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

Good afternoon, and a warm welcome to today's shareholder meeting. Today's meeting is prompt by the events of last week. In this meeting, you will meet Bravida's CEO, Mattias Johansson; and CFO, Åsa Neving. My name is Liselotte Stray and I am Head of Group Communications at Bravida. Firstly, Mattias Johansson will give you a brief introduction. And after that, I will convey some off the most frequently asked questions that we have got. You will also get the opportunity to ask questions. If you like to ask questions, we ask you kindly to log into the video webcast. You can find that on Bravida.se or financialhearings.com. This meeting will be held -- we will be holding this meeting for 30 minutes, and it will be recorded and it might be published. And with that said, I will hand over the floor to Mattias Johansson. Please, Mr. Johansson.

Thank you, Liselotte. And thank you, everyone, for participating today. We acknowledge that this is an unfortunate situation that we are in. But now our entire focus is to addressing any eventual issues and effortlessly delivering value to our clients. Let me start by walking you through what has happened since last Thursday and what action that already has been taken. Last Thursday Region Skåne announced their termination of their contract with Bravida Sverige AB. The reason why the customer choose to cancel the contract is due to suspected over invoicing. The suspected over invoicing is based on an audit by the consulting company, EY. And this report we gained access to on the same day as it was made public. In the report, EY highlights 11 invoices and deviations for a total of 358 hours. As a consequence of this, Bravida has initiated its own investigation on Friday. And it was last Friday, the 5th of April, with the aim of investigating what happened and whether any irregularities have occurred. The investigation is led by Fredrik Jonsson, Chief Legal Officer at Bravida. In addition to this, Magnus Liljefors, the former Chief Legal Officer and today, responsible for M&A at Bravida will lead a Sweden-wide investigation to ensure that our high demands on business ethics and correct behavior are implemented and complied within all parts of the organization. The investigation regarding Region Skåne will be completed at the end of the month.

Thank you, Mr. Johansson. As I addressed before, we will take some questions that has been sent into us on beforehand and actually are the most frequently asked questions by our analysts and owners. And we will start with the most common question. How are you working to deal with the situation and minimize further damage?

But first, we need to get in-depth knowledge about what has happened. In parallel to this, we, of course, need to focus on staying close to our customers and make sure that we continue to deliver service of top quality in the service project as well as installation projects. So it's a double way of working to try to find out what has happened and then continue to service our customers.

Yes. And another question we have gotten then it's that what do you anticipate the internal investigation will lead to?

Yes. Hopefully, we can clarify some question marks, investigation if that shows any weaknesses in our administration, of course, we will put the plan in place and make sure that we are delivering upon that. But again, that is something important to understand if we have those weaknesses. Yes.

And of course, based on that question, we also have gotten the question, will you involve an outside party auditor for the internal investigation?

Again, I think it's too early to say because we don't know what has happened. But if needed, we will staff this project with the right type of resources. So if needed, yes. So it depends on the outcome of the investigation.

Okay. We have seen some headlines in the media and also several customers have stated that they want to review our invoices. What do you tell them?

But I think it's quite natural that a customer want to review invoices from us or from any other supplier. And I think that is quite natural in a relationship between customer and supplier. So I think they will do, and I think they have done as well. So I think that's quite natural.

Yes. And actually, one of the questions that's also quite natural is like what has the reaction from customers been to this information? And connected to that question, they also ask if we have lost any more contracts due to this?

No, what I'm aware of today. We haven't lost any contracts, but I think it's so important for us to be very close to the customers and make sure that we continue to deliver the service and be close to the customers on local level as well on central level also.

Thank you, Mr. Johansson. I will also ask some question to Ms. Neving because we got some questions that I think that you have the answers to. One of the most frequently asked questions to you is like what is the monetary value of the canceled agreement by Region Skåne?

Yes, these frame agreements amount to between SEK 50 million and SEK 60 million yearly.

And they're not really cases like how is that affecting the Bravida's businesses coming with that?

Yes. First of all, I would like to say that all contracts are important to us, small or large ones. But in this context, SEK 50 million to SEK 60 million, you have to put that in relation to SEK 29 billion, that is our yearly turnover. So that means this is not a matter of a financial impact. For us, this is primarily a matter of trust.

And another question, a little bit different then is that we also have received is why haven't our own systems and internal processes and auditors identify any eventual wrongdoing?

But I have to say that these are still suspicions, and we need to let our investigation determine whether we have weaknesses in our internal processes. And if so, we will, of course, do anything to correct those weaknesses.

So let's summarize it that we need to wait for the investigation.

We need to wait for the investigation.

Another very frequently asked question is, what is your spontaneous reaction to the conclusions that [ EY ] are making in their report.

I think it's still too early to draw any large conclusions on this. But what we can say is that we see that the report is deficient on several issues or certain points. But before we comment that anymore, we need to wait for our investigation again, and that one will be finalized by the end of April.

And I'm noticing that you're also talking a little bit about divisions. Can you give any examples of any shortcomings in the report because that is also very frequently asked.

Yes. For instance, we -- in our business, we use subcontractors, and they report time different than our own people report time. And this is one thing that hasn't been fully taken into account in the report from EY. So that is one example.

Okay. Thank you. So these were 10 of the most-asked questions that we have on beforehand to ask Bravida since last Thursday. We have also opened up for you to writing questions, as I mentioned in the beginning, and we will see if there are coming in some, and we have one, and I will ask this to you, Mattias. How can we assure that Skåne Region is alone? Can we expect this behavior in other regions?

First of all, I want to say that we have looked into this and we see that we have around 400,000, 500,000 invoices every year. So that we can't guarantee that this hasn't happened somewhere else. And again, if something had happened because we don't know, as Åsa just said, there are weaknesses in the report from EY. So we -- and we still need -- continue to investigate what really has happened if something has happened. But then a lot of flow between us and customers. And it's quite normal to have discussions in our businesses locally, depending on sometimes we want to have a higher sum as a payment because we are doing, delivering some more than decided in the first phase. Sometimes, customers think they have got a smaller installation that they actually initially bought from us. I think it's quite normal that we have discussions. And we can't leave any guarantees, but normal discussion between us and the customers, depending on the invoices size is quite normal. And said that, I think it's so important that to understand that for us in Bravida -- it's not about the size, as Åsa said, all customers to Bravida should feel comfortable knowing that we are charging them the right type of cost for the work we are doing because we are delivering so much service with good quality to so many customers every day. So we don't know, but we think this, if there are problem, is a local matter. But let's see. That's why we're doing the investigation.

Another question that we got is to secure customer relation and confidence, what communication is now to our customers in Sweden?

First, I think, we are having this type of information, but also we have had some internal information to all our Swedish managers, and we are providing some material for them to give them the opportunity to discuss with local customers in a controlled way. So we not start to speculate ourselves. We have said that it is so important for us to stick to fact and not guessing. And that is what we are asking our managers to do as well when they are discussing with the local customers. But our customers should know that we have systems in place, how to handle this in an efficient way. And that is what we're going to tell the customers.

We have a question here. You have said that there isn't a problem with the culture in Bravida. Why is it necessary to launch an investigation to the whole business?

I think that's quite natural depending on the situation. Firstly, we -- it's important to understand what has happened in this specific case. And then depending on the outcome of that investigation, depending on what we need to do, we need to scale that up and try to look into the rest of the Swedish business. And at the same time, of course, think that we can always improve ourselves, improve our processes, way of working, et cetera. And if that can be done, of course, we should take the opportunity to do that as well.

And another question we have then is that when you do you expect we will have the result of the internal investigation?

As we said, the local investigation will be finalized this month, in April. And the bigger one, it depends on what we will -- if we find something in the first and local one. So it's hard to say. And as we have said before, it's more important to do this thorough and get the right information to create the best possible action plan that is more important than do this quick.

Okay. Thank you. I will ask this question to both of you, of course, can you see possibilities -- any similarities between the difficulties in Denmark and the suspected [ alleged ] activity connection in Regions Skåne's agreement?

Okay. I don't know what they mean really, but if there are some correlations between this occasion and the big hospitals in Denmark, if that is the question, the answer is no.

Definitely, No.

Definitely no. In the EY report, Bravida was accused of lack of cooperation with regarding and providing documentation to EY. What is your view on that?

Shall I start and then -- we don't know why they are saying that in the report. We think we have had a very good discussion with the customer and their local representatives throughout this period of time. We have met them physically. We have been, as we see it, very cooperative. We have provided material they have asked for in different ways. We -- why they say we haven't been cooperative, we don't understand, but we have -- we think we have. Yes. And then I saw some -- another question that we have got in correlation to that is also that we have sent it over the documentation in the wrong type of sorting or in the wrong way. We don't know those details yet, but I don't know if they have asked for it in a specific way or not. So -- but there are weaknesses in the report as we see it, and maybe we have some weakness on our side, but we can't speculate in what they are thinking of. I think you -- maybe someone has to ask them.

You already said that 11 invoice was questioned. The next question is, seems like an overreaction from the client to go to police for that. Is this bigger than you know right now?

No, it's not bigger than we know. I think 11 invoices, I've heard the same, a big reaction for a small thing. But again, I think we have a customer that is not happy with our way of working. And as a CEO, I think that is maybe the most -- that is important, of course. And if it's 11, 5, 20, that is not the point. And we don't know if they are wrong yet. That's the first thing. But again, a customer that is not happy with the work we have been doing and that's of course sad. So -- but again, we need to do the investigation. We know there are weaknesses. Let's come back to that. It's not bigger than we know. No.

I think we have been talking a little bit about it, but we -- we got the question, do you know how many clients who have initiated a review of the report from Region Skåne, have you received many [indiscernible] from clients in the reaction of the report?

I think those discussions are very local discussion. I don't know. But again, I think it's quite natural that the clients -- customers of ours are reviewing or controlling, checking invoices from us as well from other suppliers. I think it's quite natural. And of course, we -- again, we need to go back to this local happening to try to find out if something is wrong. Again, we have seen the 10-slided report from EY, and we know that there are weaknesses in that report. So -- but we don't know if we have any -- if they actually have reasons for say that we have over invoiced, we haven't seen that yet.

Another question that we got is what caused the customer to hire EY at the first place. Why did they become suscipient and went as far to require an external auditor?

But we know that, as we've said before, that we have -- the customer contacted Bravida locally and said that they have got some kind of whistleblower tips from someone who said there are some strange things were going on. And they acted upon that, contacted us. We have worked together with the client. And then some time in this process, they hired as the question says, EY. Why they did that? We don't know. But they did. And yes, we don't know why they did.

Another question we got is normally disputes are settled within the framework of the contract. Have you tried to settle the issues under the contract? What is the crime according to Region Skåne that make them file this case to the police?

We don't know. We, again, think that we have had very good or okay discussions locally between our people and their representatives on their side. And we -- last time we met or heard from them was in January. We have tried to be get in contact locally with the customer to find out what's happening. And then suddenly, this happens. So we don't really know why. But normally, we are solving this kind of issues locally. So this is a bit uncommon, definitely.

In an agreement such as one with the Region Skåne, are hourly reports made by individuals, installers or higher up by project managers, is the next question?

Once again please.

In an agreement such as one with Region Skåne, are hourly reports made by individuals, installers or higher up in the -- by project managers?

Hourly reports that is done by all employees within Bravida. So that is done in a system. All employees in Bravida are writing the time. So that is done locally and each individual is doing that.

Thank you. We also got a question were all of the 11 invoices related to work done by subcontractors?

We are not sure if they all had subcontractors in them probably not. But it's difficult to say because we cannot really follow the report on that detail level yet.

And another question that we got, in which quarter will the lost contract with Region Skåne be noticeable?

Pardon, say that again.

In which quarter will the lost contract with Region Skåne be noticeable?

Well, it's -- in the context of Bravida, it's not very large. So it is -- say it's SEK 50 million yearly or SEK 60 million yearly and then it's divided by 12. So -- but it will be immediate from them, say April and so.

Thank you. If you have any more questions that you also feel that you haven't been answered due to this Q&A in this session. There will be contacts in the end of this meeting, but I will hand over to Mattias now for -- yes, the next session, the closing remarks. Thank you.

Thank you so much Liselotte and thank you for all questions. I just want to say that Bravida has broad operations across the Nordic region and more than 80,000 customers depending on a very proven strategy. And this is a strategy that has signaled stability on the stock market and succeeded in attracting a number of well-known funds over the years. Therefore, we take this criticism directed at us now very seriously and we will get to the bottom of the accusations we have received. And trust me, we will leave no stone unturned to see if there is merit to the criticism. And if so and I say, if, we will then take appropriate actions. But meanwhile, I want all our shareholders, customers, partners and employees to have continued trust in Bravida and feel proud to be part of our business. By that, I thank you all for participating, and I wish you all a great day. Thank you.