Interim report January – March 2020 Sweco AB (PUBL)
Strong start of the year – but uncertain times ahead
January – March 2020
- Net sales increased to SEK 5,680 million (5,101)
- EBITA increased to SEK 630 million (531), margin 11.1 per cent (10.4)
- EBIT increased to SEK 615 million (537), margin 10.8 per cent (10.5)
- Net debt increased to SEK 2,225 million (1,706)
- Net debt/EBITDA increased to 1.0 x (0.8)
- Profit after tax increased to SEK 443 million (391), corresponding to SEK 3.76 per share (3.34)
Comments from President and CEO Åsa Bergman:
We continue to see that our work with delivering sustainable solutions connected to societal trends such as urbanisation, digitalisation and climate transition makes us relevant in the market and for our clients. The positive development in 2019 laid the foundations to enter 2020 with a strong market and financial position. As we summarise the beginning of the year, I can conclude that we delivered a strong quarter, despite the global concern for the consequences of Covid-19.
Net sales increased 11 per cent, corresponding to SEK 579 million, and organic growth amounted to 4 per cent, adjusted for calendar effects. At the same time, earnings improved and EBITA increased 13 per cent, corresponding to SEK 71 million, adjusted for calendar effects. All in all, this resulted in a strong EBITA margin of 11.1 per cent (10.4). The positive performance was mainly driven by positive fee development, positive contributions from acquisitions and an increased number of employees.
Five of eight business areas reported double-digit margins for the quarter. Sweden, Norway and Finland showed solid EBITA improvements and margins well above 13 per cent. Belgium continued to deliver strong growth and margins. UK developed well, with MLM and the commencement of previously postponed projects contributing to growth and improved earnings. Netherlands also improved, whereas Denmark had a weaker quarter, and Germany continued to have challenges with profitability.
The impact of Covid-19 and the measures taken as a result
As the impact of Covid-19 and government measures became visible, we quickly reorganized the way we work, reaching a peak of some 14,000 employees working from home. With a high degree of digitalisation, our capacity to deliver has remained relatively unchanged. We have maintained close contact with our clients, won new assignments and delivered according to plan in most projects. Moreover, many of the projects we are involved in are vital to society and are therefore prioritised even during the current circumstances.
However, we are also experiencing lower demand in certain sectors, particularly within industry and the private building and real estate segments. We have seen a number of cancelled or delayed projects, which will have a negative impact on our revenue going forward. As a result of this, we announced on 6 April organisational adjustments with a total of 200 employees in Sweden being affected, and with 50 employees in Norway and 35 employees in Belgium being temporarily layed off. We have thereafter made the decision to place some 150 employees in the UK, 25 employees in Finland and an additional 30 employees in Norway on temporary lay-off, primarily due to lower demand in the aforementioned sectors.
Short-term adjustments, long-term focus
We have adapted to the current conditions, but we maintain focus on our strategic direction and our long-term goals. Our decentralised business model with small and efficient teams working closely with clients has allowed us to act quickly and adapt our operations to the new circumstances.
In the quarter, we made two new strategic acquisitions: Talboom Group and KANT Arkitekter. With the acquisition of Talboom Group in Belgium, we are creating a leading position in the growing segment for engineering services in pharmaceuticals, biotechnology and infrastructure. With the Danish company KANT Arkitekter, we are strengthening our position in the public-sector learning and housing segments. Both acquisitions contribute to our strategic objective of taking leading positions in our primary markets.
Well-positioned for the future
Sweco stands on stable ground and has a low risk profile. We have a broad offering with a combination of private and public sector clients, as well as a well-diversified project portfolio. Our broad geographical footprint allows us to meet temporary and local changes in demand. We also have a strong financial position with relatively low net debt and good liquidity. This creates endurance and flexibility, which allows us to leverage opportunities as they present themselves.
All in all, this makes us well-equipped for the future, even if we remain humble in light of the challenges that we are now facing. Looking ahead, our long-term focus is to continue to stay relevant and develop sustainable solutions together with our clients.