Projektengagemang Sweden AB (publ)

Good morning and warm welcome to the presentation of the project engagement result for the third quarter of the year 2024. I, who would like to say welcome, am Andreas Attegiorgio. I have been the new CEO since August 19th, 2024 of course. And with me is my finance director, Liselott Haglind.

Good morning.

First, a little bit about me. I recently came from the role as CEO of Stockholm's trade chamber. I have also been an affiliated researcher at the School of Industrial Design and Social Construction, KTH. I have been in charge of the foundation, the business world and some other things. A red thread, one might say, in my career has been just the development of the state. How do we create tomorrow's promising, sustainable, resilient, innovative, attractive cities and societies? And it is very inspiring to continue into project engagement as CEO and CEO. I also work at the Department of Foreign Affairs, the World Bank's headquarters in Washington DC, and have a doctorate in national economy at Lund University and have also studied and studied at the University of Michigan. This presentation today has ten pictures. Three pictures touch the market and the outlook. Three pictures touch our three business segments and two pictures touch our financial position. And the final picture will touch the focus now and forward. And of course there will be time for questions. The building above in the picture you see is from the Falkköpings Stadsbygnadspris in 2024, where we are proud to be nominated. We have then designed the building and the outdoor environment here as architects. We start with a market outlook and here I want to point out that it is still a de-warning market and a de-warning will to invest. This de-warning will to invest and the market situation, it will last for three quarters. Commercial properties continue to show weak development and the housing construction continues to be at low levels, and this has affected us. Here we also know that there is a de-warning before a less re-extending pension policy, that is, the interest rates that have been reduced, that can be passed through and can have a positive effect on the market. And just as we have said earlier, these effects will come from a somewhat more expansive pension policy. There will be a certain reduction in the effects we can see. But what is positive, long-term, is that we have a growing underlying need for our expertise and our services. For those who saw the UNEP report last night, you will get more information that the world is going against 3 degrees of warming during this period. We know that the Paris Agreement says that we can manage a maximum of 1.5 percent of the warming to handle the climate crisis, so all countries need to do much more. But what I think is hopeful is that in this fresh report, energy and technology make it possible to reach the 1.5 degree goal. And from our perspective and what project engagement can deliver, it is exactly what the world needs now in the form of a transition in energy. We also see a underlying strong need for our services in industry, defense, city development, and so on. And we can get back to this. But in summary, it is complex challenges that society faces. We need to have the necessary skills for our expertise, with our designers, installers, environmental specialists, project leaders, architects and other experts. As we talked about earlier, the real estate market is still in this green transition, but also transition into security, resilience and resistance. We also see that we have strong regulatory requirements coming from the EU, but also from other parties that increase the need for our customers to develop existing buildings and their close environments, sometimes instead of demolishing and building new ones. And when these changes happen, the degree of complexity in these projects is also increased. And then we see that we can really be a strategic partner for companies that want to change. We also know that industry is changing to fossil-free solutions, the energy needs are increasing, it requires quick investments in solar wind and water, NATO intervention for our nation, linked to maintaining existing infrastructure, but also new requirements on national resistance and civil readiness. So, continue to follow the demand and increasing needs in the control system, data collection, surveillance, optimization of the operation, for example, in security facilities and especially in buildings and their close environments. So, from the outlook to the insight, our third quarter for 2024, we deliver an improved margin in a monitoring market. Although the third quarter is the weakest seasonally for us, due to -semester-summit, both for our consultants and our customers, we increased the margin to minus .6% against minus 12% in the previous year. The underlying result, the exclusive cost of local adjustments that were made in the third quarter of 2023, is the result in line with the previous year. The company reduced its staff during 2023 as an adjustment to a weaker market, which affects the turnover during the quarter, which now ends at 145 million. It is somewhat lower than expected due to a weak start rate after the summer. Partly explained by the delayed start of tasks, the level of activity increased in September, which was good. The effect of the monitoring market has affected the debiting rate, and this effect is compensated by increased team prices and continued good effects of our cost and effectiveness program. Two of three segments show better margins. We continue to actively recruit in areas where we see good growth opportunities, including within the housing, protection, safety, energy and environment. So, when we finish the third quarter of 2024, we have, thanks to our cost effectiveness programs, an accumulated margin of .8% and an accumulated annual result of 27 million. Now I want to go ahead and look at our three underlying business segments. We have three business segments, architecture and management. It is construction and environment, as well as installation. We start with architecture and management. There is still a weak will to invest in commercial properties and housing, but a positive demand in industry, logistics and defense. We see an improved result driven by better cost effectiveness and team price increases. The turnover is at 48 million and the eternal margin at minus 5%. When it comes to tasks, we have, among other things, gained confidence from the region of Skåne for the visitation task for the University Hospital in Skåne in Lund, as you can see here on the picture. Climate risk and damage analysis for the Mkb Fastighets AB, which is Malmö's municipal housing complex. Architecture task for the reconstruction of group housing for the Orust municipality. We have gained confidence from the investment in the construction of the Mkb Fastighets AB, and a win in the construction of the installation of the insurance company's premises in all of Sweden. We are directing the business to meet the needs of sustainability and resilience in state development, and to identify climate risks and needs of climate adaptation of already built environments. Next, construction and environment. Here the market is still challenging, especially when it comes to renovation. We see both delays and delayed investment decisions. The result is affected by a lower degree of debt and some higher reservations in the form of project deductions. The turnover ends at 53 million with an eternal margin of minus 8%. We are now focusing in greater extent on the parts of the market where there is growth potential and investment will, for example through renovation, sustainable renovation, as well as advice in the pre-cleaned areas. We are taking initiative for improved project support. During the quarter, we have received tasks for the renovation of ceiling surfaces and facades on the North Älvsborg county hospital, development of the new concept of the JM for several residential buildings with wooden houses in southern Stockholm, design of the Valjärdet school in Karlstad, as you can see here on the picture, and innovation with focus on circularity, land environment research, and more, for Stockholm's water and waste relocation and safe recovery centers. Finally, the segment installation. Here we see a continued positive result development despite a declining market. The turnover was 48 million kronor and the eternal margin minus 5% in the quarter. The quarter also shows a continued improved result driven by cost effectiveness, higher degree of debiting and increase in price. During the quarter, we have received tasks for the renovation of several residential buildings for young people in Lund, for the Rikano housing, for academic houses, we have received tasks for energy resources, as well as planned renovation of the school and preschool in Uppsala. We see an increasing need, among other things, in energy, control system, surveillance and optimization of operation in social properties. With these three pictures, we leave our three business segments. I would like to hand over to Finance Director Liselotte Haglind, who will tell us more about the financial overview.

Thank you, Andreas. We will now move on to the financial development and summarize January to September, where we accumulated a better result than the previous year. EBITDA was 27.3 million kronor, which means a margin of 4.8 against last year's minus 0.2%. The turnover was 574 million kronor and growth is still negative due to the adaptation we have made to the market by reducing our staff during the end of 2023. The organic growth was negative, thus, rose to minus 11.9%. We have a calendar effect of 16 hours, but since that effect occurs during the summer period, it is of a smaller character. It affects the turnover. As we have clearly clarified, it does not affect our EBITDA, since we prioritize the costs of the month's working hours. Our FTE growth is still negative and the assessment remains that we will not see growth during 2024. However, we continue to recruit in areas where we see that the market is profitable. During the year, we have recruited about 90 people to us. We actively seek more comprehensive expertise that is questioned by our customers. Our result improvement, as Andreas was saying, mainly depends on continued work with cost effectiveness linked to our premises and also on costs overall. The work is going well and I am very pleased with it. It is an important tool to reach our financial goals. Two of three segments have accumulated a result improvement towards the previous year. Architecture, management and installation make a result of 7 million kronor better than the previous year. In the construction and environment segment, we have a negative result development. The market has been affected by the degree of activity that has accumulated lower than the previous year. We have a decline in Q3, when the start in August is affected by some delayed start-ups. This of course affects the effectiveness of something further. However, we see a potential to continue to increase our degree of activity and our ambition is to return to historical levels. As we have previously said, a 1% decrease in activity is about 11 million kronor in the result for a whole year. Something that is still developing positively is our team prices, which partially compensates for our decrease in activity. We see good price increases in all three segments and we have good processes and good strategies that continue to work with this issue. We adjust our level of activity to be competitive in the areas that we work within and want to move to. It is important to balance against the increase in salary costs, which is our largest cost. Summary, the September has accumulated a result of 27.3 and just under 5% in the movement margin. If we look at the financial situation for Q3, the results per share were minus 0.29 against minus 0.84 kronor. The cash flows from the current activity were 4.9 million kronor against minus 3.3 the previous year. This affects a repayment of the paid tax, Q23, and we also have positive effects this year from cash flows from customers as part of our improvement. Net debt is 2.3 times the previous year, against 2.6. Here we move, as we should, down to the level of debt. As I said earlier, the work in our offices improves our debt. Here we have not reached full liquidity effect yet, depending on the different contract lengths of rents we work with. Net debt, exclusive to IFRS 16 at the start of the quarter, is 131 million kronor, and the entire net debt is 208 million kronor. With that, back to you, Andreas.

Thank you, Liselotte. So, focus, now and forward. We develop our ability. We continue to develop our value-making position on the market. And here, as I said, it is important to remember that the underlying demand is there, not least through the conversion. So we continue to work with discipline, with efficiency, price, cost control. We work intensively with sales, which will give us conditions for profitable growth. And we have improved our profitability to two out of three segments in this quarter. And of course, we need to be able to attract us and develop the absolute best talents and the employees who can be with us and make the company even more profitable, effective and sustainable. So we actively recruit, of course, within areas where we see the greatest potential. With this, I will end the presentation and open it up for any questions.

If you want to ask a question, press the square 5-5 on your phone to ask yourself a question. If you want to return your question, press square 6. The next question comes from Johnny Gin from SEB. Here you go.

Hi, and good morning Andreas and Liselotte. Thank you for answering my question. Some questions from my side. If we start with the team prices, it would be interesting to know how much they have increased year after year and how the wages have increased over time. That's my first question.

Good morning to you. Thanks for the question. We have worked intensively to meet the market with our team prices. This is something that the industry is generally good at doing. One of the key factors to keep the margin. Therefore, it is important to constantly work with index regulations and secure the right price in the right order. The level of this is what I am pleased with. It is in line to meet our wage costs increases. I see that the effect on the margin is there. The strategy forward is to work with this issue

in the course of the market. Okay. Speaking of the profitability, I understand that it is a tough market and you work hard with cost-effectivization measures. My question is how much more is there to do on the cost side to help the profitability? Or is it now that the market is helping from here?

We have worked incredibly well with our cost-effectivization measures. This is a part that will be in our DNA in the future. That we were afraid of our earned money. I see that the schedule for this runs on according to the plan that we have previously promised. With this, there have also been a lot of other effects on the other costs. I see that there is an important part in continuing to be on this issue. The big effect of reaching our financial goals is to increase our degree of development. As I said, every percentage corresponds to 11 million SEK in the last row. Our big focus now is to intensify the market work and sales.

I understand. Thank you. I have one last question. Speaking of the degree of development, which is 68% in the quarter. I thought it would be possible to break down a little per segment. I thought we would check if there is a segment that you think sticks out. Either negative or positive.

I think that everyone is affected by the declining market, of course. But we see improvements in one segment, which is installation. We see a small improvement in architecture and management. What has been the most challenging in this quarter is, as Andreas described, around construction and the environment, which is more affected by the declining market due to new production, where projects do not get started at high speed. There is also the big effect in terms of profitability.

I understand. Thank you for the answer. Thank you very much. Thank you.

The next question comes from Stefan Knutsson from ABG.

Good morning Andreas Lifslot. First I just wanted to check what you would say you have for the exposition to the final market right now for the group.

Sorry. Good morning Stefan. What did you say? What would you

say the group has for ... Why is it heard? Do you not hear me?

Yes, we hear you.

Okay, great. I repeat. What would you say you have for the exposition to the final market right now for the project engagement?

Can you clarify your question? Exposition to

... What final markets and how much exposition do you have against housing, commercial properties and industry and the

like? Thank you so much Stefan. It was probably a bit of a break, so that's why we didn't get it. We see that we have a good mix with private and public customers. Here we have succeeded with a conversion, especially on installation, to mix and work both against the entrepreneurs who get started with their projects. We have directed a whole lot of activity against the initiatives that are linked to security and defense, for example. We have a roughly -13% conversion against housing. Here we have seen a decrease in this year, but it depends on our own will to move towards other markets, but also how the market looks. Especially if you look at it historically and also from experience, it is a pretty normal mix we have there. Then we increase, if I just fill in a little, then we increase our conversion against the industry segment, defense as I said earlier. We also see that we have a good distribution against commercial properties, as opposed to something that is a little bit more It still happens there, and something that we see as an important market and that will actually come into being when the market turns.

How do you experience the general market between Q2 and Q3? I find it surprising that the drop is getting bigger in the quarter.

When we look at the macro environment, we see that the level of uncertainty has increased over the year. Rather, the recovery has been shot a little bit in the future. We see that in the macro environment, so it is

a I think that was the question I had. Thank you very much.

Thank you Stefan.

Thank

you.

As a reminder, if you want to ask a question, press the square 5 on your phone.

Then we will see.

There are no more questions from the telephone lines right now, so I leave the word to the speakers for any written questions and final comments. Please.

Thank you. Then we have received a question about industry. How does the segment relate to the buildings and their environment, which has been a focus for a long time? Will there be an investment in industrial competence in the future through, for example, competence enhancement?

Thank you for the question. As we described, we have a full focus on recruiting in all segments where we see growth potential. Industrial green and re-establishment is very interesting. Here I think we need to increase our focus further, but that applies to all parts of society and the business life that need to be re-established. It is green re-establishment both in the general housing industry and in the industry. It can be linked to other types of re-establishment related to resistance, resilience and security. There we have, as we described in the report, a demand. Then our full focus is on recruiting competent people who are relevant and good in those areas.

Then we have another question. Hi Andreas and Liselotte, I have a question about your descriptions of new legal approaches. In the quarter you have written off more than 12 million SEK, corresponding to about 50 million SEK per year. Is there a reason to believe that the decommissioning will go down further in the coming year? I note that you have previously written off about 40% of the book in the balance calculation. This is about our large cost efficiency program, where we work intensively to go through our entire local stock. We take it in different rounds, depending partly on how long and how long contracts we have. And how we want to move together in different cities, where we have had several offices. My assessment is that we are now at a level with what it will be like in the future. We will have the opportunity to look over our offices in 2025 as well. There are some offices where we will extend the contract, which will affect the debt. But at the same time there are some where we will reduce. So my assessment is that it will be about the same. That was it. I see no further questions, Andreas.

Thank you, Liselotte, and thank you to everyone who has participated and shown interest and asked questions. I want to conclude by saying that despite this de-empowering market situation, it is with great enthusiasm and strong faith in the future, that we as a new CEO and CEO together with employees and management have started a journey. We will improve the value-making position of the P.E. P.E. stands for innovation and leadership skills in construction, design and architecture. We will be central to all actors who want to intensify the transition to a more sustainable and innovative society. I look forward to that. Thank you very much and have a nice weekend.