Interim report January – June 2020 Sweco AB (PUBL)
Continued solid performance in uncertain times
April – June 2020
- Net sales increased to SEK 5,489 million (5,214)
- EBITA increased to SEK 495 million (422), margin 9.0 per cent (8.1)
- EBIT increased to SEK 439 million (398), margin 8.0 per cent (7.6)
- Profit after tax increased to SEK 319 million (281), corresponding to SEK 2.70 per share (2.39)
January – June 2020
- Net sales increased to SEK 11,170 million (10,315)
- EBITA increased to SEK 1,125 million (953), margin 10.1 per cent (9.2)
- EBIT increased to SEK 1,054 million (935), margin 9.4 per cent (9.1)
- Profit after tax increased to SEK 762 million (672), corresponding to SEK 6.46 per share (5.73)
- Net debt decreased to SEK 1,259 million (2,324)
- Net debt/EBITDA decreased to 0.5x (1.2)
Comments from President and CEO Åsa Bergman:
When we summarise the first half of this year, I can conclude that we have delivered two solid quarters despite the turmoil caused by the Covid-19 pandemic. In March, we quickly adapted to the new situation and managed throughout the second quarter to operate our business with many of our employees working remotely. We maintained our efficiency with a clear focus to execute in our client projects, to win new projects and to continue to work closely together with our clients.
In the second quarter, net sales increased 5 per cent, corresponding to SEK 275 million, and organic growth amounted to 1 per cent, adjusted for calendar effects. At the same time, earnings improved and EBITA increased 12 per cent, corresponding to SEK 51 million, adjusted for calendar effects. All in all, this resulted in an EBITA margin of 9.0 per cent (8.1). The positive performance was mainly driven by lower operating expenses, a positive contribution from acquisitions and an increased number of employees. The higher billing ratio also had a positive impact, whereas higher negative project adjustments and restructuring costs had a negative impact on earnings. Cost reductions mainly related to Covid-19 had a positive impact on EBITA of approximately SEK 80 million and restructuring costs had a negative EBITA impact of around SEK 40 million. Our cash flow from operating activities improved SEK 836 million compared to the same quarter last year and we stand financially strong with a net debt/EBITDA ratio of 0.5x (1.2) and SEK 4.7 billion of available liquid assets.
Finland continued to deliver solid EBITA improvement with an EBITA margin above 14 per cent. Sweden and Norway had slightly lower EBITA adjusted for calendar effects at the same time as margins improved. Belgium continued to deliver strong growth and margins. The UK developed well, with MLM and the commencement of previously postponed projects contributing to improved earnings. Calendar adjusted EBITA also improved for the Netherlands and Denmark, whereas Germany continued to have challenges with profitability.
Update on Covid-19
We have proven our ability to quickly and efficiently adapt to the prevailing market situation. Despite the circumstances, we have been able to work at close to normal capacity. Sweco’s projects are highly digitalised, and a large proportion of our projects are also vital to society and as such are given priority. Although we experienced continued stable demand in most segments, the Covid-19 pandemic has affected us. We announced organisational adjustments at the start of the quarter, as we experienced lower demand in the industry and the private building and real estate segments. What we have noted in the second quarter is that these segments are still under pressure. Overall, we have managed to adapt well to the situation, but we stand humble facing the future and expect a continued negative impact on demand in the second half of the year.
At the end of the second quarter, around 130 employees in Sweden had been affected by the organisational adjustments of the approximately 200 announced in April. In addition, 29 employees in Germany, 25 employees in Norway, 10 employees in Finland, 3 employees in Belgium and around 150 employees in the UK were on temporary lay-off. In total, 217 employees were on temporary lay-off at the end of the quarter.
Well-positioned for future growth
We report a solid second quarter and first half year given the situation, but I want to underline that there is still considerable uncertainty about the development of Covid-19 and how it will affect us. Therefore, our short-term focus is to continue to closely manage the situation and take action as needed. Above all, we must work closely together with our clients, deliver according to plan in our projects and win new assignments. At the same time, we will focus on continuing to execute on our strategy – to pursue profitable growth in our eight core markets and to continue to implement the Sweco model.
Looking further ahead, I feel confident about the future. We have market leading positions in large and fragmented markets, and a strong client offering that is well positioned towards the main trends in society. Our broad geographic footprint and diversified offering within sustainable solutions creates a low risk profile and our strong financial position creates the flexibility needed in uncertain times like these. I am proud to say that we have been able to remain relevant to our clients and to their needs, which is absolutely key for us going forward.