Instalco AB (publ) (INSTAL) Earnings Call Transcript & Summary

[Audio Gap] the Instalco Q1 Presentation 2025. [Operator Instructions] Now I will hand the conference over to CEO, Robin Boheman. Please go ahead.

Welcome, everyone, to this presentation of Instalco's report for the first quarter of '25. My name is Robin Boheman, and I'm the CEO at Instalco. And with me today, I have our CFO, Christina Kassberg. Let's kick off, as usual, with a short summary of the company today. Instalco is one of the leading installation companies in Sweden, Norway and Finland. And since quite recently, we also have a presence in Germany. Our decentralized model is a key strength, gives our local companies the freedom to act, but also backed with a strong governance and shared tools. Across the group, we have more than 6,000 employees contributing daily to enable the green transformation. Demand for our services continue to be underpinned by powerful long-term market trends. First, a quick glance at our last 12 months figures. Net sales amounted to SEK 13.7 billion, and we ended also the quarter with an order backlog of SEK 9 billion, which represents a steady book-to-bill of 66%. When adjusting for one-off costs taken in Q4 and Q1, our EBITA amounted to SEK 900 million, which contributes to a margin of 6.6%, compared to 7.6% the same time last year. We are not satisfied with this, obviously, and we will continue to take action to improve. But in this challenging market, when many small and midsized companies are going out of business, it is a testament to our resilient that we can continue to deliver this type of margin. Part of that resilience can be explained by our quick adoption by our subsidiaries to service, which has covered some of the shortfalls that we have on the project side during the past years. In Q1, service remained at a high level of 36% of our revenues. I'm very pleased to see that our cash flow from operations has held up, coming in at almost the same number as this year last year -- sorry, this time last year, even despite a decrease in earnings, showcasing our strong focus on improving working capital. If we look at a quick summary of the first quarter, those of you who have listened in for the past years and even slightly beyond that, know that the market has been very challenging for installers. It remains that also in Q1, but we have started to see some positive signs. Despite the headwinds, we delivered an organic growth in the quarter for the first time since Q2 '23. And according to external forecasters, the construction sector has passed its weakest point. At the same time, our operational environment is currently characterized by global uncertainty. As a local player, we are not directly affected by the increase of world in world trade tariffs, but we noticed that the economy is somewhat hesitant and willingness to invest is made up due to some uncertainty, both when it comes to interest rate and geopolitical tendencies. Our margin this quarter was also impacted by several factors, including one-off costs as well as a continued tough pricing environment in some areas, but we're actively working to mitigate these effects as always. We also completed 1 acquisition during the quarter and finalized our first phase of our investment into Germany, an important strategy and milestone for Instalco going forward. And with that, I will hand over to you, Christina, to go through the financials in somewhat more detail.

Thank you, Robin. Okay. Let's start off with looking at how our net sales and order backlog has developed during Q1. Net sales was up by 0.3% to SEK 3.3 billion with an organic growth of 0.2%. This is the first time in over a year, we report organic growth, although small. This was driven by segment Sweden. The first quarter of the year tends to be seasonally weakest. And as usual, we saw a slow start of 2025 before activity picked up in March. Our order backlog shows growth of 1.1% in the quarter with an organic growth of 2.1% in constant currency, again, driven by segment Sweden. In addition to the backlog, we have our service business, which remains an important stabilizing factor. In our service business, we saw growth of 14% in absolute numbers in the quarter. This resulted in service making up 36% of sales. Then on to looking at our earnings, EBITA in both millions and margin. The seasonally weak Q1 also impacted on earnings. We are seeing the effects of the price pressure on the market throughout last year for the projects we are now delivering on. We have continued to stick to our strategy of favoring profitability over volume, but in a weaker market environment, the choice of projects becomes more limited. This is still reflected in our margin, which we are far from satisfied with. At the same time, a number of major projects were recently finalized that have not yet been fully replaced with new ones due to timing in the order book. This has led to a number of subsidiaries having temporarily lower capacity utilization during the quarter. This had a direct impact on the group's earnings, especially in other Nordic segment. In December, we communicated that Instalco's remaining exposure to Northvolt amounted to approximately SEK 60 million. Following Northvolt's bankruptcy, we now take the exact cost of SEK 64 million as a one-off expense, which impacted EBITA in the first quarter. Adjusting for this, EBITA amounted to SEK 187 million, corresponding to a margin of 5.7%. The action program we also communicated in December is on track. The savings that have been realized so far corresponds to about SEK 5 million in the quarter, and we are taking further measures for subsidiaries that need them. To break it down into more detail, over to a slide that summarizes segment Sweden in Q1. Overall, net sales were up to SEK 2.4 billion with an organic growth of 5.7%. The entire one-off cost of SEK 64 million for Northvolt relates to segment Sweden. Adjusting for this, the EBITDA margin amounted to 6.8% compared to 7.9% last year. Without adjustments, the margin came in at 4.1%. The order backlog grew organically by 2.4% to SEK 6.5 million. The Swedish installation market is still characterized by major regional differences. For example, in Northern Sweden, the level of activity has fallen compared to last year, although volumes are still good. In Stockholm as well as in the southern parts of the country, there is some recovery from low levels. In Mid-Eastern Sweden, demand remains weak. The development and demand in the industrial sector is generally positive. Okay. Now for a summary of the rest of Nordics segment. Overall, net sales were down to SEK 900 million with an organic decrease of 11.6% Acquisitions contributed with a growth of around 1%. The EBITA margin amounted to 2.7% compared to 5.3% last year. Last year, the market in Finland remained on a low but stable level. However, during Q1, the market showed sign of deterioration. Both sales and earnings were negatively affected by temporarily lower utilization of staff in several subsidiaries, primarily in Norway. This was due to the fact that larger recently completed projects have not yet been fully replaced by new ones. The Norwegian market had a tough start to the year. The timing of the backlog and project pipeline is expected to improve somewhat going forward, but uncertainty remains. The order backlog for the segment decreased organically by 1.3% to SEK 2.4 billion. This still represents a sequential growth from the SEK 2.18 billion at the end of Q4. Then on to the cash generation in the quarter. In Q1, cash flow from operations amounted to SEK 223 million, an increase of 12% compared to last year despite the lower earnings. The positive development is mainly due to improved working capital, which has been a focus area for us for a long time and remains so. The work is never done. Looking at the cash flow from investment activities. Here, the main thing is that one acquisition has been finalized in the quarter and the minority investment in Fabri, Germany was closed, with the majority of the purchase price paid in newly issued Instalco shares. In operational performance, it is reassuring to see that despite the challenging market, we are reporting a very strong cash conversion at 96%. Finally, we look at our performance on a rolling 12-month basis in relation to our financial targets. Our targets are set over a business cycle. And given the market situation, there is no surprising that we are currently not meeting the growth target of 10%. This is a result of our prudent order taking over the past year. But I'm happy to say that we are reporting growth numbers that are back in black. Our adjusted EBITA margin came in at 6.6%. We are not satisfied and continue to take actions for subsidiaries where this is needed. Cash conversion came in at a very high 96% due to a strong focus on working capital. The leverage target we have set for ourselves is 2.5x net debt to EBITDA. In the current environment, with earnings still impacted by market conditions, we remain above the target. This said, we still have significant headroom in relation to our loan covenants and our dialogue with the banks remains strong. All this to say, we have a stable financial position that allows for continued selective growth, and we expect leverage to go down quickly when the market turns. This through our focus on profitability and working capital as well as prudence in capital allocation. In a week from now, we will hold our AGM where shareholders will vote on the Board's proposed dividend of SEK 0.68, maintaining the level of last year. This is above the 30% policy due to the strong cash flow and forward-looking optimism. And we also remain committed to our climate targets announced in December. More information about this and our progress so far can be found in the recently published annual report. So Robin, by that, over to you again.

Thank you, Christina. In March, we finalized our first acquisition of the year, which I would like to highlight very quickly here. Alf Näslunds Eltjänst is a well-established electrical installation company based in Örnsköldsvik, founded in 1995 and led by Anders Näslund since 2010. The company brings a team of around 30 skilled employees and generates a net sale of around SEK 55 million. This is a strategic step aligned with our local cluster model and well timed with the upcoming investments in the region. We already have an operation there through Inlands Luft, Keyvent and Melins Plåtslageri. And adding Alf Näslunds Eltjänst strengthens our multidisciplinary capabilities in the region. We have previously collaborated with Alf Näslunds Eltjänst and found a shared commitment to quality and customer focus. We welcome them into the team and the Instalco family and a natural progression, and we are looking forward to a successful partnership together. The theme for the quarter, a typical Instalco project, I know that a typical Instalco company that we showcase in Q3 was quite well received. So we thought about digging a bit deeper and taking a step further and showcasing a typical Instalco project. Our bread and butter is small projects. The projects that are maybe not so prestigious or large that they deserve or warrant a press release, but they are the ones that make up the majority of our offerings in any given year. And it is definitely an area where we can excel. So here is basically one of the pages that I wrote as one of the first ones when we started Instalco, it's basically stayed the same. So we focus on the midsized projects. We focus on the public buildings, residential, commercial building, industrial buildings, housing corporations. And we do that due to that key success factor here is quality, lead time, local presence and relationship. And that's also to minimize risk, which is lower in the midsized segments. We can also do some partnering projects here. We have also stayed in the range, as you see here of SEK 1 million to SEK 75 million, where we only have a few larger fixed price projects above SEK 30 million. So this is size and a, so to say, business environment where our local companies thrive. This is an illustration that gives you a glance of an order backlog of 2 of our companies. They have a turnover of -- these companies have a turnover of roughly SEK 60 million to SEK 70 million each year. This is a moment-in-time print out from our POC database, and it includes all the projects that these 2 companies are currently have in their order backlog. And of course, this varies a lot between different Instalco companies based on discipline, customer base, local market and so forth. And again, this might not be the most prestigious flashest projects out there, but it is where we can do our best work. So it's a difference here in company A and company B. You see some difference here. There's some fire stations, some retail, some electrical upgrades, some municipality projects for company B, there are some few residentials, also some commercial, there's some fire, there's school replumbing. So there is a wide variety of smaller projects and some projects also somewhat larger here, especially for company B, but also a fire station there for company A, for instance. So actually, over 80% of our projects are generated within the range of SEK 1 million to SEK 75 million. And you can see the different contract types that we use. So fixed price projects, 44%, partnering projects, 30% and other types of commercial contracts, 26% and others typically some kind of a mix of the 2 above. In addition, after growing our service offers, we have a very well-balanced sales mix when it comes to project types where new builds now only make up 1/3 of our revenue. We always get a lot of questions about new production, which is, of course, is relevant topic. But most of these questions center around residential and commercial properties. And here, it is more important to remember that this also includes a lot of industrial properties, if you look on the right side of your screen there. So renovation, new production and service. So in addition to focusing on an attractive niche when it comes to project size, we have also worked with actively in the recent years to broaden our customer base and diversify our end market. Today, our sales are spread across the well-balanced mix of segments. Industrial properties lead at 24%, followed by schools and hospitals at 16% and commercial properties at 14%. This diversity helps us to reduce exposure to individual sectors and give us a resilience throughout change in the market conditions compared to more focused competitors. Our customer base is -- has a wide variety of ranges across construction, property, industrial and public sector. Construction companies are our largest group, but no single client is, so to say, dominant in this field. We serve around 2,000 customers and our top 5 customers combined makes up only 11% of our sales in 2024 and our largest contributes to less than 4% of our turnover. It is diversification across both customers and market that gives us a long-term stability and strength. And here are 2 examples of typical Instalco projects. The first is a ventilation project during a renovation of a surgery room. Medical context requires special knowledge and advanced skills in a very sterile environment. The other one is a small but quite exciting one. It is one of our subsidiaries did a heating and plumbing in a very specialized residential new build where the new house of 20 apartments were built on an existing in the yard in a very old style of building surrounding it. These examples showcase the range of our expertise from technical complex environment to innovative urban infill solutions. Now back to the summary and Q1. As we mentioned, previously, the market remains challenging, but we are starting to see some positive sign. Notably, this quarter marks the first time since Q3 '23 that we are reporting our organic growth even if it's on very small levels. Our order backlog has also seen a slight little increase. Both are important early indicators of a momentum of maybe returns, but we're not there yet. Further, our technical consultants at Intec continues to deliver margins above the group, and they are much earlier in the cycle than our installation companies. Also, our automation branch within Inmatiq is showcasing good progress as they get closer to celebrating their fifth year of existence. With that said, the environment is still tough. And on top of weak market conditions, our margins this quarter were impacted by temporarily overcapacity in parts of our business as well as one-off write-downs, as Christina mentioned earlier. These are short-term effects, and we are taking actions and steps to addressing them. And we are not on a satisfactory level of where we aim to be as a company. Global market remains somewhat unstable and uncertain, while our local operation is shielded from these kind of effects and increases of tariffs. But of course, we are affected by the investment environment. And we are more influenced by interest rates and development in geopolitical instability. Looking beyond the quarter, our financial situation, as Christina has gone through, remains stable, which gives us the flexibility to be selective and strategic when it comes to acquisitions, which is an important part of our long-term value creation. I'm also pleased to report that we are completed the first phase of our expansion into Germany. It is a significant step in broadening our platform and diversifying our growth opportunities even further. Internally, our team is working intensively focusing on what we can influence, how we can improve our efficiency, how we can sharpen our offerings and build the foundation of what is to come out when the market turns. We remain confident in our strategy and our ability to create value, both in short term and long term. And with that, I would like to hand over to you for any further questions.

[Operator Instructions] The next question comes from Carl Ragnerstam from Nordea.

It's Carl from Nordea. A couple of questions. Firstly, you talked a little bit about the fact that you completed some bigger projects, especially during Q4, whilst it takes some time for new ones to sort of startup, that sort of vacuum. How long do you think it will last given that the backlog has developed quite nicely over the past 2 quarters? So how should we look at that sort of development or that dynamic over the coming few quarters here or remainder of '25?

I think when it comes to that comment, it mainly was also targeted against the rest of Nordics, where we had some larger and quite profitable projects that ended in Q4 and did not sort of say, fully we did not get so much effect in Q1, and we were not able to, sort of say, offset it with that type of profitable projects going forward. So it's always hard to give a prognosis of, so to say, next quarter in that sense. However, we do think that the level that rest of Nordics delivered this quarter is definitely not satisfactory. And we don't think that, this is a level of where they should be. So this was a bit of an extra effect in Q1. I think it's more important to look maybe at the 12 months rolling for rest of Nordics to kind of extrapolate this further out.

Okay. Very clear. And also leverage, you obviously had a quite impressive working capital release development, especially considering the typical seasonality. But looking at leverage approaching 3x here, could you remind us a little bit apart from the proposed dividend, of course, but how -- what will burden Q2 and perhaps Q3 such as minority dividends, minority payments, earn-outs? And where do you think as of now, we might sort of peak in terms of leverage? Because I guess with the tough market, we will see a negative organic EBITDA, at least LTM for 1 or 2 more quarters, I guess. So how do you view leverage at this point?

First of all, I want to restate my summary there as -- we have a stable financial situation. We still have cash in the bank. Obviously, leverage is somewhat high due to the somewhat slow start when it comes to EBITDA. However, we have good confidence in the bank relations at the moment. We still have headrooms when it comes to any situation regarding the banks. So I'm not too concerned on that. More concerned I have to pay a lot of interest rates, which I don't like. But we still have good discussion, just showcasing that we are still able to do M&A, if we wanted to. And so we don't have any restrictions, anything like that, not in the near term either. To comment on going forward, obviously, you have to sort of say, have in your calculation, like Christina mentioned, we have our AGM next week where they're proposing a dividend. That dividend will be paid in -- during Q2. We will also buy back some minorities during Q2 and Q3 and typically pay out any long-term, sort to say, earn-out that we have for companies we acquired, we have a tendency of having earn-outs from between 1 to 3 years of typical acquisitions within Instalco. And just to guide a bit, you could say that in Q2 last year, we paid out some SEK 100-plus million. And in Q3, we paid out, I think, just shy of SEK 100 million in this type of payback -- so to say, buybacks of minorities and earn-outs. So I would guess you'll have to look at roughly the same numbers going forward.

Very clear. And also finally here, on Germany, we've seen Fabri doing 3 acquisitions year-to-date, last one, I think, a couple of days ago. How does Fabri's balance sheet look right now? Do you think they'll need to inject cash? Or are they just running with their free cash flows? And secondly, if you could touch upon the demand situation and margins Fabri is generating in this environment currently?

Yes. So if we start with the balance sheet of Fabri, they just received, so to say, the first and obviously, the big injection from us. So I think they're well capitalized, you say, well capitalized in that sense. When we acquired them, we also made a deal with existing shareholders to take away all the shareholder debt, so to say. So they were debt-free when we acquired them. We had the capital issuing here. And they also have an existing own bank agreement for Fabri in Germany. So the acquisitions you have seen recently have been roughly done 50-50, so 50% with own cash flow and 50% by bank debt. They still have headroom. So they are well capitalized in that sense. So I don't see any need for, so to say, any additional shareholder contributions in the near term unless they do some real big acquisitions, but there is nothing in the pipeline so far. There are more of these typical companies, as you mentioned, they have acquired a few. So the business is growing. They have a good, stable pipeline and the plan is to execute a few more this year to have a steady growth within, so that we will also grow the business to the targets that we have set for the group so that Instalco also gets the threshold of acquiring an additional, so to say, amount of shares so we can become a majority shareholder, which we hope to become during '26.

The next question comes from Karl Noren from SEB.

Yes. I have a couple of questions from my side as well. And if we start on Sweden, I mean, quite impressive with the 6% organic growth there. It would be interesting to hear what you have seen in the market and if, I mean, overall, you have seen an improvement compared to previous quarters, if you would say that? And also a question on, let's say, your strategy there because before you said that I think you still say that you have a strategy to prioritize price over volumes. Would you say that you are still doing that? Or have you taken on some lower margin volumes to get up utilization, you would say?

When we look per business area, I would say that only those that are able to maintain or strengthen the margins are growing at the moment when it comes to sales. So we try to continue with the strategy. So we're not growing, so to say, organically all across the board. So we try to grow where we are also seeing that we can continue with this strategy. So it's not a full grown for whole Sweden, but separate areas are, so to say, growing. And then your other point regarding [Technical Difficulty]

On demand [Technical Difficulty]

On demand, yes, yes. On demand overall, as mentioned before, I mean, we are seeing a bit of a pickup when it comes to activities. I don't know if you saw, for instance, NCC reported earlier today also showing that they're building sites. We're taking on quite some good order backlog as well for Building Sweden. So we're seeing some of our customers continue to take orders, which obviously will generate projects for the installers as well. So there are some parts where we can see some growth, but it's still from low levels. We still need more also to get prices up a bit, I would say.

Yes. Understood. And then on the Swedish side as well, Inmatiq, is it possible to quantify how much that business contributed to growth here in the quarter?

Maybe not to growth, but we can give you that Intec, so the technical consultants are roughly 460. Inmatiq has grown to 75 FTEs. So there are steady growth for Inmatiq, and we're seeing some positive trends also when it comes to their order backlog. But obviously, utilization is not fully there for Inmatiq due to their growth and also due to their quite recent, so to say, entry into the market. The first companies that we started was roughly -- a little bit less than 1 year ago.

Yes. And I guess, it's still impacting margins negatively first, I guess.

Yes. That is correct. That is correct. But they're at least showcasing some positive trends, but they are in the situation, as you might recall, when we started Intec as well, the technical consultants. But Intec is now marginal-wise better than the group.

Yes. It's been a good development for that one. And one question also referring to Carl's question before on cash flow. I mean, working capital quite strong here. I mean, what would you say is the main driver behind the working capital development? Is it broad-based across the group? Or is there some certain larger subsidiaries improving it a lot? Or what can you say there?

Maybe, Christina, you want to comment? I think my comment is only that we have been very focused, and we have also basically not talking about working capital, but we are talking about specific accounts in our accounting system to make it very easy for subsidiaries to follow this, and we track it much more often and much more focus is put. I don't know if you want to add something, Christina.

I can state the same actually. We are, of course, very pleased with the adherence and the strong cash flow and the cash conversion demonstrated in this period and quarter. And we will aim to maintain the high level of operational management regarding this going forward. It's hard work every day. And it's routines and procedures wrong invoicing, following up, et cetera. It's the DSO and DPO management and hard work, and we will continue to focus on operational efficiency in this area.

Okay. So it's broad-based, you would say. It's not that.

Yes, yes.

I mean, it's not that you've used some factoring or something like that. It's more underlying improvement, you would say?

No factoring.

Yes. Yes. Good. And then just a final one on -- I mean, you mentioned in the report as well, and you had this Northvolt one-off here in the quarter that there is still a lot of bankruptcies in the industry, et cetera. I mean, do you see any risk that more bankruptcies going forward will impact you in a similar way as Northvolt has made, so to say?

No. Northvolt was, I think -- I'm not an expert, but I'm guessing it is one of Sweden's largest bankruptcies for a very long time is my guess. So we don't anticipate anything nearly similar to this situation going forward. And as you saw maybe, for instance, for Serneke, which is also quite -- was a large construction company, the effect was not nearly close to that, and that was basically swallowed up in the daily business of our subsidiaries.

Okay. That's good. And then if I may, just on Fabri, one more on the contribution and how it will be reported in the numbers here going forward because I guess it will contribute with some positive earnings here in Q2, I guess. Just wondering how it will be reported if you will create a new segment or if it will be reported under like the group items as a positive for the earnings.

Yes. I mean we have Christina. Obviously, this is your expertise, but we have said that it will be under the group so far.

Yes. The profit from Fabri, 24% going forward from Q2 will be allocated to, so to say, group-wide or segment other. So you can read it in that table. And if you should look in the P&L going forward, we could think about having an own road that sets share of profits of associated companies. So you can read it from these 2 places in the quarterly reports going forward.

And I mean, we still have about a year until we, at the earliest can say become majority shareholders. So we have a year to plan also on how we will do this going forward. So -- but in the meanwhile, as Christina mentioned, this is our plan going forward for the coming year.

The next question comes from Marcus Develius from DNB.

Just a couple of follow-up questions from my side. Most of the questions have been asked already. But going into the working capital again, would you say that you've noticed any payment terms becoming worse towards the end of the quarter due to the geopolitical situation, not that you're impacted by it by maybe some customers becoming more hesitant?

No, I would not say that we have seen any of those type of trends. The overall trend has been, obviously, when you go into this industrial segment, as we have talked about for the last 2 years that we have really increased -- 3 years that we have really increased our focus on industrials. There, obviously, going from sort of say buildings to industrials, there are some worsening sort of say, terms when you are -- have your industrial end customer. But that's sort of say, in the numbers, that has nothing to do with the quarter or the geopolitical situation. But that's a shift we have seen. But we have been managed actually to offset it quite a lot with improving working capital overall. You would otherwise anticipate worse working capital when you go into this industrial focus that we've done for the last year, but we have managed to offset that. So happy with that as well.

But we can also say in this market, all companies, all players in the market as us, as we, as a company, are having eye on the target on the cash flow from operations. So it's a day-to-day important business to be close to your clients and your customers and all around the working capital. So no special, but the market climate gives us the work hard on a daily basis on this.

Okay. And then a follow-up question on the order backlog. Volumes seems to be good, especially in Sweden. But would you say that this -- you spoke slightly about it, but is it because prices to win the projects are down because of competition is remaining so tough? And how should investors think about the balancing of filling capacity utilization, for example, in rest of Nordics compared to mitigate the margin pressure in the short-term versus being conservative and not taking the projects at low margins? Just if you could talk about the balance there.

Yes. I think it's extremely important to work with this on a daily basis. This is something that we evaluate company by company. And so to say, have a discussion with the local CEOs on how to structure and what projects to take and not to take. Obviously, at the end of the day, we are running a decentralized business model. But obviously, there's a lot of discussions going on. And there is especially a lot of discussions at the moment going on, on, so to say, where is each individual company going to be afterwards, maybe when we see a more normal market situation. And there, we have to plan. And I think that plan is how we run the business, meaning that do we think that this specific subsidiary will come back to the same situation, then we might be willing to sort of say, have some overcapacity in that specific subsidiary, whereas others where we don't see them coming back to the same market as maybe in 2018 or so, then we need to take on actions. So as I said before, the situation that we are in today, we have initiated already 2 cost-cutting programs. And we will continue to work hard on making sure that we have the right amount of staff and the right staff both for this environment, but also the environment that we see after that will come back to a more normal situation. So it's like balancing on a knife edge. You need to be very cautious not to get rid of people that you need going forward, but you can also not, so to say, continue and be inefficient and have overstaffed as well. So it's a balance.

Okay. And then a final question from my side. I don't know if you can comment on this, but have you started to see contributions from NATO expansions in the Nordics in the figures now? And do you expect this to ramp up gradually in the coming quarters?

Maybe not from NATO specifically because NATO in my view, has maybe not started really, but the effect of the increase when it comes to defense spend, we are starting to see so much we can comment. Like I said in previous quarters, there is a new customer in town that were not there before.

The next question comes from Johan Lönnqvist Sundén from Carnegie.

We touched upon a couple of subjects. I wanted to go back to start off with working capital swings. Big release in Q1. How much -- or how should we think about the working capital swing profile for the rest of '25 per quarter? Will there be big kind of swing backs in Q2 and Q3? Or how should we think about that?

If I knew that, exactly. But I think that -- I mean, this is a focus area. And as I said before, we need to -- in the environment that we have today, you need to focus locally. As I just mentioned, you need to focus on what you can do as a company yourself and working with working capital has nothing to do with, so to say, the market environment or the pricing environment. So this is an area where we can improve and we will have to continue to work very hard on. We have set quite hard targets for ourselves to continue to work with this. Then whether the swings will be Q2, Q3 and so forth, that's very hard to comment on. The best I can give is basically look at our historical level of this that there are typical quarters that are sort of say, good quarters for releasing of working capital. And the best guidance I can give is to look at the historical numbers here. And then we were very happy that we were able to sort of say, offset Q1, which is typically a bad quarter in a sense to be able to stay at this level. We're quite happy with that. That's -- but main focus is to continue to do the hard work, as Christina said, and our focus will obviously be going forward to, as I just mentioned, continue to work with our subsidiaries, look at our own costs, look at our own processes, our own efficiencies and going through our portfolio. That's the key things to work with coming quarters.

And then going to -- go back to the utilization drop in Norway. Do you think that you must expand your restructuring work initiated during Q4 to cope with the current situation? Or do you have such a confidence in your order backlog that you will hold on to your kind of resources during the spring? Or how should we view that?

I think we will continuously the couple of quarters going forward now have to take on measures across the board for all companies within Instalco to really go through and be very thorough when it comes to what kind of actions can we take. As I say, we don't see -- even if we see some small positive trends here and there, we don't see a big change in the market in the near-term future. So we need to take on actions on our own. So we'll continue this. We might not launch a typical like a prod, so to say, an officials like we did in December, but we are definitely continuing that work and intensifying that work and making sure that we also deliver on the promises we gave in December of saving the SEK 30 million, because this is a level that we're not satisfied with that we delivered in Q1.

And the wider restructuring initiative that you implemented, how much of an effect did you see already in Q1?

So we have basically seen -- in December, we said that we were going to save SEK 30 million on this. And I would say that we have -- we can see in Q1 already SEK 5 million. And then you can say, but that's not so good. But I think you have to calculate it in a sense that SEK 5 million is roughly 2/3 since this is an ongoing. So meaning if we stay at this level, that will mean that we, in the year will deliver SEK 20 million out of the SEK 30 million. So with that said, we still have things that needs to come into play. As I said, a small reminder for those that didn't read the press release in December was that we were closing down 2 entities and 6 entities where we are going to merge. And we have basically closed down 2 and merged 3 out of the 6. So there's still -- but also the last one cannot be merged until November. So this will be an ongoing project for '25. Maybe a long answer to a short question, but roughly SEK 5 million in the quarter, you can say. So we're on a good path.

Perfect. And I was a little bit late to the call. I think, Christina, you said that there was activity that has picked up in March. Can you please just repeat the message of the intra-quarter activity levels and how Q2 has started?

I think what you referred to is that Q1 normally is a slow season. And we started this year in a low temp as previous year. But in March, we saw the activity pick up a little bit, and that's where we landed the Q1 quarter you have seen.

Yes, January was very bad this year compared to what -- it's typically not a great month, but this was really very slow month, to be honest.

And final question from my side. It's on leverage and the dividend. Given the high leverage situation, were there any discussion for postponing the dividend or scrapping it?

Yes, there were discussions. But I mean, at the end of the day, it is the Board's decision. And I think that they had a good discussion, a solid discussion and agreed upon a level. And as Christina mentioned, we have a consensus in the Board of 100% on this. And it is also, I think, maybe a bit of a statement looking forward on where we are heading and the strong cash flow that we can continuously deliver. I think that's where the discussion ended up basically.

[Operator Instructions] The next question comes from Karl Bokvist from ABG Sundal Collier.

Just wanted to follow-up on Johan's question regarding utilization in rest of Nordics here. So you specifically highlight Norway, but is it then fair to assume that if we if you call it, the change in the margins either year-over-year or quarter-over-quarter in rest of Nordic, that is mainly due to Norway. Is Finland still progressing at a pretty good level?

I think for Q1, Q1 was a bit of a hiccup for both countries in that sense. And to very -- to make the answer quite easy, I think the main reason is that, so to say, a few quite profitable larger projects ended at the end of the year 2014 that we were not able to mitigate in these 2 countries. And remember, the rest of Nordics is quite small. So it will fluctuate over time and over quarters. As I mentioned many times before, that's also one of the reasons why we didn't state last year when actually rest of Nordics beat, so to say, Sweden in margin that you have to bear in mind that these are small segments, so fluctuation can be quite high when you look at percentage and numbers or absolute numbers as well due to the, so to say, lack of scale in those 2 segments.

Understood. And then the development in Sweden, we have, well, returned more or less to organic growth and adjusted margins have held up. So is there anything worth flagging here regarding any larger projects that were complete that we should keep in mind? Or is it more about the balance between cost, and then now hopefully a bit of improving activity that should be the drivers going forward?

I mean, like I said, the activity, we are seeing some pickup in the activities. However, I would not anticipate a big change going forward. Obviously, we're not satisfied with the margins that we deliver in Q1. Q1 is typically a tough quarter. However, there are things that needs to be done internally. And we also hope to see some pickup in the market overall. But it is like a '25 will be sort of a transition year going forward, and we will try to mitigate this kind of price pressure due to cost optimization internally.

Understood. And my final one is on the financial situation and covenants. You mentioned a wide margin to your financial commitments or if we put it that way. I understand you might not be willing to give us a full definition, but just kind of in broad terms, when your financial creditors look at the debt side and the earnings side, do they take into account impairments such as the one we saw now in Q1?

Impairment, thank you. I mean -- yes.

Impairment or -- yes.

Yes, we are allowed to sort of say, use adjusted, if that's the -- if I understood the question correct.

Yes. Exactly.

We are allowed to, sort of say, deduct the unfortunate situation of Northvolt, for instance.

Up to certain level.

Up to a certain. We cannot obviously adjust for everything we want, but we have possibilities to do some adjustments.

Understood. And the net debt that you report to them, is that fairly in line with the figure that you report externally?

Yes, I would say so. Yes. Absolutely. So it's fairly in line.

No more questions at this time. So I hand the conference back to the speakers for any closing comments.

So I think thanks, everyone, for listening, and thank you for the questions. I think we have gone through a fairly thorough the report and also the presentation today and a lot of questions. So, we thank you all for listening, and we will get back to work and continue to improve this company and make sure that we are well in line and well prepared for what's coming. So, thank you, everyone, for listening, and have a nice day.