Bravida Holding AB (publ) (BRAV) Earnings Call Transcript & Summary

Welcome to the Bravida webcast for teleconference Q4 2021. Today, I am pleased to present CEO, Mattias Johansson; and CFO, Åsa Neving. [Operator Instructions] Speakers, over to you.

Thank you very much, and good morning. And as you heard, it's myself, who will take you through this presentation; together with our CFO, Åsa Neving, slightly younger on the picture but still going strong.

Absolutely. Stronger than ever, I would say.

Yes. Today's agenda is first, something about the market position in the Nordic, the Q4 report, of course. And then Åsa will take you through the different countries and the performance in those segments, and then we have a summary and a Q&A in the end. So welcome to this presentation. We start with the market and our position in the same. Again, I think to repeat what kind of business model we have is important. We are in the 4 Nordic countries. And strong public financials that are supporting the demand in the market together with a quite strong economy overall. When we entered the pandemic in, yes, 2 years ago, my ambition was to show you, as an investor, what kind of strong business model we have, how resilient it is. And I think we have done it. And I think the reason why we have been able of doing that is, of course, that we have so many, close to 12,000 really skilled employees, who are really close to the customers. There are 3 different things we usually mention, and that are that we are having diversified end markets, low customer concentration and small average contract size. And I think that is the secret behind the, I would say, success we are able to present today in the Q4 report today. We have a broad scope of offer to the customers that are buying over and over again from us, really strong and tight relations with those, of course. So -- and internally, in Bravida, we very often say or I say, together with the group management and many other leaders, that we are not satisfied with the results we have been able to deliver, but we are really proud. And today, I think we are really proud to present this report. Bravida is a company that we try to develop and we are changing. We have a high focus on the next business plan, delivering more service, better service, more sustainable service to the customers. And we also have a new vision for a new time, as we say. And Bravida helps customers develop the full potential of their buildings. Through service and installations, we bring buildings to life, leading the way to a sustainable and resilient society. And I think that is important to understand that we are, very often, the solution for many of our customers to improve their work with their sustainability and reach their sustainability targets. We are the Nordic leader in sustainable technical solutions. We want to be a partner from the design phase throughout the building phase, the installation phase, as we call it, and the service phase, and we want to do it in a very sustainable way. Offering and explain for the customers how we can help them with the sustainable work they are facing or thinks is a bit challenge is, of course, on our top focus on our list. Every customers have an access to all our services. Life cycle perspective of all buildings, and we want to be the one who is leading the work with sustainability in this industry. We're adding new business areas like building automation and technical facility management. And being #1 in building automation, telling the vision to the market, to future employees that we have ambitions of being the best in the market regarding those is important. I think we are probably best positioned to do that because we, together with technical facility management and building automation, we can offer the full scope to the customers, which is an advantage for us as a supplier. We are working with solar panels, changing that more to business-to-business customers. We have a really good solution for car charging. And by saying that, I mean the software. We have the best solution as we see it in the market that can take care of existing chargers, expand the solution for the customers with another type of chargers and still be able to administrate the -- for example, who is going to pay for the electricity, reporting to the sustainability department, et cetera. So we really have a really strong offer on that sector as well. Then, of course, helping the customers to taking down the energy consumption is important for us. So that was the short intro. Now what about the Q4? And as you probably understood and already maybe read, the Q4 report is really solid and a strong report. The market outlook is good. We can see a good demand for both service and installation. We also see quite increasing demand for sustainable and energy-efficient solutions. It hasn't really come up to very high volume yet, but due to the energy prices, et cetera, of course, our customers want to use less energy and make sure that they have efficient solutions inside their buildings. We can see some rising raw material prices, and we see some risk for material shortage as well. But so far, we have handled the situation quite well. We are working in different ways with the material prices. Of course, we are working together with our partners on the supply side to make sure that we don't get too high increases. We are working on the customer side to increase the prices, but we're also focusing more on sourcing more direct, taking away different levels in the chain that are not adding value. And we are focusing more and more to do more international sourcing, direct import. We see some high sick leave in the end of Q4 and in the beginning of Q1. In January, we had really high sick leave that will, of course, impact the Q1 and short term. But in some places, we're already now seeing that the sick leave is going down again. So hopefully, that is something that we can put behind us quite soon. The demand is good, but of course, we need to have people in production to make -- to be able to deliver strong numbers next quarter as well. But short term, some challenges. Long term, we really have a strong demand in the market and a good order situation as well. Building confidence indicators is actually above normal level in all countries. So the highlights in the quarter. Net sales is up 11%, 6% coming from organic growth. And as we have guided and said the last 2 sessions like this, we have said that we are expecting the organic growth to come back in Q4 or Q1. 6% in Q4, so I'm happy to see that the thing we said actually happened as well. Strong order intake, really strong, plus 41%, and we see a really strong order intake in Norway, which is, of course, good for us. Norway is a country that are coming back to quite high margin again. And now, we have, for a short while, suffered a bit from slightly lower order intake, et cetera. But now, we see the order intake coming in, a lot of projects where we have been in early phases, developing this together with customers. And also, quite low risk because of index clauses as well due to the discussion we have regarding the material prices. Record high order backlog, above SEK 16 billion. EBITA margin, 10.1%. And we see improved cash flow at SEK 1.115 billion. We have some repayment from insurance premiums that are affecting the quarter, but at the same time, we have done some investments in the business as well regarding digitalization to be able to do -- to offer our employees a better platform to continue development and perform even better in the coming years and quarters. Cash conversion, 83%, and we are seeing that when Q1 and Q2 from last year is going out from those numbers, we can see an improvement regarding that as well. Net sales, again, SEK 329 million is organic growth; SEK 233 million from M&A. We have some FX impact as well, but really happy to see that we have organic growth in all countries, except for Norway then. But on the other hand, the order intake in Norway was the highest in the group, so we really are positive for the future regarding Norway as well. And we can see that we are growing both service and installation, which is, of course, strength as well. Sales growth in '21, growing 3% in the full year. And we can see growth in service business mainly, slight positive organic growth. I think it was 0.4% or something, rounded down to 0%. We can see organic growth in all countries except Norway, and 3% is coming from acquisition. Take a step back and looking on what we have done during the pandemic, I said that I wanted to show you that we were a stronger company when we left the pandemic than we were when we -- before we entered it. When I said that, I couldn't imagine that this will vary for 2 years so far, and hopefully, we can say it was only for those 2 years. But being able to grow the business with 7% during those 2 years and increase the EBITA with 23% is extremely good and something that we are not satisfied with, but we are very proud of being able to present it. EBITA, 10.1% in the quarter. We have improved margin in all countries, except for Denmark. We have some effect -- impact on the EBITA. We have the -- some investments on the digitalization, as I said. We also have participated in the tender for Fehmarn belt tunnel. Let's see what happens with that, but we took that as a cost last year, in total for the year, SEK 44 million. So being able to presenting the best year ever and still investing in the future is, of course, something that we're really happy to be able to do. And by the way, Fehmarn belt, there are 4 competitors in the world that have been prequalified to be able to participate in that tender. One actually left, because the reason, I don't know, but there are 3 remaining. And being 1 out of 3 in the world that are chosen to compete on a tender like that shows the quality, what kind of quality we have in Bravida as well, which is some other way you can explain the strength we're having in Bravida. We have also invested in new skills on a group level to capitalize on our business plan. And that is, of course, also, taking into -- as a cost in the P&L, and we normally don't adjust for those things. So it's a clean P&L, but we have done investments for the future as well. And I think that's important for you to understand. It's important for me to explain for you because quite often, companies are adjusting for this. We are not, so far. EBITA margin in '21 improved to 6.9%, which is a really strong number, of course. Order intake, I mentioned it a couple of times, plus 41%, and it's increasing in all countries, except for Finland. But it has been a little bit more challenging market in Finland, but we have been able to grow our business in Finland during '21. So we haven't been stressed. Hopefully, the demand will go up again. The statistics will say -- or say that it will be quite okay or positive demand regarding the outlook for '22. The order backlog increased with 20%, and order backlog is only installation contracts. The service is not included in that number. So really strong order backlog, and again, the order intake increased in all countries, except for Finland. And down to the left, you can see how the order intake last 12 months has developed, and that is, of course, supporting the growth going ahead. Earnings per share increased dividend. And the dividend proposal is SEK 3, and it's increased by 20%, and that is 53% of the net profit. And to the right, you can see the development of the dividend. Again, during the pandemic, we have been able to increase the dividend with 33%. And we have increased it with 10% plus as an average since we did the IPO in 2015, which also is a way to look at Bravida as an investment. Health and safety, and one KPI that we are working with internally regarding our sustainable work internally, has improved. We can see an improved LTIFR in Sweden, Norway and Denmark. And it's down to 8.4% compared to 8.6% last year. We have still some work to do. There are some differences in the different markets, and the focus on this number is high. Another topic we are discussing a lot internally and a way for us to actually make a difference is our cars. I think we have one of the biggest car fleets in Sweden. And we have a target that we are supposed to reduce our emissions with 30% until 2025. And one important measure to do this is to change our cars that are old enough to be changed. We are not changing new cars. And that is to buy electrical vehicles instead. And during 2021, we bought 279 electrical cars, which is 33% of the total number of vehicles. There are still some shortage in -- regarding those cars. So we are not really able to buy 100% yet because of long delivery times, et cetera. But we have a high focus, and that is one KPI we are following up our regions, branches upon. In Sweden, for example, we have around 1,200 company vehicles, and we are trying to get even more climate-friendly regarding this. So from now on, it's only possible in Bravida to buy electrical cars if you're driving a company vehicle. And that means that we have the possibility to offer all our employees to drive an electrical vehicle instead of fossil-driven. It's -- we are not even longer buying a hybrid car. We are focused on electrical vehicles. That's another way for us to make a difference in the society. Acquisitions. I know that some of you or many of you think this is an important part. We have already, to this date, done 6 new acquisitions in 2022, adding around SEK 200 million in sales. During 2021, we did 20, adding SEK 1 billion plus in sales. We still have a really strong pipeline. We definitely have a balance sheet that will support a continued M&A journey. We still can do M&A to attractive multiples, and we can see somewhat increased competition but nothing that we can't handle. So M&A, after the pandemic, we suffered a bit during the pandemic because we want to meet the company we are buying. We want to -- it's so important for us to integrate, to create value. 1 plus 1 are supposed to be more than 2. So to be able to -- learning to know the seller, get them -- give them the opportunity to know us, discuss what we want to do together to improve the business is important. And now, we have the pace up again regarding M&As. So now, I'm going to hand over to Åsa, who will take you through the different countries, so please.

Thank you, Mattias. And I am very proud to present the strong performance in our country segments. And we will start with Sweden. Sweden did a strong quarter. They grew -- starting with the top line, they grew the sales with 9% in the quarter, and the growth was 5% in the full year. And the growth was both coming from service and installation. And as Mattias said, service was -- has been picking up all during the year, and then installation was a bit slow in the beginning and -- but has been picking up now in the, yes, last quarters, you can say. We had an organic growth in Sweden by 5%, and all divisions had organic growth in Sweden, so that was really strong. And also, our largest division South, that was a bit slower in the beginning of the year, had now the strongest organic growth in the quarter. Also, a very strong EBITA margin. It improved to 12.5% in the quarter compared to 9.5% the previous year. In this figure, we have this nonrecurring repayment of this insurance premium of SEK 96 million. But even if you take that out, it's a really strong EBITA margin, higher than last year. Also, if you look at the full year, the EBITA margin is very strong, 8% compared to 7.1%. And also, taking out this nonrecurring item, it's still above our financial target on 7.2%. Very strong order intake, plus 19% during the quarter. And also, all divisions had a strong -- all the Swedish divisions had a strong order intake during the quarter. Backlog, plus 10% year-on-year. Moving on to Norway. And as Mattias said, Norway was the hardest hit by the pandemic and has done a really strong recovery. Now if you look at the Q4, they grew the top line with 6% to SEK 1.2 billion in reporting currency. If you look at it in local currency, it was flat. It was actually a black zero, you can say, and you have to go back to Q1 2020 to find growth in Norway. So very strong and happy that we are picking it up again. Organic growth was still negative, minus 1%, but also improving during the quarter. EBITA margin was very strong, 7.8% compared to 6.4% last year. And if you look at the full year, it was 6.2% compared to 5.7%. Also, as Mattias said, extremely high order intake, 168%. If you look at local currency, it was still a strong 148%, and a strong order backlog at plus 76% year-on-year. And in this order intake, there are 6 large hospital orders that we received during the quarter at an amount of SEK 775 million, and Mattias talked a little bit about those. And I would also like to add that Norway has done a lot of hospital -- large hospital projects before, so we feel very comfortable with this type of projects. Moving on to Denmark, who also had a strong growth in the quarter. They were growing by 11% to SEK 1.2 billion. The growth was also coming from both service and installation. If you look at the full year growth, it was 4%; and in local currency, 7%. Organic growth, strong, plus 12%. If you look at the EBITA margin, it decreased some in the quarter to 5.8% compared to 6.3%. It was due to a lower performance in the project portfolio. But if you look at the full year, the Denmark increased the margin to 5.3%. Also, Denmark had a very strong order intake, 11%, and a strong order backlog at 13% year-on-year. Moving on to Finland. And in Finland, we also see a strong sales growth, plus 27%, and some percentage higher if you look at it in local currency, so ending up at 5 -- SEK 496 million. Finland was also growing both in service and installation. The organic growth was good at 9%. And if you look at the EBITA margin, I am very proud that they have improved the EBITA margin to 8.6% in the quarter. But also, the full year margin has improved to 5.7% (sic) [ 5% ] compared to 4% last year, which I think is very strong. Order intake, a little bit slower in Finland, so order intake decreased with 15%. And also, the order backlog decreased with minus 2%. So Finland needs to fill up their order books a little bit. We should also remember that Finland has had high production now in almost 2 years or at least 1.5. They got a large order, the Wärtsilä project in beginning of 2020, which they are producing on now for 2020, 2021. So they will have some difficult comps in the coming quarters, but very strong result, also, there. So let's look a little bit at our financials. And as you know from previous quarters, we had a lower operating cash -- we've had a lower operating cash flow, and we have a lower cash flow in 2021 compared to 2020. And this is -- as we said before, the main reason is that we have had 2 -- or we have 2 projects where we have increased -- where we are in dispute with the customers in Denmark. So the accounts receivable have increased a lot there. And -- but as we said before, there is no news on this. This will be settled in court. Probably later this year, one of them, and then the other one will take probably another 2 years. But we don't expect any effect on the results there. Anyway, so that has been affecting the cash flow for 2021, although we see now an improvement in the Q4 mainly coming from the fact that we are increasing the installation projects and getting a good payments plan there, and so the -- it's the working capital that is improving. And this also leads to an improvement in cash conversion to 83%. It was 75% last quarter. And this, we also expect will improve as we go along. This is an LTM figure, so we have now -- in this number, we have 2 low quarters in the beginning of the year 2021 in those. Looking at the net debt/EBITDA ratio, it's on a low 0.5. And if you would take out the leasing part of this, we would be more or less 0 net debt. So on the next slide, just showing the working capital. We talked about it last time that it was -- that it has had worsened a bit. But now, you can see that in this quarter, we are coming back on a good low level again at minus 6.7%. So just summarizing the financial targets that we have. As you know, we have an EBITA margin target on 7% or more than 7%. We had a year with a margin of 6.9%. If you take out this nonrecurring item, it is still 6.5%. So we are not there yet, but the margin is higher than last year, so we're improving. Cash conversion, not 100% but 83%, and it is picking up. Net debt to EBITDA, as I said, is on 0.5, so a lot below our target. Sales growth, 3%, which is good in this pandemic -- in a year of pandemic, as Mattias talked about earlier. And then we have a dividend proposal that we will pay out 53% of our net profit. So Mattias, by that, I will hand over to you.

Thank you, Åsa. You look really proud.

I am proud. Of course, not satisfied but very proud.

No, of course. We are never, no. Okay. Just to summarize this presentation. Again, organic growth, 6% growth in service and installation. Order intake, plus 41%. Increased order backlog, record high level, SEK 16.5 billion. Improved EBITA margin in Sweden, Norway and Finland. The cash flow is good, and the dividend proposal is SEK 3 per share, increased by 20%. And this slide is a really nice one. And you can see the development, and again, this shows the beauty of the business model we're having and the way we are actually executing on the model as well because we have so many employees, close to 12,000 that every day goes to work and do everything they can to give a really strong, good service to the customers. And that is -- this is a result out of that. And you can see there in the middle of this slide, the EBITA development during the last 7, 8 years, and we have 9% CAGR, which is, of course, really strong. And this year, a couple of weeks ago, actually, I -- it was 24 years since I started in the company, so I'm -- so I mean, the -- well, during this year, start my 25th year. And at the same time, we have anniversary in Bravida. Bravida turns 100 years old this year. We are going to celebrate that. And of course, in the year we are celebrating 100 years of Bravida, my plan is not to change this trend at least. So hopefully, we can have a nice celebration of Bravida at the same time as we continue to develop the business in the company. So by that, we open up for some questions.

[Operator Instructions] And our first question comes from the line of Carl Ragnerstam of Nordea.

It's Carl here from Nordea. A few questions from me. Firstly, on the higher sick leave rates you mentioned in late December and also, until today in 2022, is it possible to quantify the rates currently compared to normalized quarter? And also, would you say that the effect from that is mostly on EBIT? Or is it also sort of on organic growth? Or do you manage to compensate with the subcontractors?

But I think, first of all, it's hard to give you an exact number, but it's definitely twice as high in the beginning of the year as it normally is. There are some geographic variations, and it will impact both the EBITA -- both the earnings and the growth because we need the hours to allocate cost to make sure that we get the sales. I don't know if you want to add something.

No, it's just -- it's double. In January, it's roughly double what we normally have and then probably also the first week in February. Now we see that it is -- we think we see -- at least we get some signs that it is going down.

And now it's not sick leave, as it normally it is. It's very often quarantine as well because you have someone else in the family. So when those rules are loosened up a bit, of course, people will come back to a higher extent quite quick.

Okay. Perfect. And in Norway, as you said, you took quite a big -- a few big hospital projects. But in a market with a quite extreme raw material inflation or any inflation for that matter, how do you ensure that these projects sort of are taken with the right profitability? And are they partnering projects in general or a fixed price?

In Norway, you can say, in general, they are partnering projects. And of course, in that specific type of contracts, we have discussions with the customers, how to source it in the most efficient way. So I would say that in Norway, we have another culture of using indexes. But again, we have been discussing raw material price increases in last summer. So we have been aware of it. We have tried to adjust it. I think it's more a question about if we have adjusted enough or too much. It's not the question if we have adjusted. So if there will be some impact, negative or positive, I think those impacts will be quite short because we are discussing it, and we try to pass it through at the same time as we try to keep the prices down, of course. And as I said in the report but also earlier in this presentation, we are working more on sourcing more direct and try to make sure that we are sourcing in an efficient way by doing more direct import as well. That's another solution to handle increases. Because there are some suppliers in the Nordic market that are actually not doing their job. They are just trying to passing through increases, and there are so many who is taking the chance to increase the prices more than, yes, what you can, what I think is okay to do. But -- so we are working on more than one front.

Okay. Perfect. Very good. And in Denmark, I mean, the margin there has been a bit muted in the past few quarters. It continued somewhat in Q4 as well. But what is a bit surprising to me at least is that services is growing 5x installation, which should mean that you have a favorable margin mix in the quarter, but still, margin is down quite a few basis points in the quarter. So do you have bad installation projects that you need to work through also in the coming quarters in Denmark? Or what's happening?

Yes. I think you can have -- I think you are right in your analysis here. Service is normally very good. We are not -- we think that we still have the potential on the service business in Denmark, but we have struggled a bit in some installation projects in Denmark in the quarter, but still presenting a quite okay margin, I would say. They are chased by Finland now. Finland have improved a lot. So I think that we will see -- hopefully, we can see a margin -- a better margin in the coming year compared to '21. That's at least our ambition.

Okay. Perfect. And the final one from my side is a bit -- maybe a longer question, but with easing restrictions in the Nordics, which we see during Q1. Hopefully, people are returning at least to the offices, or maybe, it will be a hybrid model, I don't know. But would you say that the trend coming back now to offices will drive sort of more installation demand for you in, at least, the coming few quarters here as, I mean, I guess, companies need to remodel offices to be ready to have a more hybrid model of working?

Yes. I think the answer to that one is yes, definitely. But I think maybe the most important thing is that when people coming back to different types of workplaces, again, they see things that is not working, and then they start to order again. So I think people back on job sites is good, yes.

And our next question comes from the line of Stefan Andersson at SEB.

Just starting a bit with the M&A side. You touched a little bit about it, talking about the SEK 1 billion acquired last year in sales. I mean, your balance sheet is extraordinarily strong. Probably net debt to EBITDA, I guess, is the highest you've had, I don't know if you -- in your 25 years, probably not, but for a long time. So I'm just thinking, what's your ambition here? Because if you keep the pace that you have currently, it's not really -- you're not using up that balance sheet. So are you hoping to dramatically improve your pace here? Or have there been discussions on the Board level when it comes to extra dividends or repurchasing of shares? Or what's your thinking about that?

Yes. Of course, I don't know everything that -- what the Board is thinking, but I know what I want to do. And I think increasing the dividend with 20% is one way of showing you that we have muscles to get to increase the dividend. On the other hand, we want -- I want to keep some money in the company to continue to develop through M&A. We think that we can increase the pace compared to last year because the first 6 months, H1 last year was quite slow, and then we speeded up a bit, H2. We think we can have a slightly higher pace, but we also think, although should be, some kind of possibility to do slightly larger M&As well during the coming, yes, X years. And I think that's why I want, at least, to have ammunition to do that as well. Strong balance sheet is, of course, supporting that, and let's see what happens. But we definitely have an ambition to do more '22 than the SEK 1.050 billion last year.

Would a company like Assemblin be too big for you?

I think Assemblin is one of the biggest in the market. And maybe, just a comment on that one, I think maybe we are too strong in the same places -- in too many places. I don't think Assemblin is too big, but maybe, that's not the same as I think Assemblin is a good target.

On the sick leaves, maybe I missed that. But if you look at the countries, which countries are most impacted? You talked about geographical differences here. And I could do some guessing, but if you help me out, I would be...

No, but I think Sweden has been quite heavily impacted in the beginning of this year. Then, of course, in the end of last year, I think the last version of the virus actually impacted everyone. Close to -- it was close enough to look at someone in the paper who had the disease, then you got it yourself. So it was quite dramatic in the end of last year. Still, a strong report, and of course, that has followed us in Q1. I think Sweden, the highest impact, followed by Norway. Finland and Denmark, quite okay, but they had some -- Finland had some restrictions slightly longer. Denmark had -- I think Denmark was first out in that queue. They had some slightly higher problems in maybe November, beginning of the December. So...

Good. And my final question then, and I don't know what you can answer on that. But the organic growth pickup in the quarter was rather -- was very high. Normally, we don't see those kind of movements. So I'm a little bit curious if we should see this as, I mean, activity increasing that much all of a sudden, or if there is some extraordinary items, maybe large projects that are the final invoices sent out, or something like that.

I think 6% is a high number, definitely. I think what you can expect, when we have entered our organic growth phase, that will continue. But 6% is high for a quarter for our industry with their risk management in control, so to say. We don't really know the sick leave in Q1, but I definitely will say that we have support for organic growth if we exclude the question about the sick leave in Q1. We have a strong order backlog. We have a strong demand. We have installation projects, again, that we can produce on at the same time as the service demand is picking up. So I think that is the difference. And I also think 6%, we had quite low comps maybe compared to the last quarter where we had -- I think Q4 '20, we had slightly lower installation activity, I think. Now we had a good momentum in both installation and service at the same time, which is a normal way, actually. That is a normal situation. So I expect that the growth will continue, but 6% is high, as you say.

And we have one further question in the queue. [Operator Instructions] The next question comes from the line of Karl-Johan Bonnevier of DNB Markets.

Yes. First of all, congratulations to the results that you're at least satisfied with -- or proud of, not satisfied with.

Exactly. Exactly. That's important.

On those lines. And a couple of digging deep -- couple of things deeper, looking at the order backlog, obviously, being at record level. And how do you feel the risk of inflation creeping into that order backlog and then taking down your perceived profit margins in there? And I guess, a part of that backlog is now starting to get a little old as well, isn't it, compared to what you normally would see?

I think that's maybe the one and maybe the only concern I have for the moment. We are thinking about many things. But have we increased the prices enough? Then you can split that question up. In Norway, we have close to 95%, 100%index clauses in all contracts, which is some kind of protection, of course. In Sweden, that is not the same culture, not in Denmark as well, meaning that we have been discussing, we need to do some measures to be able to protect the margin when the price is going up. And again, we are working intense on the supplier side to make sure that the increases are as low as possible. We are also looking after alternative type of materials, doing direct import. But then, we have, since last summer, been discussing in all our tendering meetings. As you know, we have a really strict process on how the four eyes principles that when we are submitting a tender above a certain level, you need to discuss with the person above you. In those meetings, we are always discussing inflation, regarding salaries, material prices, et cetera. And that is something we have done. We are always doing that. And that is not the thing we have started just because of this certain happening regarding the material prices now. That is common business for us. We're always doing that because when we're offering, today, we know that we will have salary and material increases in March, April. So we always have to take that into consideration. Now instead of adding 2%, 2.5%, 3%, we are adding 10%, 12% maybe, 15%, 20%, I don't know, depending on the different segments. So the process regarding discussing this is down into our culture. Now it's more about have we discussed the right type -- the right amount of increase. So I think -- what I'm thinking about is not if we have done it, have we done enough. So I think, let's say, we haven't, then we get some impact quite short. We also can -- if we win a contract today, material prices is coming in April, then we can do the deal already today to make sure that we are buying to the prices we're having today and then get the material delivered after the summer, et cetera. So we have different tools of handling this.

And I guess, the other part of that question also is now when organic growth is picking up as you described, there's obviously -- do you see any risk for labor shortage out there and that's becoming then a double situation, so to say, for you to be able to deliver?

Yes. And labor shortage, I think -- I don't think we have helped -- I think this is the 26th report I'm doing as a CEO, as a listed company, and I think I've got that question, all of them. What about the shortage in regarding the resources in the industry, and that is something we need to handle. Maybe that will increase even more. So we need to try to search different way of solving that, improve the productivity subcontracting. But I think longer term, I think the whole industry have to work to make sure that we're getting more resources into the industry, so we can solve this issue more long term. And I think the whole society has a challenge of support and actually make sure that there are handcraft workers in the society because we are needed. And I think one way to look at it, everything that can be digitalized will be it, and some kind of the service we are offering can't be, at least, in the very near future. So I think there is a really good future for the younger generation who want to have a nice, good job and maybe safe place to work in as well. So I think short term, some challenges. Long term, we need to improve our ability to actually make sure that we get more talents into the industry.

Excellent. But to sum that up, Mattias, just to understand it fully, looking at the order backlog and the labor shortage and all these kind of things, looking at what you have in there for the moment, you feel pretty confident that you have, say, a good enough margin in the order backlog to -- and also, the, say, the resources to deliver on the order backlog at standing here in mid-February looking forward, so to say.

I think to have the resources and to be sure on the margin is, of course, not fair to say because we can't have resources sitting and waiting for an order backlog to be produced. I think that is a work we are doing in parallel. We have to do that at the same time as we are growing. We need to hire more people. During the pandemic, for example, we took down the numbers of employees because of the market situation. Now we are in another situation where we need and want to hire more people. We think we have done enough measures on the margin side. We don't know yet. Time will tell, but we have definitely structured processes to be able to be successful in that topic. And hopefully, we have been that or will be that.

Excellent. No, that sounds confident. So I noticed that you took up provisions about SEK 80 million, SEK 90 million during the quarter. Is that something particular in there? Is that just a general cautiousness that is behind that?

I think it's -- on a year-to-year basis, I think it's SEK 60-something million, right? So no, I think it's more -- as you may say, contract management, and it is -- we have putting some provisions in Sweden and also in Finland. But that's -- yes, you can say precautious, but that's the way we work. So it's not anything unusual, no.

And also, I noticed that you changed the definition of the cash conversion in the quarter. Is that anything special or -- that we should notice in that?

No. It's actually very little difference. It's just that now you can find all the items in the report, and that was a comment that our auditors said, that you couldn't -- you can't find the different items adding up to the cash conversion, so we have changed it for that reason. But it has very little impact.

For traceability, basically, yes.

Yes, exactly. It has very little impact on the actual figure.

Perfect. And one final from me and coming back to Stefan's question on the capital allocation. Mattias, you have highlighted facility management and building automation as 2 new segments where you really would like to grow. Could you just describe the size of those operations for the moment? And what do you think those could be, say, in a 3- to 5-year perspective or something like that if your ambition plays out?

Yes. Regarding building automation, I think depending on how you -- how the definitions are, but we have around SEK 500 million today in Bravida, and we -- our ambition is to be the market leader medium term. I don't know if it's 3, 4 years. Of course, that will take the time we need to do it, but we will be #1 in that market. And I think we will be that, and that means something around SEK 2 billion, SEK 2 billion plus in total. Regarding technical FM, I think it's a little bit harder to actually answer that because what we see, it's a clear trend of customers that have a high extent of installations in the services they try to outsource. And that trend is, of course, supporting the demand for technical facility management. And let's see how fast that journey will go. But again, when we do something and communicating this clear as we have done regarding technical FM, of course, we want to be one of the biggest player. Then we have some players that are quite large on the soft FM, that's not our ambition to compete with those. Maybe on the contracts that they are having in using specialists like us as a subcontractor because the customers want to buy the food from the chef and the installations from an installer. And we have a strong belief in that we can continue to grow Bravida throughout those 2 initiatives, and let's see how long time it will take. But we have won -- we have good discussions with some customers on the technical FM side. We have won a couple of smaller ones as well, so it's slowly growing. But maybe we can come back to that in the next session or after the summer maybe when we have speeded up a bit.

Sounds promising. And I guess all those areas are interconnected to some extent, aren't they as well so?

Yes. And I think one of the customers -- actually, we won a contract that isn't signed yet, but we were the only one who could offer the services they were asking for, to close to 95%, and just a small amount of the service they wanted to buy was something we needed some contractors for. And of course, that is good quality for the customers giving us the opportunity to give better service for them, but it's also something for the customers. They, of course, understand that they not -- does not have to pay margin on margins, and that is an advantage for us, of course.

We've had one further question come through. That's from Stefan Andersson at SEB.

Just 2 follow-ups. On the salary issue -- or a question, just remind me there, in Sweden, I think you have couple of years agreement. Is it like 2 years left on that agreement? How is it looking in the other countries? Are there negotiations coming?

Actually, I don't know for the moment. There could be a negotiation coming up in Norway, but I'm sorry, I am really not sure. Maybe we can come back on that one. But it's right, as you say, in Sweden, we have an agreement that are -- there is no new negotiation this year. That's correct.

And then on your financial net, and I can't see that in the report, and maybe you said it but I missed it. But to me, it looks a little bit higher when it comes to the interest rates, so there must be some revaluations in there as well. Or am I mistaken?

No. For the quarter or...

I'm thinking about the quarter, if I -- maybe I've done something wrong with that one. Is it like [ SEK 19 million ] something?

No, I don't think it was high. No, I don't think it was that high, no.

Okay. That's fair. So normal run rate. Okay.

Yes.

And as there are no further questions in the queue, I'll hand back to our speakers for the closing comments.

Thank you so much for all questions or for your participating in this conference. Now Åsa and myself are going out and work for the '22 years results with some investors and have -- during the year end, until we meet next time, we'll have some cake and celebrate the 100 years as well. So thank you very much for listening. Bye-bye.

Thank you. Bye-bye.