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Edited Transcript of NETCG.CO earnings conference call or presentation 6-Feb-20 10:00am GMT

Full Year 2019 Netcompany Group A/S Earnings Call

Feb 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Netcompany Group A/S earnings conference call or presentation Thursday, February 6, 2020 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* André Rogaczewski

Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board

* Thomas Johansen

Netcompany Group A/S - CFO & Member of Executive Board

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Conference Call Participants

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* André Thormann

ABG Sundal Collier Holding ASA, Research Division - Analyst

* Claus Almer Nielsen

Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT

* Erik Elander

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* George W Webb

Morgan Stanley, Research Division - Equity Analyst

* Poul Ernst Jessen

Danske Bank Markets Equity Research - Senior Analyst

* Yiwei Zhou

SEB, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the presentation of the Q4 company announcement of the annual report 2019. (Operator Instructions) I must also advise you the conference is being recorded today, Thursday, the 6th of February 2020. I would now like to hand over to your first speaker today, Andre Rogaczewski. Please go ahead, sir.

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [2]

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Thank you. Good morning, and welcome to this presentation of Netcompany's Q4 2019 and full 2019 results. My name is Andre Rogaczewski, and I'm the CEO and Co-Founder of Netcompany. And I'm joined today by our CFO, Thomas Johansen.

Before we get going, there are some important disclosures that I need you to read through. So could we please have Slide #2, please? I will pause for 30 seconds here and that you all have a read-through of these important disclosures.

And with that, can we go to Slide #3, please?

The topic of today's presentation follows our usual layout, which is that I will give an update on the business highlights for Q4 and the full year of 2019. I will discuss our employee base and the developments in that. And I will also spend some time discussing these -- the projects that we have delivered in 2019, including a few words on a project we have recently won here in 2020, and give an update on the 3 acquisitions we have made over the last 3 years. Finally, I will go through our financial guidance for 2020. Once I'm done with that, Thomas will go through the numbers in greater details, including cash flow and work in progress.

Can we have the next slide, please?

In Q4, we continued our high growth rate and realized growth in top line of more than 23.5% in constant currencies. Gross profit increased by close to 33%, yielding a gross margin of 42.3%, including the negative impact from our recent Dutch acquisition of negative 0.5 percentage point. The increase in gross margin is a result of our continued flawless implementation of large projects throughout all our operating units, something that I'm truly proud of. The improvement on gross profit is also reflected in our adjusted EBITA, which grew more than 37.5% in the quarter and landed at DKK 179.9 million, which yields a margin of 26.8%.

To put this result into perspective, the amount generated in the last quarter of 2019 is in line with our full year result for the whole 2015. FTEs grew by almost 500 in Q4, 489 to be exact, which is 25.1% compared to Q4 last year. And in Q4, we've said hello to more than 200 new employees.

Can we have the next slide, please?

So for the full year, we realized a total revenue growth of 19.5%, of which 17% -- sorry, 17.7% was organic, in line with our revised expectations communicated when we reported the Q3 results. Gross profit increased by 22% and reached almost the DKK 1 billion mark. As was the case in Q4, we have delivered a number of large complex projects during the entire year, which has had a positive impact on our gross profit, that lifted our gross margin to 40.6%, an increase of 0.8% point despite the softer Q3 in Denmark and Norway from a top line perspective and the inclusion of the Dutch operation. A result that speaks for itself and underlines that we are very well positioned for 2020 and onwards.

Adjusted EBITA margin was 25.2%, including the negative impact from the Dutch operation of 0.7%. Adjusted for this impact, the adjusted EBITA margin on the organic business was 25.9% compared to 25% last year.

FTEs increased more than 23%, and we continue to be positive about our growth opportunities. And hence, we continue to hire in 2019 to support our continued growth aspiration for 2020 onwards.

Can we have the next slide, please?

On Slide 6, taking a deeper look at the FTE growth and where it has been generated during 2019. It shows that around 3% of the growth comes from adding the Dutch operation in the fall. Further, on a full year level, the amount of freelancers decreased by 26. And in the U.K., the level of independent contractors decreased by 8. The decrease of independent contractor has accelerated mainly during the last quarter of 2019 as a consequence of the new employment legislation coming into force in April 2020 in the U.K. And in Q4, the amount of independent contractors in the U.K. was reduced by 67. Thomas will discuss this in more details later on in the presentation today.

Excluding the FTEs from the Dutch acquisition, the amount of client-facing employees was 2,221 in Q4 2019, an increase of 110 sequentially from Q3 into Q4 this year and an increase of 376 or 20% from 1,845 in Q4 2018. Average age remains low and is currently around 34, reflecting the continued commitment to hire 8 out of 10 new employees straight out of university. And as I mentioned in the start of my presentation, we have hired 210 new employees during Q4, which underlines our continued growth aspirations.

Churn for the last 12 months was 20.2%, which was 4.8 percentage points lower compared to last year. In Denmark, the churn ratio was reduced to 16.5% compared to 18.8% last year. And in Norway, the high churn we saw in Q3, at around 19.9%, increased slightly in Q4 and left the churn for the year at 20.4%, slightly higher than in Q3, but close to 4% higher than in 2018. The main reason for the churn in Norway to reach 20% is the outflow that we saw during Q2 2019 where a group of employees with around 5 to 6 years of experience left us. These employees came from the original Norwegian company Mesan and had difficulties in seeing themselves in the Netcompany model.

In the U.K., churn rate was reduced compared to same period last year and was 36% for the year, which is still high compared to the group. However, the U.K. is still in a major transition period, and the introduction of the new IR35 regulation will accelerate this transition further.

The churn ratios for Vietnam, of course, demonstrated from the group from 2 to 1 office location in 2018. Currently, monthly churn ratios annualized are more in line with what we expect on a group level, which is around 20%.

In total, the amount of administrative employees measured as non-client-facing resources was 6.6%. We firmly believe that the non-client-facing resources ratio will come down towards the level of about 5% during the next couple of years, in line with the level pre-IPO.

Now can we jump into Slide #7, please?

As I mentioned at our Q3 presentation, the year 2019 was truly outstanding from a delivery perspective, in a manner that we've been taking so many society critical and complex systems lives. And in Denmark, we've delivered on projects such as the new housing benefit and child benefit systems. And we have delivered a rather complex project for case handling regarding the abuse of children and young persons in Denmark, the so-called DUBU system. In addition, we delivered the new system for collecting all public debt in Denmark, including outstanding taxes. And we've also delivered the new system to all schools in Denmark, AULA, an implementation that has been on the very high attention in Denmark. And in fact, to the extent that the most sought after word in Google in Denmark in 2019 was, in fact, Aula, the name of the plan. AULA is a platform with more than 2 million users and has been delivered in time and budget and in great quality also. This policy in our delivery capabilities is so important for us, not only because it is important to our customers, but also because it supports our margins and is the best possible branding in a market for us to win new exciting, complex and critical projects.

So let's move to the next slide and take a look at some of the large new contracts we won during 2019 in the public segment. Next slide, please.

In Denmark, we were awarded the contract to deliver the new Digital Post for all public communication to all citizens of Denmark. We have won a significant project with the municipality of Copenhagen regarding case handling in relation to social vulnerable citizens. And we have won a system for social pension or welfare benefits to the Danish municipalities and a host of other cases not mentioned here. It all added up to a win rate of 73% in 2019 in the public sector in Denmark.

In the Netherlands, we won a project to deliver the registry used for all elementary schools in the Netherlands. And in Norway, we've won a contract with Kulturrådet, which was a retender of current engagement we've had in Norway at this time.

In all of cases, our reputation to deliver on time, in budget and an agreed quality has been a decisive factor for the win.

Also, I want to mention that we last week won a project with the Danish police to develop a new platform to handle local and national operational dispatch in real time. A project we are proud to have won and a project that will be important to our ambition to get a stronger position in this important part of the topic segment, not only in Denmark, but in other countries too.

Can we have the next slide, please?

On Slide 9. In the private side, we have won a number of larger projects during 2019, but most of them cannot be disclosed. However, we are proud to be able to mention that the project we won in Q1 in the Danish industry segment is with Topdanmark, which is also a case story in our annual report. The project at Topdanmark is a real interesting one, an important project to us for many reasons. Not only is it a large multiyear transformational project implementing a new and modern platform, it is also one of the first large-scale projects that has been initiated in the financial service industry for some time, an industry where most of the players face the same daunting issues, really, really old IT platforms that prohibits them from taking true steps into the age of digitalization in the core of their business.

And in the U.K., we are working on a major digitalization project with our client, DCC, who, on behalf of the regulator of gas and electricity, has a task to implement an entire new platform to facilitate free choice of provider of gas and electricity in the U.K.

We are working on a number of advanced and very interesting cases in the private segment in all countries that have similar similarities in the 2 cases mentioned here, which gives us the comfort in the segment and future growth driven by digitalization.

Can we have the next slide, please?

So before I move to talk about our expectations for 2020, I want to give an update on the 3 acquisitions we've made over the past 3 years.

In November 2016, we acquired Mesan in Norway, which, at that point in time, was a company of around 125 employees and around DKK 125 million in revenue. Today, we are close to 200 employees in Norway and a revenue of just above DKK 200 million. All integration work is, for all practical matters, completed and the only thing that we need to do in Norway to claim that we have completed the integration is to win a large new development project in line with the projects we win in Denmark. We have expectations that this will happen during 2020, and the pipeline of projects to get us there is strong and very promising. We have, in addition, added senior industry resources to our partner group to facilitate and enable future growth in Norway, too.

In October 2017, we acquired Hunter Macdonald in the U.K. And when we acquired Hunter Macdonald, they were around 28 -- or sorry, 325 employees and had a revenue of around DKK 300 million. Unlike this transformation in Norway, where we have seen 30% top line growth in recent years, the integration project in the U.K. has been focused more around the project portfolio mix and the employee mix and getting those rights in Netcompany trends rather than just growth in itself. Today, we are around 375 employees in the U.K., generating a revenue of around DKK 400 million. But more importantly, we have managed to turn the U.K. into a significantly more profitable business, generating a margin of around 14%, which is more than double the margin when we made the acquisition. This is the result of the implementation of the Netcompany business model, focusing on larger projects delivered via our own employees rather than small engagements selling just resources. We are 2 years into the integration of the U.K., a process that we have outset expected to last 5 years before we could conclude the U.K. to be in operating in true model and true Netcompany terms. And in the meantime, a piece of employment legislation have been introduced in the U.K. market, the so-called IR35, which will have huge impact on our U.K. operation and potentially accelerate our integration project. Thomas will go more into details with the status of the IR35 implementation.

And finally, we acquired QDelft in the Netherlands in May last year. The integration is ongoing at a high speed there, and actually, also a little faster than what we originally planned for. A number of tasks to implement Netcompany's business model has already been concluded. The project methodology is implemented and a new office building on campus has been leased. And we are in the process to add senior resources to the partner group in the Netherlands to support and accelerate growth.

All in all, we are very pleased to our acquisition and the results achieved so far, a strong system going to the ability of our business model to work in other countries, too.

And this leads me into our expectations for 2020. So can we have the next slide, please?

On Slide 11, at the beginning of 2020, we had the visibility of more than DKK 1.8 billion of revenue, as shown here. This is an increase of close to 16% compared to the same period last year. The highest amount of contractually committed revenue is within public, as has been the case historically. However, we have seen improvement in the visibility in the private segment following major wins in both Denmark and in Norway earlier in the year.

The change in mix from private to public in the U.K., as seen in 2019, expected to continue into 2020, and has a negative impact on the growth in absolute numbers of the revenue visibility in the private segment, simply because the U.K. business is expected to generate less private segment revenue than was the case a year ago.

In addition, the implementation of IR35 generally introduces significant uncertainty short term to the 2020 expectations in the U.K. since conversion of contractors to perms have to happen forcefully and faster, which could lead to some contractors leaving before being substituted by perms. But overall, the quality of the visibility is better this year and more than 80% of the total revenue visibility is contractually committed compared to around 40% in 2019. This increase is mainly driven from the private segment, where we have entered into longer-lasting projects, an increase in fixed price products, too, in the public segment in Denmark compared to the start of 2019.

Can we have the next slide, please?

So on Slide 12, the markets that we are operating in had a total value for the addressable part in 2019 of DKK 183 billion, which means that our market share was around 1.4%. The highest market share in 2019 is in Denmark where we have a market share of 8.7%. For 2020, core addressable market where we have operations are expected to be more than DKK 190 billion, which means that despite rapid growth over the last 20 years, there is still growth opportunity for Netcompany to be had.

Given our current revenue visibility and the pipeline of projects we are looking into, we expect organic revenue growth of around 18% to 20%. The uncertainty to the lower end of the range is mainly related to the implementation of the IR35 legislation in the U.K. Naturally, any major delays in larger tender processes where Netcompany compete could also have a negative impact on revenue growth. The current coronavirus outbreak is currently not expected to impact that growth in 2020. But if the outbreak leads to a general global recession, this will naturally impact Netcompany too.

We expect margins of around 26%. Given the cash generation in our business, we will, given that we meet our expectations, top line and margins, be in a position where we'll have surplus cash that will be distributed to our shareholders in the form of dividends.

And with that, I will give the word to Thomas to take you through the financials in greater details. So Thomas, please go ahead.

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [3]

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Thank you for that, Andre. And like already mentioned by Andre, I am the CFO of Netcompany. And I will go more into details with the financial performance for Q4 and for the full year of 2019.

So if we move past the break in Slide 13 and straight into Slide 14 in one swift go, please, Slide 14.

Before I go into details on the numbers, we have recapped the number of working days per quarter compared to the same quarter the previous years. As you will see from this slide, Q1 and Q4 2020 has 1 working day more than 2019 and the rest of the quarter is unchanged apart from Q2 where Norway has 1 more working day and the Netherlands have 2 less. So in general, we have more working days throughout the different businesses, and the delta to last year is 2 days in total on group level for the year.

So can we have the next slide, please?

Now, Andre has already spoken to our performance in general terms. And here, we've shown actuals against our original expectation for the year. We narrowed our expectations to top line growth in Q2 to 20% to 22% organic revenue growth, which we then revised further in connection with our Q3 reporting to be around 18.25%. At the same time, we revised our expectations to nonorganic revenue growth to around 1.75%. And given that more revenue would be generated from the Netherlands, we revised the nonorganic revenue impact on margins from negative 0.3 percentage point to negative 0.6 percentage point, all in connection with our Q3 report.

Adjusted EBITDA margin from the original organic part of the business was left unchanged in both Q2 and Q3. All revised guidance targets were met.

And can we have the next slide, please?

The financial performance in Q4 is outlined here.

For the group, revenue grew 23.5% in reported currencies and 23.4% in constant currencies. 20.5% was organic revenue growth and the rest came from the inclusion of the Dutch acquisition. Growth was mainly generated in the Danish unit, that grew 23.9%, with lower brokerage in Norway and the U.K. The growth in Norway was 12.4% in constant currencies and as such, display the continued impact the loss of a couple of contracts in the summer of 2019, continued to have on top line in Norway.

In the U.K., growth was 8.5%. But where the lower growth in Norway was due to earlier loss of new project, this was not the case in the U.K. In the U.K., the lower growth is fully attributable to the ongoing change in the employment base, where a large number of independent contractors will be either transformed -- or transferred into permanent roles or discontinued. Q4 2019, we -- against -- Q4 2019 against Q4 2018 saw the number of independent contractors reduced by 67, while the number of permanent employees increased by 61, which, together with a lower proportion of resources from Vietnam working on U.K. projects, reduced the FTE base by 20. In that context, we are very satisfied with the growth generated in Q4 in the U.K.

Gross margins increased to 42.3% compared to 39.4% in Q4. The improved gross margin is driven from better performance in the U.K. and in Denmark. The inclusion of the Dutch operation impacted gross margin negatively by 0.5 percentage points. Offsetting this negative impact was the impact from the release of provisions from the risk contingent reserve, which impacted gross margin positively by around 1.1 percentage point.

Administrative costs grew by 25% in Q4, including the impact from the Netherlands. Excluding the impact hereof, so excluding the impact from the Netherlands, the administrative costs grew by 17% in Q4, which is mainly related to adding new employees as the natural adding of employees have follow-on costs in terms of computers and other costs associated with employees. Overall, the amount of non-client-facing FTEs are coming down, and we will gradually move from the current level of 6.5% non-client-facing FTEs to around 5% over the next couple of years.

Net financial cost was DKK 5 million, with both positive and negative adjustment on currency position and a cost on our external bank loan of DKK 4.4 million. The effective tax rate was 21.5%.

And if we move to the next slide, Slide #17, please, we get the results for the full year of 2019.

For the full year, revenue grew 19.5%, with strong performance in Denmark despite the negative impact from the general election in 2019. Overall, markets also increased. And for the full year, gross margin was 40.6% against 39.7% in 2018. Negative impact on gross margin from the Dutch operation was 0.3 percentage point, which was offset by a positive impact from the release of the risk contingency reserve that impacted gross margin positively by around 1 percentage point for the full year. Adjusting for both these impacts, positive and negative, margins were in line with 2018, despite the lower utilization in Q3 in the Danish operation following the general election.

Amortizations are starting to come down as intangibles from the original FSN transaction back in 2016 are beginning to be fully amortized. Apart from goodwill, most intangibles are expected to be fully amortized by 2022.

Net profit for the year more than doubled in 2019, both as a result of a strong operational result, but also as items "below the EBITDA line" was improved significantly compared to 2018 where a number of one-off costs were incurred in connection with the IPO.

And with that, let's move to a more detailed discussion of the individual country performance. So can we have the next slide, please?

Growth in Denmark was driven by growth in public that grew by 27% in Q4, while revenue in the private segment grew at 19%, which, on balance, resulted in growth of 23.4%. The growth was expected to be of that magnitude in Denmark in Q4, as both Q4 2018 was somewhat soft and that delayed cases in the public segment were expected to come to the market in Q4, and they showed it. In the public segment in Denmark, growth was driven from both existing clients and from new contracts being initiated. The level of tender writing activities in Denmark, and again, remain at a high level, which is a prerequisite for Netcompany to be able to win future large projects, too. The growth in the private sector in Denmark is based on wins in the spring, and they grew during Q4, with existing and new clients being added. A number of progress cases in the private segment pipeline lays a strong foundation for 2020.

While growth in Norway was below our initial expectation for the full year, we still grew 19% in 2019, which in the Norwegian market is close to twice the average organic growth rate in the IT services industry. We have continued to hire talent in 2019, and we start 2020 with a strong foundation for continued growth in Norway. Opposite to Denmark, growth in Norway was generated in the private segment, that grew 41%, while the public segment was more or less flattish.

In the U.K., growth was generated in the public segment that grew 76% compared to 2018, particularly due to strong growth in that segment at the beginning of the year. On balance, the U.K. grew 16.7%. And in particular, towards the second half of the year, growth rates were reduced as the impact of the new legislation framework, the IR35, is beginning to have its impact on our business in the U.K. In addition, we have chosen to discontinue a number of smaller engagements in the U.K. that were of subscale, both in terms of complexity and margins, and as such, were projects that we would not want to be doing as Netcompany U.K.

Activities in the Netherlands remained high and also higher than expected based on strong performance in the public sector, where we continued to see new wins.

And can we have the next slide, please?

From a gross margin perspective, Q4 was strong with total gross margin of 42.3%, an increase of 2.9 percentage point. The Danish operation grew margin as a result of increased utilization, and in general, strong delivery performance in all projects, while the reduction of margin in the Norwegian business was due to the aftermath of the loss of a couple of new deals in the summer of 2019, leading to a lower utilization. The biggest positive impact on margins though came from the U.K., that saw margins more than double from 13.5% in Q4 2018 to 29.1% in Q4 2019 as a result of a combination of better balanced projects and a lower proportion of independent contractors. This development in the U.K. is reassuring for the longer-term perspectives for our operations in the important U.K. market, a market that is 6x as big as the Danish market. And finally, margins in the Dutch operation were around 20%, both for the quarter and for the year as a whole. While the Dutch operation is still not a big part of the total group, it's important to note that the business is generating positive return on the direct projects, expressed here as the gross margins.

Can we move to the next slide, please? Slide #20.

The strong performance on gross margin in Q4 is almost fully embedded [through down] the adjusted EBITDA margin for the operating entities, and this is before the allocation of central headquarter cost, which only saw marginally lower percentage-wise increase of 2.3 percentage points compared to the 2.9 percentage point we saw on gross margins in Q4. The reason for this is attributed to the inclusion of the Netherlands, that has realized negative margins on EBITA level as all integration costs is reported as administrative costs and hence suppressed EBITA margin to be negative 70% in Q4 in the Netherlands. Adjusting for this, margins in the units supporting organic revenue growth in 2019 increased by more than 3 percentage points.

Again, strong performance in the U.K. operation for reasons already mentioned, which was further improved below the gross margin line to yield an EBITA margin to be close to a [factor] 3 up in Q4 of '19 compared to the same period in 2018.

The development in both Denmark and Norway on adjusted EBITA margins follow the same pattern as -- and reasons as just discussed under the gross margin.

So can we move to the next slide, please?

We wanted to give you an update on the IR35 implementation in the U.K. And again, IR35 is a new piece of employment legislation that will come to be effective in the U.K. as of 1st of April 2020. The essence of IR35 is that if you are an independent contractor in the U.K. and you only have one main customer, then you are viewed to be an employee rather than an independent contractor, which has significant additional taxes for the individual as a consequence. It also introduced taxes for the company in which the independent contractor works. Those taxes, known as NIC taxes, are around 13% of the base payment to the independent contractor.

What IR35 also does is that it makes companies that are violating the rules post-implementation to be liable for all taxes not paid for also in a retrospective manner. Hence, the implications are fairly severe, and our assessment is that the implementation of IR35 will lead to a large change in the U.K. labor market within a short period of time.

As of end 2019, 42% of the client-facing FTEs in the U.K. for Netcompany are independent contractors. This pie chart shows our current status in the ongoing discussions with the independent contractors we have on our books. We have already successfully converted 14% into permanent employees to roll over on employee contracts come April 1. We have offered or are about to offer employment contracts to another 15%. And we expect around 1/3, so 28%, plus half of the undecided, 10%, of the current pool of independent contractors to actually leave Netcompany. Post-implementation of IR35, we expect that roughly 1/3 of the current level of independent contractors will remain in that role, as they can truly be categorized as actual independent contractors under the IR35 legislation.

Can we have the next slide, please?

When looking at the split between development and maintenance, the group picture is fairly stable. For 2019, 49% of revenue is maintenance and 51% development. And last year, it was opposite with the same percentages. The relative stable group distribution covers differences in the various countries where a relative larger proportion of revenue in Denmark is maintenance compared to the other geographies, a natural consequence of the portfolio of customers being more mature and to a higher degree in later production stage mode already in Denmark. Our target split remains 50-50, and this split can vary from quarter-to-quarter.

So can we have the next slide, please?

Free cash flow improved from DKK 22.8 million to DKK 116.8 million in Q4 2019. Operating profit was improved, but working capital changes were negative compared to Q4 2018, offsetting some of that improvement. However, the main change to free cash flow in Q4 2019 is that the payment of income taxes in 2019 has been correctly timed according to performance. And hence, the tax payment in Q4 '19 was DKK 44 million compared to DKK 120 million in Q4 2018.

Looking at free cash flow for the full year underlines the strong performance of Netcompany for 2019, with an improvement to free cash flow of more than DKK 272 million to DKK 435 million for 2019. The improvement is driven by better operating results, but also a significant reduction in changes to working capital, which was mainly driven by a reduction in days sales outstanding and payment of some of the old work in progress that is gradually being moved to accounts receivable and subsequently being collected as cash. The work in progress invoiced according to plan in Q3 was paid according to plan in Q4 2019 and there will be similar payments in Q1 and Q2 2020 from the "old work in progress balance being invoiced."

Cash conversion ratio consequently increased from 60.3% in 2018 to 93.2% in 2019. And 2019 is, in many ways, a better proxy for how Netcompany cash flow develops, as all nonrecurring costs associated to the IPO taken in 2019 will not recur.

Payment of corporate income taxes are strengthened and in line with the actual book taxes for the year. There will continue to be focus and there will continue to be funds tied up in work in progress. However, the development hereof will be fully transparent. And as we've shown in Q4 2019, work in progress will actually be turned into receivables that will subsequently be collected at the full par value. This will also mean that we, all other things equal, will be in a position to pay out some of the surplus cash generated as dividends, which we have planned to initiate in 2021 based on the 2020 full year results.

And can we have the next slide, please?

So to illustrate and assuming that we will be repaying another DKK 300 million of debt in 2020, our net interest-bearing debt, utilizing cash at hand at the beginning of the year, will be down to around DKK 500 million at the end of 2020. And based on our guidance for 2020 and assuming same development in cash flow items in general, our leverage will be comfortable below 0.75. And free cash flow after repayment of DKK 300 million of debt will allow us to pay out somewhere between DKK 75 million and DKK 100 million in dividends for 2020, without impacting our continued growth opportunities at all. We will firm up this expectation during the year in connection with our Q2 report in August and be more specific on the expected dividend payout for the year.

Before we open up the call for questions, can we move to the next slide, please? Slide 25. And what you see here is a "save the date" for our Capital Markets Day in 2020. We will host the Capital Markets Day on 2nd of June in Copenhagen. We'll begin around 11:00, allowing you time to apply in the same morning. More details will be sent out separately. And if you know that you want to participate already now, you'll find the contact details mentioned here and feel free to reach out.

So with that remark, I've concluded the detailed financial walk-through for the quarter and for the year, and we will now open up the call for questions. So we can move to the Q&A slide, please, and open up the call. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of George Webb from Morgan Stanley.

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George W Webb, Morgan Stanley, Research Division - Equity Analyst [2]

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I have 3 questions, please. Firstly, in Norway, the annual report highlights that growth in 2020 is dependent on winning 1 or 2 large new projects. Can you give us a sense of what sort of a win rate that would be? Is that 1 or 2 out of 5? Or is that 1 or 2 out of 10? That would be helpful.

Secondly, in the U.K., it looks like IR35, and I might be wrong on this, is due to come in from April 2020. So should we be thinking about the U.K. growth potentially being most challenging in Q1 and Q2 and then potentially easing kind of in Q4?

And then finally, when we move into 2020, do you have any internal targets around cash flow conversion?

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [3]

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Thank you, George, for those questions. Andre here. Yes. So in Norway, to take your first question, we are bidding on some of the larger public deals there, but also in the private space, we have great opportunities. I can't be specific around our pipeline. I'm not allowed to do that. But it is of some sort of binary nature. We are talking a number of opportunities. And we -- as you said, we need to win 1 or 2 of those. I can't be more specific than that.

When it comes to the implementation of IR35, you're absolutely right. It goes into production, so to say, in April 2020. We have made a plan to do this continuously over the months to come. And of course, also over the months after the April to be absolutely exact on how this will proceed, it's too early to say. We are in a constant dialogue with the employees and the contractors. And yes, well, over the next 2, 3 quarters, we will do an effort in this area, but it is very difficult to say exactly. We'll monitor it very, very closely, but it will take the next -- the remainder of the summer and also going into the fall in order to finish this transition.

And for the third question, I leave that to you, Thomas.

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [4]

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Yes, thank you. And thanks, George. So the third question was on cash conversion targets for 2020, and per se, we don't have any communicated the cash conversion target. But as I just stated, 2019, in many aspects, is a good model year for how cash flow will be looking in Netcompany. And for 2019, we've generated a cash conversion ratio of around 93%. So it's probably fair to assume something in that order without saying that's going to be 92% or 94%, but in that magnitude, I think, would be a fair assumption to put in.

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Operator [5]

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And our next question comes from the line of Claus Almer from Nordea.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [6]

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Also a few questions from my side. The timing of these larger tenders you mentioned as part of your 2020 guidance, when should we expect these to be awarded, not having a negative impact on your revenue growth in 2020? That will be the first question.

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [7]

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Again, it's very difficult for us to be very exact on these matters. We have, as we said here in this walk-through, that we've won -- recently, we won Digital Post and also the police was mentioned, and we have a great deal of interesting contracts that we would like to win over the course of 2020. Now you can never be very exact on this because even if I wanted to be exact, sometimes these are postponed, and sometimes even some of them come up faster than expected. You never know exactly. However, what I can say is that our visibility for 2020 is at the same level as it was for 2019 at the same time. And the assurance, I mean, what is already in the contracts is actually much higher than it was last year at the same time. So we are very confident. But of course, we need to, as always, deliver high-quality tenders and be very observant, and there, when we need to win the cases. And as also mentioned in this report, we have a win rate, over 70%, in 2019. So we just need to do exactly what we did the last 2 years and be there when it's needed, and then the guidance will be correct. Sorry for not being more accurate on this one.

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Claus Almer Nielsen, Nordea Markets, Research Division - Senior Analyst of Capital Goods and IT [8]

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Okay. That's the best maybe I can get. Okay. Then move to the second question and that's coming back to the comments about the dividend payout. So now you're going to do dividend rather than M&A. Is this the result of lack of attractive candidates at the right price, obviously, or it's more driven by a wish to have full focus on integrating the already done acquisitions?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [9]

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Thanks, Claus. And there's absolutely some truth in the latter part of your question to make sure that we get the full benefit of the 3 acquisitions that we have made already and make sure that we get the full benefit of those in the markets where we operate. So that's including both the U.K., Norway and the Netherlands, and then of course, Denmark. The total value of those markets for 2020 is an estimated core addressable market of DKK 190 billion, of which we have 1.4% market share. So it's not that we lack growth opportunities where we are. And of course, we want to make sure that we get the full benefit of those countries.

Now in terms of the potential payout of surplus cash to dividend to our shareholders, what we're saying is that, all other things equal, and given the fact that we are not looking at any major M&A projects because that's not in the nature of our business, then we will be able both to continue to grow, and that will mainly be organic, and then pay out dividends. So we're not ruling out that we would potentially do any M&A, but it's not in the cards. And the last comment I want to make on that is that if you look at the acquisition we made last year, in the Netherlands, the cash outflow on QDelft was a small EUR 5 million, so 35 million. So we can be in a position where we can still do, if we find the right opportunity, some M&A activity and actually still pay out a dividend due to the strong cash generation of the business.

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Operator [10]

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And our next question comes from the line of Yiwei Zhou from SEB.

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Yiwei Zhou, SEB, Research Division - Analyst [11]

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I have 3. Firstly, on the 2020 guidance, since you gave the preliminary guidance in November, I was wondering if there is any change for you to see the 18% of growth now. Is it possible to give us an indication of your assumption for the 18% scenario?

And the second question is regarding the win rate, 73%. And how much tender size was this 73% equivalent to?

And then thirdly, just back to Norway. So one, do you expect Norway back to the high growth and to see the utilization back to normal?

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [12]

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Yes. So the guidance from -- we said around 20%, now we're saying between 18% and 20%. This is not an exact science, but what we are saying is that, specifically, also in the U.K. where we have this transition, the U.K. is in a transition period because of the IR35, we are now somewhere in between 18% and 20% for 2020. That's how we guide for that and very close to the original, around 20%. But specifically, the uncertainty in the U.K. is something that we work with over the next 6 to 9 months. And I think in the longer term, the journey in the U.K., we're just pushing harder to do what we had to do anyways, but that could have an influence on some of the revenue, and that's where we highlight the guidance from 18% to 20% instead of around 20%.

When it comes to the 73% tender win, whether what size that was on, we cannot disclose that. What I can mention though is that the way we measure the success rate is, these are the tenders that we actually deliver in and that where we expect yes or no from the customer. We actually spend energy. So these are the targeted customers where we deliver tenders. And it's a 2-phase discipline, this one, because you want to target the tenders where we actually have a chance of winning and then you want to deliver a very high quality in the tender. And so that's how the number 73% should be seen. So being good at targeting, what we want to win, and then again, of course, to be able to win it. Yes.

And the third question, I think I'll leave that to you, Thomas.

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [13]

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Yes. So that was on the growth rates in Norway and when we will return to high growth rates. And with that, I will still make a humble comment and say that 19% for the full year 2020 is not low. Now I agree that it is below what we've seen in '17 and '18 in Norway, which was about 30%. So to get back to a growth rate in Norway that is above what we saw in 2019, there are certain things that need to happen. And the most important one is that we win 1 or 2 of those large projects that Andre alluded to also in his presentation. We have good visibility into an interesting pipeline that will facilitate and support that. We are adding external senior resources or senior resources from the industry to our partner group in Norway to facilitate that we win those tenders. We are adding resources from the Danish senior partner group to help writing tenders in Norway, so that we have the right quality. So in any aspect then and the long answer is that we expect to see Norway coming out better in mid-2020 without being specific as to what growth rate that will then be.

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Yiwei Zhou, SEB, Research Division - Analyst [14]

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Just would like to follow up on Norway. So if you were to win those tenders you talked about, should we expect this would happen before summer or after summer?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [15]

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No. I mean it can happen both before and after. Some of them are due in the first half and some of them are due in the second half. Now it's not that it's only 2 or 3 tenders we're bidding for. There's a whole host of tenders, and some are in the early part of the year and some are in the later part.

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Yiwei Zhou, SEB, Research Division - Analyst [16]

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Okay. And just on the Danish public, is it possible to give us the total order intake or contracting during 2019 from the Danish public sector? The order intake. Remember, last year, you gave us a range, was DKK 900 million to DKK 1,100 million. Is it possible to give us the number for 2019?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [17]

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Now what we've disclosed for 2019 results is the full year win ratio of 73%. And because it is so high, it's difficult for us to give more information on that. So you have to estimate that from publicly available information, Yiwei. Sorry.

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Operator [18]

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And our next question comes from the line of Poul Jessen from Danske Bank.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [19]

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Yes. I think there's only the small ones left. A question about the U.K. and the contractors who are going to leave. Based on the pie chart you have, if we combine both the leaves and those are still undecided, it's about 40% of the existing contractor base or 15% of the total front-end people in the U.K. When are these people going to leave? Is it before 1st of April? And therefore, do you have -- should we see going to a total standstill on the growth rate when you take such a large share of the capacity out?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [20]

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Yes. Sure. I mean -- so the vast majority will be leaving not before. And if they leave, they will most likely leave on April 1. So there's kind of a clip there. Now also you have to take into consideration that we know that this is going to happen, so that's also why we have increased our recruiting activities in the U.K., and we are hiring more perms to cover for the loss of some of those independent contractors. Now it's correct that if we didn't do anything, then there will be a big drop in our capacity to deliver towards our clients. And of course, that is what we are, doing everything we can to mitigate in terms of hiring perms and converting independent contractors.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [21]

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So should we see a sizable pickup in the market then in the U.K. from Q2 as you take out the expensive guys and take in perms on a very large scale?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [22]

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For the full year of 2020, without going into specific on the various quarters per country, which is not what we guide for, but for the full year of 2020, the impact of having fewer independent contractors will have an impact on margins. It's not going to be fully embedded in the margins in 2020 because there's going to be some additional costs associated with hiring our own employees, training them, to a larger extent than what we do with the independent contractors, buying laptops and the likes. So the full real swing impact, if you will, will come in 2021. Now there will be a pickup in 2020. But to put a number on it, it's simply too premature for me to do at this point in time.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [23]

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Okay. Then a clarification on the amortization drop that we're going to see. Of course, we have the FSN, but isn't that from '21 that we should see that coming out?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [24]

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Yes. Coming out during 2021. If you look at it, then there's still some left which will sit on the books in 2021. And then the vast majority of all intangibles will be fully amortized by the end of 2021. And that means that come 2022 full year EBITA and EBIT will be more or less similar.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [25]

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Okay. And then the final one, on the M&A, where you are putting a little -- stepping on the brakes a little outside the markets where you are. Is it both a consequence of the opportunities in the markets you have, but also maybe that it requires more work to implement the ones you have already?

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [26]

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I think in general, we would really like to show that the Danish model works in a very sufficient market space that we already have targeted, both in Norway, in the Netherlands and in the U.K. Now so we will focus our energy on that. However, that does not mean that we are blind, and that's -- something turns out. And as Tom has mentioned earlier, the acquisition in the Netherlands was actually a swift and small one that gave us a good access to the Netherlands. So we will constantly keep our eyes open for any opportunity. But our main focus here is to get both growth and profitability in the new markets that we are in now.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [27]

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Okay. And then the final one, the contract with the Danish police, I just checked, I couldn't find it anywhere. What's the size of that one?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [28]

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Non-disclosed.

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Poul Ernst Jessen, Danske Bank Markets Equity Research - Senior Analyst [29]

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Also, if -- won't they have to disclose it when it comes?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [30]

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It is not disclosed. That's all we can say. It's non-disclosed. Non-disclosed, for example.

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Operator [31]

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Our next question comes from the line of Andre Thormann from ABG.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [32]

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Just starting off with this one. In terms of utilization in Denmark and Norway, what is that currently in a total or split between those 2?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [33]

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So we don't disclose the utilization per country, and therefore, that's difficult for me to answer, Andre. But the 2019 utilization rate in Denmark was slightly negatively impacted by the soft Q3 we saw, which was also a reason why we took expectation to the full year down. Utilization is looking to be for 2020, where we want it to be and in line with historical levels.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [34]

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Okay. Okay. But in Norway, the biggest potential of increasing utilization, that's in Norway, right?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [35]

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Yes. Correct.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [36]

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And how much? Is it possible to increase it in percentage points? Would that be possible to say something about?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [37]

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Not typical for me to, because then I will give you a number and then you would deduct the number that I don't want to give. So that's difficult for me, Andre. But I understand the question, and you'll have to accept that I'll skip on that.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [38]

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All right. Just in terms of the profitability difference between public and private, I mean, just to understand, why is it really higher for private? And should we continue to see this, that profitability is better there?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [39]

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So the reason why we have higher profitability in the private sector, and I think we've discussed this before also, is that we have a subsector within the private sector or subsegment within the private segment which is very mature, consists basically of a customer base that are on the same platform and they're all in late development stages, and that just generally yields a higher margin. Now margins can swing a little bit up and down. But it's true that the private has been slightly higher. We expect margins in general to converge around the same level for the group. And what that then means on the short term is difficult to quantify, but the main reason for private to be higher is this subsegment that is very mature in the Danish private segment.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [40]

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Okay. But just to understand. You expect the margins for public to increase? Or is that what you said in terms of conversion?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [41]

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What we're saying is that we guide the margin on a group level. And that's how we communicate our expectations for March, and that is on group level, not on the individual portfolios. And the reason for that is that, if we start there, not that we don't measure it, but if we start there, then we all of a sudden have 18 different guiding metrics. So we guide for the full group. And what we said and what we said in the prospectus, which still holds true, is that we gradually expect to see margins come up. And they came up in 2019 with almost 1 percentage point, excluding the Dutch operation. And that means that gradually, margins are increasing throughout.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [42]

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Okay. But just to be sure, because I remember previously, you have been talking about the split on 50-50 between public and private. I mean, is this still your goal? Just looking at some of the other markets, it sounds like a lot of the potential with U.K. is in public, also in Norway in public. But will it still be 50-50 on an overall level do you expect?

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [43]

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Well, as we always did the last many years, we are only looking at the complexity on the projects and the long-tail nature of them. So at any point of time, in any given market, what we look at is what is it that we can do for the customer and how long time can we stay in a strategic relationship. And that will be the guiding principle overall for what we tend to take in as work. Now in general terms, I think it's very, very good to be balanced. So you have business in both public and private. But the specific guidance in terms of what we do at particular times is always about the complexity and the strategic nature of the work, whether it's one or the other.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [44]

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Okay. But just on the opportunities you see, is it incorrectly understood that the biggest opportunity currently is within public on an overall level?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [45]

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Correct. That's incorrect. And if you look into the annual report, where we've in detail described the individual markets, if you look, for instance, in the U.K. market, you'll see that the private side of the U.K. market is larger than the public side. So it's incorrect to assume that there's only opportunities for us to be had in the public sector. Now the reason why we have grown mainly in the public sector is, exactly as André is saying, so my Andre, not yourself, but that is because that's where the public -- that's where the complex projects has been. So if you take a look at the complex projects in the public sector, particularly in Denmark, there's those 5 we just mentioned, whereas the only real complex project in the private sector over the last 4, 5 years has been the terminals implementation in Nordea. Now what we see in the private sector both in Denmark, but also in the other countries, is that more and more of those multiyear complex projects will start to emerge in the private sector. And that is good because that just enhances our ability to win further new complex contracts. So growth is not only to be had in public. There's also vast growth opportunities in private. And that's also why we are extremely proud and thrilled about working with companies like Topdanmark in the insurance industry in Denmark.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [46]

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All right. Okay. And then just on U.K. in terms of the political situation. I mean, what are you looking into in terms of upcoming tenders for 2020 in U.K.? Can you elaborate a bit on that?

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [47]

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No. I think the political situation in U.K. is somewhat, if you walk on the streets of London or wherever you go in the U.K., I think most people, whether they're Brexiteers or pro-Europe are relieved that, well, you can always argue whether that should be a real relief, but Brexit is not the same big topic anymore and there's much more focus on how to start dealing with British things in the U.K. And we see more and more focus on becoming better and digitalizing both in the public and private sector. And for sure, in both areas, there's big potential in the U.K. market. So I don't think from a macro political point of view, that, that can have any big effect on what we do. We are focused on our customers and getting more in both private and public. And luckily, it seems like the focus in general is also being more effective in building up U.K.-based digitalization and we are part of that. So I'm happy just to observe that.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [48]

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Okay. But just to be bullish, you don't see any effect on tenders in U.K. in 2020 due to the political situation at all?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [49]

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No. It's -- of course, there's been some delay on some of the Brexit projects because they needed to get Brexit done before they could actually start the project. So that is absolutely true. But you also have to take in consideration that our relative size in the U.K. is fairly small. So if we had had a Brexit in Denmark, I think Denxit or whatever you want to call that up. Of course, if Denmark would leave the EU, then the impact on us would be much bigger because we are a bigger player in Denmark. Now the postponement of some of the Brexit projects, and there's going to be a lot, and the expectation is that they now come to the market at the back end of 2020, it's not hurting us because we're not really doing them anyway. What it does, if anything, is that it actually gives us good timing to be ready to bid for them because then we have an opportunity to get our workforce more in line with how we want it to look when the projects come out. So if anything, it's not negative to us that they have been a little bit postponed. I think some of the U.K. larger players are more hurt by that. And that's probably also what you hear if you look at some of the bigger peers in the U.K. But for us in isolation, there's no big impact.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [50]

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Okay, okay. And then just my last question. In terms of the win rate, was that 73% only for public or in total?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [51]

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Public only.

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André Thormann, ABG Sundal Collier Holding ASA, Research Division - Analyst [52]

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Public only. And do we have anything for private you want to say or...

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [53]

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No.

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [54]

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No.

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [55]

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Not disclosed.

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Operator [56]

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We have further questions from the line of Erik Elander from Handelsbanken.

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Erik Elander, Handelsbanken Capital Markets AB, Research Division - Research Analyst [57]

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So in 2020 now you need to improve your margin by 100 basis points in order to get to 26%. I mean you get some of the tailwinds from the calendar effect positively and also from the IR35 from the U.K. But except for that, what geographies will drive this margin improvement? And also what exact measures are you taking in order to reach this margin? And also related to this question, what do you see as the main risk in this execution that you will do in order to get your 26% margin and not below that?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [58]

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So if we look at what will drive the margins, then you're absolutely right in saying that there's going to be some impact in the U.K. So that will have an impact. There's going to be some impact from the Netherlands. So the Netherlands in 2019 generated a negative EBITA, mainly due to the accelerated integration into Netcompany. That is expected to be significantly improved in 2020. Without giving you the number, the ongoing implementation and taking more and more projects live and going into maintenance in the Danish portfolio will also have an impact. So various bits and bites will have an impact on the margins to go to around 26%. So it's not just one silver bullet, it's a number of different things that we will do. And that we measure meticulously on a monthly basis. We measure very much operational metrics in terms of how many people are staffed, what are they doing, how much time are they spending on business development, how much time are they spending on the clients, how many non-client-facing FTEs do we have and all these things. So there's a whole host of very detailed metrics and KPIs that we follow very close and which gives us a good understanding of whether we are on the right track or not. The underlying utilization will also impact the margins. So having stated earlier that we saw somewhat soft utilization in Denmark in Q3 and also in Norway in general, that will be expected to be reversed to some extent during 2020, which will have a positive impact on margins.

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [59]

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And Erik, to add -- to answer the last thing you asked about the risks, they are all the same. We need to deliver the projects in time, at budget, at the right quality. And if we fail doing so in the number of projects, that is always a risk in this business. So as Thomas alluded to, we need to be monitoring this very carefully and make sure that we're delivering as we always have been over the last 20 years. And that's the undergoing risk in this business always, to deliver -- make sure that the project is going as they used to do, the very high-quality level that we are delivering. So we -- but we are monitoring that closely, but there will always be an ongoing risk in a business like this.

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Operator [60]

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And we have one more question from the line of Yiwei Zhou from SEB.

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Yiwei Zhou, SEB, Research Division - Analyst [61]

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Zhou Yiwei from SEB. So I have a question on the working capital. You have improved the contract work in progress during 2019. And could you please give us an indication for the development in 2020?

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [62]

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No. I mean we don't necessarily specific guide on working capital, Wei. But what we've done in 2019 on work in progress is fully aligned with what we said early on in the year, where a number of the work in progress associated to some of the large projects that we have won back in 2017 are beginning to meet milestone plans. They have then been invoiced during Q3, collected in Q4. We'll see similar invoicing in Q4, collected in Q1, and in Q1 collected in Q2. So for all practical matters, like mentioned before, without going into greater details, I think that 2019 is a good, solid model year for how cash flow will be looking at Netcompany. So you can use that as a good proxy for how to think of our cash flow for 2020.

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Operator [63]

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And there are no further questions at this time. So I'd like to hand back to the speakers.

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André Rogaczewski, Netcompany Group A/S - Co-Founder, CEO & Member of Executive Board [64]

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Well, thank you all for joining in this morning, and I wish you all a very good day. Thank you.

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Thomas Johansen, Netcompany Group A/S - CFO & Member of Executive Board [65]

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Thank you.

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Operator [66]

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Thank you. That does conclude our conference. Thank you for participating. You may now disconnect.