Strong cash flow and increasing underlying margin
Demand for technical service and installations generally remains good on our markets. Sales rose in the quarter due to the sustained high rate of acquisitions. A further four acquisitions were made in the quarter. The order backlog, which only comprises installation projects, remains at a high level and Bravida is continuing to increase its service sales. Cash flow was strong and improved on the previous year, but the EBITA margin was slightly lower.
Growth through acquisitions
The technical service and installation market generally remains healthy, as reflected in the sustained good order intake and order backlog. We have had lower production on some of our markets compared with the previous year, which had a negative impact on sales. Bravida grew through acquisitions during the quarter. Sales rose by 3 percent, of which 5 percent was acquired sales. Organic growth was negative, particularly in Norway and Finland. The volume loss in Norway was due to us having fewer large projects in production. In addition, we are at the early stages of a number of large projects that have not yet generated any significant sales revenue.
The negative performance in Finland was due to some delayed project starts-ups and weak order intake.
Service sales rose by 6 percent in the quarter, which is in line with our strategy of growing our service business.
EBITA margin, cash flow and dividend
The EBITA margin declined in Denmark and Finland and improved in Norway. In Sweden, the EBITA margin was negatively affected by restructuring costs in Stockholm. The restructuring has been implemented as planned and all costs, SEK 58 million, were booked in the quarter. Excluding the restructuring costs in Stockholm, the EBITA margin in the Group improved to 8.5 percent.
Cash flow remained strong and cash conversion was 115 percent.
The Board proposes that the dividend be raised by 13 percent to SEK 2.25 per share. Since its public listing in 2015 Bravida has increased its dividend from SEK 1 to SEK 2.25. This proposal by the Board means we have achieved our financial target for the dividend to amount to at least 50 percent of net profit.
Bravida continues to strengthen through acquisitions
Our growth and market position in both service and installation continue to strengthen through acquisitions. In 2019 we completed 20 acquisitions, four of which were in the final quarter, adding annual sales of just over SEK 1,100 million. Since the end of the period we have completed two more acquisitions, one in Denmark and one in Norway, and signed an agreement for an acquisition in Sweden. These acquisitions bolster our local market positions, complement our business and expand our customer offering.
There is still a long list of potential acquisitions that are a good fit for Bravida, and our robust financial position with low indebtedness and strong cash conversion means we are well positioned to carry on growing through acquisitions.
The technical service and installation market is set to remain good in Sweden, Norway and Denmark and stable in Finland. Since Bravida’s market is local, local variations in demand will continue on our different markets. Bravida’s total order backlog is at a good level, with a high order backlog in Sweden and Denmark. The order backlog in Norway decreased in the last quarters. However, there are good opportunities over the next few quarters to improve order levels in Norway as we are at the early stages of a number of large projects. Our service business is growing and accounts for 47 percent of our sales. This business is generally recurring, providing stability for our operations.
Following the measures we implemented in our Stockholm and Finland businesses and the completion of the unprofitable projects carried over from the acquisition of Oras, we have a good opportunity to return to organic growth over the year and improve our business’ margin.
Mattias Johansson, Stockholm, February 2020
For further information, please contact:
Mattias Johansson, CEO and Group President of Bravida. Tel: +46 8 695 20 00
Åsa Neving, CFO. Tel: +46 8 695 22 87
This information is information that Bravida Holding AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 CET on 13 February 2020.
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 over the phone. There will be room for questions.
Link to the webcast:
Telephone numbers for telephone conference:
SE: +46 8 505 583 66
UK: +44 3333 0090 35
US: +1 646 722 49 56
The report and the presentation are available on bravida.se/en/investors/.