Sweco AB (publ)
STO:SWEC B
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
100.4939
180.4
|
Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good morning, and welcome to Sweco, and welcome to the report for the first quarter 2021. Today, we have the privilege of having our CEO and President, Ă…sa Bergman; and Olof StĂĄlnacke, our CFO, who will walk you through the report. We start with the presentation, and after that, we take questions.So Ă…sa, please go ahead.
Thank you, Katarina, and welcome, everyone, to Sweco's Q1 presentation. Before we move into the quarter, let me give you a short recap of Sweco. We are Europe's leading engineering and architecture consultancy with 8 geographical business areas in Europe, and we do business in more than 70 countries worldwide. We employ 17,500 experts, which means that we can deliver a unique set of competencies to serve our clients. With this introduction, let us now move into the result of the first quarter 2021.We start the year with solid margins and a slight positive organic growth despite this challenging market. 4 out of 8 business areas report double-digit margins, with 3 of them above our profitability target of 12%. We continue to win new projects and play an important role in the sustainable transformation of society. One good example from the first quarter is H2 Green Steel that you can see here on the slide. It's a pioneer projects to develop large-scale, fossil-free steel production in the northern part of Sweden. It will be an important step in the transition to fossil-free steel production and in accelerating adaptation to climate change.Moving over to net sales. It amounted to SEK 5.5 billion. We delivered slightly positive organic growth of 0.4% adjusted for calendar. Please note that there is a significant negative calendar effect in this quarter. We had a positive contribution of 2% from acquisitions and a negative currency effect in the quarter of minus 3%. EBITA amounted to SEK 540 million in the quarter, with an EBITA margin of 9.8%. And adjusted for this negative calendar effect, EBITA increased by 4%. We continue to have a stable cash flow and strong financial position, bringing us flexibility and allowing us to act upon opportunities.We will also continue to add new acquisitions. In Q2, we acquired the Belgian consultancy BUUR. And in April, we announced 2 new acquisitions in Finland that I will talk more about later in the presentation.Let us now move over to the market situation. The overall market demand for Sweco services is rather unchanged compared to the previous quarters. Continued lockdowns and restrictions related to the pandemic still impacts our growth mainly in Norway and the U.K. We see a continued pressure in parts of the industry segment and the private building and real estate segments.As communicated in the previous quarter, it's hard to give any guidance on how long the pressure on growth will prevail as it's related to the development of the pandemic. What we can say is that the overall demand for our services remains good. We have a stable inflow of new orders, and we strengthened our order book in this quarter. It's to a large extent related to these long-term drivers of sustainability, digitalization and urbanization. A good example of sustainability services is the project you can see on the right side here. Sweco is the leading railway design expert in Northern Europe. And during Q1, we won a large contract for Bane NOR in Norway to help them plan a new double-track line through Stange municipality.Now let us take a closer look at the Q1 result. Adjusted for calendar, we delivered slightly positive organic growth of 0.4% in the quarter. Belgium, Denmark, Germany, Central Europe and the Netherlands showed positive organic growth in the quarter. The positive drivers were mainly lower level of absence together with higher average fees. As I mentioned in the previous slide, continued lockdowns and restrictions related to the pandemic still have impact on our growth, mainly in Norway and the U.K. This is reflected in the negative organic growth of minus 10% in the U.K. In addition to pressure from pandemic and Brexit, the decline is driven by project adjustments and a lower number of employees. Restrictions and market uncertainty also have a negative effect on our recruiting and FTE growth. It's a key priority for us to increase recruitment while keeping our margins stable.Let us now move over to the result in the quarter. All in all, our operating margins remain solid. EBITA increased by 4% in the quarter to SEK 540 million adjusted for calendar, and we report a margin of 9.8%. The improvement is driven by higher average fees, reduced absence and cost reductions. 4 out of 8 business areas reported double-digit margins. The Netherlands, Belgium, Sweden and Finland delivered margins above 10%. I would like to highlight that the Netherlands had a significant uplift in the quarter, with an all-time high margin of 13.8%. Norway and U.K. are, as mentioned before, affected by lockdowns and restrictions related to the pandemic. Germany and Central Europe reported a negative result in the quarter.As previously announced, a change of leadership is an important part of our plan for returning to profitable growth in Germany after the write-down in Q4. I'm therefore very pleased to announce that we have, as of April 12, appointed Julia Zantke as Business Area President, Sweco Germany & Central Europe. Julia has extensive experience from the consulting and engineering industry, and she is an experienced leader with the right skill set to lead the organization in the right direction. She's also part of the Sweco Group executive team.Let us now have a look at our new acquisitions. I'm pleased that we continue to execute on our acquisition agenda. In Q1, we closed the acquisition of the Belgian consultancy, BUUR, that I talked about in the Q4 presentation. In April, we announced 2 new acquisitions in Finland.On April 7, we announced the acquisition of Gaia Consulting. Gaia is the largest sustainability consultancy in Finland, with offices in Helsinki and Turku as well as an international presence. In 2020, the company had more than 60 employees and a revenue of EUR 6.3 million. With Gaia, we strengthened our offering in sustainable development, especially in early-stage strategic consulting, and we will further strengthen our ambition to be the leading adviser of sustainability services.On April 9, we acquired Linja Arkkitehdit, specialized in design of educational and business premises as well as residential buildings and with offices in Helsinki, Oulu and Jyväskylä. In 2020, the company had 60 employees and a revenue of EUR 5.3 million. With the acquisition of Linja Arkkitehdit, Sweco becomes one of the largest architecture companies in Finland. And with a total of 1,400 architects and landscape architecture, Sweco Group is one of the world's 5 largest architecture firms.With that said, I will now hand over to Olof to walk you through the numbers. Please, Olof.
Thank you, Ă…sa, and good morning, everyone.We'll start with the net sales development. Net sales in the quarter, SEK 5.5 billion, taking LTM net sales to SEK 20.7 billion. Organic growth is slightly positive, adjusted for a significant negative calendar effect from 13 less hours. Positive impact from M&A is outweighed by the negative FX effect.Looking then at EBITA. As we already heard, EBITA in the quarter of SEK 540 million, which brings LTM EBITA, excluding IACs, to just below SEK 2 billion. EBITA is down versus Q1 last year, but adjusted for the calendar effect, we are SEK 26 million or 4% up. And again, the significant negative calendar effect which corresponds to SEK 115 million negative.Looking then at the EBITA improvement or EBITA development by business area. Netherlands, worth highlighting, delivers the largest EBITA improvement and also an all-time high EBITA margin of 13.8%. Belgium continues to perform strongly, just behind Netherlands at 13.5% margin. And we see improvements also in Sweden and Denmark. And the main drivers of the improvements are lower absence, cost savings and also higher average fees. Norway, impacted by lower billing ratio and a negative FX effect, and apart from U.K., Norway is probably the market most impacted by COVID-19 as we've seen it.Finland has a slightly weaker quarter after a long period of very strong performance but still delivers double-digit margins. The U.K. looks similar to what we have seen in previous quarters, and they are also up against a very strong Q1 last year. Germany, Central Europe, finally, slightly below last year and roughly at breakeven. There are no further write-downs or portfolio risks of any size but also not yet any significant improvement of the underlying performance.Financial position remains strong. Net debt is below SEK 1 billion and decreased by SEK 1.3 billion compared to Q1 last year. The main driver is strong cash flow from operations but also reduced M&A cash outflows.Leverage remains at 0.5 as it did at the year-end. And we have available liquid assets, including unutilized credit lines of SEK 3.9 billion. This gives us a good position to manage through the current situation but also to capture any opportunities that may arise.And with that, back to you, Ă…sa.
Thank you, Olof. Let us now conclude the first quarter of 2021.We have a solid start of the year despite the challenging market. 4 out of 8 business areas report double-digit margins, with 3 of them well above our profitability target of 12%. We also have a stable inflow of orders and increasing order book. Yet another example of this is the agency for road and traffic in Belgium that awarded Sweco with a 4-year contract to conduct road safety studies to increase safety on regional roads in the Flanders.We also continue to deliver on our acquisition agenda to strengthen our position in our business areas and as the Europe leader within our industry. Our growth is still affected by the pandemic. However, we maintain a strong financial position with stable cash flow and low net debt, giving us flexibility and allowing us to act on opportunities.Going forward, we will continue to focus on delivering profitable growth, organic and through acquisitions. We will continue to execute on our long-term strategy and to implement the Sweco model in all business areas. And of course, we will continue to work closely together with our clients and to develop innovative solutions together with them.One good example is our partnership with Keliber in Finland. We have worked with them for several years, and now we will plan a large-scale plant in Finland, which will be one of the most significant battery chemical production facilities in Europe. In addition to Keliber project, we have also been assigned to -- in recent years by Terrafame and Northvolt to develop sustainable battery industries. These projects are a good example of how we are part of transforming society in a sustainable direction.With that, I will end my presentation of Sweco's first quarter. Thank you.
Thank you, Olof and Ă…sa, for that. So with that, I think we should open up for questions. Please go ahead.
[Operator Instructions] First question comes from the line of Erik Paulsson.
So I have 2 questions. I'll start with the first one. Is it possible to give a sort of quantification of the order intake and the order book in the quarter?
Erik, maybe Olof, you should start, and I can add.
We -- as you know, Erik, we -- and I know there has been comments about this earlier. We don't report the order book. But what we do say is that we continue to see an order inflow and that the order book has increased in the quarter.
Okay. And my second question is on pricing. You mentioned in the report, you talked about higher average fees at a couple of positions in the report, actually. And so can we actually say that pricing momentum has started to pick up now from quite low levels? Or how would you comment that?
I would say that what we have seen is that it's -- the competition on the market is more fierce. And we have to focus more on prices and ensuring that we put the right prices, and we have to select to really keep our prices and to develop the prices. I think it's too early to say due to that we still are in the middle of lockdowns. So I mean, what we see right now is what you see in the report. And we continue to have focus on prices and price develop, and that goes for all business areas.
And if I may add, Ă…sa, we had -- we saw actually positive average fee impact also in Q2 and Q3 last year. So Q4 is really the only quarter where we have seen negative impact on pricing.
Next question comes from the line of Johan Dahl.
Yes. I was just wondering, Ă…sa, you talked about the priority performing on net recruitment to the group. Can you just talk about how you weigh sort of the need for efficiency? We saw an unchanged billing ratio in Q1 to Q1 last year, and you want to recruit. How do you weigh those 2, yes, to each other as we look into 2021 here?
Johan, as you know, recruiting and hiring new people is important for us to increase our growth. And what happened when we entered into this pandemic was that we actually faced a situation where we pulled back when it comes to recruitment. We have continued to recruit in certain areas where the demand for services is really high. But it's also connected to the circumstances around the pandemic that it's quite hard to recruit under those circumstances. So for us, it's about to push both, meaning focus on efficiency and workload planning and ensuring that we distribute our order books in a very efficient way and recruit in, right now, specific areas. And as the -- hopefully, the pandemic is behind us to really continue to push recruitment again. So it's about doing both at the same time. I hope that answers your questions.I also think that one of the big areas when we're talking about efficiency and workload is that we're still in a lockdown. And as we said before, it really works well for us. We have most of our people working from home in remote. But what we would like to see is that we start returning back to office, and that goes for us and it goes for our clients because there is something about efficiency and interaction that we would like to see going forward.
And on that topic, Ă…sa, returning to office, getting back to normal internal education, travel, et cetera, what sort of cost headwind do you anticipate in -- as things normalize just on a year-on-year perspective here in H2, for example?
I can start, and then Olof can add on, on this one. As you know, it has been very special circumstances. We have learned a lot, meaning that we have learned to work on a distance. And what we have learned that makes us more efficient and that we can really utilize into the future, we will keep that. I don't think we will travel as much as we have done before the pandemic. I think we will use the remote work as a tool to become even more efficient but also to make sure that we can deliver competence from whatever country to bring specialists into our local projects. It's a bit too early to tell what costs we can keep on lower level and what not. We have already started to educate our people a bit more. And yes, that's what it is.Maybe Olof, you can add when it comes to the figures and comparing it to...
Yes. What we have seen is quarterly savings of between SEK 60 million and SEK 90 million for the 4 quarters we've seen now with the COVID-19 pandemic. And what we've said before as some kind of estimate is that maybe 1/3 of that, SEK 20 million to SEK 30 million, could be sort of long-term effects, but it's still too early to tell. And I think maybe also the first quarter, when this opens up, there might be a pent-up demand from -- for physical meetings, et cetera. So there, you will probably not see a lot of the savings remain, but part of it will certainly be there long term.
And do you -- Olof, do you expect this to be offset sort of by positive dynamic effects ending that then? Or should we sort of take into account that we get some margin pressure from this issue?
No. Obviously, if we start recruiting again and if we see sort of the dynamics of top line growth again, that will also drive some costs. But I mean, the important thing is to manage to make sure that it's sort of overall positive for EBITA growth. So it's a bit difficult to tell how this will play out once we sort of get moving again.
Next question comes from the line of Dan Johansson.
A couple of questions from my side, if I may. You experienced positive organic growth in this quarter despite the rather slow market, except from the impact from higher sales, which you talked about, feels to me like you're taking a bit of a market share. Is that a correct observation?
I think -- I mean, I guess, the market is still not growing positively. So us having positive organic growth must probably mean, without sort of knowing the details in every market, it probably means us taking some market share, yes.
And as we said, I mean, we're growing our order books in the quarter, and orders received is good in almost all sectors.
Perfect. On the public side and public spending, are you seeing some signs of improvements now? Or is there more larger tenders coming out now compared to 1 or 2 quarters ago? Or is that something that is still ahead of you?
So what we have experienced is that it's quite hard to measure, but what we have experienced is, for example, in Belgium, where we see that we have a government that really supports the Green Deal, meaning that transformation of the energy sector as Belgium is now on the agenda, meaning that there is more projects in that area, for example, in Belgium. That affects also the industry to transform into renewables. That is one example.Another example that I mentioned before is Finland, where we provide services. And it's the biggest provider of railway design, meaning that we also have won lots of rail projects. You also have -- you can see in the different countries that sustainable transformation, the transformation into renewable energy is happening. The pace and the speed of it, it's linked to where the different countries are when it comes to the stimulus. And I think we need to remember ourself and be humble that we are still in lockdown, and we're not out of the pandemic yet. And we don't know when the vaccine will really affect us in a way that we can open up.So as long we -- that we cannot kind of move and cross borders and the government needs to focus on the existing pandemic situation, we don't really know when the stimulus will affect us even more. But we could foresee a gradual improvement of the private sector. And we believe that there will be a stimulation in the public sector in the back end of this crisis, as we said before.
Perfect. And the final question from me, with U.K. opening up now, are you hearing some positive signal from your U.K. office already and see some signs of demand improving there?
It's a little bit too early to say because even if we are talking about that they have been vaccinated and that they were starting to open up our offices, it takes a bit of a time to see the effects on the market. So it's too early to say. We still face the effects of the pandemic in U.K.
Maybe I'll do a final question as well if I have the time, and that's on acquisitions. How much of an obstacle is the pandemic in terms of doing M&A? Are you a bit more cautious doing a bit more sizable acquisitions? You seem to have a decent momentum on doing smaller bolt-ons, but clearly, you have the balance sheet now to doing something a little bit more sizable with almost SEK 4 billion in credit lines and cash. It will be interesting to hear your thoughts on that.
So we have had and have the same strategy as before and during the pandemic. We have a structured way of focusing and working with M&As. We have an M&A agenda for each country, and it is about looking at opportunities and finding the possibilities on the market. And if we get the opportunities and we think that the potential target fits Sweco, then, of course, we will try to acquire. So it's more about opportunities and the fit than anything else.
There are no more questions at this time. Please continue.
Okay. Then if we do not have any more questions, then I would like to thank Olof and Ă…sa, again, and everyone who participated today. Have a great day. Thank you. Stay safe.
Thank you.