Bravida : Q3 Interim Report 2021.pdf

INTERIM REPORT JULY-SEPTEMBER2021

July-September 2021

• Net sales increased by 2 percent to SEK 4,854 million (4,750)
• The order backlog was SEK 15,269 million (14,274)
• EBITA increased by 4 percent to SEK 294 million (284)
• The EBITA margin was 6.1% (6.0)
• Profit after tax was SEK 221 million (213)
• Cash flow from operating activities was SEK -139 million (10)
• Net debt amounted to SEK -1,906 million (-1,230)
• Three acquisitions were completed in the quarter, adding annual sales of approximately SEK 118 million
• Basic and diluted earnings per share were SEK 1.09 (1.07)

January-September 2021

• Net sales increased by 1 percent to SEK 15,657 million (15,533)
• EBITA rose by 2 percent to SEK 887 million (873)
• The EBITA margin was 5.7% (5.6)
• Profit after tax was SEK 669 million (647)
• Cash flow from operating activities was SEK 322 million (1,298)
• 12 acquisitions were completed in the period, adding annual sales of approximately SEK 692 million
• Basic and diluted earnings per share were SEK 3.34 (3.22)

Financial overview

	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec	Oct 2020-
Amounts in SEK million	2021	2020	2021	2020	2020	Sep 2021
Net sales	4,854	4,750	15,657	15,533	21,147	21,271
Operating profit (EBIT)	293	283	886	871	1,348	1,363
Operating margin (EBIT), %	6.0	6.0	5.7	5.6	6.4	6.4
EBITA	294	284	887	873	1,351	1,365
EBITA margin, %	6.1	6.0	5.7	5.6	6.4	6.4
Profit/loss after tax	221	213	669	647	997	1,020
Cash flow from operating activities	-139	10	322	1,298	2,171	1,195
Cash conversion, % 12 m	75	167	75	167	153	75
Net debt/EBITDA, 12 m	1.1	0.7	1.1	0.7	0.6	1.1
Order intake	5,212	4,024	16,986	15,101	20,242	22,127
Order backlog	15,269	14,274	15,269	14,274	13,791	15,269

We bring buildings to life

CEO STATEMENT

Strong order intake and improved margin in the quarter

Order intake increased by 30 percent in the quarter and the EBITA margin improved to 6.1 percent. An improvement in ­demand for installation projects boosted the order backlog and puts Bravida in a good position for the next few quarters.

Sales and EBITA

It's pleasing to see a recovery to more normal conditions in the past quarter. Sales growth was 2 percent. The pandemic impacted installation order intake last year, which resulted in lower production volume this year. Some delays in project planning and start-up by customers also contributed to lower activity. The order backlog for installation projects has improved by SEK

1.5 billion in 2021, which will boost production volumes over the next few quarters.

Order intake rose by 30 percent, driven by installation projects. All countries contributed to this increase and the order backlog grew in all countries, apart from Finland.

Service sales increased during the quarter by 6 percent, with good growth in Norway, Denmark and Finland.

The EBITA margin, which improved to 6.1 percent, rose in Sweden, Norway and Denmark and was unchanged in Finland. These solid earnings demonstrate the strength of our business and that we can maintain and even improve the margin in more challenging times. This is despite investments in areas such as digital tools and the recruitment of new skills, which support our long-term strategy.

Cash flow

Operating cash flow decreased compared with the previous year, largely due to higher trade receivables. We still have two large outstanding receivables in Denmark from two public- sector customers and they have had a negative impact on cash flow during the year. These projects are in their final phase of production and the receivables will be settled by an arbitral tribunal. Our assessment is that this will take time but these are not expected to have any significant impact on earnings.

Acquisitions

So far in 2021, we have completed 15 acquisitions, with total annual sales of around SEK 750 million.

We have acquired three businesses in the building automation sector, which is a priority growth area for Bravida. Competition for acquisitions targets increased slightly and we have strengthened the capacity of our operating business to increase our acquisition pace. This has resulted in significantly higher activity and an excellent pipeline of possible acquisitions.

We have continuing to bolster our Finnish business and have agreed the acquisition of an HVAC company with sales of around SEK 110 million, which will expand our customer offering in Southern Finland. In addition we also have signed an agree­ ment to acquire an HVAC company in Norway.

"A record order backlog puts us in a good position for the next few quarters."

Sustainability

During the quarter, we launched Green Hub, our fossil-free service concept in large cities, which has received significant customer interest. We have also developed our sustainability work, which is a key part of our long-term strategy. Bravida is investing in new growth areas such as technical facility management and building automation, in which our significant technical expertise will contribute to sustainable solutions and lower energy consumption for our customers. The key factor for reducing our own climate impact is converting our vehicle fleet of almost 7,000 vehicles to fossil-free fuel. Its a challenge, but the percentage of electric and hybrid vehicles on order is growing as new models of vehicle appear on the market that are suitable as service vehicles, and these now account for 42 percent of all vehicles ordered in 2021.

Outlook

The market outlook has gradually improved over the year and there is a clear recovery in both our service and installation businesses. As we announced previously, raw material prices are rising sharply and there is a risk of materials shortages in some areas. Bravida is following matters closely and we have good systems for handling this.

Our strength is that we can carry out both small and

medium-sized projects, but also that we are one of the few players who can handle large complex projects. We are seeing increased demand for large infrastructure projects and I am proud that Bravida among other things is part of a consortium that is one out of four pre-qualified tenderer for the Fehmarn belt tunnel between Denmark and Germany. Our strong order intake and order backlog indicate improved sales growth over the next few quarters.

Mattias Johansson

Stockholm, October 2021

BRAVIDA INTERIM REPORT JULY-SEPTEMBER2021

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FINANCIAL OVERVIEW

Consolidated earnings overview

Net sales

July-September

Net sales increased by 2 percent to SEK 4,854 million (4,750). Organic growth was negative at -1 percent, acquisitions boosted net sales by 3 percent and currency effects had a marginal impact. Net sales rose in Sweden and Denmark.

Compared with the third quarter of 2020, net service sales increased by 6 percent, while net installation sales declined by

1 percent. The service business accounted for 46 percent (44) of total net sales.

Order intake rose by 30 percent to SEK 5,212 million (4,024). Order intake increased in all countries. The order backlog amounted to SEK 15,269 million (14,274), an increase of 7 per- cent. The order backlog, including acquisitions, rose by SEK 361 million in the quarter. The order backlog only includes installation projects.

January-September

Net sales increased by 1 percent to SEK 15,657 million (15,533). Organic growth was negative at -1 percent, acquisitions boosted net sales by 3 percent and currency effects had a negative impact of -1 percent. Net sales rose in Sweden, Denmark and Finland.

Compared with same period in 2020, net service sales increased by 6 percent and net installation sales decreased by

4 percent. The service business accounted for 47 percent (45) of total net sales.

Order intake amounted to SEK 16,986 million (15,101), an increase of 12 percent. Order intake rose in Sweden, Norway and Denmark. The order backlog, including acquisitions, rose by SEK 1,478 million in the period.

Earnings

July-September

Operating profit was SEK 293 million (283). EBITA increased by 4 percent to SEK 294 million (284), resulting in an EBITA margin of 6.1 percent (6.0). The EBITA margin increased in Sweden, Norway and Denmark but was unchanged in Finland. Group-wide income was SEK -1 million (6). Net financial income/ expense amounted to SEK -13 million (-12). Profit after financial

items was SEK 280 million (271). Profit after tax was SEK 221 million (213). Basic and diluted earnings per share increased by 1 percent to SEK 1.09 (1.07).

January-September

Operating profit was SEK 886 million (871). EBITA increased by

2 percent to SEK 887 million (873), resulting in an EBITA margin of 5.7 percent (5.6). The EBITA margin increased in all countries. Group-wide income was SEK -9 million (14). Net financial income/expense amounted to SEK -37 million (-46). Profit after financial items was SEK 848 million (824). Profit after tax was SEK 669 million (647). Basic and diluted earnings per share increased by 4 percent to SEK 3.34 (3.22).

Depreciation and amortisation

Depreciation and amortisation in the quarter totalled SEK -107 million (-102), SEK -98 million (-93) of which related to the amortisation of right-of-use assets. Depreciation and amortisa- tion in the January-September period totalled SEK -323 million (-313), SEK -295 million (-286) of which related to the amortisa- tion of right-of-use assets.

Tax

The tax expense for the quarter was SEK -59 million (-58). Profit before tax was SEK 280 million (271). Tax paid totalled SEK -46 million (-52).

The tax expense for January to September was SEK -179 million (-178). Profit before tax was SEK 848 million (824). Tax paid totalled SEK -164 million (-176).

Cash flow

July-September

Cash flow from operating activities before changes in working capital totalled SEK 348 million (330). Changes in working capital amounted to SEK -487 million (-320). Current receivables increased by SEK 416 million, current liabilities decreased by SEK 70 million and inventory rose by SEK 1 million. Cash flow from operating activities was SEK -139 million (10).

Net sales (SEK million)

Order intake (SEK million)	Net sales by country,
	Jan-Sep 2021

7,000				22,000
6,000				21,000
5,000																				20,000
4,000																			19,000
3,000																			18,000
2,000																			17,000
1,000																			16,000
0																				15,000

1909 1912 2003 2006 2009 2012 2103 2106 2109

Net sales by quarter

Net sales, rolling 12 months

7,000	24,000
6,000	23,000
5,000	22,000
4,000	21,000
3,000	20,000
2,000	19,000
1,000	18,000
0	17,000
	1909 1912 2003 2006 2009 2012 2103 2106 2109

Order intake by quarter

Order intake, rolling 12 months

55% Sweden

18% Norway

20% Denmark

7% Finland

BRAVIDA INTERIM REPORT JULY-SEPTEMBER2021

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FINANCIAL OVERVIEW

Cash flow from investing activities was SEK -98 million (-27), of which acquisitions of subsidiaries and businesses totalled SEK -76 million (-13). Cash flow from financing activities was SEK -97 million (43). Cash flow for the quarter was SEK -335 million (26). 12-month cash conversion was 75 percent (167).

January-September

Cash flow from operating activities before changes in working capital totalled SEK 1,018 million (1,013). Changes in working capital amounted to SEK -696 million (285). The change was mainly due to higher trade receivables in Denmark. Cash flow was adversely affected by relatively lower installation activity in 2021, with fewer large newly started projects with frontloa- ded payment plans. In addition, projects that initially had good payment plans have progressed further in terms of completion, naturally leading to them having lower cash flow. Last year's extension period for tax payments due to Covid-19, which were paid in the first half of the year, has also impacted cash flow. Current receivables increased by SEK 1,374 million, current liabilities rose by SEK 684 million and inventory increased by SEK 6 million. Cash flow from operating activities was SEK 322 million (1,298). Cash flow from investing activities was SEK -388 million (-254), of which acquisitions of subsidiaries and businesses totalled SEK -347 million (-230). Cash flow from financing activities, which refers to net repayment of borrowing, dividends and amortisation of lease liabilities, was SEK -752 million (-817). Cash flow for the period was SEK -818 million (226).

Financial position

Bravida's net debt at 30 September was SEK -1,906 million (-1,230), which corresponds to a capital structure (net debt/ EBITDA) ratio of 1.1 (0.7). A dividend of SEK 507 million was paid in the second quarter, whereas in the previous year the dividend was paid in the fourth quarter. Consolidated cash and cash equivalents were SEK 973 million (1,129). Interest-bearing liabilities totalled SEK -2,879 million (-2,359), of which SEK -1,400 million (-260) was commercial paper and SEK -979 million (-882) was leases.

Total credit facilities amounted to SEK 2,500 million ​ (3,000), of which SEK 2,500 million (2,300) was unused at ​30 September. At the end of the period, equity totalled SEK 6,236 million (6,033). The equity/assets ratio was 34.2 percent (35.9).

Acquisitions

Three acquisitions were completed during the quarter, adding a total of around SEK 118 million in annual sales. 12 acquisitions were completed in the January-September period, adding total annual sales of approximately SEK 692 million.

Employees

The average number of employees at 30 September was 11,817 (11,972).

Sustainability

Reported occupational injuries that led to at least one day's sickness absence decreased by 9 percent over the past 12 months to a LTIR (lost time injury rate) of 8.7 (9.6). In Sweden the LTIR was 9.8, in Norway it was 2.7, in Denmark 12.0 and in Finland 13.2. LTIR increased in Sweden but decreased in other countries. Our target is a LTIR of <5.5, with an ultimate goal of zero workplace accidents.

The number of electric vehicles ordered so far this year

amounts to 231, which is 28 percent of the number of vehicles ordered. The number of hybrid vehicles ordered amounts to 116, which is 14 percent of the number of vehicles ordered.

Parent company

Revenues for the quarter were SEK 42 million (43) and income after net financial items was SEK 1 million (7). Revenues for the January-September period were SEK 139 million (140) and earnings after net financial items were SEK 0 million (6).

Shareholder information

Bravida Holding AB's ordinary shares are listed on the Nasdaq Stockholm Large Cap list. At 30 September Bravida had 9,809 shareholders. The five largest shareholders were Mawer Investment Management, Swedbank Robur Funds, the Fourth Swedish National Pension Fund (AP4), Lannebo Funds and Handelsbanken Funds. Mawer Investment Management holds just over 11 percent of the votes.

The listed share price at 30 September 2021 was

SEK 118.40, which corresponds to a market capitalisation of SEK 24,074 million based on the number of ordinary shares. Total shareholder return over the past 12 months was just over 12 percent.

Net sales and growth
	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec	Oct 2020-
Amounts in SEK million	2021	2020	2021	2020	2020	Sep 2021
Net sales	4,854	4,750	15,657	15,533	21,147	21,271
Change	105	112	124	795	743	72
Total growth, %	2.2	2.4	0.8	5.4	3.6	0.3
Of which
Organic growth, %	-1	1	-1	2	1	-2
Acquisition-based growth, %	3	4	3	5	5	3
Currency effects, %	0	-3	-1	-2	-2	-1

BRAVIDA INTERIM REPORT JULY-SEPTEMBER2021

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Share capital totals SEK 4 million, divided among 203,816,598 shares, of which 203,323,771 are ordinary shares and 492,827 are class C shares, which are held by Bravida Holding AB.

Ordinary shares entitle holders to one vote and a dividend payment, while C shares entitle holders to one-tenth of a vote and no dividend.

Financial goals

• Sales growth: over 5 percent a year
• EBITA margin: over 7 percent
• Cash conversion: over 100 percent
• Net debt/EBITDA: under 2.5x
• Dividend: over 50 percent of net profit

Other events during the period

There are no other material events to report.

Significant risks

Changes in market conditions, financial turmoil and political decisions are the external factors that mainly affect demand for new construction of housing and commercial property, as well as investment from industry and the public sector. Demand for service and maintenance is less sensitive to economic fluctuations.

FINANCIAL OVERVIEW

Operating risks are related to day-to-day business operations such as tendering, price risks, capacity utilisation and revenue recognition. Management of these risks is part of Bravida's business process. on the extent of completion of each project and the expected date of completion. A well-developed process for the monitoring of projects is essential in limiting the risk of incorrect revenue recognition. Bravida continually monitors the financial status of each project to ensure that individual project calculations are not exceeded. The Group is also exposed to impairment loss risks in fixed-price contracts and various types of financial risk such as currency, interest rate and credit risk.

Transactions with related parties

No transactions with related parties outside the Group took place during the period.

Events since the end of the period

Three small acquisitions were completed on 1 October; two in Sweden and one in Denmark. Two acquisitions were signed in October, in Finland and Norway. For further information, see Note 3.

On 25 October, the Board decided on the issue and repurchase of 600,000 class C shares. The aim of this is to ensure the provision of ordinary shares to employees participating in the LTIP 2021 performance-based incentive programme.

EBITA (SEK million)
500	1,500
450	1,350
400	1,200
350	1,050
300	900
250	750
200	600
150	450
100	300
50	150
0	0

1909 1912 2003 2006 2009 2012 2103 2106 2109

EBITA by quarter

EBITA, rolling 12 months

EBITA margin, %
9	9
8	8
7	7
6	6
5	5
4	4
3	3
2	2
1	1
0	0

1909 1912 2003 2006 2009 2012 2103 2106 2109

EBITA margin per quarter EBITA margin, rolling 12 months

Cash flow from operating activities (SEK million)

1,000	2,600
800	2,300
2,000
600	1,700
1,400
400	1,100
200	800
500
0	200
	1909 1912 2003 2006 2009 2012 2103 2106 2109

Cash flow from operating activities by quarter

Cash flow from operating activities, rolling

12 months

BRAVIDA INTERIM REPORT JULY-SEPTEMBER2021

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