired in 2023 added competencies in a wide range of areas from broad engineering and architecture services to experts within climate tech, biodiversity and digitalization.Acquisitions are a central part for our long-term growth strategy, and we are actively scanning the market for new opportunities. And this leads me to the first acquisition in 2024. On January 10, we announced the first acquisition this year. Econsultancy is one of the Netherlands' leading environmental consultancy agencies with a broad multidisciplinary offering from more than 200 experts.This acquisition is in line with our ambition to reach a top 3 position in the Netherlands, while delivering a market-leading offering in environmental services and for projects connected to climate adaptation and the green transition. Econsultancy are experts in areas such as ecology, biodiversity, infrastructure and water. The acquisition has been completed and consolidated into Sweco as of January.The green transition and its impact on energy, transport, industry and urban areas continue to be a core driver for Sweco. And this is evident to the projects won in the quarter, all of which are directly influenced by these key drivers. In Sweden, we will support the ongoing expansion of the Stockholm Metro to enable sustainable transportation in the growing capital. In Belgium, we have been commissioned to work with flood protection in Ostend. And in Norway, we have won several framework agreements to support Statnett in development of the Norwegian energy grid.The other week, we announced a major framework agreement where Sweco's contract value is approximately EUR 100 million over 10 years. And this is a typical example of a large contract within the energy transition. The client is the energy operator, Gasunie, in the Netherlands, and we will support them with the development of the new energy infrastructure, 1,200 kilometers pipeline for hydrogen with a capacity of 3.5 gigawatts. Sweco is supporting Gasunie to do the transition from traditional natural gas to hydrogen, CO2, renewable gas and heat, and we provide consultancy, engineering and environmental studies. Very exciting projects involving expert from several of the Sweco markets.Let me now conclude by presenting our key priorities and focus areas going forward. A key focus area near term is to execute on the repositioning of the U.K. business and adapt parts of the Finnish business to the current market situation. We are also accelerating our efforts to elevate cost control and efficiency by making necessary organizational changes, having strict focus on cost and improving efficiency in underperforming segments.To summarize the year and the fourth quarter, our focus going forward is to center -- is really centered around making sure that we continue to capture growth opportunities in the market and tap into attractive growth segments, which is related to continued focus on recruitment of experts and to execute on our M&A strategy. Thank you.

[Unknown Executive]

Thank you, Asa and Olof. And we will now open up for questions. There will be a possibility to ask them directly through the phone line or in the chat function. But please, operator, if you could give us more detailed instructions.

[Operator]

[Operator Instructions] We will now go to your first question. And your first question comes from the line of Johan Dahl from Danske Bank

[Johan Dahl, analyst]

Just on this project adjustments you're making in the fourth quarter, you talked about the U.K. and I was just -- if you sum it up for the group, including the positive adjustments in Germany, et cetera, et cetera, what sort of net do you add up -- What sort of net does that add up to? And also, is there any sort of adjustments being made for future profitability in these projects just to understand how it may impact '24 looking at project adjustments alone?

[Olof Stålnacke, executive]

If we -- if you talk about the one-offs, as we said in the presentation, we have roughly SEK 30 million in restructuring costs, SEK 15 million in Finland and SEK 15 million in the U.K. And in addition, we have SEK 40 million of project write-downs in the U.K. Then we have positive project adjustment, as we talked about in Germany and negative in Denmark. And both of those roughly SEK 20 million, so I would say, they wash out in a way. So the net number for the group is SEK 70 million.

[Johan Dahl, analyst]

And just looking at the numbers you highlighted in terms of redundancies, U.K., Finland, I mean, it adds up to, what is it, 200 people, a fairly small share of the total given your sort of quite significant decline in billing ratio over the last couple of years. Do you think -- why do you think that's going to be enough for you to rectify efficiency?

[Olof Stålnacke, executive]

Yes, I think -- maybe to add to that, that's the numbers we highlight in U.K. and Finland. We have also made some reductions in Norway as we talk about in the report, which is roughly 25 persons within architecture. And we have also -- as we talked about earlier in Q3 and at the Capital Markets Day, we are also making reductions in Sweden, maybe around -- in total in the second half about a 100. So there is more than what we talk about. But obviously, U.K. and Finland are the bigger ones in terms of restructuring.

[Åsa Bergman, executive]

And maybe to build on that, I mean, we are looking into units and pockets of the Sweco business to really adapt to the market situation. But with that said, I mean, there is -- I mean, the order backlog is stable. We have a solid orders received. So we are well positioned and have the order back to really have a good start and position for next year.And then related to your question regarding the billing ratio in this quarter, it is affected mainly from the U.K. and the Finnish business and some pockets in other units. But for us, it's about taking necessary actions, but also to work focused with efficiency to make sure that we work to distribute the workload we have, which is a little bit unbalanced, as we talk about -- there is -- it's good demand in some segments, strong in others and a bit weaker in buildings -- the building segment. So, I mean, we need to be able to do both, really focus on strong growth -- in FTE growth and also make sure that we take the right and the necessary actions to reduce, if needed.

[Olof Stålnacke, executive]

Yes. Maybe to add, I mean, back to your question, Johan. We will continue to adjust the personnel as needed, as Asa said, to improve efficiency and to make sure that we improve on the billing ratio.

[Johan Dahl, analyst]

Just a final one. Asa, did you say orders were in line with organic sales growth as you talked about the stable order book? And also on Norway, the stuff you're doing there in architects, is that something that's going to impact sort of -- is it going to be redundancy cost in Q1? Is that what you're signaling? Or are you going to realize savings already in Q1? Just to be clear on what you're saying on Norway there?

[Olof Stålnacke, executive]

When we talk about the order book, it is as percent of net sales, so not in absolute numbers. So it's stable as a percent of net sales, or LTM net sales then. And in Norway, there will be no redundancy costs, but we will have the effects of the reduction from Jan 1.

[Operator]

We will now go to the next question. And your next question comes from the line of Fredrik Lithell from Handelsbanken.

[Fredrik Lithell, analyst]

I have 2 questions, please. First, Asa, if you could sort of look a little bit at sort of the project pipeline? You won a few decent contracts with long durations. How is the pipeline looking? Has there -- if you could describe that a little bit more for us how you feel about it? And if there have been any shifts or improvements or strengthening or -- I know you talked about the specific segments. And so would just be interesting to hear your views on that.And then, Olof, on prices, what was the price component in organic growth in Q4? And also, if you could discuss a little bit how secure are you on price indexation in [ framed ] agreements that you already have in place? And how are prices on new tenders out there in the market right now?

[Åsa Bergman, executive]

So if I start with the order backlog and the projects won. I mean, what we can see during the last, I would say, 3 years, is that we have positioned ourselves even stronger in the energy segment. We have won several of those frameworks agreements that we talk about this framework agreement with Statnett. We have also projects in -- towards other TCOs in Europe. We win interesting projects in the hydrogen sector and in the energy production and the storage sector. So lots of projects linked to the green transition. That is a new element.And then, of course, there is a huge need for our resources and competencies in the energy sector, meaning that those contracts are normally a little bit longer and quite high volumes. And that is a little bit of a shift if I look at the last years, I have to say.But then back to what we see on the market that -- we see a good demand in energy, in infrastructure and in water and environmental. And when it comes to the building sector, it has weakened, as you know, for the last year in residential and commercial real estate. Still good demand in the public building segment. So that is the overall picture that we see from the [ group ].

[Olof Stålnacke, executive]

And looking at the pricing in the quarter, roughly said it's about 5% on pricing, so continues to be good, 2% on FTE growth. And then we have the negatives from billing ratio and from project adjustments taking the numbers down. If you look at prices going forward, we have said that it was the -- sort of the biggest challenge for this year to increase price with the salary inflation we see. It continues to be a challenge for next year. But so far, so good, I would say. We are relatively pleased with 2023, and we are now pushing to do the same thing in '24. There is sort of no sign that we will not succeed with it, but it will continue to be a challenge.

[Operator]

We will now go to the next question. And your next question comes from the line of Johan Lonnqvist Sunden from Carnegie.

[Johan Sundén, analyst]

A couple of questions from my side as well. The first, [ think ] -- go back to the U.K. business. Can you just give some background of how things have played out during the fourth quarter? You talked about the weakness and change in direction of the U.K. business on the capital market. But I think the magnitude of initiatives was bigger than, at least I have expected. Can you give some background, please?

[Olof Stålnacke, executive]

Yes. I think the restructuring actions probably not that sort of strange in a way. We have made additional redundancies. We have also exited office space. We get onerous leases that we have provided for. But the big item is, of course, the project write-downs. And here, it's primarily a small number of large infrastructure projects, which have been either canceled or reduced in scope. And the effect of that has been that we have gradually over the quarter taken write-downs or project adjustment to these. So it's -- I would say it's market-driven to a large extent. We may, in the end, get some of that back. But I think from a prudent perspective, we have decided to write these down now.

[Johan Sundén, analyst]

Then also a little bit -- a comment on the market. And I know that you don't want to comment on the outlook, but I must still ask because you had a competitor in Norway, at least, reporting earlier this week, talking about an improvement in some of the building areas and hope for that to materialize during the second half of '24. Do you share that view? Or is it just specific for that company?

[Åsa Bergman, executive]

I think that -- looking into the future and forecasting what will happen, I think that is -- I mean, there is others that really focused on doing those forecasts better than ourselves. But what I can say is what I've said before, that the order backlog that we have is stable, but -- and of course, the weakness in the real estate and commercial real estate is, of course, related to when the market will turn and in what pace the market will turn and when that happens, let's see.

[Johan Sundén, analyst]

And just a little bit more color on the kind of restructuring things you're doing now and has been doing during the fall. And if you bridge that to the billing ratio comments on the Capital Market Day in November, how much of an improvement on the billing ratio can be possible to imagine during '24, given the actions? Because, yes, you're still taking out [ somewhat ] -- 1% of FTEs. And if those are not in projects, that should probably be positive for the billing ratio, right?

[Olof Stålnacke, executive]

Yes. I agree. All things equal, it should be positive. Then again, as we've talked about, still some challenges, especially in Finland and U.K. on the market side. So we may need to do more there, of course. But all things equal, you should have the impact that you talk about with the reductions we have done.

[Operator]

[Operator Instructions] We will now go to our next question. And your next question comes from the line of Stefan Knutsson from ABG.

[Stefan Knutsson, analyst]

Just a question on the net recruitment here. Despite the layoffs that you do in Q4, you seem to have a good pace in net recruitment. How do you view this going into 2024? Do you -- have you seen any change in how you approach hiring?

[Åsa Bergman, executive]

No, due to the fact that the demand for services in most segments are solid and good, meaning that we need to make sure that we continue to recruit. So it's this balance I talk about that you need to be able to do, 2 things at the same time.

[Olof Stålnacke, executive]

But I think, maybe adding to that the fact that the personnel turnover is coming down, obviously, is a big support in terms of gross recruiting coming down, reducing sort of the effort and the cost to do that.

[Stefan Knutsson, analyst]

Then just one follow-up on -- if I got it correctly, there is no further actions planned. You said that you might need to take further actions. But outside of the U.K., ones that you mentioned, is there anything more that you have decided on?

[Åsa Bergman, executive]

I mean, we continuously evaluate, I mean, units or pockets that is underperforming or having lack of work linked to the specific weaker segments. So that is like an ongoing work for us, but other than that, no.

[Olof Stålnacke, executive]

And nothing of the magnitude that we have done in Finland or the U.K. so -- But also maybe worth highlighting that in Finland, we do have a headroom on the temporary layoffs, that is negotiated, as I said on the -- previously in the presentation.

[Operator]

We will now go to the next question. And your next question comes from the line of Raymond Ke from Nordea.

[Raymond Ke, analyst]

2 questions from me. First one, if you maybe could elaborate just a bit about the repositioning plan in the U.K., maybe where you are today and where you want to be and how many quarters in a sort of best case scenario, if you would?

[Åsa Bergman, executive]

I mean, this is about making sure that we position ourselves towards the segments where we see healthy growth and where we can really get traction. And I've said it before in the past that the U.K. market for us is a bit to move away from the very big schemes, and move more to regional and local infrastructure in that segments also position ourselves stronger towards the energy sector and also make the right choices in the building sector. So it's really not to shift everything. It's more to do corrections and then, of course, some small units where we don't have really traction in that area that we have closed some of those departments.

[Raymond Ke, analyst]

Then in terms of time, it sounds like maybe you're talking at least 1 year? Or how long would you say that most of the shift...?

[Åsa Bergman, executive]

I can't really -- I can't forecast that because this is -- I mean, the activities that we have taken now, or actions we have taken now in Q3 and Q4, it's part of that journey. So we have already done parts of it. But then again, it takes time to really make sure that we win the right contract and so on. So I mean, hopefully, we will see gradual improvements.

[Raymond Ke, analyst]

And second question, if you could maybe elaborate a bit about the architects in Norway? What type of architects they were? And if you think you see the same sort of trends in other regions?

[Raymond Ke, analyst]

I have -- I mean, one reason to why we talk so much about our project portfolio and client portfolio is due to the fact that, if you look at our architects business in Sweden, for example, we have a broad portfolio. We are working in different segments with our architects, covering the building sector, the private and public sector in buildings. We are covering infrastructure. We're working with industry projects and so on. So we have this broad portfolio, so we can move our resources.The situation in Norway is that we are too exposed towards the residential sector, and we have been able to maneuver that, but we are working -- and we work hard with that to try to win contracts in other segments. But what you see now is, with the weakness in those segments of residential, especially in commercial real estate, we had to take some actions to reduce the architects business in Norway and that is linked to that we are too exposed towards one sector.

[Operator]

We will now take the next question. And the next question is from the line of Fredrik Lithell from Handelsbanken.

[Fredrik Lithell, analyst]

I just had a follow-up question on the discussion around project write-downs and revaluations of projects. I mean, do you sort of track that every day and have sort of a heat map on projects that you feel you might find it necessary to do write-downs? Or how does that work on an everyday basis? And when -- and what make -- what triggers you to take the decision to write it down if it's not the client that is canceling a project? I understand that one, but would be interesting.

[Olof Stålnacke, executive]

No, it's -- I mean, it's part of what we do, maybe not every day, but sort of every week out in the business areas and also something we review every month with each business area in terms of any projects where there are write-downs or write-ups because that's also part of the story. So, I mean, that's part of project accounting, making estimates to complete -- looking at where you are in the project, et cetera. So that's something we follow all the time. I think U.K. maybe in this quarter is a bit of an exception, of course. But otherwise, we see these movements all the time in the project portfolio.

[Operator]

There are currently no further phone questions. I will hand back for any web questions.

[Unknown Executive]

Thank you so much, [ Sharon ]. There are no questions in the -- through the chat. So that will end our Q&A session for today. I'd like to thank you all for joining us. Thank you, Asa and Olof.And before we end, just a small reminder of our Annual General Meeting that takes place on the 19th of April here in Stockholm. With that, I wish you a nice day and a couple of hours from now a nice weekend also. Bye.

[Åsa Bergman, executive]

Thank you very much.

[Olof Stålnacke, executive]

Thank you.