Good afternoon, and welcome to our First Quarter 23 Webcast. This webcast will focus on our first quarter 23 performance, and we will share with you the highlights and management's observations. Let us look at some of the highlights of this first quarter. Q1 showed a strong 12% growth. B2B had another strong quarter and came in with 16% growth. EA accounted for 6% of this growth. The organic growth of 10% came from all B2B product lines. Sanitary a bit stronger than activities in electricity and carpentry. Despite turbulent supply issues, AO has managed to maintain a high delivery capability to customers throughout the quarter. EA assortment is fully integrated in AO central warehouse and has found its way to two AO shops in Zealand, namely Holbæk and Nørrebro.
We have now started the journey in making EA nationwide, and many more AO shops will add the EA assortment during the year. Continued high growth is seen in green transition. However, recent normalization of gas prices has temporarily lowered sales of heat pumps. Fulfilling our customers' orders during times with uncertainties of supplies caused us to maintain higher level of inventory in Q1. Although the supply situation has started to stabilize, AO has decided to keep higher stock levels in selected products. When as the situation normalize, we will de-stock accordingly. As previously mentioned, we have taken the opportunities given by our increased inventory capacity to start stocking new assortment. The level of SKUs available to our customers has increased from approximately 400 to almost 600,000.
Global e-commerce continues to decrease, and general cost inflation causes private consumers to hold back new investments in house improvements. To AO, B2C activities are ready and prepared to serve the consumers when the appetite for new investments grows, and our ambition for B2C remain high. The cost of doing business is under pressure from the general cost inflation while energy prices have decreased during this quarter, other costs like salaries and are increasing. Also, higher interest levels will kick in. Although having enjoyed higher growth this quarter, we do expect B2B projects to decrease. As this will cause an overcapacity in the business, margins may come under pressure. Furthermore, big unit sales in green transitions as heat pumps and district heating units come with a lower margin. Combined, we see a higher margin uncertainty than normal.
We are neither macro experts nor able to foresee the changes in the marketplace. Let us look at some of the market signals that we are experiencing. Many experts claim that the length and depth of the recession is likely to be less severe than expected three months ago. The continued high rate of employment and the reduction of energy cost levels are strong indicators to back this view. We saw a sound level of house trading in March, which is also promising. The interest level has increased significantly. This will undoubtedly stop or postpone part of the planned projects within the building sector. As the volume of projects reduce, overcapacity will be a fact in the wholesaling business and many other lines of business, which likely will put a pressure on the margins.
From a customer's point of view, we experience sound activity but still concerns about level of projects. We see a tendency of customers grouping and consolidating into bigger groups with the aim of being able to serve their customers as a one-stop shop, and at the same time, utilizing an increased bargaining power for procurement. The level of bankruptcies has been stable during this quarter. The highest frequency seems to have hit the contractors up to now, while only a few in sanitary and electricity experienced bankruptcy since during first quarter. While the volume of projects are expected to reduce, the repair and maintenance sales are expected to stay stable, and modernization may experience a lower demand. In AO, the repair and modernization and maintenance sales count for approximately 70% of the B2B sales. A temporary slowdown of heat pumps has shown during Q1 as gas prices have decreased.
Society's need for and desire to transform energy is as vital from an environmental point of view that the human incentive has cooled, seeing the business case turning less attractive due to normalized prices in conventional energy sources. As my closing remark, let me stress that although it is unpredictable times, AO feel prepared for the future. Now, Per, please take us through the financial performance.
Thanks, Niels. As expected, we showed good momentum in Q1. B2B grew 16%, including EA, and 10% excluding EA. The volume growth in B2B was approximately 5%, and the rest being price impact from the price increases during 2022. B2C came in at index 88, and as Niels mentioned, private consumers has reduced investment in house improvements temporarily. Gross margin increased from 23.6% - 23.8% in Q1. The increase was primarily due to lower distribution ratio and due to EA. Product mix and one-off from price increases was a net zero impact in Q1. External costs were DKK 11 million higher than last year. Apart from the EA impact, we also saw increased IT cost in the quarter. Salaries has increased DKK 17 million, whereof slightly less than 70% being related to the EA acquisition.
EBITDA increased 10% or DKK 11 million compared to Q1 last year. Financial cost took a hit in Q1 as net interest-bearing debt and interest rates have increased and as Swedish and Norwegian currencies depreciated. Depreciations increased some DKK 6 million, mainly due to the central warehouse investments. Consequently, EBT ended at DKK 83.3 million against DKK 85.9 million last year. The reduced EBT margin caused by the higher interest and depreciations. Let's turn to the margin development comparing Q1 this year with last year. The quarter saw margin increase from 23.6% - 23.8%. The higher margin business in EA shows up at the radar and is lifting the group margins by 0.3 percentage points in Q1 as has been the pattern since the takeover.
On the other hand, the higher margin B2C business was relatively smaller compared to 2022, which reduces margins by the same 0.3%. The price increases and the product mix was a net zero, as I said before. Distribution cost was positively impacted by lower B2C share and the fact that part of the growth was price-related. Distribution ratio improved margins by 0.2%. Let's leave the margins and turn to the segment info. The B2B segment accounted for 90% of revenues, and the B2C segment accounted for 10% of the revenues. The segment split was 87, 13 last quarter or the same quarter last year. B2B sales increased 16% as well as EBITDA, which increased the same 16%, and the EBITDA margin accounted at 13.3%, same as last year.
The B2C sales were 12% shy of Q1 2022. B2C improved gross margins to 28.4% in 2023. Finally, indirect non-allocated cost has increased 12.8% during the quarter. Let's turn to cash flow and net interest bearing debt. As we expected, net interest bearing debt increased during the quarter, as it uses to do in Q1. Gearing increased 0.5 x EBITDA, compared to an increase last year's first quarter of 0.7% x EBITDA. The increase was mainly due to increased working capital and payout dividend. As Niels mentioned, we have continued high stocking levels of parts of the assortment in order to ensure high level of product delivery to customers. We will destock when and as the supply situation further normalizes.
Accounts receivables increased as B2B sales increased relatively, thereby reflecting that cash paying B2C customers amounted to a relatively smaller proportion. Consequently, net interest-bearing debt of DKK 853 million amounted to a financial gearing of 1.7 against 1.2 in Q1 last year. Let's turn to the investments. Please be aware that the chart does not include M&A investments. Also be aware that the green band shows the normal level of maintenance investments in AO. As you know, AO has invested heavily in expanding warehouses in Albertslund and Horsens during the past two years in order to prepare for the future. In Q1 2023, investment amounts to DKK 30 million against DKK 60 million last year, half level. We foresee significant lower investments than in 2021 and 2022.
However, as we also said back in February, we do expect higher than normal investments in expanding relevant AO shops to include EA assortment in order to make EA nationwide. Now, let's leave the financials and turn to the outlook 2023. The strong growth in Q1 was as hoped for and as expected. AO maintains the outlook of 2023. We expect that a reduced demand for B2B projects activities will result in Q2 sales at the same level as Q2 last year. As the demand decreases, we assume that the outlook for that demand will lead to a 10% lower volume sales during the second half of 2023, partly mitigated by a 5% price increase from the 2022 price increases. In other words, a 5% reduction in second half.
As Niels mentioned, both product mix and competition put risk on the margin development during 2023. Summing up, AO maintains a revenue outlook of DKK 5.25 billion-DKK 5.45 billion, an EBITDA of DKK 435 million-DKK 465 million, and an EBT of DKK 300 million-DKK 330 million. That concludes the presentations, and we are ready to take your questions. We have received a couple of questions. One being if we, in Q1, see the full impact of efficiency gains from the new automatic warehouse solution, and if we see the full impact of synergies from the EA acquisition. The answer is a double no. In the automated warehouse, obviously we went live end of 2022.
Along Q1, we have improved the functionality of the system. At the end of Q1, we are looking at satisfying efficiencies but not fully impacted in Q1. When it comes to EA, obviously we both have areas of cost where we are expecting to do smarter when combined. The largest part of the rationale by buying EA is obviously the sales synergies. We have a potential in both areas, but especially the sales synergies going forward will materialize along as we insort EA assortment in the AO universe.
Remember that EA only had seven shops and AO have 51, we have a universe in AO to include an EA in order to make EA nationwide. We have another question, how do you see your possibility to grow in the electrical market? On one hand, you have a fantastic network of shops which the market leader lacks, on the other hand, the market leader seems to have come further when it comes to ESG. Well, we don't disclose expectations area per area. As you know, we have an ambition to outgrow the market, that will also be the case within the electrical market. How high is the interest on the debt?
We don't disclose the percentage, but It's CIBOR plus an additional spread, which will be normal for companies of our size. Remember that more than half of our net interest-bearing debt is mortgage debt related to our portfolio of properties. In the mortgage debt, you would see that a part of the mortgage debt would be a floating interest, and the main part would be a three or five years fixed interest. We have a question, how and where will you cut costs to mitigate the lower sales and earnings that you foresee?
As we presented back in February also, we feel that we have a model where we are able to scale the business part of our cost base to the activity level. Amongst others in our supply chain, we work with temps. So approximately, 1/3 of all employees or 25 to 1/3 of all employees are temps. So that would be an easy area to adjust. We have a question, if we see more or less M&A opportunities for 2023, and how many companies are out there that could be of our interest? Well, what we saw during 2021 and 2022 was quite high multiples.
We do expect that, as margin reduces out there in society, perhaps multiples also reduces, the price for a company will be lower in 2023 or 2024 than what it used to be. In my personal opinion, I think that the 2023 accounts will be a moment of truth for many companies, that may result in that it could be interesting to look at M&A in 2024. We have a question that some investors out there seem to be negative when it comes to our report. Please explain why they don't have to be negative. It's not really our business to understand the share price.
I think we will leave it to you guys, and we will have to concentrate on doing it as good as we can from a business point of view. We feel that what we are laying forward today match what we expected that we would lay forward back in February also. We are not disappointed. We have another question related to M&A. If we are increasing our M&A efforts within our B2C market, and then how is your solar power initiative progressing? The first one, the M&A effort, I think I already answered that. The M&A within B2C market is also interesting. As you know, we are not a quarterly driven company.
Us viewing that private consumers, they are investing less for the time being in house improvements doesn't scare us. We have high ambitions on the B2C market and are also paying interest on relevant M&A opportunities within B2C in Denmark, Sweden, and Norway. Our solar power is progressing as we plan. We don't disclose our, our progress in details within this area, but it's progressing, but from a low base. What proportion of our of our business is heat pumps? We are asked, and as we used to say, it's between 5% and 10% when it comes to heat pumps and the installments you need when installing a heat pump.
How do you come up with 10% volumes for second half? Many Nordic industrials companies have strong order intake. Well, it's a good question, and as Niels also said, we don't feel as experts when it comes to foreseeing the future. We feel that the best we can do for you guys is to try to share our assumptions, we have tried to translate those assumptions into a number. Whether this number is too negative or too positive, only time will show. How fast will inventories be reduced to a normal level? We are asked. Can you give a target for end year? I would rather not, I expected you to ask. It's not an easy answer because it's not pure math.
It's also a question of demand. It's a question of the supply issues area per area. I would expect us, everything else being equal or you could say the supply situation normalizing further. I would expect us to be able to reduce the inventories approximately, I don't know, DKK 100 million, perhaps a little less, perhaps a little more during 2023. Beware that we are not a quarterly-driven company. Don't, please don't try to put us in a box. We are looking at our customers' well-being, and we would rather stock DKK 25 million or DKK 50 million too much and then leave no customer disappointed.
We are asked if, with the present share price, shouldn't we then initiate a share buyback program? I think it's a relevant question, and we get it from you guys from time to time. The answer we are giving is that we do indeed know of the tool, and it is a part of our toolbox. We haven't initiated it so far. It is in our toolbox. How big is the risk of inventory becoming obsolete, we are asked? Not big. Obviously, technologically, technology changes are taking place. We don't see revolutions when it comes to our, to the products, we are stocking.
We shouldn't be overly nervous about obsolete inventories. I think, this was the, our answer to the questions we have gotten from you so far. If no further questions, then we would like to say thank you for participating. Looking back to see you again, to meet you again during August for the second quarter accounts. Bye for now.