Sweco AB (publ)

Good morning and welcome to this presentation of Sweco's Q3 report. Sweco's president and CEO Åsa Bergman is with us this morning together with CFO Jan Alde. Together they will take us through the results of the third quarter and they were presented earlier this morning as you are aware and after their presentation we will open up for questions. So please Åsa.

Welcome everyone to Sweco's Q3 presentation. Before we present the third quarter results, let me give you a quick overview of Sweco. Sweco is Europe's leading architecture and engineering consultancy with operation in eight geographical business areas across 15 markets in Europe. We are a well-diversified business operating across three different segments with a good balance of private and public clients. The foundation for Sweco's long-term success is our mix of competencies spread across 23,000 experts, our focus on organic and acquired growth, as well as our efficient and decentralized operational model. With a strong financial track record and financial position, we are focused on continuing our growth journey and build on Sweco's success. With this, let's go into the presentation of Q3 2025. Sweco delivered a strong result in a mixed market. Net sales increased by 5% to 7.1 billion SEK, and the organic growth rate was 4%. EBITDA increased to 702 million SEK, an increase of 19%, with a margin of 9.8%. The positive development was driven by further improvements in average fees and billing ratio and a higher number of employees, as well as improved cost control and realized synergies from previous acquisitions. We also maintained a high M&A activity, closing five acquisitions in the quarter, including the listed company project engagement in Sweden. And after the quarter, we added another three in October. I will get back and give you an overview of these acquisitions later in the presentation. In alignment with our strategy focusing on selective core markets in Europe, we also divested Sweco's check operations in the quarter. Altogether, a strong result and a positive performance in Q3 driven by price, billing ratio and M&A synergies as we continue to deliver on our strategic priorities. Now let us go into more details from the quarter. In Q3, seven out of eight business areas reported positive organic growth and seven out of eight business areas reported EBITDA improvements. We navigate successfully in a mixed market, improving both our order intake and order backlog during the quarter. The solid operational trend continues across most business areas, with three reporting double-digit margins. Sweco Germany and Central Europe was the largest contributor to the EBITDA improvements in the quarter, benefiting from efficiency improvement and positive project adjustments. We also continue to see improvements in the UK. We have continued effects from the efficiency measures we have taken, resulting in further improvements of our billing ratio. Overall, we are pleased that we continue to make consistent progress across our business areas. Let us now turn to the market overview. Overall, the demand for Sweco services was broadly consistent with previous quarters, with some variations between segments and markets. Demand remained good in the energy and infrastructure and water and environment segments, and with increases in security and defense. Certain areas of the building and real estate segments continued to be weak, while demand was somewhat healthier in the public buildings. We also saw continued weak demand in parts of the industry segment. This quarter demonstrates that our well-diversified business continues to be a strength for us and provides stability, resilience, the green transition, resilience and the green transition, digitalization and AI, and demographic shifts continue to be the key drivers for our business. With that, I will welcome our new CFO, Jan Alde, to walk you through the numbers. Welcome, Jan.

Thank you, Åsa, and it's also very nice to be here. So let's start with the summary. Net sales came in at 7.1 billion SEK, organic growth of 4%, acquired growth of 3%, and a negative FX impact of 2%, giving a total growth of 5% in the quarter. We have the same number of working hours in Q3 as in last year. And EBITDA increased by 19% or 140 million SEK to 702. EBITDA margin increased to 9.8%. And our net debt to EBITDA ratio stands at 0.9 times. Looking at sales, so we see organic growth in seven out of eight BAs. Germany and Central Europe had the strongest organic growth at 13%, driven by positive project adjustment, higher average fees, higher FTEs, and also a higher billing ratio. The UK and Netherlands also reported strong organic growth at 11% and 9%, respectively. Due to the recent acquisitions, the Netherlands also reported an 8% acquired growth. The organic growth in Sweden was flat in a stable but mixed market. The acquisition of Projekt Engagemang added 7% acquired growth in the quarter. All other BAs grew between 2 and 5%. So overall, the organic growth was driven by higher average fees, higher number of FTEs and a higher billing ratio. Looking at the EBITDA, it increased 140 million SEK or 19% versus last year. The EBITDA margin increased to 9.8% versus 8.7% last year. Germany and Central Europe, Denmark and Belgium reported significantly improved and double-digit margins. Norway also reported higher margins, but from a low level last year. The UK delivered 7% margin in another quarter of improvement, and the Netherlands and Finland was roughly in line with last year. So overall, the EBITDA improvement was driven by higher average fees, higher billing ratio and FTE growth with higher personnel expenses had a negative impact. With regards to the calendar effect, we had the same number of working hours in Q3 this year as last year. So the group result was impacted by transaction and integration costs related to the acquisition of project engagement of 33 million, where 28 million impacted the result in Sweden negatively. Excluding this, the result in Sweden improved by 24 million. Germany and Central Europe, Denmark, Belgium and Norway all delivered significant EBITDA improvement. The improvement in Germany and Central Europe was driven by positive project adjustments, higher average fees and a higher billing ratio. The improvement in Denmark was driven by lower operational cost and also less absence, while the improvement in Belgium was the result of higher average fees and higher billing ratio. We have also started to see a gradual positive impact from previous acquisitions coming through in Belgium and Denmark. And Norway was positively impacted by the higher average fields, but also some one-off costs last year. The Netherlands and the UK and Finland also reported higher EBITDA. Let's look at the financial position. Cashflow during the first nine months of the year was impacted by an increase in working capital, partly a seasonal effect and partly effect of the recent acquisitions. M&A cashflow for the whole period was 739 million SEK. And then we had the dividend of 1187 million SEK. With regards to the net debt position, it now stands at 3.1 billion SEK at the end of Q3, and the net debt to EBITDA ratio was 0.9 versus 1.1 at the same time last year. Hence, our leverage is well below our target and we remain financially very strong. And finally, let's take a look at the calendar effect for 2025. So in Q4, we expect one more working hours compared to last year, which means that the total impact for the year is eight working hours less than in 2024. Please also note that we have included a table in the Q3 report showing the expected number of normal working hours per quarter in 2026 versus 2025. And by that, I hand back to Åsa.

Thank you, Jan. Acquisitions are, as you know, one of Sweco's key growth drivers. And as I mentioned in the beginning of the presentation, we have accelerated the level of activities, completing and announcing several new acquisitions during and after the quarter. We did five acquisitions in the quarter. In the beginning of the quarter, we announced two acquisitions, Pro Group and Positive Impact in Luxembourg and Volantis in the Netherlands. In mid-July, we completed the acquisition of the listed company Projektengagemang in Sweden, which adds over 600 experts to Sweco and strengthens our offering and footprint in Sweden. The integration is progressing well and we are estimating significant synergies in the beginning and realized gradually in 2026 and 2027. In August, Sweco also acquired Obus Design Operations in Norway as part of an asset transfer. We also added three new acquisitions after the quarter. Finpec in Finland offers specialist expertise in renewable energy, hydrogen, bio and circular economy, forest industry, batteries and critical minerals. And we'll add some 400 experts and 577 million SEK in net sales to Sweco Finland. The acquisition will strengthen Sweco's position as an advisory in the ongoing energy and industry transitions. The Belgian firm Assar Architects is a leading architect firm specialized in large-scale public and private sector projects. The acquisition of Assar significantly broadens Sweco's architecture offering in Belgium and Luxembourg, adding 150 experts and around 189 million SEK in net sales. This makes Sweco the leading architecture company in Belgium. The company VHGM in the Netherlands is specialized in geothermal energy consulting and will add 22 million SEK in net sales and around 22 experts in Sweco. All in all, we have acquired 12 companies so far in 2025, representing some 1,500 experts and 2 billion SEK in annual revenues. Projects won during the quarter highlight Sweco's role in future-proofing societies and industries. In Sweden, Svenska Kraftnät has commissioned Sweco to renew power lines in the Jämtland region to enhance grid resilience and enable future wind power development. In Norway, we entered into a framework agreement with the public transport operator Storvägen to support sustainable transportation in the Oslo and Akershus area. In the Netherlands, Sweco will support the Dutch road and water management agency Rijkswaterstaat to modernizing the country's primary infrastructure, enhancing safety, resilience and mobility to address climate challenges such as sea level rise and flooding. In Finland, Sweco will be responsible for the overall design of the iconic Finnish food company Fazes future chocolate factory in Lahti, a factory designed to operate without direct CO2 emissions. With that, I will conclude with our key priorities and focus areas going forward. To summarize, Sweco delivered a strong third quarter. The quarter demonstrates the strength of Sweco's well-diversified business and operating model, as we continue to successfully navigate in a mixed market. We consistently execute on our key priorities, improving efficiency and margins, and build on the strong pipeline of acquisitions. Going forward, we will remain focused on further improving efficiency and margins and capturing growth opportunities in the currently mixed market situation. We will also continue to pursue attractive M&A prospects and to enhance Sweco's position in the planning and designing of a more competitive and resilient Europe. Thank you.

Thank you so much, Åsa and Jan. We will now take your questions. And as said, you can ask them directly through the phone line or through the chat function. So please, Sandra, if you could give us the details of instructions.

Thank you. To ask a question, please press star, one, one on your telephone and wait for your name to be announced. To answer your question, please press star, one, and one again. We will now take the first question. From the line of Adela Tashian from Jefferies, please go ahead.

Thank you and good morning. A few questions from me. If we start with the geographical mix here in the quarter, it's very obvious that your larger exposures to the Nordics, especially Sweden, is what is lagging. And we now have another rate cut. And I guess you could say maybe we've reached some sort of inflection point. Would you agree with that? Or do you still think that there is more way to go before Sweden and Denmark and other Nordic countries are on the same pace as the European recovery that's currently set in place?

Good morning and thank you.

So if you're referring to the profitability in Sweden, the result there was impacted by the cost related to the acquisition of project engagement. And as I said, if you adjust for that, there is an underlying profit improvement in Sweden.

I just want to be clear, it's not the profitability I'm referring to, it's actually the organic growth, which was lower than the rest.

And if I refer to the market situation, what we see is the same picture as we are alluding to overall, that we see no big shift in the market. This is more about the overall sediment of the economy. So what we could wish for is really to see an uptick in the market so we can grow more organically in the Nordics going forward. What we have done the last years is really to maneuver the market in a disciplined way and also taking actions in the Nordic market to position ourselves in the right way. But to get into higher organic growth levels in the Nordic countries, we need to see some more tailwind going forward.

Got it. All right. And then maybe on the pricing benefits in several regions during the quarter, what's driving this? Is it a mix of the projects that you're involved in, or is it an industry-wide phenomenon?

We have a great focus regarding prices all the time. We focus country by country, project by project to make sure that we put the right prices out on the market and that we cover for the salary cost increases. But it's what you're alluding to, it's a mix of what kind of prices we put out in the market, but also how we execute the project, because the price elements is a combination of how we price ourselves and also how we execute our projects. So we really get paid for all the work that we are doing. So we are consistently focused on this and we will continue to do this.

Great. Thank you for that. And then lastly, on the UK, quite a strong acceleration in Q3 versus H1. What's your view on the UK market post the spending review in June and also ahead of the budget in November?

I would say that UK is coming from a low level last year and as we have talked about before we have focused to reposition the UK market so we kind of focus on the selective sectors and areas where we have a good market position and where we see that we can grow with that said it has always also to do with how The UK is operating their business, so we have a focus to really turn around the UK, and that is what you see in the figures, more than that the market has shifted in any way in the UK. So repositioning and executing our business in a better way. Great, thank you for that. Thank you.

Thank you. We will now take the next question. From the line of Raymond from Nordea, please go ahead.

Good morning, Raymond.

Hi, good morning. Good morning, good morning. A couple of questions from me as well. First, starting off with Denmark, which had very impressive margins. Is there any element to this that is one-off in nature, or is there any seasonal about it, maybe timing-wise, that makes it stand out here in Q3 that should not be considered normalized?

I would say the improvement you see in Denmark is it's good operational improvements and with some lower operational costs, but they also had a bit less absence in the quarter. And the third aspect, as we said, we do see gradually some positive impacts from acquisitions they have done in the past with synergies coming through.

Got it. And you write that you want to capture growth opportunities in the mixed market that you work in right now, which sounds great. Could you just help us understand a bit more where you think is the best way to execute on this vision in terms of where you see the most attractive growth opportunities right now?

I said, if you look at the big trends in Europe and the agenda of the EU, but also everything linked to what is in there, Europe's competitiveness, the green transition, defence and security and resilience for Europe, and then you link it to the critical infrastructure that needs to be in place. So we're talking about the segments that we refer to where we see good demand. So it's the infrastructure in all aspects. It's the energy area. It's the water segments. I would put out defense and security, as we have talked about a lot before, where we see an increased demand and we will see an increased demand going ahead as well. We see data centers in Europe. So there is lots of areas. With that said, if I look back, what we have done since the market turned down is that we have, and I know you know this and we have talked about it before, but we have made sure that we are positioned right. We have repositioned us away from For example, residential and the commercial real estate segments and areas also where we don't see growth. So the repositioning, but also to make sure that we continue to broaden our portfolio. So for example, if you look at the quarter and you see Azar Architects, they are one example where we fill a gap. We kind of want to really grow the architect business in Belgium to take a strong market position there. you know, there is expertise where we add on expertise. So it's a mixed picture where we are focusing our investments, but it's really about a clear picture of that we should have this broad and diverse portfolio and that we will continue, of course. So, yeah.

That's very helpful. Yeah, definitely. And just one final, maybe a smaller, almost technical question, but the project adjustment in Germany that was positive and helped your margins there, how big was it approximately?

Yeah, the product adjustment we had in Germany certainly contributed to the strong EBITDA margin that you saw in Germany in the quarter. It's important to remember, we always have product adjustments, positive and negative. So having a little bit of a longer look at the margins are always a good way to look at it.

But it's for sure a bit extra in this quarter, as you have seen the margin.

Yeah. Is there like any number you could maybe give us or a range perhaps?

It's really difficult because in Germany, I mean, it's part of their project portfolio. And so, I mean, if you look at the... The trend in Germany, they are executing their project in a better way. But maybe the main margin expansion is coming from those project adjustments. But that is really part of their business as usual. So it's really hard for us to specify it.

Got it. That makes sense. Thank you so much. I'll get back in line.

Thank you. We will now take the next question from the line of Dan Johansson from SEB. Please go ahead.

Hi, Jan, and also thanks for taking my questions. Good job in the quarter. It looks like the highest margin in the queue for you that I have experienced as a SWECO analyst at least. Two questions from my side. Morning. On the higher billing rates here in the quarter year of year, I think you face a bit more challenging comparative figures this quarter as you had a bit of a bump during H2 last year. So I'm a bit positively surprised that you continue to improve efficiencies. So is there anything specific driving that continued good progress on efficiencies? Is there any specific countries or anything in particular that drives it this quarter? Thank you.

No, it's a continued work in line with what we have talked about before, making sure that we stay efficient when it comes to our support functions, making sure that we really distribute and plan our workload in a good and efficient way. So we continue to take measures and we are continuing to look into where we need and could do more. So it's the same kind of work, but we continue to focus on it. And for sure, you are right that we are up against completely different figures last year, but of course, we know that as well. So it's really about within, and I said it before, within Sveko, in some countries, we have really the best practice and we try to look into that and we try to implement ways of working, structures, ways of working, into the other business areas step by step. And of course, it's also about how the project portfolio looks like in the business area and also how much projects we win and how the order backlog looks like. So again, to continue the expansion, I would wish for a little bit more tailwind in the Nordics.

Yeah, let's hope for that. Thank you for the clarification. Maybe one more on the balance sheet. Still quite strong, especially for being in Q3. You had a high M&A activity here and typically have good cash flows in Q4. It sounds like you're in a good position there. But operationally, do you need some time to digest and integrate the acquisitions you've done here? You've done a couple of mid-sized acquisitions here in several countries. Do you think you can continue to be active and add more businesses here in coming quarters? Thank you.

Yeah, for sure. I mean, we work as we always do with the M&A pipe and we lean forward and we will try to do the acquisitions that we want to. But as I said before, it takes two to tango, so it's more of a timing questions. But you are right. Of course, if I look back, we have... track record of acquiring companies on lower level and integrate them and take out the synergies and expand the value from there. And that we will continue to do. We see the acquisitions really case by case locally and follow them and handling like that. But if we acquire quite many in one country, we also need to be a bit cautious to make sure that we consolidate and integrate with quality. But, I mean, we haven't changed the strategy when it comes to M&As. So we will continue.

That's good. I think that was all from my side. So thank you so much. Best of luck out there. Thank you.

Thank you. We will now take the next question from the line of Tom Gingshort from Pareto Securities. Please go ahead.

Thank you and good morning. Question on divestments here. Any other geographies or areas that you wish to? Liv?

No, we are focusing on the business areas that we have. And when it comes to Czech, it was a minor, 150 employees in Czech. And our strategy is really to make sure that we can roll out the whole portfolio. So it was really about focus on... So no, the geographical footprint we have is the footprint we plan to have. And we also see growth opportunities in those markets ahead.

Perfect, thank you. And just a question on the margin impact here in the German division or Central Europe, given the divestment. Do you have any sense of how much that impacted?

The financial impact of the divestment in Czech is really hitting the EBITDA, not the EBITDA line. So it would be no impact on the EBITDA as it's reported.

Okay, thank you. That's all from me. Thanks a lot.

Thank you. Thank you. As a reminder, to ask a question, please press star 1 and 1. We will now take the next question from the line of Johan Lundqvist Sundén from DNV Carnegie. Please go ahead.

Hi, Åsa and Johan. Hope you can hear me.

Good morning, Johan.

Morning. A couple of questions on my side as well. First one is related to the M&A side. I'm a little bit curious to learn more about the synergy effect that you have started to realize from previous acquisitions. Can you give some color to what you have been able to realize Just to hear how the kind of integration work looks like, given that you also have a couple of big transactions that are to be integrated over the coming two years.

Well, Johan, The impact or the comments that we made regarding that we're starting to see some synergies coming through, I think it's more in general nature. And I want to attach specific numbers to that in the quarter. But you're saying that we do see some positive impacts, particularly then on Denmark and in Belgium. And you see that in terms of efficiencies coming through. So I wouldn't really like to provide any figures that was more meant to show that we do see that as a positive impact here coming through gradually.

And then if you, for example, take VK Architects and Engineering in Belgium, what Jan is referring to, what we do is that we fully integrate that company and they were high performing when we bought them. And then, of course, that case is really to integrate and get the value out of the combination when we win greater projects on the market together so that is you know it's not a synergy case and in itself so of course it's a mixed also in our portfolio of what kind of companies we buy but for sure in the quarter you see the effect of project engagement which we have described in the report affecting us with costs mainly and will affect us in the first quarter next year. But with that said, the integration is working as planned and we will start to take out synergies of that integration in the beginning of next year. It's hard to quantify as it's a mixed portfolio and we have different cases with different volumes of synergies.

Any specific nature? I guess, given your explanation, the VK in Belgium is more like a revenue synergy case, while maybe others can be more on the cost side. Just curious to hear if there's any specific bucket that you can do more with than others.

I fully understand that you want figures here, but we focus to really find the right expertise. The right expertise, the geographical footprint, sometimes the scale in a certain growth direction. so so it's really a mixed picture and so it's not that we focus more or or less on anything it might be so that we have a case in front of us with the right expertise high profitability levels and then our job is to make sure that we can keep those profit levels when we integrate them in into the to sveco so it's more about as i said aiming for the right expertise rolling up our project portfolio and making sure that we can grow in the right areas. And then the cases look different each time.

And the kind of integration of these we're referring to that has happened in the past, are the synergy realizations surpassing your initial expectations or is it just in line with your initial business case?

Yeah, that is of course also a mixed picture, but we try to be as strict and as prudent as we can. But of course we have situations where we might face a situation when the market shifts and something happens on the market that we can't really excel. But a clear business case, a clear integration project with a strict follow-up, But of course, the most important thing is to select the right companies for the future. That is complementary for us.

I understand. And just to follow up on the other topic you mentioned, Jan. Any guidance for the integration costs for project management coming to quarters that we should be aware of?

Yeah, I mean, so... General comment on the P integration. The integration is going well, and of course, we see clear synergies in terms of shared resources, shared office systems and things like that. And of course, we are planning to take integrated related costs in Q4 and also into 2026. But as also said, we see that we can offset those as we generate the synergies gradually over the next two years. So yes, there will be integration costs, but we cannot comment specifically on those right now.

I understand. But it would be good to give some further guidance along the way on what kind of integration costs that will come. But we can get back to that in another forum. Just to find out from my side, also on the calendar tailwinds, you highlighted in the presentation that you have a calendar guidance for 2026. Any kind of reason to believe that the tailwind that you highlight here should not materialize? Is there an impact from certain kind of union agreement that make the kind of theoretical calendar tailwind not materializing as it should? That we should be aware of?

No, not specifically. No. No.

Perfect.

That was all for me. Thank you.

Thank you. There are no further questions on the phone. I would like to hand back over for any webcast questions.

Thank you so much. And there are no further questions. So with that, we want to thank you for joining us. And I also want to remind you that we will publish our year-end report, Q4, on February 11th next year. And with that, I wish you a pleasant day. Thank you.