Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bravida Holding AB (LTS:0RBW, Financial) reported a strong cash flow improvement, with SEK193 million compared to a negative SEK212 million last year, marking an improvement of around SEK400 million.
- The company achieved a cash conversion rate of 134%, indicating efficient management of working capital.
- Service business grew by 8%, providing stability in challenging market conditions.
- Positive margin improvements were noted in Finland and Norway, with Norway's margin reaching 5.7% including the Thunestvedt acquisition.
- Bravida Holding AB (LTS:0RBW) has a strong acquisition pipeline and has completed nine acquisitions this year, adding approximately SEK0.5 billion in sales.
Negative Points
- Organic growth was negative at minus 3%, reflecting challenges in the market.
- Order intake decreased by 12%, attributed to strict project selection and soft market demands, particularly in Finland and southern Sweden.
- The EBITA margin decreased to 4.5% from 5.4% last year, affected by operational changes in Denmark and weak demand in southern Sweden.
- Restructuring costs amounted to SEK19 million for the quarter, impacting margins by approximately 0.3 percentage points.
- The order backlog decreased during the quarter, except in Denmark, indicating potential future revenue challenges.
Q & A Highlights
Q: Can you provide details on the branches affected in Southern Sweden and the rationale behind the decision to consolidate or close them?
A: The market in Southern Sweden is more challenging compared to other regions. We are closing around five branches and 20 cost units due to their inability to achieve satisfactory margins even in favorable market conditions. The decision is based on maintaining our strategy of focusing on margin over volume. The sales from these units, approximately SEK250 million year-to-date, are currently loss-making.
Q: How does the order intake performance compare to the market, and how are you managing the shift in strategy from gaining market share to protecting margins?
A: We are being more selective with projects to maintain margins, which may result in losing some market share. This strategy requires strong local leadership to avoid taking on low-margin projects. Despite being the market leader, we are focusing on projects where we can maintain good relationships and margins, which impacts our order intake.
Q: Regarding Denmark, what improvements do you expect in Q4, and when will newly taken projects start production?
A: We expect a clear trend shift in Q4, although some low-margin projects will still affect results. Structural changes and new management are in place, improving project handling and cash flow. New projects in Denmark will start production mainly in the middle of H1 2025.
Q: With the order backlog decreasing, are there any regions where you are concerned about the backlog's strength?
A: The Southern part of Sweden and Finland have weaker order backlogs. In Norway, the backlog is slightly lower due to selective project intake and some projects transitioning from design to production phases.
Q: What needs to happen to achieve the 7% margin target by 2026, and how do growth initiatives contribute to this goal?
A: Achieving the 7% margin target requires market improvement and internal enhancements in project execution and efficiency. Growth initiatives like building automation are progressing well, while technical FM and energy savings are on hold due to market conditions. We aim to leverage our scale advantages and streamline processes to reach this target.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
