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Edited Transcript of BRAV.ST earnings conference call or presentation 6-Nov-19 8:30am GMT

Q3 2019 Bravida Holding AB Earnings Call

STOCKHOLM Nov 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Bravida Holding AB earnings conference call or presentation Wednesday, November 6, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Åsa Neving

Bravida Holding AB (publ) - CFO

* Mattias Johansson

Bravida Holding AB (publ) - CEO & Group President

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Conference Call Participants

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* Karl-Johan Bonnevier

DNB Markets, Research Division - Analyst

* Lucas Ferhani

Deutsche Bank AG, Research Division - Research Analyst

* Stefan E. Andersson

SEB, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Bravida Q3 report 2019. Today, I'm pleased to present CEO, Mattias Johansson; and CFO, Åsa Neving. (Operator Instructions)

Speakers, please begin.

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

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Thank you very much, and good morning, everyone, and welcome to this presentation of Bravida's Q3 report. It is myself, Mattias Johansson; and CFO, Åsa Neving, who will present and answer your questions today.

So we start immediately on the next slide, Slide 3, and the business highlights. Bravida, as you all know, is the premium multi-technical service provider in the Nordics. We are represented in more than 160 locations with up to 300 -- close to 300 different branches, and we have more than 55,000 customers. And top 5 customers represent only 13% of the sales. After Q3, we have an LTM sales at SEK 20.3 billion, LTM EBITA at SEK 1.240 billion, and we are today more than 11,500 FTEs. And this all is the base for the low risk in our business model as diversified end markets, low customer concentration and small average contract size.

Turning to Slide 4, and the summary of this report. We can summarize that we have a very strong order momentum. Order backlog is up 35% year-on-year, and the order intake in the quarter is actually up 25%, very strong figures. We have continued high M&A activity. Four acquisitions completed in the Q3 quarter and approximately SEK 1 billion in acquired sales year-to-date. Service is growing 10% and is now 47% of the total sales. We have improved margins in Norway to 5.9% due to tender selection and the margin over volume focus, and overall stable margin at 6%.

We have a strong cash flow generation, above 100%, if we look at the old way of measuring it, and we have a solid financial position at net debt at 1.8x EBITDA. And we are very well positioned for continued profitable growth, both organically and through M&A.

And on the next slide, I just want to clarify, due to the press release from this morning regarding the planned restructuring in Stockholm. And I think it's important to mention that it's not Stockholm at all that we are struggling with profitability. We have many branches that is profitable, but we have for quite a long time, has experienced negative earnings, and that has, of course, affected the margin in Sweden as well as the organic growth, of course. To improve the earnings in Stockholm, part of Stockholm, a number of measures have been taken. New leadership, and as you know, we changed the Head of Stockholm earlier this year, and we have also changed branch managers as well. We have been working with restructuring, greater emphasis on project management and control, and we have been training and try to educate the personnel as well. In Q3, we had closed a couple of unprofitable departments. And I think it's important to mention that closing is, of course, always the last option. But in some cases, we really have to do it, but that's something we always try to avoid.

But even if we have done all these things, we have not seen any improvement in the business in these areas in Stockholm, as expected. And Tore Bakke, we still see a good demand in the market, and in order to have a competitive position going forward, we have decided to restructure. And this has resulted in a plan calling for layoffs, and the management estimates of the total cost is SEK 60 million, and that is something that will affect the fourth quarter of 2019.

On the next slide, the highlights for the quarter. And the sales grew 5%. We had negative organic growth and M&A contributed 7%. We had growth in Sweden, Denmark and Finland. And service sales growth was 10%, which is, of course, very positive. The order backlog, again, at record high level SEK 14.5 billion, up 35% year-on-year and a continued good momentum in the order take as well, very high order intake, plus 25%. We have strong order intake in Sweden, Denmark and Finland.

EBITA increased by 3%, and the margin is unchanged at 6%. EBITA margin has improved in Norway and was unchanged in Denmark, but lower in Sweden and Finland. The margin in Sweden is lower due to the project write-downs in region of Stockholm, and Finland had lower margin due to lower volume in some branches and some write-downs in projects as well. The cash flow is, depending on the season, very good, SEK 65 million, and the cash conversion is 104%. Working capital, minus SEK 640 million and the net debt at minus SEK 2.7 billion, 1.8x adjusted EBITDA.

We have done 4 acquisitions in the quarter, so far 16, and actually, after the Q3, we have done another one. So in total 17 acquisitions so far in '19, and we still see a good pipeline. So we think that we can continue to do acquisitions going forward as well.

On Slide 6, I will guide you through our view on the market. Overall, we still see a stable market and a good demand for our services. In Sweden, Norway and Denmark, we still have a good market and a stable market in Finland. In Sweden, the main drivers are public investments in buildings and infrastructure. In Norway, the market drivers are mainly public investments and energy efficiency projects. And in Denmark, the construction of residential, health care and education buildings are driving the volumes. In Finland, a stable market that actually is driven by refurbishment and public investments at good level. So continued strong market.

And on the next slide, you will see a slide regarding sales and the EBITA development. To start with the sales development, as I mentioned before, we expect the period with slightly lower organic growth, depending on -- I think, I mentioned before, we have been very thorough regarding what kind of business we have been taking in Norway, in the Oras acquisition. And we also have seen that, that is actually affecting the business in a positive way now. The margin in Norway is up, and we can see that the Oras acquisition is contributing in a positive way in the third quarter this year.

We have been very selective regarding projects and customers in Finland and Stockholm as well. And of course, this together with -- that some of the big projects are in slightly less busy phases, have impacted organic growth as well. But again, we have a really strong position going forward regarding the order backlog and the order intake we had in the quarter, so costing in that perspective. Sales growth, 5%, in fact, 7% from M&A, negative organic growth of 3%, but we had sales growth in both Sweden, Denmark and Finland, and organic growth in Denmark.

EBITA, plus 3% and margin unchanged, 6% and improvement of the margin in Norway, very much depending on better performance of the Oras acquisition, slightly lower in Sweden due to the challenges we already have mentioned, and mainly in Stockholm region. And in Finland, I had mentioned the reasons as well. But overall, growing business, and I think it's quite a strong evidence that we can actually keep the margin at the same level as last year, even if we have taken some costs regarding the challenges I already have mentioned as well.

The backlog is shown on the next slide, that in Slide 8. We have a very strong order intake in the quarter, up 25%, as I mentioned a couple of times, and actually 21% year-to-date. The order backlog increased with SEK 600 million in the quarter, and we had an increased order backlog year-on-year in Sweden, Denmark and Finland. And in Norway, it's a different type of projects, we are actually working in now because there are some kind of partnering project with [FDR] in phase 1, where the design and cost is calculated, and many of these orders will turn into production and coming due to the order backlog in phase 2. So I would say, we look at the -- quite positive within the region position as well regarding the order backlog.

One large order in Denmark and multi-technical installation in a public building, very interesting to see because I think we are the only player in the market that actually can act like a one-stop shop like we did in this case. We have signed a contract regarding full installations in the building, and that's not only ventilation, plumbing and electrician. It's also sprinkler and building automation. So we -- by the acquisition we did last week in Denmark, we are also #1 in the cleaning industry in Denmark. So we are really strengthened our position in Denmark to be a one-stop shop for the customers going forward.

On Slide 9, the financial. No. As you see, on the next slide, we will talk about the acquisitions. And 4 acquisitions done in Q3, adding SEK 265 million in sales. We actually so far this year had SEK 950 million acquired sales. Five acquisitions completed in Denmark, 10 acquisitions completed in Sweden and 1 acquisition completed in Finland. Norway, it's not on this list but they have been working with Oras acquisition, as you know, and when we just see that Oras is actually turning into contribute phase that -- where they are contributing to the -- in a positive way to the profit and loss. We also think that Norway can start to continue their acquisition journey as well. We still see a strong pipeline to attractive multiples.

And now we will focus on the financial performance for all the different countries. So now, over to you for the...

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

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Thank you, Mattias. I will then guide you through the financials in the countries, and I will start with Sweden on Page 11. And as you can see, if you start with the top line, we can see that our sales have been growing with 6%. This is all due to acquisitions in Q3. We had a organic -- a negative organic growth of minus 1% in Q3 and also year-to-date. And this is due to the fact that we have a lower growth in the Stockholm area. And as Mattias said, it is -- because we are very, very careful, and we're not taking on projects in this Stockholm business where we are having problems. So we have reduced volume there, and that is leading to a lower growth in total. It's also leading to a decreased margin. We had a margin of 6.3% in the quarter compared to 6.7% last year, and this is also been due to the problems that we have in Stockholm.

The Stockholm business have not contributed at all in the quarter. We had a 0% margin. So that has then had the FX impact on the total margin of 6.3%. All in all, we believe that it is a good market in Sweden. We have a strong order intake, plus 23% year-on-year and a very strong order backlog on plus 61% year-on-year. We also have had a good growth in service of 8% in the quarter.

Moving on to the next slide, Norway, we can see that we had a decline in sales by minus 5%, and that is also a declining organic growth of 5%. This is due to a lower -- to a -- that we are being very selective when we're taking on projects in the Oras business. So we have been careful with the tender selections and this has led to a lower growth and -- but it has also led to an improved margin. So the EBITA margin has improved to 5.9% compared to 5.6%. And since we are -- we believe that margin goes before volume, this is very good. And we can also see when we look at the -- only at the Oras part, that the margin has improved a lot in that area.

If you look at the order intake and order backlog, we have a negative order intake, 1% and a negative order backlog of minus 9%. This is also due to that we have been restricted on -- taking on new projects in the Oras business. But this, as Mattias just said, we believe that we have a positive future in Norway and that there are a lot of projects coming in now from this partnering contracts when they are going into the next stage.

Moving on to Denmark, Page 13. This is where we had the highest growth. We had a sales growth of plus 20%, a lot comes from M&A, but we also have an organic growth of 3% in the quarter. And this is almost only an increase in service, which is positive.

EBITA also increased. We had a stable margin at 5.6%, at the same level as last year. A very high order intake and a very high order backlog. We have gotten one large project in the order intake this quarter, as Mattias said, SEK 350 million. Otherwise, this is normal, small and medium-sized projects coming in.

Looking at Finland on Page 14. We have a sales increase in Finland in the quarter of 4%. The organic growth was negative. It's the same here that we have been careful on tender selection in the quarter in some parts of Finland. We still have -- we have been struggling with the profitability and volume in Finland for some time, and this is due to the first acquisition that we did in Finland, that we still are struggling to improve, and where we have the lowest volume and the lowest profitability is in the Tampere area. But it is improving. It's not growing fast enough, but we are slowly getting there. Yes, the margin for the quarter was 1.8% -- sorry 0.5%, so lower than last year.

Moving on to the financial position on Page 5 (sic) [Page 15]. We have a solid financial position, very strong. We have a net debt of SEK 2.7 billion compared to last year was EUR 2.1 billion. But in the net debt this year, also the financial leasing is included, EUR 922 million. This leads to a net debt EBITDA ratio of 1.8x compared to last year's 1.7x. If we would exclude the financial leasing, it would be 1.4x. The comparable figures is 1.4 to 1.7x. A strong cash conversion of 104% compared to 98% last year. And as Mattias said, we have gone back to the old calculation on cash conversion where we're not including IFRS 16 because that's a bit misleading.

We have also concluded a new financing. It's in place from October 14. So it's financing package of SEK 2.5 billion at the banks. We are, right now, using or drawing SEK 600 million on that facility. The average interest rate on this is STIBOR plus 90 basis points. Maturity in October 2022, and then it's including an option 1 plus 1 year. So we are very happy to get that in place.

Yes, I think that's what -- let's go to the next page of the financial target. Just to repeat our financial targets for you. We have a -- now we are on Page 16. We have a sales target that we should increase the sales growth with more than 10%. It should be 5% organic growth, 5% to 7% from acquisitions, yearly. This will, of course, vary from a year to another, but with our business cycle, we should be there. We have a target of more than 7% EBITA margin. We are not there yet. We don't believe that this is impossible, and we are getting better. Hopefully, not too far away from now. We have a cash conversion target that we should be above 100%, and we have a target of paying out dividend of at least 50% of the net profit. And we also have a target of net debt/EBITDA ratio of around 2.5x, which we are fulfilling.

I think that was it, Mattias. Do you want to continue?

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

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Yes. Thank you. That takes us to the -- my favorite Slide 17. And I think this really shows the best side of the business model we have in Bravida. We have a low risk, and we can generate a lot of cash. And I think we can continue to grow this business, both organically and through M&A. And the cash we are generating actually allows us to do acquisitions at the same time as we pay down the debt and also can payout dividend to the shareholders. And this is -- yes, shows the history, and we think that we can continue this journey for a while as well, is supported by the business model we're having and the demand in the market.

To the last slide, I just want to summarize once again. We have a very stable performance. Sales increase is 5% and driven mainly by acquisitions. The installation order backlog at record level, SEK 14.5 billion and continued good business momentum for service that actually grew 10% in the quarter. And that we altogether support the growth the coming quarters as well. And the order intake, up 25% in the quarter is very strong.

Margin stable at 6%. The margin is improving in Norway. M&A execution on track with a healthy pipeline. 16 acquisitions completed so far in '19 until last of September, adding SEK 950 million in sales. We have a net debt at 1.8x EBITDA and a strong operating cash flow on SEK 1.4 billion. Cash conversion above the financial target of 104%, and as you can see, we continued with acquisitions in the quarter as well.

So overall, a stable quarter, as I said -- have said to you before, we are in a period with slightly lower organic growth, but we are quite confident, I'm quite confident that this will turn, not the coming -- next coming months, but after that we will see a period of growth again, supported by the strong order backlog we're having.

And with that, thank you very much. And I think we can open up for questions.

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Questions and Answers

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [1]

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Let's see what happens. Do we have any questions?

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Operator [2]

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One from Stefan Andersson from SEB.

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Stefan E. Andersson, SEB, Research Division - Analyst [3]

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A few questions from me, then. If we start with Norway and Oras, we see margins are improving now. Where are we when it comes to problem projects running at low margins? Are we -- are we out of that? Or is there more easy margin improvements to come? So that's the first question. Secondly, if we exclude that portion of the margin expansion, how quickly do you think Norway could come back, so to speak, or Oras could catch up to the other Norwegian business?

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

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Thank you. First of all, yes, I think we see that we have a much better portfolio of projects in the Oras part in Norway. It's definitely a clear difference. And how fast it will grow, is, of course, hard to estimate. But without mentioning any specific margins, we can see, in the quarter, the Q3 quarter, that the margin is trending upwards in the Oras business in a positive or even in a quite positive way.

Regarding the projects you are mentioning, those are finalized. There could be a small risk that there will be some kind of disputes after the project, but that's nothing we know about today. But the project is finalized. The last movement of assembling has been done, so to say. So it's -- the timing is hard to answer, but it's definitely trending in a positive way.

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Stefan E. Andersson, SEB, Research Division - Analyst [5]

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But you did have some projects running in Q3, or...

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [6]

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Yes, of course. We have got projects in Oras running in Q3, definitely. And in that we...

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Stefan E. Andersson, SEB, Research Division - Analyst [7]

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I mean projects with -- I mean, these problem projects, did they affect Q3? Or is Q3 clean of that?

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [8]

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No. I think that's a -- it's not clean, very close to clean from that.

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Stefan E. Andersson, SEB, Research Division - Analyst [9]

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Okay. And then on Stockholm, just so I understand this correctly. I understood that you had some issues with loss making in some units, electrician units maybe and that you were to do a restructuring. Now you said that you already closed a few units and that you are -- so I'm a little bit confused here. Maybe if you could give me a little bit more information on what you are doing.

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [10]

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Yes. But -- first of all, the model of the business in Bravida is that we are hiring new people, and we are actually having layoffs where the market is shifting somewhere. That's the way how we treat demand in the market. And it is a -- today, we are hiring more than we actually -- that's ludicrous that we have to actually get rid of. But in Stockholm, we have had experienced quite long time of low profitability, and already in Q3 of this summer, we closed a couple of branches because we have actually tried to do the same, shifting the branch managers and more project control, try to educate, train people. And the last option is always, actually to close down branches. But that's correct. We closed some branches in Q3 as well, and the costs for doing that is already in the profit and loss.

But that hasn't affected the Stockholm business enough in a positive way, that makes us take the decision to continue this. And this actually is a question or the call for layoffs in more branch, and actually -- yes, I don't want to say more about that because we have discussions with the unions is going on right now. But we closed some branches in Q3 and that could happen in Q4 as well. And the estimated cost for this altogether with the different types of costs we're having in a process like that is estimated to be SEK 60 million.

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Stefan E. Andersson, SEB, Research Division - Analyst [11]

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Yes. So if I understand, just to get that, the SEK 60 million, it's not a broad-based Stockholm restructuring. It's more -- it's a few branches that you have defined that it's related to...

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [12]

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Yes. Because we have branches. You can say, we have a mix in Stockholm. We have, today, 2 regions regarding electrical, one of them is profitable. We have the plumbing region, which is profitable. We have other business that are profitable as well. But these electrical branches that you are actually asking about is not profitable, and we actually need to do something more about that. And unfortunately, we have to close down 1 branch and do some other things in a couple of more branches. So -- yes, and the cost that we estimate, the SEK 60 million, is, of course, different pricing cost. We have to finalize some projects. We have to -- we have some premises we actually have to pay for, et cetera, et cetera. So that's an estimate.

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Stefan E. Andersson, SEB, Research Division - Analyst [13]

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Yes. Okay. Good. I don't know if you're going to give me this. But if we -- the margin drop, I guess, you've given 2 explanations. One would be that there is -- the difference is project write-downs, and then the other one -- I mean, I don't say it's different explanations, it's just the same. It's 2 different ways to say the same thing. So project write-downs was one comment made. And then you said that the Stockholm or can't remember now in the presentation here, but that you had some branches in Stockholm creating the difference. So focusing on the projects there, probably write-downs, is it fair to say that if you did not write-down projects, would you be on a similar level of margin in Sweden? Or is that...

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [14]

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Yes. I think Neving said that, I think she did. And I think I just want to add something to the Stockholm. I think what we have actually seen is that we haven't been competitive enough on the market as it is today. We still think we have a strong demand in the market. But if we can't make money with certain circumstances in certain teams in the market we're in today, then we will face even bigger problems in the future. We still see strong demand, but if you can't make money in this market today, then, of course, there are something that is not good enough.

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

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Yes. Okay. Then moving over to M&A. Regarding the pipeline, you touched on it, that Norway might be back on the agenda. But where would we -- where do you see the largest potential? I mean we never know what you close, of course. But if you look at the pipeline on the 4 regions, which countries do you think would be on top next time we discuss or a year from now?

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

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Yes. Thank you for that. Of course, it's not very easy to know which one we close. But if you look at it from another perspective, I think that we had the opportunity to continue to do acquisitions in 4 countries we are in. But from the perspective that Denmark has been quite busy this year as well as Norway had been quite low in the M&A market because of the big acquisitions they did, I think we can expect maybe the same from Denmark for a while. But the opportunity is there in all countries. I think we will continue to do in Sweden, some in Finland may be, and Norway and maybe similar in Denmark, but not because we can't do it more because we want to take care of the acquisition we have done this year.

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

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Yes. And then on Finland, a little bit struggling -- was struggling for a long time with that unit. If you look at the underlying margin there, are you willing to mention anything about that? There were some big write-downs again in Finland that -- what are they?

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

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Yes. I think you can say Finland has improved to some extent because now we are -- the challenges we're having is isolated to the Tampere area today. The acquisitions we have done contributes in a okay way to the P&L in Finland, but we have isolated the problems in Tampere, and that's actually coming from the very first acquisition we did 4, 5 years ago, and that's something we actually is -- yes, shifting out personnel, culture and that has taken some time. But except for Tampere, we are definitely moving in the right direction in Finland. That means not done yet.

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

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But the reason is, of course, that last year, you had a big write-down in Q2, and then you -- that was probably made too large, too big and then you release that. You had a 6% and 5.5% margin in Q4, and now we see some write-downs again. So I'm just trying to understand if we should see a release again or...

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

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Yes. And I think -- the dynamics you've seen then is slightly different because that's quite small division. And write-downs to some extent is part of our risk model, and we normally price it in a good way. But when you have a write-down in that small division, that's visible immediately. And I think we still need to grow the business a bit in Finland to get stable enough so we don't get that impact in the margin from that type of happenings.

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

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Yes. The first half is more relevant than Q3 and Q4 last year than anything else, I guess. The performance you had in the first half of '19, I guess, is more toward...

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

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Yes. I would say like this, we are not satisfied with the performance in Finland for the moment, but we think we have an isolated challenge we needed to carry.

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

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Yes. Okay. Then final question for me. Just remind me, on the old financing that you, I guess, partly are replacing with the new financing, could you -- what was the interest cost on that?

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Åsa Neving, Bravida Holding AB (publ) - CFO [24]

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It was a little bit less -- it was SEK 2.3 billion, and the interest rate on this debt ratio where we are now was SEK 1.25 billion -- STIBOR plus SEK 1.25 billion.

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Operator [25]

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(Operator Instructions) And we have a question on the line from Karl Bonnevier from DNB Markets.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [26]

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Just coming back to the reservation you're doing in Q4 to start with, is that including project reservations and rather particular write-downs? Or is it just for, say, restructuring the operation as such, looking at manpower and so on?

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [27]

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It's a combination because we have some projects that we have to finalize in those branches, and we really don't know how that will be finalized in what way. So that's just an estimation, combination of layoffs, projects, premises cost, et cetera.

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

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And looking at the SEK 60 million, you think that is sufficient to do those finalization as well?

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

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Yes. We think so. And I think that's an investment we are doing because again, if we are not competitive in this market, then, of course, there are something that is not really helping.

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

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Excellent. Just to give me a slightly better feel as well on the Stockholm operation, these 3 units you're now highlighting for closing, how much of the Stockholm operation did they represent? Just to get a feel for, say, how the remaining operation or the ones that you are not focusing on is really contributing?

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Åsa Neving, Bravida Holding AB (publ) - CFO [31]

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This part of the Stockholm business, it's very small because we haven't taken on new projects in this for some time. So it's actually only a handful of projects, less in this area, and they are at the end of the production phase. So it's not a lot of production. It has been a low volume in the quarter.

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

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Good. When I look at the short-term outlook for, say, organic growth staying at a modest level, I understand that it's driving you into 2020 to some extent. Then Mattias, if you just could give me a little better feel for it, obviously, your service operation is growing very nicely. You have a nice order backlog. Is this just a timing effect of that order backlog really starting to kick in on sales again?

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

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Yes. That's not very easy to actually answer. But we see that, yes, first, the order backlog is, as you understand, really strong. The timing and the character of the project is slightly different because we are working today, slightly more on the partnering type of projects than we did a year ago, which actually means that the designing phase is slightly longer, and we are entering into the project slightly later. But I will guess that we will have the organic growth kicking in, as you said. My estimation is that, that sometimes in Q1, that will -- I don't know if I should say definitely happen but let's say, happen. That's my estimation.

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

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Perfect. Then just looking at Q4, obviously, with the modest organic outlook and you say you're working more towards partnering projects, does that have any implication for these kind of end of projects finalization effects that you normally see in Q4, looking at profitability I think so.

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

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No. I think -- yes, I think that's more about the starting phase that we haven't started the project. I think that we try always to be a bit conservative in the forecast regarding the projects. I would say that, that shouldn't be a very big difference this Q4 compared to last Q4.

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Operator [36]

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Our next question comes from Lucas Ferhani from Deutsche Bank.

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Lucas Ferhani, Deutsche Bank AG, Research Division - Research Analyst [37]

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I have just one question. When you speak about project selection, can you explain a bit more kind of the issues you have? Is it more competition? Or is it coming from client, maybe putting a bit more pressure on prices if maybe the demand environment is not as strong? What is exactly causing that?

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [38]

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Is that regarding the Stockholm you actually is asking about?

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Lucas Ferhani, Deutsche Bank AG, Research Division - Research Analyst [39]

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Yes, yes. When you're saying in the press release that project selection is impacting organic growth. I think it's...

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [40]

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I would say that it's not that -- this is not related to the market at all. This is not company-specific, I would say. It's more branch-specific. It's our own capability to produce in the environment. We are not productive enough, we can't handle the contract good enough, we are not planning the project good enough because we can see that we have 2 regions of electricians in Stockholm. One of them is profitable, and they are acting on the same market. So that's only connected to our -- the teams in the branches, both blue collars, project management, branch manager, altogether, how efficient and productive they are and their possibility to actually make money in the same market that the other one is making money. So I wouldn't say that the competitive landscape has changed. It's not tougher today, it's been through strong markets, so this is not related to external factors. This is just our own poor performance.

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Operator [41]

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And as there appear to be no further questions, I will turn the conference to you.

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Mattias Johansson, Bravida Holding AB (publ) - CEO & Group President [42]

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Okay. Thank you very much. Good questions, and we wish you a great day, all of you. Thank you very much.