U.S. Markets closed

Edited Transcript of BRAV.ST earnings conference call or presentation 19-Jul-19 11:30am GMT

Q2 2019 Bravida Holding AB Earnings Call

STOCKHOLM Jul 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Bravida Holding AB earnings conference call or presentation Friday, July 19, 2019 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Åsa Neving

Bravida Holding AB (publ) - CFO

* Mattias Johansson

Bravida Holding AB (publ) - CEO & Group President

================================================================================

Conference Call Participants

================================================================================

* Karl-Johan Bonnevier

DNB Markets, Research Division - Analyst

* Predrag Savinovic

Nordea Markets, Research Division - Analyst of Consumer Goods

* Stefan E. Andersson

SEB, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, welcome to the Bravida Q2 report for 2019. Today, I am pleased to present CEO, Mattias Johansson; and CFO, Åsa Neving. (Operator Instructions)

Speakers, please begin.

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [2]

--------------------------------------------------------------------------------

Thank you very much. And good afternoon, everyone, and welcome to this presentation of Bravida's Q2 report. As mentioned, today, it's myself; Mattias Johansson; and our new CFO, Åsa Neving, who will guide you through this presentation and answer your questions later on.

So let's start on Slide 3, Bravida as a growing business. And we are located in more than 160 different locations in 4 countries. We have more than 55,000 customers, and almost 50% of our sales is service, and more than 60% of our sales is coming from service, renovation and redevelopment. These gives us, as you know, a low risk in our business model: first, diversified end markets; second, low customer concentration; and third, small average contract size.

I think it's worth mentioning that we have reached milestone in this quarter. This is the first quarter where we had an LTM sales higher than SEK 20 billion in sales. So over SEK 20 billion in sales for the last 12 months, and I think that's something worth to mention.

Let's look at the highlights on the next slide. Net sales grew 6% to SEK 5.1 billion. Organic growth was minus 1% and M&A contributed with 6%. We had growth in Sweden, Denmark and Norway. We had high growth in service than in installation, which is good. And the service sales growth was 11% and installation sales growth was 2%.

We have an order backlog at record level at SEK 13.9 billion. We have continued good momentum with order intake at SEK 5.5 billion approximately, and we have good order intake in 4 countries.

EBITA decreased by 2% to SEK 274 million and the margin at 5.4%. EBITA margin improved in Sweden and Finland. And as we have told you earlier about, Norway had a lower margin due to 2 write-downs in 2 old Oras projects. And Denmark had lower margin due to integration costs related to acquisitions in the quarter.

Cash flow from operating activities was SEK 131 million, and cash conversion, 113%. Working capital, minus SEK 858 million or 4.3% of sales. And net debt at SEK 2.6 million or 8 -- 1.8x adjusted EBITDA.

On the M&A side, we have done 7 acquisitions in the quarter, adding SEK 340 million on annual basis. And so far, we have done 12 acquisitions in '19, adding close to SEK 700 million. And we still see a good pipeline for future M&As.

On the next slide, I will tell you about our view on the markets. And overall, we still see a stable market and a high demand for services for both installation and our service business. There are, within the different countries, of course, some geographical differences as it always is, but overall a good market.

In Sweden, the service and installation activity is good. The main growth drivers are public investments in buildings and infrastructure. Construction confidence indicator are at normal level. In Norway, the overall service and installation activity is good. Market drivers in Norway are public investments and energy efficiency projects. And in Denmark, the construction of residentials, health care and education buildings are driving volumes. And finally, in Finland, the refurbishment and public investments are at good level.

On Slide #6, you can see group sales and EBITA development for the quarter. And as I mentioned earlier, sales growth was 6%. M&A continues to contribute and acquired growth was 6%. Organic growth was negative and is impacted for some effects from Easter, of course, as you all know. But also, the fact that we have a high order backlog that gives us the possibility to be even more careful when it comes to project selectation (sic) [selection]. We also have some effects from large projects that are in different phases, in phases that are not as intense as they were last year, for example. And we also have some regions or branches that aren't allowed to win any new projects depending on the way they had performed for the last year. And those are more known as the turnaround branches, as you know, or underperforming branches.

EBITA is minus 2% in the quarter to SEK 274 million, and margin is 5.4%. We had a margin improvement in Sweden and Finland and lower margin in Norway and Denmark. And the reasons behind that I have mentioned to you, and we also talked about the Norwegian issue last report as well or last quarter.

The backlog is shown on the next slide. And again, the order backlog are at record level, SEK 13.9 billion, close to SEK 14 billion. Order backlog is up 25% year-on-year. We have increasing order backlog in Q2 with SEK 400 million. And we have increase in order backlog year-on-year in Sweden, Denmark and Finland. And this is mainly medium and small orders. Order intake is up 7% in the quarter.

Now turning to Slide 8 on acquisitions. Acquisitions are a strong value driver for Bravida. We know that there are many possibilities in the market to continue to do acquisitions. We have done 7 acquisitions in this quarter: 4 in Sweden, 2 in Denmark in 1 in Finland. I have told you earlier that we have strengthened our M&A team, and this is now seen in our M&A activity. And we have done 12 acquisitions, adding almost SEK 700 million in annual sales so far this year. And compared to last year, this is definitely the strong performance.

For the coming quarters, we still see a pipeline that will support future deals to attract deal multiples, and I'm convinced that M&A will contribute to Bravida's development the coming quarters as well.

And now over to Åsa that will present our financial performance.

--------------------------------------------------------------------------------

Åsa Neving, Bravida Holding AB (publ) - CFO [3]

--------------------------------------------------------------------------------

Thank you, Mattias.

Let's look into the financials a little bit deeper then, starting on Slide 9. If you look at the top line, as Mattias said, we grew by 6%. It comes all from acquisitions. We had a negative organic growth of minus 1% and also some currency effects of plus 1%.

Looking at EBITA. It decreased by 2% to SEK 274 million, and also the margin decreased from 5.9% to 5.4%. And this led to earnings per share decreasing by 5% in the quarter. Year-on-year, they were on the same level.

Turning to Page 10 and looking to where the figures actually come from, starting with Sweden, which is our largest country. You can see that we had a growth of 3% both in the quarter and year-to-date. This comes from acquisition, and we had a slow organic -- or negative organic growth here. And as Mattias said, there are different reasons for this. And in Sweden, we can say that, of course, there are some geographical variations, but it's also so that we are more selective when we are taking projects because we had a high order backlog and we also had some branches that we don't want to take on any project.

In Sweden, it's also so that we had some projects that are either in the beginning -- some large projects are either in the beginning or at the end of the project cycle, some would say, production-intensive, which compared to last year when we had some projects with high production intensities during the quarter.

Looking at the EBITA margin. It was better than last quarter, 6.6%. And the EBITA grew by 4% to SEK 176 million. We still believe it's a good market. We had an order intake of plus 4%. There are a lot of small and midsized orders. We had 1 large share order in the quarter. That is a multi-technical installation in a hospital in the southern part of Sweden. The order backlog is strong, plus 49% year-on-year, and it increased by SEK 144 million in Q2.

Moving on to Norway. Norway grew by 6% and -- in Q2 and 10% year-to-date. And this all comes from organic growth, which is nice. And they had a good activity both in service and installation and especially in service, I would say. There was also some currency effects here. The EBITA decreased by 31%, and also the margin was lower at 4%. And as Mattias said, this comes from the 2 projects that have been written down that comes from the Oras portfolio. And these projects are written down both in Q1 and Q2, and they had a total impact on the result of about SEK 50 million. These projects are now finalized or finished, and we don't have anything from the Oras project -- or Oras project portfolio going forward now. If you exclude these 2 projects, the EBITA margin was in line with Q2 2018.

The lower -- Norway has focused a lot on finishing this Oras project. They had a lower order intake of minus 13% year-on-year and also a lower order backlog, minus 10%, but they still had a backlog at a good level in Norway.

Moving onto Denmark on Slide 12. They grew their top line by 20% in Q2 and 19% year-to-date. They had a very good activity in service. Their growth comes from acquisitions. They had 5 acquisitions in these first 2 quarters. That would also come from currency effect of about plus 3%. The EBITA improved 7%, but the margin decreased. And in Denmark, we have had some integration costs related to these acquisitions. It's both for administration, for taking them in our systems and so on. But also, we have been a bit conservative with the margins since we don't really have all the projects in our system, so we don't have exact figures. So we've been a bit conservative there. They had a good order backlog, order intake of plus 27% year-on-year and an order backlog of plus 13%. And they have also many small and midsized orders.

Moving onto Finland. We have a top line at the same level as last year for the quarter, and it grew by 15% year-to-date. They have -- this growth year-to-date comes from acquisitions, and they have a negative organic growth. Also, there is some currency effects here of about 3%. The EBITA improved with SEK 6 million (sic) [SEK 4 million] to 1.5% in margin. So Finland is going in the right direction. We don't think it goes fast enough so we'll work on that. They have a good order intake, we could say plus 132%, and also a good order backlog at plus 38%.

That was the countries. If we move to the next slide, Slide 14. Look into the financial position. And as you can note and as you can see, Bravida has a very strong financial position. We have a net debt of roughly SEK 2.6 billion, and a substantial amount of that comes -- is from the financial leasing, IFRS 16. The net debt EBITDA ratio was 1.8 in the quarter. It was 1.6 in Q1. The difference here is related to the dividend payout.

The operating cash flow is still strong although a little bit less than last quarter, but still on a high level. We had a cash conversion of -- if you exclude IFRS 16, it was on the same level as last year on 98%, it was 99% last year.

If you look at the right-hand side, you'll also see our financing package. We are about -- we are in the middle of a refinancing now, and there will be a new package that we will present to you in Q3.

Next slide, our financial targets. We have a sales target. We will increase sales growth by 10% and this will be a combination of acquisitions and organic growth. We have a target on EBITA. We will reach more than 7% EBITA margin. We are not there yet, but we don't see any reasons why we should not get there. We have a target on cash conversion, about 100%. We are on that level. We also have a target on dividend payout of at least 50% of net profit. We haven't reached 50% yet, but we have increased the payout every year. We also have a target on net debt. So we will have a ratio -- net debt EBITDA ratio of around 2.5. We are on 1.8 now, including IFRS 16, so we believe that we will stay within that ratio. So that will not be a problem with -- or even if we include IFRS 16.

And I think that was all from me, Mattias. I will hand over to you, and you can summarize.

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [4]

--------------------------------------------------------------------------------

Thank you, Åsa. But before we summarize, I just want to take a look at Slide 16, and maybe to take a step back and just to show you what we have done the last 5 years. And actually, Bravida has developed from a approximately SEK 11 billion to SEK 12 billion in sales to higher than SEK 20 billion with improved profitability. And I think that's fantastic. And growth comes from both organic as well as acquired growth. Our business model is really great because our strong and stable cash flow enables us to take down our debt, as Åsa just told you about, at the same time as we can pay a dividend. And if I remember correctly, I think even if we haven't met the financial targets yet, I think we have increased the dividends with 26% on average the last 5 years or something. And at the same time, as we take down the debt and pay out the dividend, we can continue to do acquisitions. And I think this slide is a very nice slide to show you before we summarize on Slide 17.

And the Q2 quarter for 2019 has shown our -- the result of this is the sales increase at 6%. The installation order backlog, again, at record high level, close to SEK 14 billion, and we have a continued good business momentum for service that will support growth the coming quarters. The margin is at 5.4%. The margin has improved in Finland and in Sweden, which is our largest market. And of course, it's important that Sweden develops in the right direction. It's good to see that Finland is moving in the right direction, and I agree to what Åsa said, even if we don't think it's moving fast enough. So it is stepping in the right direction.

On the downside, we had 2 low-performing projects in Norway and integration costs in Denmark that affects the margins in those countries in the quarter.

M&A execution, on the other side, is on track with a healthy pipeline, 12 acquisitions completed so far in '19, and the annual sales added at SEK 685 million. Net debt at 1.8x EBITDA. A strong operating cash flow, SEK 1,220 million the last 12 months, and we have a cash conversion above our financial target at 113%.

So by saying that, I think we can open up for some questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Okay. Our first question comes from the line of Predrag Savinovic from Nordea.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [2]

--------------------------------------------------------------------------------

Starting off with Norway. It is a bit worrying to see that the order intake was down 13%, and the backlog, 10% as well. Could you tell us what the reasons are behind this and how we should interpret this going forward?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [3]

--------------------------------------------------------------------------------

Yes, Predrag. Yes, actually the -- I think the reason is, when I spoke to Tore the other day, is that we have another phase of -- first of all, of course, it's the result of taking down the Oras backlog. That's one reason. Secondly, we have a lot of projects or negotiation of projects that are in the late stage that we haven't got any written or signed contracts yet but we're very close to in Norway that hasn't been -- yes, and that's why it's not in the order backlog, of course, because it's only signed contracts that are in the order backlog. But we have also a couple of large projects that we are working together with the customer, you can say a partnering project, where we have 2 phases: that we help the customer to design in the first phase; and when we have designed it, we set the prices together with the customers. It's more open book projects where we actually build the orders for the second phase into the order backlog until we have signed that phase and agreed upon the final sum of the contract. So it can vary from one quarter to another. And I'm not worried about the order intake going down in Norway. I think we will have a -- yes, I think we will have some deals that will be back in the order backlog or we'll be putting the order backlog that (inaudible). The demand in the market is still strong.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [4]

--------------------------------------------------------------------------------

Okay. Super. And then on these projects that you completed within Oras that are part of this explanation, how big were they? And also, how big were the write-downs in the quarter?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [5]

--------------------------------------------------------------------------------

The write-down in the quarter, those 2 projects were SEK 25 million or SEK 24-point-something million -- yes, around SEK 25 million. And in the quarter, total this first half was SEK 50 million for Norway. So that means that we have the existing Norwegian business on the same level as, margin-wise, as last year.

And then how big they were, they're large. One of them was ending up on a total sales, 1 -- somewhere between SEK 150 million, SEK 200 million, I think.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [6]

--------------------------------------------------------------------------------

Okay. All right. And then on the big swing in working capital in the quarter, what is the reason behind this? And is this anything to worry about? A new normal or something like that?

--------------------------------------------------------------------------------

Åsa Neving, Bravida Holding AB (publ) - CFO [7]

--------------------------------------------------------------------------------

The reasons for that is mainly that we have higher accrued income that had not been invoiced and also that we have lower trade payables. This is -- we haven't digged into this in detail, but it's probably because they have a lower production in the installation business, which will lead to a lower trade payables. So these 2 items, they are the main concern.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [8]

--------------------------------------------------------------------------------

Okay. And what is this going to look like going forward? Are you going to tie more capital? Or how should we see it?

--------------------------------------------------------------------------------

Åsa Neving, Bravida Holding AB (publ) - CFO [9]

--------------------------------------------------------------------------------

No. Well, I don't think there is any reason to believe that.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [10]

--------------------------------------------------------------------------------

And then you also had some wording in the report that you have been more focused on project selection. And to me, it sounds a bit more as if you've been able to cherry-pick projects. Does this mean that the overall quality of the backlog has improved in terms of the margins you can achieve? Or -- and I mean, at the end, then the market growth is higher than the report suggests today? Or how should we square this?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [11]

--------------------------------------------------------------------------------

I think the word cherry-picking is quite positive. But I think when -- if you isolate this to a branch in Bravida, if you have a really strong order backlog, of course, you can have a small period where you haven't -- where you aren't overloaded with work. At the same time, you have hard -- or difficulties to fill that space with the new projects. And you know that if you have an order backlog, that you can and have to produce that accompanying 18 months. That's, of course, a situation where we are more, yes, keen on trying to select the right type of customers with the right type of projects. I'd say, yes, from that perspective, it will -- gives us a better quality in the order backlogs.

Then one other explanation is that we have some turnaround branches that aren't allowed to take on projects for the moment because we want to take down the sales. We always have a number of those branches which is also affecting the growth -- organic growth for the moment. And this is, for example, Stockholm area where we are a little bit more careful depending not on the market -- demand in the market but more from the perspective that we don't think we have been good enough on executing and negotiating so we can win the right type of projects. So I think that's 2 reasons. And then we have some order effect from Easter, of course, but that's a couple of days and that's hard to estimate. But yes, of course, there is some capital effect as well. But I think the order -- the backlog shouldn't -- yes, I think we have a good quality of order backlog, at least.

--------------------------------------------------------------------------------

Predrag Savinovic, Nordea Markets, Research Division - Analyst of Consumer Goods [12]

--------------------------------------------------------------------------------

Super. And finally, on the calendar impact on top line, do you have any idea of how much that has impacted your growth...

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [13]

--------------------------------------------------------------------------------

No. I mean we did say that we have a higher effect or impact in Norway, where we also take the whole week off, et cetera, and then we have a smaller effect in the other countries. So -- but we don't have that. But let's say -- I think it had been the right side of receivable if the Easter had been in quarter 1. You can do that and other type of comparison. The first quarter this year compared to the first -- H1 this year compared to H1 last year is close to, let's say, organic growth.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Our next question comes from the line of Stefan Andersson from SEB.

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [15]

--------------------------------------------------------------------------------

First, a question on, I think, Mattias or both of you actually talked quite a lot about the headwind you had, but I want to talk to your top line in the quarter, set aside the Easter effect, different reasons for that. Could you maybe elaborate on how long those -- I mean Easter is just for this quarter, but the other impacts, are they longer than the quarter? Or is it just a quarterly impact?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [16]

--------------------------------------------------------------------------------

Okay. You mean the organic growth depending on more selective projects, et cetera?

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [17]

--------------------------------------------------------------------------------

You talked about -- I can't remember, you mentioned quite a few things.

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [18]

--------------------------------------------------------------------------------

Yes. And I said that we have a good order backlog and a good position that gives us the possibility to be more selective regarding different projects and customers. That was one. Large projects in Norway and the less intense phase -- intensive phase and also the branches that aren't allowed to win any projects.

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [19]

--------------------------------------------------------------------------------

Yes. Exactly. And then -- yes, how about -- will any of that drag on for a while? Or is it mainly a quarterly impact?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [20]

--------------------------------------------------------------------------------

No. I think it's quite easy to answer that because it's very hard for us to forecast because we don't have those instruments to be able to do it. But I would say that given the nature of this business, the growth can vary from one quarter to another. And of course, it's -- we have a strong order backlog and some of the -- the timing in the order backlog has not changed compared to the past. On the other hand, there could be an effect of this in the next quarter as well, of course. On the other hand, there could be some phases in the project that are actually more intense, that would take out the growth. But of course, it can be lagging into the next quarter as well. But in the longer-term perspective, I'm not worried for the moment. I think that's the best way to answer it.

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [21]

--------------------------------------------------------------------------------

Yes. Then also just double-checking, you made lots of acquisitions in Denmark in the quarter, and I guess that's burdening the margin. If I understand correctly, if I just add on the margin for Q2 last year, would that difference, as you mentioned also, be truly these integration costs?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [22]

--------------------------------------------------------------------------------

No. I think, first of all, acquisition is a really good way to create value for Bravida. But we also know that in the beginning of -- when we're taking those acquisitions to onboarding them into Bravida, it will take -- it will cost something, of course. That has been showing in the number for Q2. And it will also cost focus, of course. And we know that, that will have some impact on the margin in Denmark as well for the coming quarters. That's normally the fact. In the long term, again, this will create value for Denmark. And you can do your own math. And of course, we have lost some margins in Norway and Denmark the first half year in '19. And of course, it would be tough for both Norway and Denmark to cover that within the existing year. So I think we're going to expect slightly lower margin when we do the math in '19 for those both countries.

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [23]

--------------------------------------------------------------------------------

Yes. And then for my last question, talking about the margin target that you have and the comment made that you've reached that. I mean just remind me, but you've been -- historically you've been blaming the acquisitions for not really reaching that. Are you now saying that you will be able to reach that with the current pace of acquisitions? Or are you saying that you will slow down acquisitions in order to reach that? I mean what -- could you maybe elaborate a little bit on what you mean by seeing that, that target is so easy to reach since we haven't seen it ever?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [24]

--------------------------------------------------------------------------------

I don't think Åsa said it would be easy to reach, and I haven't said it yet. I think we are -- in Bravida, we are very keen on putting up targets that actually challenge us a bit. And of course, doing more acquisitions as we have decided to do, even if we're doing more acquisitions with higher margin today than we did 2 years ago, of course, will dilute the margin. So we are making it slightly harder for us to reach the 7% target. But what we can see what we are doing in the current business, the upsides we should have. And I think slightly less overheated margin should maybe make it a little bit easier for us to drive the margin even closer to 10% to start. And of course, as long as we continue to do acquisition it means we will have slightly more difficult to reach the 7% target than otherwise. On the other hand, we have improved the margin. If we adjust for the acquisition, we have improved the margin 10 bps every year, and we're getting closer and closer to it. So we have no reason to put out target that we already have reached. We want to reach 7% before we change it.

--------------------------------------------------------------------------------

Stefan E. Andersson, SEB, Research Division - Analyst [25]

--------------------------------------------------------------------------------

And the way to reach it is with the current model of -- also doing acquisitions?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [26]

--------------------------------------------------------------------------------

Yes. I think we -- well, we don't want to stop. I think it's more important that we continue to do acquisitions and we reach 7% margin just by stopping doing acquisitions. I think that's the best way to create value for the shareholders, to -- getting closer and closer to 7% margin as well as -- and doing acquisitions at the same time.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Our next question comes from the line of Karl-Johan Bonnevier from DNB Markets.

--------------------------------------------------------------------------------

Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [28]

--------------------------------------------------------------------------------

To continue on Stefan's question on the acquisitions. When I look at the companies you have acquired in Denmark so far this year, all of them seem to be having higher margins than you have in your legacy business. So could you just explain how this works coming into your model and it becomes diluted?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [29]

--------------------------------------------------------------------------------

Yes. You're right. And I think that supports well what I said, that we are buying higher -- companies with higher margin today than we did a couple of years ago. But when it comes into our account, we are charged with an overhead, of course. And the downside for them is the overhead. The upside is the synergies we can give them as a member of the Bravida Group. And of course, taking out those synergies in form of purchasing, getting them into our platform, et cetera, that will take a couple of months. And we haven't been able to do that yet in Denmark. So I think that's the reason. We normally, in the fast phases, get the companies into our platform within, yes, 3 months or something. In Denmark, they have done slightly a number of acquisitions in a short while, which means that it would take a slightly longer time. So I think that's the reason. Before we have taken out the synergies, they will have a slightly lower margin. And the synergies we are calculating is hard synergies, like purchasing, which is probably the fastest synergy to take out. Then we also calculate the cost for premises, et cetera. That would take slightly longer time to -- before we can relocate and get rid of one contract for the premises, et cetera. And in some cases, we have the synergies for administration costs, and that's also slightly longer time before we have taken those type of synergies out. So I think that's the reason.

--------------------------------------------------------------------------------

Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [30]

--------------------------------------------------------------------------------

So when I look at the performance in Q2 in Denmark, it's really the sheer size of the number of acquisitions you added and then integrating them quickly, that has affected the short-term profitability?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [31]

--------------------------------------------------------------------------------

Yes. I think that's a good way to answer it. We -- If I am correct, I think we have added close to SEK 100 million in the quarter, SEK 90-plus-something million with lower margin. And then as a result of they're not -- that they are not onto our platform, we don't have the same transparency regarding margins, performance, et cetera, in the projects. That will actually mean that we are slightly more cautious about or conservative regarding the bottom line when we put them into our quarterly result this quarter.

--------------------------------------------------------------------------------

Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [32]

--------------------------------------------------------------------------------

Excellent. And then just how do you see the opportunity for you to source the skilled staff you need? Obviously, you continue to drive the service operation in double digit and you have a record order backlog in the installation. Is skilled staffing a limitation for you at this stage?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [33]

--------------------------------------------------------------------------------

I think that in some places, there are limitations. We can use subcontractors to a certain extent, but I -- also, that's an explanation why we say no thanks to some type of projects, where because we don't want to take on a bigger risk in our own portfolio by selling fixed-price projects when we need to use subcontractors on a -- that are nonfixed price to us. So we are, in some cases, more cautious where we don't think that we can use the right type of subcontractors to the right contract -- yes, type of contracts, I would say.

--------------------------------------------------------------------------------

Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [34]

--------------------------------------------------------------------------------

Excellent. But if you sum it up, could you say that keeping service growth at good positive numbers and then continue to build order backlog, that wouldn't be a problem from a skilled personnel point of view, still?

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [35]

--------------------------------------------------------------------------------

Yes. I think that's -- yes, I'd say yes on that, Johan.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

(Operator Instructions) And it looks like there are no more questions registered at this time, so I'll hand the call back to you, speakers, for your closing comments.

--------------------------------------------------------------------------------

Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [37]

--------------------------------------------------------------------------------

Okay. Thank you very much, and thanks for good questions as usual. And I just want to wish you all a great summer. And I think at least some of us in this room is -- need some vacation as well, so I hope you get a great summer, all of you. Thank you very much.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

And this now concludes our conference call. Thank you all for attending. You may now disconnect your lines.