Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I am pleased to present CEO André Rogaczewski and CFO Thomas Johansen. Please begin your meeting.
Good day, and welcome to this presentation of Netcompany's results for Q2 2021. My name is André Rogaczewski, and I'm the CEO and co-founder of Netcompany, and I'm joined today by our CFO, Thomas Johansen. Before we get going, there are some important disclosures that I need you to read through. Could we please have slide number two, please?
I will pause here for 30 seconds and let you all have a read-through of these important disclosures. With that, can we please go to slide number three, please? The topic of today's presentation follows our usual layout, which is that I will first give you an update on the business highlights for Q2. I'll also go through our revenue visibility and our financial guidance for 2021. Once I'm done, Thomas will go through the numbers in greater details before we open the call for any questions.
Can we have the next slide, please? We continued the strong momentum from the last quarter into this recently ended quarter and grew top line by 21.2% in constant currencies, all of which was organic. This is very satisfying, taking into consideration that we are starting to see more of the deferred vacation not taken in Q1 being taken in this quarter, in line with what we had expected. Gross profit increased by 13%, yielding a gross margin of 35.5%, which was three percentage points lower than in Q2 2021.
The reason for the lower margin can be summarized into one single reason, and that is support of international growth. Thomas will go more into details with the mechanics thereof, but overall, we've seen a need to continue to support our international entities in establishing a solid foundation for both short-term and longer-term growth.
This has a negative temporary dilutive impact on margins. However, it sets us up for continued longer-term growth on the entire group level. That is what we believe is more important than short-term margins. The lower gross profit margin naturally impacts adjusted EBITDA margin to the same tune, and adjusted EBITDA was DKK 166.7 million, which yields a margin of 20.2%.
In addition to the gross profit-related impact to adjusted EBITDA margin, we also had non-recurring severance costs related to our U.K. operation in Q2, further diluting adjusted EBITDA margin. For the third consecutive quarter-over-quarter, FTEs grew by more than 500, actually 575 to be specific, and I'm particularly proud of our ability to continue to attract new employees and to retain our valued talent in a labor market that is increasingly tightened.
I believe this to be a testimony to our strong employer brand built over the last two decades, where we have always focused on delivering complex and important projects to our customers in both the private and public sector. Can we have the next slide, please? Continuing on the employee topic, the breakdown here shows where the 575 new FTEs have been hired.
We have added FTEs in all our units, and we have reduced the level of independent contractors in the U.K. to 14, which for all practical matters, means that we have concluded the conversion away from independent contractors to own employees in the U.K. The main intake of new employees was in our largest unit, Denmark, where FTE increased by 287 people. However, on a relative basis, the highest intake was in the U.K., where the level of our own employees increased by 39%.
Of that increase, around 15% was conversion of independent contractors to employees, and the remaining 24% was net new hires. In our two talent pools, Vietnam and Poland, we also increased our FTE level with close to 150 FTEs compared to the same period last year. Churn for the last 12 months was 18.3%, which was 2.4 percentage points higher compared to last year.
In Denmark, churn has picked up during Q1, and overall, we begin to see more movement of employees between different jobs, a clear indication that we're coming to an end to the COVID-19 spillover effect on the labor market. While we clearly enjoy a strong employer brand, we see increased competition for talent with digital competencies across all the geographies we are in. Churn also picked up in the U.K. and in the Netherlands.
In the Netherlands, the churn is at a high percentage level, but with limited employees actually leaving it. The amount of administrative employees measured as non-client facing resources was 5.99% in Q1 2021, compared to 6.8% in Q2 2020, and thus continuously decreasing towards our target, which is 5%. Can we have slide number six, please? We have won a number of larger multi-year contracts, both with different governmental agencies, but also with different private customers in various geographies, and I will mention a few here.
In Denmark, we've won the contract with the Agency for Labour Market and Recruitment, a contract which will lead to a modernization of the platform used for unemployed citizens. In addition, other of the agency solutions will be modernized. Also in Denmark, we've won a contract with the Agency for IT and Learning. This contract was a four-year new contract with a customer that we've already served for many years. In the U.K., we've continued to expand our presence with the NHS, following our award to participate on the framework contract that we succeeded to get onto last year.
More specifically, we have recently been awarded a two-year project to support NHS Digital in improving quality and data, which in the end will lead to better healthcare for the citizens in the U.K. Two new deals were signed in the Netherlands in Q2, one framework agreement and one where a current customer prolonged their cooperation with us for another four years. In addition, we've also signed another larger framework agreement in the Netherlands with a unit called Logius in the beginning of July, so actually in Q3, but I wanted to mention it in this setting too.
In general, there has been some delayed decision-making in awarding public contracts in the Netherlands following the election in the spring. With these recent wins in the Netherlands, we are confident that utilization will increase. Overall pipeline in all countries looks healthy, lays the foundation for continued growth throughout the rest of the year. Can we have the next slide, please?
The investment in terms of increased usage of Danish resources in Norway, the U.K., and in the Netherlands was continued from Q1 into Q2, as we firmly believe that this will give us a strong foundation for longer-term growth outside of Denmark. Revenue in Norway increased more than 47% in Q2, following the strong growth of 30% in Q1 on the back of the strong momentum we had in Norway in Q4 last year. Margins improved, also supported by the high utilization realized in Norway in Q2.
We see strong demand for our services in Norway. We have finally been able to get our employees back into the offices in our new headquarters in Oslo and our new office in Trondheim. In the U.K., we've seen a positive activity following the win from last year with the NHS. We've seen a growth of 22% in the quarter. We improved margins also. We see an interesting and continuously developing pipeline in the U.K.
With our finalization of changing from independent contractors to our own employees, we now have a foundation to really expand on. In our most recent acquisition, the Netherlands, the integration is progressing to plan. However, we are very negatively impacted by the election in February. There's still not a new government in place there. This has delayed decisions on larger tenders, which negatively impacted our revenue growth in the second quarter.
However, things are beginning to progress in the Netherlands, which the signing of a couple of new framework agreements is a testimony to. We are satisfied with the progression of our integration of the new markets, and we are convinced that they are solid foundations for significant future growth. Can we have the next slide, please?
The strong performance in all of our business units has increased the level of contractually committed revenues to close to DKK 3.1 billion at the beginning of July, which was an increase of more than 23% compared to the same period last year. As in recent quarters, we see improved revenue visibility in both the private and the public segment throughout all of our units. This leads me into our expectations for 2021. Can we have the next slide, please?
For our top line, we now expect revenue growth of between 18%-20% compared to 15%-20% previously. As we also mentioned at our Q1 earnings call, some of the growth we have had so far in 2021 is caused by deferral of vacation from the employees, as we see societies generally easing COVID-19 restrictions.
We expect that deferred vacation will be held, which in turn will impact our revenue growth and margin numbers negatively as expected. The underlying sentiment in the markets we operate in are positive, and we do have a better revenue visibility than we did last year, which also means that we have raised our expectations to the top line growth to the upper end of the guided range for revenue at 18%-20%.
Despite the strong performance in the first quarter, we still expect to have to invest in our entities internationally by utilizing Danish resources on international projects. Hence, we maintain our expectations to our margin at between 23% and 25% for the full year. With that, I will give the word to Thomas to take you through the financials in greater details. Please go ahead, Thomas.
Thank you for that, André. Like already mentioned, I'm CFO in Netcompany, and I will go more into details with the financial performance for Q2 2021. If we move past the breaking slide number 10 and straight into slide number 11 in one go, please. André has already spoken to our performance in general terms, I will go more in details with the performance in Q2. Revenue growth was 22.4%, positively impacted from currencies by 1.2 percentage point, leaving growth in constant currencies at 21.2% against Q2 2020.
All revenue growth was organic in Q2 2021. Gross profit margin was 35.5% in Q2 compared to 38.4% in Q2 2020. The lower gross margin was a combination of different factors, which I will elaborate on a little later. The common denominator, though, can be labeled as, "future growth-enabling investments." Administrative costs grew by DKK 26 million or 27.5%.
In that, a non-recurring severance payment of around DKK 7 million related to operation in the U.K. was included and adjusted for this. Administrative costs grew by around 20%, driven by normal costs associated with hiring new employees, cost for external advisors in connection with our new headquarter in Oslo and our new office in Trondheim, and in general, more costs related to employee-related activities following the gradual easing of COVID-19-related restrictions.
Amortizations have reduced by more than 60% as part of the intangible assets related to the FSN acquisition of 52% of the shares in February 2016 have now been fully amortized. Net financials was reduced by 58%, as both interest costs on our loans have gone down as we reduce the outstanding amount due, and also we have converted a loan related to our acquisition of Hunter Macdonald in 2017, denominated in British pound to equity, which has reduced the currency adjustment included in net financials too. Can we have the next slide, please.
Public sector revenue grew by 10.4% in Q2, driven by growth in particular in Norway, where revenue grew by 77.6%, and in the U.K., where growth was close to 14%. In contrast to the period up to 2020, revenue growth in Denmark was the lowest of the units in the public sector, this time at 6.5%.
This was, as in Q1, due to a combination of more larger-scale projects being won in the private segment in Denmark, and also a number of resources from the Danish public segment organization working on projects outside of the Danish organization. The usage of Danish resources on projects in other countries leads to lower margins in those countries, as resources in Denmark are more expensive.
However, it sets us up for future margin expansion, and the cross-usage of resources is an important element of implementing the correct Netcompany methodologies in the countries outside of Denmark. Adjusted EBITDA margin was 15.1% compared to 18.8% in Q2 2020, mainly driven by the increased usage of freelancers in Denmark, increased cost utilization, and more hours spent on business development. Can we have the next slide, please?
As in Q1, the private segment outgrew the public segment again in Q2 2021 and grew by 45%. The growth is broadly based from both the Danish, Norwegian, and the U.K. operation. Private segment revenue in Denmark grew by 40.7%, where the growth in Norway was 46.7%, and the growth in the U.K. was 46.7%.
As the level of private segment businesses outside of Denmark is still limited, the cross-usage of resources from both the private Danish operation does not impact the private segment in the other countries to the same magnitude as for the public segment, and hence we do not see the same level of margin decrease in the private segment for the group as seen in the public segment. Consequently, margins in the private segment increased in Q2 2021 compared to Q2 2020. Gross margins increased to 40.3% from 39.6% last year.
Adjusted EBITDA margins was unchanged at around 26%. Can we have the next slide, please? All units but the Netherlands grew revenue compared to Q2 2020. The group grew revenue by 21.2% in constant currencies in total. Denmark grew by close to 20%, despite the fact that a significant number of resources were working on projects in the other operating units.
The growth was, as mentioned, based on strong performance in the private segment. Norway saw the strongest growth in the group and grew by 47.1% as a result of the wins on the public segment during Q4 2020, which has led to an increased utilization in Norway. In the U.K., revenue grew 22.3%, driven by our relationship with the NHS, but also with other large existing customers.
In the Netherlands, revenue declined 2.9% following lack of decisions on a number of larger public tenders following the election in February. It was only towards the very end of the quarter that these tenders were finally awarded, and Netcompany managed, as André has already mentioned, to get on two of these. Can we have the next slide, please?
Gross profit margins are three percentage points lower than for Q2 2020. There are a number of factors impacting the gross profit margins, and they fall in three groups with the same common denominator, future growth-enabling activities. Firstly, we have increased the usage of freelancers in the Danish operation by 40% compared to the same period in 2020. This has impacted gross profit margin negatively by 1.5 percentage points.
Second, we've had an increased level of cross-utilization on projects in the group, whereby senior resources from the Danish organization have been utilized on projects in the U.K., in Norway, and the Netherlands. The amount of senior Danish resources currently on international assignments is around 100. This has impacted gross margin negatively by around 1.5 percentage points.
Thirdly, we've spent more hours on what we call business development activities in the second quarter of this year compared to the same period last year. This covers tender writing activities, enhancing of our GovTech framework, investing into solutions delivered that potentially can be developed further into platforms, and so on. When we do these activities, the level of utilization declines, leading to lower revenue, but on costs that are still maintained. This has reduced gross profit margin by around two percentage points.
Offsetting these negative impacts to gross profit margin, was significantly improved performance in the U.K. and in Norway, which together improved group margins by a little more than two percentage points. While the activities related to the increased cross-utilization have a short-term impact on margins, it is our firm belief that they are the right ones to make, as they will enable the units outside of Denmark to generate growth at a rate which will sustain the strong growth of the group as seen historically.
Can we move to the next slide, please? Adjusted EBITDA margin for the operating entity decreased by 4.1 percentage point in the quarter. Most of that is due to the reduced gross profit margin that I just explained. In addition, a non-recurring service payment in the U.K. accounted for 0.8 percentage point of the 4.1 percentage point reduction in adjusted EBITDA margin.
We did see increased costs related to employee activities, and this was expected, and we are actually pleased that it is now possible to have more face-to-face activities with our employees. We expect these type of costs to continue to increase through the remaining part of 2021. Can we move to the next slide, please? Free cash flow was negative DKK 10 million in Q2 2021, compared to positive DKK 103 million in Q2 2020.
The main reason for this was the payment of DKK 96 million due to the Danish Vacation Foundation following new vacation law implemented in Denmark, whereby employees earn the right to their vacation on a monthly basis rather than in the old model, where it took one year and four months to have the right to paid vacation.
The payment of the amount due related to the vacation for the Danish employees is voluntary for all companies in Denmark. However, if you, as a company, do not pay the amount, you will have to pay an interest to the government. Given our strong cash position, we have chosen to pay the amount due. Day sales outstanding were DKK 65, in line with the level in Q2 2020.
In general, DSO tend to be a little higher around Q2 as the end of June is also the high season for holiday with many of our customers. Work in progress has increased by 16%, and accounts receivable around 26%. Together, they increased by 21.9%, in line with revenue growth. In Q1, we repurchased own share.
Sorry, in Q2, we repurchased own shares of around DKK 50 million, and we've invested a further DKK 25 million into the JV we have with Copenhagen Airport. Despite all of these payments, cash at hand still remains high at DKK 179 million. With that remark, I've concluded the detailed financial analysis, and we'll now open up the call for questions. Can we move to the Q&A slide, please, and open up the call for questions? Thank you.
Thank you. If you'd like to ask a question, please press zero one on your telephone keypad. If you wish to withdraw you question, you may decide by pressing zero two to cancel. There will now be a poll for question registered. The first question comes from the line of George Webb from Morgan Stanley. Please go ahead. Your line is open.
Morning, André and Thomas. I hope you are doing well. A couple of questions on my end. Firstly, to touch on that Danish resource cross-utilization topic, and as you've mentioned, that stepped up this year, and you expect it to continue for the rest of the year. Can you give a bit of background on what prompted you to step up that cross-utilization in Q1 and Q2 of this year in particular?
Is that down to anything around the progress the non-Danish business units were making? Was it tied to the whole working progress being made easier by remote working? Or was there any particular catalyst there? To what extent is this still a short-term measure that only lasts this year to accelerate that build-out of capability? Or could it continue into 2022?
Then just secondly, as a background question, can you talk about what level of wage inflation you've been seeing in prior years in your business and what you're expecting for this year as a whole? Thank you.
Yes. Thank you so much, George. Well, basically, the usage of Danish resources, in particular in Norway and U.K., is a result of complex high-end projects where we need Danish resources to make sure that we get things done the right way. As you know, telling about a methodology or showing a methodology is not enough. Sometimes you have to work with it in order to make sure that the people you train do it the right way. The whole idea is to have more Norwegians, more British people, and also more Dutch people knowing this and using it the right way, because then they can teach.
Again, they are employees. It's actually on a positive background because many of the projects that we've won, particularly also in the public sector, requires us to use some of the best people, and that's investing into future growth. The question in regards to whether it will continue in 2022, well, the reason why we're doing it now is because many of these projects are being defined, and also many of the employees we've hired in Norway and hired in the U.K., they need that now in order to reflect and teach onwards to the people there.
Right now, what we're looking into is at least this year, and then hopefully we'll have trained enough so the competencies in these markets are on a substantial level. Depending on the growth and the type of projects we get there, we might need to help more or less, but right now we've chosen to invest into competencies at specifically Norway and in the U.K. When it comes to the wage inflation, Thomas, do you have any projections in regards to that?
Yeah. Thanks, George, for the questions. Typically what we do in Netcompany is, once a year, we adjust the wages for all of our employees, and we have our own, "rhythm. " The ones that are well-performing will or have historically been given salary increases of between 9% and 12%, which even in a tough and tightened labor market is still competitive.
Now, we can do that and still maintain our performance, given the usage of the pyramid structure and the ongoing hiring of new employees. When we look at it on a full year, cost per employee is fairly stable. Now, in terms of what the wages are going to look like next year, still premature to look like or to say anything about, but during the year, we have not increased the wages midterm or what have we. We've managed with our model so far.
That's really helpful. Thank you. Maybe just one quick follow-up. Just in Q1, attrition was sub 16% LTM up to over 18% in Q2. Do you expect that to get worse from here, or is that now a level that you can plateau at even in a tough labor market?
I think it's a result of COVID being more or less over, at least in the minds of people. We have also seen a smaller churn when we were in the midst of the pandemic. I think it's a natural reaction. Well, it's difficult to say exactly what's going to happen, but right now we are able to attract new talent. We see no change in the satisfaction of our employees at the moment. I think those two things indicate that we still have a very positive work environment and people like to be with us. We're definitely hoping that this increase in churn is just a result of, let me put it this way, that the labor market is free again in a sense.
Thanks very much.
Thank you. The next question comes from the line of Claus Almer from Nordea. Please go ahead. Your line is open.
Thank you. A few questions from my side. The first question goes to the high tender activity mentioned in the report, and I guess also in this presentation. When do you expect these projects to be awarded? Is the nature of the projects that you are tendering for, especially outside Denmark, changing in structure, size, and so on? That would be the first one.
Yeah. Thank you for that question. I'm actually delighted to say that the nature of the projects and also the size of the projects that we're bidding for is, they're getting more complex and they're also getting larger. That goes both for Norway and the U.K. Especially when it comes to the GovTech framework and our public tenders, you need to know exactly what you're doing and you need experience.
That's also one of the reasons why we've chosen to invest some of our Danish resources into that. It's on the basis of a positive development and theoretically, you can continue to grow in Denmark by more than 20% for many years. Practically, I think it's a good idea to invest into winning larger projects in the other markets.
When it comes to when these will be awarded, well, typically it's on six months, typically two quarters from tender writing activities to winning. That's approximately six to eight months, typically when it comes to the public tenders. Some a bit quicker, some a bit slower, that's typically the timeframe.
Okay. That makes sense. The second question goes to the employees. The number of employees is up by something like 22% year-over-year. You also mentioned that you are adding in Denmark external consultants. What is the total amount of client-facing resources up year-over-year?
The client-facing resources is up by around 0.8 percentage points. The non-client-facing, 5.9% compared to 6.8% quarter-to-quarter. Around a little bit of one percentage point, Claus. Clearly, we spent more time, as André say, on activities related to tenders. We spent more time with Danish resources on projects in U.K., Netherlands, and Norway, and that does not yield the same revenue, so that's why there's not a one-to-one match on that in top-line growth.
Does that include the external consultants you added in Denmark?
Yes, they are included because they are fee billers. Everything that is fee billers is included in that. The freelancers, the 77 in Denmark is included, and the independent contractors, the 14 that is left in the U.K. are also included because they're fee billers or fee generators.
Okay. Sure. This growth, if you look at it year-over-year, more than 20%. If you try to match that with your implicit guidance for revenue growth in the second half, then you have grown your number of employees somewhat more than that is reflected in the guidance. Does that mean you are expecting to keep using a lot of resources on tendering activity? How do you try to match this development in employees and revenue growth?
Yeah, no, I think, in general, what we said in Q1 and what we've also highlighted here, is that part of the growth that we had in the first half of the year is also due to the fact that our employees have deferred some of the vacation. That means that some of the growth that we've had in Q1, you can say is something we've borrowed from, or in the first half, is something we've borrowed from the second half.
Irrespective of the fact that we are more FTEs, and I fully understand your logic, which is correct, then we do not expect the full impact of that in the second half of 2021 because there is still some deferred vacation that will be taken, and that will clearly have a negative impact on the potential growth. I understand your logic, Claus, and the reason why it's not a full one-to-one spillover is that there is still some deferred vacation to be had in 2021.
Okay. Thank you so much.
Just a comment from my side. I could just see that on the presentation, I was referring to two slides that are in the appendix. We will update the latest version, but the slides that were missing and the reason why you could not potentially reconcile ongoing is the revenue in public and private, and they're the first two slides in the appendix. That's where they are. Thanks.
Thank you. The next question comes from the line of Yiwei Zhou from SEB. Please go ahead, your line is open.
Hi, André and Thomas. Thank you for taking my question. I have two left here. You mentioned the high attrition rate in the Dutch operation. Would you add a bit more color on this? Are you seeing more senior in the management level employee leaving the company, or is it more consultants are leaving? I'll do two questions one at a time.
Okay. When it comes to Dutch operation, as you guys know, it's the most recent acquisition. For sure, we've also taken some deliberate action in taking some people out and putting in new people. We've also done that. It is a natural thing that we do. It actually also happened in Norway and U.K. if you look at it historically, so we're not too worried about that.
To add on what André is saying, there's also a little bit of timing in it, Yiwei, when you compare and when you calculate these churn rates. From the time people leave us and then until we've hired new ones, if that happens in different quarters, then of course, the quarter where we have leavers but no new starters, the churn will by pure math, be higher. On the last couple of months, we've seen inflow of staff in Holland to the tune of 8- 10 new employees per month.
Yeah.
Okay. Can I just follow up here? If you compare to Denmark where you have a very strong brand, do you see it more challenging for you to hire people in this new market?
Of course, you don't have the same brand as you have in Denmark, but it's similar to what we did in Norway and also in the U.K. You got to start up by working closely with universities and take it step-by-step, then over time, you will then build up your brand. That's no different from the Netherlands than it has been in Norway and in the U.K.
In Norway, for instance, we now have a much better brand than we also do in the U.K. It actually follows a pattern because in the beginning, you don't need that many people, relatively. Then when you start building up the brand and the activity starts to yield results, you can hire even more. We're following that path as we normally do.
Okay. Thank you. Very clear. My second question is regarding the utilization rate for Norway and the U.K. It is positive to see the gross margin improved in Q2. How should we compare the utilization rates to Denmark?
We don't disclose the utilization rates or ratios on a country-specific level. On the group, historically, and that's also the case now, we've had utilization rates of between 86, 87.5-ish. Both the U.K. and Norway have enjoyed increased utilization rates during Q2, which of course is also leading into improved gross margins. Neither the operation in the U.K. nor Norway are at an accumulated level to the same to the group on utilization year to date. They are picking up, and Norway is a little bit ahead of the U.K.
Okay, great. Thank you. I jump out of the queue.
Thank you. The next question comes from the line of Gianmarco Conti from Deutsche Bank. Please go ahead. Your line is open.
Morning, André Rogaczewski and Thomas. Thanks for taking my questions. I have a few. Maybe just one going back on the Danish resource. How are you actually addressing the now recurring problem of having to shift these resources to other geos, which will lead to lower margins, as well as having to hire freelancers?
My question is, could this be a recurring event, potentially posing downside to your guidance? Do you actually plan on hiring senior staff in those geos to essentially replicate the Danish business? That's my first question. My second question is, in what geos did you actually invest in for business development activity, such as tender writing? And then I might take a follow-up.
Well, thank you for those two questions. I think the first question is, it's about, again, how to utilize Danish resources in the other geos, and will that continue, and will we hire senior staff in those geos? Of course, we will also hire senior staff in those geos, and we will also, I think that's very important, make sure that the next generation of new hires in these geographies, because we also hire consultants and senior consultants that are taught off by Danish managers to do what they have to do in order to succeed with the projects we win.
This is a long-term investment because we want to be successful in delivering these projects to the customers in both Norway and in the U.K., where we are spending most of the time right now. That's because we know that winning and delivering projects will yield a long-term relationship with our customers. That is an investment into our customer relationship building and an investment into teaching the next generation of local staff how to do, and that the best way to do it is, specifically on complex projects, is by doing it together. That's what we do.
As I also said earlier, when you've done it with one person can typically grasp maybe two or three persons on the level lower. By doing so, we will create more people in the local geographies that are capable of doing the same exercise again after the Danish have been around.
That's what we're doing right now, specifically in the government sector, specifically investing a lot of time both in Norway and in the U.K., where I think we've had a breakthrough on several verticals in government. I think it's a sensible thing to do in order to create the necessary growth there and the potential of growing even more in those countries. Sorry, I think I forgot the second question. Maybe I didn't write it down. Sorry about that.
Yeah. The second question was, in what geographies did you exactly invest?
That was the U.K. and Norway specifically, yeah.
It was in the U.K. and Norway.
Yeah, also because I mean, the Netherlands, it's not that we're not helping the Dutch, but they are still a small operation. What takes more effort is, of course, both Norway and the U.K., where we've been for a longer time and where we see the demand of more complex Netcompany projects and engagements.
Okay. Just to follow up. How many freelancers did you actually add in Q2, and how many did you have in Q1? I'm just trying to understand per freelancer, what would be the margin impact on a quarterly basis?
From Q1 into Q2 or from Q2 to Q2?
How many freelancers did you have in Q1 2021, and how many did you have in Q2?
Okay. Q2, we had 77. In Q1, we had 59.
59
In Q2 2020, sorry, we had 40. No, 44 or 42 and 38, and then 77 in Q2 2021. The increase from Q2 to Q2 was 40. 40 more net freelancers. Sequentially from Q1 into Q2, the increase was 18.
Right.
The level of normal freelancers, sorry, Gianmarco, the level of normal freelancers is, historically, we've been somewhere around the level of 40-ish in the group.
That's actually very helpful. Just to follow up and understand that. On the first question, I was talking about the Danish resource. Is it not just possible to effectively hire someone, some number of senior figures, for example, in the U.K., so you don't have to basically export people from Denmark? Is the level of the complexity of the projects that you are addressing, for example, with the NHS, so much company-dependent that you need people who actually know how to navigate the modality of how you do consulting at the company?
Well, the thing is that there's a reason why we actually create those margins that are industry-specific high. The reason why we create these margins is because we actually deliver in time, on budget, within the required policy. I know this sounds a bit bullish, but you really need to know.
You have to be working with this for quite a long time to understand how to do and how to operate and run a project that comes at a time. You see it again and again in the industry. You can have experienced people that you hire, and you put them in charge of a project, and even though they've had five or 10 years of experience other places, they will not deliver it on time and on budget and within the required quality levels.
We know from experience that taking one or two very talented and great project managers from, and it's not only Denmark, but primarily Denmark, taking some of those resources that have done this before and several times will yield a successful project and then yield the margin we need. Yield the people that we need to build up in the local geographies. To answer it shortly, no, you cannot just hire experienced people in the lower geographies and then think that after reading the manual, they will run a Netcompany project the same, exactly the same way as we do with experienced resources in Denmark.
Thank you. Just a reminder that if you would like to ask a question, please press zero one on your telephone keypad. There will now be a further pause while questions are being registered. The next question comes from Mads Quistgaard from Carnegie. Please go ahead. Your line is open.
Yes. Thank you. I have two questions. I will take them one by one. My first question is on the gross margin. You have two percentage point impact, which is explained by increased business development in the Danish public sector. Is focus tilting again towards the public sector in Denmark? Is it mainly tender writing activities which drag on the margin, or is it from building on the GovTech framework? That's my first question.
We are definitely, even though the private market has been growing a lot in Denmark, we are still very much into the public market as well, and we see a great deal of interesting tenders coming up. We're definitely riding on that too. When it comes to the GovTech framework, as you know, this is a strategic asset for us, and we're using it across borders. We're also investing some time and resource into that. Most of our time spent is on tender writing or business development directly associated to customer engagements. That's the closest I can get to an answer to that.
Okay. Perfect.
Thomas, do you have anything to add?
Thank you.
Okay.
The next question comes from the line of Frédéric Boulan from Bank of America. Please go ahead. Your line is open.
Hi, André. Hi, Thomas. Good morning. Two questions, please, on my side. If you can discuss the competitive environment, especially outside of Denmark. Are you seeing some of the pressure on the labor market starting to be reflected in a more favorable pricing environment? Secondly, around, particularly the U.K. and the Netherlands, any specific verticals you're focusing on or where you're seeing a strong momentum? I've seen the U.K. as being very much driven by the NHS, any more color on verticals would be very useful. Thank you.
Yeah, I think when it comes to favorable prices going up on our services and because of digitization being more and more controlling in businesses, I think it's very difficult to predict that. I think in the government sector, there's a very high competition on all tenders. In the private sector, one might expect that some prices will go up if the resources are becoming more and more scarce. Looking at it historically, I think if we look back over the years, we haven't seen a tremendous price development in service. It has been quite stable, really, and that's what we've been planning with so far.
When it comes to industry specifically, I think the GovTech framework, if you look into that framework, you see there's a lot of focus there on both grant management solutions, but also on the whole tax and customs part, and a lot of on self-service and larger portals for self-serving solutions for citizens. That's where we are definitely putting our focus, both in the U.K. and in Norway, and of course, health, as you mentioned yourself, the health sector, which is already at somewhat where we penetrated both Norway and the U.K.
Okay. Thank you very much.
Thank you. We have a further question from Mads Quistgaard from Carnegie. Please go ahead. Your line is open.
Thank you. Yeah. My second question, is it possible to give an update on Sweden? I guess, can some of the margin drag be explained by tender writing activities into Sweden? Maybe just to explain, are you in the middle of tender writings in Sweden? Are you awaiting the results of certain tenders in the public sector? Thanks.
Well, we are also writing some tenders to the Swedish market. That's the closest I can get to that. We have an open opportunity to go into Sweden also on a greenfield basis if we want to do that. I cannot come closer to that. Now, when we see something interesting coming up in the Swedish market that we think we have a good chance of winning, of course, we will invest into tender writing there. We take it on a case-by-case basis. Sorry, I can't get into more detail than that.
No, that's great. Thank you.
Thank you. Just a final reminder that if you would like to ask any final questions, please press zero one on your telephone keypad. We have a question from Claus Almer from Nordea. Please go ahead. Your line is open.
Thank you. Yeah, just a few follow-ups about the Danish operation. We saw that the Danish operation was down profit-wise year-over-year. Should we expect the same for the second half this year? That will be the first.
Say down, Claus, which things are you referring to?
Sorry, EBITDA. On the EBITDA level.
On EBITDA level, it's correct that the Danish organization was down year-over-year. There are some costs that are coming in on administrative level, as also alluded to in the second quarter. Also remind you that Q2 in 2020, we had a significant reduction of costs since we did not use any travel or anything. Denmark closed down on the 11th of March 2020. Seems a long time ago. Q2 was kind of low. We will increase or continue to increase cost during the second half of the year, that is all reflected and incorporated also in our guidance for the full year, where we maintain with the 23%-25% margin.
Okay. Also mentioned during this presentation that you are transferring resources outside Denmark, thereby having a negative revenue impact. Does this mean you also tendering for less projects in Denmark, or is actually more a timing of revenue in Denmark, i.e., we will see more revenue, everything equal, going forward?
That's a question with many moving parts, which makes it difficult to give you a straight answer. In terms of revenue in Denmark and potential going forward, if you look at it another way, we have around 100 people from the Danish organization doing jobs in international units. We've substituted them with 44 more freelancers compared to Q2 2020. That means that could we have had more top line in Denmark?
Was there more work if we had substituted the full 100? Most likely. If we would've done that would've just been pass-through of cost and no real meaning to do so. The level of FTEs, which is a good indicator for how the future will look, is looking promising in Denmark also. There's some timing in terms of when we write tenders and when they come, and that's how it's always been.
That is particularly so in the public sector. We continue to focus on larger potentials in the private sector, which also looks promising for the remaining part of the year. That's as close as I can get it. I think you wanted a more detailed question. We cannot be more detailed at this point in time.
Fair enough, Thomas. Thanks.
Thank you. We have no further questions, so I will pass back for any closing comments.
Well, thank you so much, and have a very good day.