Interim Report July–September 2023
Stable demand in a challenging market
• Net sales increased by 8 percent to SEK 6,583 million (6,097)
• The order backlog was SEK 16,459 million (17,895)
• EBITA decreased by 1 percent to SEK 352 million (357)
• The EBITA margin was 5.4 percent (5.9)
• Profit after tax was SEK 251 million (270)
• Cash flow from operating activities was SEK -212 million (78)
• Net debt amounted to SEK -3,036 million (-2,144)
• Two acquisitions were made during the quarter, adding annual sales of approximately SEK 69 million
• Basic and diluted earnings per share were SEK 1.21 (1.29)
Net sales increased by 8 percent while the EBITA margin was again squeezed somewhat during the quarter. The order intake increased by 11 percent, and another large infrastructure project, with a value of SEK 1.3 billion, was received in October.
Net sales and EBITA
Net sales increased by 8 percent, 3 percent of which was organic. We continued to achieve organic growth in Sweden, Norway and Finland, but at a more normal level than in previous quarters. Bravida’s focus on margins rather than volumes means that we have stricter project selection criteria during the current period of price pressure. However, demand is better than expected and the order intake increased, for both service and installation, by 11 percent, which resulted in the maintaining of a good order backlog. In October, we also received an order with a value of approximately SEK 1.3 billion, for installation work in the extension to Stockholm’s metro system. The design work will take place in 2024 and production will start in 2025.
The EBITA margin decreased, as expected, and was 5.4 percent. As has been communicated previously, the margin has been under a degree of pressure and has been negatively affected by project write downs relating to installation activities. These are explained to some extent by increased costs for materials that were not fully priced into calculations. This effect is apparent in all our countries, but we maintained a stable margin in Sweden and Norway. However, I am encouraged by the improvement in the service margin during the year. The Danish business continues to face challenges in its project area, which is partly explained by the strong growth. In Finland, we had some project write downs during the quarter and my assessment is that the Finnish market remains challenging. As has been previously communicated, we have also made significant investments to make our business more efficient, via measures such as digitalisation and development in new business areas. Due to the weaker economy, we now have a greater focus on costs and active cost control in all our business operations, to ensure we maintain a stable margin.
Cash flow and cash conversion decreased during the quarter. Our growth results in capital being tied up in increased trade receivables, and several major projects for which we had already received advance payments also caught up with these payments and entered the later stages, while only a few new major projects involving advance payments were started. Project write downs have also had a negative impact on cash flow.
The biggest challenges are in our Danish business and as previously communicated, we have some ongoing disputes there. In general we are currently seeing a slightly lower willingness to pay among our customers, with there being more discussions that delay payments and lead to an increased amount of capital being tied up. Improving cash flow has the top priority. We have strengthened our credit monitoring and intensified our efforts to ensure invoicing and payment, in order to improve our working capital.
So far this year, 12 acquisitions have been completed, adding approximately SEK 414 million in sales, and two acquisitions were completed in this quarter. We have also signed agreements for three acquisitions, which add sales of SEK 740 million.
One of the agreements concerns the acquisition of the Thunestvedt Group in Norway, which is the largest acquisition we have made since 2017. This acquisition strengthens our market position and makes us the largest business in the industry in Western Norway. The company has had weak profitability in recent years, due to some write downs in projects that have now been completed. We believe there are significant synergies and great potential to improve profitability to the same level as we have in our other Norwegian operations. A comparison can be made with Oras in Norway, which we acquired in 2017. This was also a turn-around project and it is now delivering good growth and margins.
We continue to see good opportunities to make acquisitions and are actively working with several potential candidates. In a tougher economic environment, acquisition opportunities of which Bravida can take advantage arise in the market.
Bravida has a strong customer offering in energy-efficient solutions and energy optimisation services, and is benefitting in these areas from the EU’s decision to introduce its taxonomy and Green Deal. Our assessment is that this should lead to a higher demand for energy efficiency improvements in buildings, although the demand is still much lower than I expected.
Macroeconomic factors such as high inflation, higher interest rates and a deteriorating economy continue to make the market difficult to assess going forwards. For Bravida, I think that the demand for service work will be stable, while demand for installation projects may be more affected. There continues to be price pressure in the market, which could lead to further pressure on margins for the industry in general and also for Bravida. This means Bravida's focus on margins over volume is now even more important, so we will be even stricter in our project selection, customer selection and pricing.
Installation volumes for new residential construction will decrease significantly this year and in the coming years. Bravida has a relatively low exposure, with about 7 percent of its work relating to the construction of new residential buildings. Installation work in new-build public properties, as well as industrial and logistics premises, is stabilising the market. The market for renovation and extension work is expected to remain stable, with support from energy and climate adaptation measures. The green transition, electrification and digitalisation in society will create good business opportunities for us in the long term.
Stockholm, October 2023
The report will be presented at 09:30 CET by CEO and Group President Mattias Johansson and CFO Åsa Neving. The presentation will be held in English and can be followed on the web or by phone. There will be room for questions in the telephone conference.
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This disclosure contains information that Bravida Holding AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 25 October 2023, 07:30 CET.