Ework Group AB

A warm welcome to the presentation of E-Work Group's results for the fourth quarter 2024. My name is Karin Skreil and I'm the CEO and Group Chief Executive of E-Work Group. I'm here together with Johanna Eriksson for the first time. Johanna is our new CFO for eWork Group since fourth quarter last year. Johanna and I will now jointly review the results and developments during the quarter, after which we will open up for questions. We are recording this presentation to be able to share it with stakeholders who are unable to join us during the live broadcast. So, first of all, eWork Group at a glance. eWork Group is a leading European talent and workforce solutions partner. We are built on a strong foundation as an independent provider of consultants since 25 years. Today, we serve more than 500 clients across public and private sectors, such as automotive, manufacturing, banking, telecom, life science, retail and energy. With a vast talent network of more than 200,000 consultants and 29,000 partner companies, we connect organisations with highly skilled experts in IT and engineering. We support organisations who are navigating rapid growth, transformation and large-scale projects, delivering both individual consultants and specialised teams to meet complex business needs. At the end of the fourth quarter, we had over 11,500 consultants on assignment, delivering critical expertise from more than 50 countries around the globe. eWork is powered by a dedicated team of around 300 employees. And in 2024, we reported a turnover of just under 16 billion SEK. We operate across six markets with 13 offices in Sweden, Norway, Denmark, Finland, Poland and Slovakia. and we are headquartered in Stockholm. eWork's business model is designed for scalability and long-term stability. While our sales has historically been generated through margin-based fees on consultant contracts, we are increasingly diversifying our revenue streams. At eWork, we are not just providing workforce solutions, we are shaping the future of work. We are creating value through a powerhouse for total talent solutions. We have a complete offering that is centered around workforce management from strategic advisory and planning through talent acquisition and talent management to continuous improvement and optimization. And this enables us to serve as a full stop shop and a trusted partner to our clients. Our offering is built around our base services where find and select consultants is our core. All services can be delivered individually or in combination, just like Lego pieces. And this way we can tailor our proposition and the value we create to individual client needs while ensuring high efficiency, quality and security in delivery. In addition to the base services, we have a range of add-on services aimed at partners and consultants in our talent network. On the one hand, such as e-work services and PayExpress, and our clients on the other hand, such as permanent recruitment, background checks, digital platforms and nearshoring. In 2024, we enhanced our base and add-on offering, and we developed new services for program management and compliance. This was done in response to the new landscape and legislation affecting our clients. In 2025, we will continue and refine our offering while paying particular attention to talent advisory as a way to provide our clients with insights, best practices and knowledge. We will also take further steps in supporting our clients' cost optimization agendas through a comprehensive suite of nearshore services. Over to the fourth quarter, where a first highlight is that eWare continued to take steps towards a more profitable growth. We had a positive trend in margin development, with an increased contribution from both base and add-on services, despite a challenging market. It is evident that our refined and expanded offering for total talent solutions is enabling us to move up the value chain and strengthen our position with clients. Throughout the fiscal year 2024, e-work achieved 11% growth in framework agreements, including a new strategic framework agreement with Swedish National Grid for the provision of consultants in engineering and IT. We saw an increased interest in nearshoring to Poland among private sector clients, and this was driven by cost focus and geopolitics. And at the turn of the year, we were thrilled to announce the next step on a continued geographical expansion to a seventh European market, Belgium. Our work to streamline operations based on our refined service portfolio and best practice ways of working together with an updated digital platform has now positioned us for more scalable and profitable growth going forward. And finally, eWorks board of directors has proposed a dividend of seven Swedish kronor per share to our shareholders. Among new business wins in the quarter, one that stands out is our new strategic framework agreement with Swedish National Grid, which was announced at the end of 2024. The agreement covers consulting services with a focus on technical engineering and IT, and it extends over up to eight years, making e-work a long-term comprehensive provider of strategic talent management to Swedish National Grid. The scope of services is based on eWorks flexible talent solutions, where we independently match the client's needs to eWorks consultant network. It also covers eWorks efficient, user-friendly and relieving administrative services related to the procurement of consultants. The agreement is a key step in E-Works' growing focus on engineering, an area with significant growth potential for our company. Through the collaboration with Swedish National Grid, we will contribute to the green transition and secure energy supply, which is well aligned with our ambition to be a sustainable partner and a societal actor. During Q4, we also signed a new framework agreement for IT consulting with the Swedish police authority. The agreement means that E-Work will continue to provide IT consultants for the police authority from north to south across Sweden. The estimated value of the agreement is 200 million SEK per year over a four-year period. I'm very proud of this re-win because it demonstrates our ability to provide qualified IT expertise and meet the expectations of clients with high demands for quality, efficiency and sustainability. Finally, we also won a new framework agreement with the Swedish Board of Agriculture, which I'm really happy about. Under this agreement, Ewok will support the authority with a robust supply of IT consulting services. The framework agreement runs for two years with an option for a two-year extension and has a maximum contract value of 450 million SEK. Looking at the service revenue in the industries that E-Works serves, automotive, manufacturing and life science maintained steady growth and automotive continued to be the largest industry segment in Q4, surpassing public sector in Q3. Demand remained high for specialists in electrification, autonomy, connectivity and AI. Banking, finance and insurance showed steady increase compared to previous year, partly driven by the new framework agreement with one of our large banking clients. Public sector and telecom remained restrained, declining by 2 and 3 percentage points respectively versus 2023. As seen also during the previous quarter, the share of total service revenue in retail increased compared to last year, to 4% from 3%. Looking into the service revenue development in our markets, Poland showed good progress in the fourth quarter, with substantial improvement in service revenue and a continued focus on margins. The volume growth was essentially driven by nearshoring, which in turn has to do with our clients' cost focus. In Sweden, margins improved despite lower net sales, and this was driven by the new operating model, cost efficiency and growth in higher margin services, such as, for instance, PMO, Program Management Office. Increased volumes of add-on services also contributed positively. Service revenue grew in Denmark, driven by strong demand from large clients and a favourable mix of clients in manufacturing, life science and banking. We also saw higher demand for matched consultants, especially at mid-sized clients. In Norway, we are gradually reshaping our business to help clients navigate in the new regulatory environment, and we bring our full range of services and solutions to the market. Despite continued market challenges, we saw our margins in Norway improve in the fourth quarter. With new local leadership and an updated service portfolio in place, we are now well positioned for growth and development in the new market landscape. In Finland, both net sales and profitability improved, and we gained larger clients in banking and finance. Manufacturing clients were also an important contribution. Looking into market trends and insights, we see several trends in the global arena that affect our clients and the talent industry in one way or the other. The market landscape is currently challenging to navigate and it's characterized by general uncertainty, digitalization and globalization, increased cost focus and change in legislation that affects client purchasing behaviors. Following this, the demand for talent continues to be volatile, as we saw across industries and clients, but the underlying need for expertise, as well as the skills shortage within IT and engineering, remains high. We see an increasing number of clients wanting to acquire talent in the form of work packages, such as project or statement of work, which aligns well with eWork's offering called Project Provider. We also see that clients' cost-cutting initiatives and the geopolitical uncertainty has increased the interest in nearshoring. Here E-Work has a broad suite of services that are delivered with Poland as a backbone. There are many available IT consultants on the market, and we continue to see high numbers of applications for each assignment, especially in skilled areas such as project management. The situation for engineering, however, is slightly different than IT, and here we see an increasing demand, primarily driven by societal trends in green transition and infrastructure development. Finally, we are following the development of the Agency Work Act. We welcome the developments that unfolded recently with the ruling in Malmö District Court, which supports our position further that the consultants provided by e-work are not in need of protective legislation. So a few words about the geographical expansion, which is driven by our ambition to be a global partner to our clients. This aligns very well with the pool we are currently seeing from existing clients to support them across multiple geographies. During the fourth quarter, we continue to grow and expand our operations in Kosovo, Slovakia, where in addition to our existing clients, we've won a new client, Deutsche Telekom, T-Systems, earlier in 2024. We continued to capture business needs from our clients and we explored scenarios for expansion into more countries in the fourth quarter. Building on our establishment in Slovakia, we now have a blueprint in place for organic, sustainable growth with low risk. At the turn of the year, we launched a plan to establish operations in Belgium during the spring 2025. The initial establishment will be in Ghent to meet the growing demand for talent solutions from both existing and new clients, particularly within the manufacturing and automotive industries. In addition, Belgium and the Netherlands together form one of Europe's largest consulting markets. So eWork's presence in Ghent also enhances opportunities to develop the talent network across the Benelux region. With Belgium in place, Ewok will have own operations in seven European countries, along with our global talent network, agent of record partnerships in countries where Ewok does not have its own presence, and a global operating model for sales and delivery. We have all the capabilities necessary to serve as a global partner to our clients. And with this, I'm handing over to you, Johanna, to talk about our financials.

Thank you, Karin. And we will move on to the Q4 financials. And I would like to start with a financial overview of the fourth quarter and the full year of 2024. As you can see, if we start at the top, we reported a net sales of 4.2 billion SEK. And that is about 10% lower than last quarter where we reported 4.6 billion SEK. And we have mentioned this before. This is due to the planned phase-out of the non-profitable client contracts. that are resulting in lower volumes. And this is part of the e-work strategy that we are moving towards more profitable growth, which means that we are pruning our contract portfolio as well as working on operational efficiency and cost reduction. And this is, of course, with an aim to increase our margins going forward. But transition takes time and the effects will be seen gradually in our P&L. We have also mentioned the challenges in the Norwegian market, and the status is about the same as before, partly causing these reduced volumes in net sales. And we also have one less working day in the quarter compared to last year, and that is also adding on to negative development in revenue growth. But this has been partly compensated with more billable hours. If we look at the profit side, we are happy to report an EBIT of 54.3 million SEK for the quarter compared to 58.2 last quarter. And of course, the EBIT is negatively impacted by the lower business volumes. But this has been compensated by a lower cost base. E-work has launched before in the past a cost reduction programme that we are following and we do not expect a rebound on the cost size. So this is the new normal and that is important to emphasise. We're happy to see an EBIT margin increase of plus five basis points, Q on Q, and that is, of course, partly due to the focus on improving our profitability. And we do see a positive trend here. What's also positive is our financial net that increased with 90%, and that is due to the growth in our add-on services and also positive currency effects in the quarter. We are working on improving our financial net amongst other the working capital in Poland and this is starting to give effect. We are also building a stronger treasury function because we see positive potential in this area. The EPS growth, which is one of our financial targets, was plus 16% in the quarter. We are very happy to report that. If we look at the financial year of 2024, we're not really able to reach our ambitious goal of 30% EPS growth. We are also closing 2025 and we're happy to report a net sale of 15.8 billion SEK. That is lower than 2023, but also due to the planned phase out. We continue to improve our EBIT margin full year plus eight basis points. And this is due to the cost reduction and focus on improving our business margins. And as Karin mentioned, we're happy also that the board has decided to propose a dividend of 7 SEC per share, which is above our target of 75% of our net profit. Moving on to our order intake, the reported order intake for Q4 is 7.6 billion SEK. That is also lower than last year and it's again, you will hear this many times, the pruning of our contract portfolio. And that is, of course, to push for the profitable growth and the higher business margins instead. And we can see that the margins in our new deals are higher, and that is really, really positive. We are hitting all-time high on a regular basis in this area. Overall, the market remains slow, which is, of course, something we've seen during the year. And we see a volatile demand, both in industries and geographies. As Kari mentioned, public sector is slow, which is kind of unusual in a recession. And banking and finance remain strong. But we're happy to report that we managed to increase our contract length, and that is part of our strategy to be a long-term partner to our clients and deliver the total talent solutions. And we're also happy that we managed to maintain and increase our hourly rates in new frame agreements, and that is due to the consultancy mix with more senior expertise. Looking at the net sales development, of course, you can see in this slide the negative effect of the phase out. This is something that we will continue to see in 2025, given that we started this phase out in the first half of 2024. And of course, the challenges in Norway has had a negative effect in net sales. So these two are still the main explanations for the decrease. On the positive side, we see an increased interest in our add-on services that is contributing positively. And we see also a big potential in this area to have bigger volumes and share of business, which is really positive. And we do also see, as mentioned, the higher hourly rates in the new contracts. Looking at the EBIT development, of course, it's been impacted by the lower business volumes and that is partly met by the lower cost base. And the actions taken on the cost side to increase efficiency and lower the cost base has given effect and that will continue to do so. And we are also happy that we now have a basis to stand on where we can take on the profitable growth in a more scalable way. So this makes me positive that we will be able to further increase our profitability going forward. And also, as you can see in this slide, the add-on services are contributing positively to our EBIT. Service revenue is a new definition. Ework stands apart in the market. We have a unique business model that differentiates us from a traditional consultancy firm. And to better reflect our financial performance, we have introduced an alternative KPI, service revenue, or gross profit. And we believe that this will help clarify the true value that Ework actually creates. and also to see our profit development over time. So we will report this on a quarterly basis from now on. And if we look at the development, we're happy to report a service revenue margin or EBIT in relation to service revenue of 32%. And for the full year 2024, we managed to increase this KPI with one percentage point. And this shows that we are on the right track and that we have a positive development.

Okay, so to summarize, we saw in the fourth quarter a continued positive trend in margin development and in our value-adding services growth. And this was despite continued challenging markets and volatile purchasing behaviors across industries and markets. We saw the trend with higher margins in order intake continue, which was very positive. And our refined service offering for total talent solutions is enabling us to be a trusted partner to our clients. And this is evident in the development of our client engagements. Our work to transform and streamline our operations, for instance, the new internal digital platform, has positioned us for more scalable and profitable growth going forward. And our geographical expansion to Belgium and own presence now in seven European countries means further opportunity to support existing clients and to grow into new markets. We're also happy to be celebrating 25 successful years since the start in year 2000. For 25 years now, we have built a strong foundation, navigating industry shifts and continuously evolved to meet the changing needs of clients and consultants. And this longstanding presence is a testament to our ability to create sustainable growth and value, but also to adapt to market trends and drive long-term value for our stakeholders. So with this, we conclude the presentation of our Q4 results 2024 and we'll open up for questions.