Good morning, and welcome to the trading update of Boreo Plc for the Q2 of 2024. Before we head off to the traditional presentation, a note to inform and recap basically the changes that we announced last Friday. So we have appointed, following the information from June, Aku departing and leaving the company later this autumn. We have appointed Jesse Petäjä, who heads our... who has headed our M&A practice since year 2021, and been in charge of, or co-headed our technical trade division during the last months. He is appointed as the new CFO from September 1 onwards.
So I would like to take the opportunity to thank Aku for the good service and wish him all the best for the future. Aku has had a great role in the last four years. He joined the company in 2020 when the firm was still Yleiselektroniikka, and I think we had, at that point of time, seven or eight companies. So a lot has happened since, and we all wish Aku the best for the future.
Thank you.
With that said, we continue to the traditional, traditional item. So as normal in these updates, I will start off with some highlights, and then Aku will dig into... dig deeper into company performance and group financials as well. So as the headline of our Q2 report noted, we view Q2 as a step in the right direction. We had a tough or a poor, weak Q1, where following a significant sales decline, profits well fell to EUR 0.6 million in Q1.
Now, even though sales continued to be under a significant pressure, we were able to restore the company's profitability back to the historical levels we have been in line with last year. So, pleased with the work that our companies and we have done together to secure profitability, and an achievement of 7% operational EBIT margin is a good result under these circumstances. As said, I mean, we will talk about those the affecting contributors more in detail in the next slides, but cost actions, the minimum EUR 1 million annual cost savings that we're targeting, we went well underway to achieve those savings.
They contribute significantly to the positive result, and then also the successful management of gross margins during the first half of the year. The outlook going forward remains challenging. We don't expect the market to significantly help us in the latter part of 2024. However, through the order books we have in place in our companies, there is solid ground, especially towards the end of the year, to support the performance and an improving performance going forward.
However, if we look at the overall situation, the demand outlook outlooks in our companies, we see that we're not going downwards anymore as we did in Q4 and Q1 this year. But we have averaged the bottom and expect to gradually continue to improve performance on the sales side as well. Priorities continue to remain as they've been during the last couple of quarters. Profit generation, working with our existing companies, strategy. I mean, not only cost optimization, not only, let's say, securing short-term profitability, but continuing to invest in long-term profit growth and good strategic steps taken in many of the businesses in the last months.
Leverage is too high compared to where, I mean, versus where we would like it to be, at 2.8x at this point of time. Considering the pressure that the hybrid instruments also bring to our cash flow, the target is to continue deleveraging in the next months and quarters to come. Briefly, long-term targets, the same headline as in Q2, temporarily far away from long-term targets, so priorities being as I explained. I mean, we have, since 2020, improved and grown results over 20% per annum. So overall, if we look at it, significant growth of sales.
However, as the bars clearly show, from Q2 2023 onwards, tough time in generating earnings. And then because of that, basically now we're looking at a -12 to -20 on rolling 12-month basis when it comes to our growth rates on earnings. Returns are stable. The profitability due to the restoring of the profitability back to the levels where we were a year ago, balance sheet continues to be, as I mentioned, too stretched, and we're working our way to deliver de-leverage in the coming quarters.
If we look at the performance, first of all, from a sales point of view in a bit more detail, now we are at roughly EUR 144 million of rolling twelve-month sales, compared to EUR +170 million, where we were twelve months, fifteen months ago. The decline is due mainly to the pressure that is there in the market to our construction businesses. So looking at the EUR -8.5 million revenue decline, of that, close to almost close to EUR 7 million is from our construction businesses. So Putzmeister operations, mainly challenges more in here in the Finnish market, also quite quiet in the Estonian market compared, whereas more positive outlooks in Sweden.
In addition to that, the Machinery construction business, revenue levels are low. The same goes with our Multitel business here in Finland. However, on the result side, the strong gross-margin profiles and the renovation in construction industry part continues to support the profit generation there. There are some positive developments in part of the company. So if we look at, for example, FNB, where we had a tough 2023, due to reorganizations, implementation of a new ERP system, and so forth. Now, if we look at already the last 12-month sales, FNB starts to be on the historical levels where it was at the point of acquisition in 2021. Very good work. I'm very pleased with those developments.
Filterit had a strong quarter in Q2. Outlook continues to be rather stable. Infradex, our thermal camera distribution business here in Finland, the same thing, as well as our courier logistics business, ESKP, here in Finland. So in more and more positive outlooks going forward, if we look at the sales trends we expect to see in the next quarters, especially towards the end of this year. The most positive news from the report today is basically the margin development. So two things: gross margins first. You can see here in the graphs, especially on the side of the technical trade division, a heavy uplift in our gross margins. I mean, this is a result of a couple of things.
A good management and good development on an organic basis in many of those technical trade companies. The sales mix impact is the biggest contributor. So, I mean, in a situation where there are lesser of big machine sales, more big machine sales with low margins, increased share of aftermarket business with higher margins, this is what happens for those companies. So, of course, in a good way, a sign of a certain level of resiliency of the portfolio in a tough environment where the margin and the business mix overall supports margin development. But very happy about that.
Going forward, as we assume, there will be more machine deliveries at the end of the year, also next year, then there will be surely some sort of a decline in those margins on the other hand. The other positive thing where we have succeeded well is the cost-saving actions that we started to implement at the already Q2. Well, basically a year ago and at the end of 2023. Cost decline now in Q2 as planned, even a bit more than we expected. We have communicated a minimum target of EUR 1 million, starting from Q2 2024 or basically H2 2024 onwards. I believe we are well underway to achieve those savings as well.
Continue to monitor and adapt to the market situation. There are also growth investments we're doing in a number of our businesses, but all in all, we are significantly below in our fixed cost levels compared to a year ago and also the beginning of this year. Cash flow, on the other hand, I mean, we had a really strong quarter. Q1 operational cash flow was about EUR 6 million. Now in Q2, negative by EUR 1.9 million, as expected, except for a few companies where some inventories did not decline quite as we planned. However, quite close to the targets we had when entering the quarter. So trade working cap at the moment at around EUR 82.8 million.
However, now in Q2, mainly as a result of accounts payable coming significantly down, so inventory levels are continuing to trend downwards, and I believe there will be, in the coming quarters, a development that we expect to see towards the EUR 25 million mark that we have communicated in the last quarters as well. Overall, I mean, last twelve months, EUR 12.1 million of operating cash flow shows that we've been able to manage our balance sheet in a quite good way during the tough times and decline of the market. Returns very briefly look stable, quite mediocre as said, we're already in the very beginning.
So return on trade working capital that we measure in all of our companies at the group level, quite stable. Profitability has been declining these numbers downwards. Cash flow, on the other hand, and release of working capital to the positive direction, this continues to be the metric that we use in our steering going forward. Final slide from my point of view, looking at the, I mean, summarizing the views towards the future. So, as I mentioned in the very beginning, we don't expect a significant change to happen in the marketplace during the second half of the quarter. We have a certain evidence through our order books that there will be a better time ahead.
In particular, for example, the significant deliveries that we were able to secure in our Putzmeister operation in Finland, with one of our major customers there, delivery starting expected to start from Q4 2024 onwards. Also, Floby Nya Bilverkstad, a good development with regards to order book. Milcon, our defense industry business, also had a tough H1, but expect that H2 will be significantly better. So order books support the development that our view, that we expect to be able to perform in a decent way, even though the market conditions overall continue to be tough. Cost actions, the EUR 1 million, I think we're, I mean, very secure on that.
I believe there's a fair chance that we will achieve a significantly higher number than the EUR 1 million, going forward, but we want to be conservative in terms of managing the expectations there, as things can happen when working with cost-saving initiatives. However, target to come out with a much higher saving number than the EUR 1 million that we communicated this far. And also, I mean, just to note, there are a number of companies which continue to have a stable outlook there. The construction businesses, or the whole that the construction business as we that cause to our revenues at this point of time, continues to be there.
However, on the positive side, especially in the Putzmeister business, we have not lost our dominant market share. We continue to be number one in all of our markets, in the three markets. And once the market stabilizes or comes back, we expect that our position will be even stronger than in the future. So that overall, we see that short-term outlook is, say, decent or somewhat stable. However, a significant improvement potential is there when the market starts to help us, on the demand side as well, a bit. So I would end with that and hand over to Aku for further review. Aku, please.
Okay, thanks. As earlier in the quarterly releases, let's dig into a bit more on the business area comments. A bit of a repetition, however, good to note that despite of, as Kari mentioned, very material drop in sales compared to Q2 2023, where in our case, it normally comes from different companies, but now it was clearly focused on the Putzmeister business, roughly EUR 5.5 million negative compared to last year. And then mainly the rest come from the Baltic operations in the electronic side. So it's more focused on certain businesses, certain companies, this time.
which led actually to the right-hand side picture that as we can see, margin improved clearly from the comparison period. Normally, we have been roughly on a 7% or a bit more, 7% level in Q3, but now we reached that in Q2. Thanks to the mentioned items by Kari already, that we mentioned also in the report, cost improvement actions, performance improvement actions that have been initiated. On the other hand, the share of lower margin business decreased now in Q2. And then we had some earn-out reversals also impacting positively on the Q2 result, plus then sales mix and company mix, which also impacted positively on the margin.
Also a bit longer-term trend curve that we have used to present earlier. Direct cost and indirect cost ratios, very good performance continued in the left-hand side graph. Direct cost ratio continued to decline and basically same reasons that were already mentioned have been impacting on that positively still. Whereas in the right-hand side indirect cost ratio continued to increase, and that is mainly or only because of the drop in the top line. What has to be noted here in the right-hand side curve is that if you look at the absolute rolling 12-month indirect cost amount, that actually decreased now first time during the time series of 3.5 years that we see here.
And that was because of the cost-saving actions that we have initiated now in the first half of the year and already in the end of last year, and that is expected to continue. Then looking into the electronics first, highlight definitely is the margin improvement. Clearly improving from the previous quarters and from the Q2 2023. In Yleiselektroniikka in Finland, a good development supported by the recent reorganization actions and cost saving initiatives in the Q1 of this year. In Noretron, on the other hand, outlook is moderate and we have low sales impacting on the performance. Milcon still slow the first half of the year.
However, the defense industry is supporting the outlook and the demand in the mid longer term. Infradex, good solid performance, and also outlook is stable. SSN were above last year, however, it's still far from our expectations, and the reason is the same as in the previous quarters: mainly due to the main customer, investment holiday, which impacts negatively on the sales. Delfin, is the only inorganic part now in the Q2 report, as it was... It was not still included in the group structure in Q2 2023. Recent result, with also stable outlook and the investment program, that we have been initiating there is proceeding according to plans.
As mentioned before, Baltic businesses in electronic side have been struggling on the lower sales upon the post-COVID record high sales that we saw, especially last year. Capital efficiency stable compared to the Q1 2024. A big decline during the past quarters. However, that was also supported by the performance actions that have been initiated. Cash flow generation has been continuing positive as we have succeeded with the trade working capital release there. Then moving on to technical trade, same message here. Profitability improvement compared to the comparison period, but a lot differentiating between the businesses and between the companies.
Machinery Power here, if we look at the first half of the year, it's on par with last year. Q2 was a bit lower compared to Q2 2023. Moderate or decent outlook, stable outlook, I would say. Order books are still on a good level, although a bit below the beginning of the year. Construction business have been struggling during the past quarters. However, now we see positive signs, especially in Multitel, supported by some parts of the construction industry where the company is focusing. And then from the welding and metal machines business in Machinery, first with Fronius. Modest performance. Market outlook is kind of waiting.
It's an investment or CapEx-driven business as the metal machine business in Machinery, so customers are in a waiting mode still. However, especially in Machinery, Q2 was ahead of last year, supported also with some postponed deliveries from the Q1 of this year. J-Matic and Filterit, especially Filterit, one big delivery during Q2 supported the numbers, and J-Matic had a bit slower quarter as in Q1. Then from the Putzmeister business side, as mentioned before, in Sweden, the result was still good, supported especially by the aftermarket business, although the number of deliveries of the new machines was low.
Very good order book still, which expected to support our performance in latter part of the year, especially in Q1, Q4. However, in Finland, a very slow market during the first half of the year and also in the end of last year. And there are blurry outlook, I would say, soft outlook in tough market environment. In Estonia, relatively low activity, however, we are doing positive step to strengthen the presence in the country. As mentioned before, FNB, which was struggling the whole 2023, basically, with the ERP implementations, with the delivery challenges, and so on, those are now one and strong result again in Q2, supported by the good order book going forward.
Very stable performance in our logistic business in ESKP continued in due to stable volumes in the transport business. However, still some cost pressures that will impact on the profitability. And final slide, left-hand side, earnings per share, operative earnings per share in light gray color, and the operational net cash flow per share. And as we can see, very high bars, dark blue bars during the past quarters, positively impacted by the releases in the working capital, impacting positively on the cash flow.
Now, as we said already in Q1 bulletin, that Q2 will be kind of normalized, and because of that one, and because of the timings of the trade working capital items, now the cash flow was also in the Q2 negative. However, H1 is very much in par with last year, which is good. And operative earnings per share, EUR 0.21, compared to EUR 0.29 last year, and that was impacted negatively by the hybrid bond interests. On the right-hand side, return on equity curve, which has been in sliding trend now on Q1 2023, and basically the...
That's because of the performance and moderate net result together with the increased equity due to the hybrid actions we have done in the beginning of the year. So I will end with this slide and moving on to Q&A.
Okay, thanks, Aku. There are some questions. Let's maybe take first one that you can continue. There was a question on interest rates. So interest rates have started to decrease during the summer. Will the decrease in interest rates benefit Boreo's result at the end of the year or next year?
I would say that both. So it will gradually start to see positive impacts now. I would say already in Q2 a bit, but now going forward. If we are still in the lower interest environment in Q2 and forward, definitely we will see some positive signs on that. We have to, although, remember that we have still some hedging in the loans, which have been stabilizing the interest increases in the past also. So the lower interest rate will, on the other hand, impact negatively on the valuation of the hedging instrument, so that will have some impacts. But in mid-term, definitely we should see some lower interest costs.
Mm-hmm. For background, I mean, the interest rate adjustments are done on a biannual basis, so two times a year. So that's basically the lag that we might see once if it is so that interest continue to go down. Let's then continue forward. A few questions on expectations going forward. I mean, let's take this one. If you compare your position now compared to your expectations in the end of 2023, did H1 go as you expected? No, not quite. I mean, we did end up below our own expectations for H1. Not overly dramatic, or less on the profit side, but more on the revenue side.
So, once we were looking at the world at the end of 2023, we did expect a challenging market environment. What it then has ended up being on the demand side has been even tougher. On the other hand, I think we have succeeded better than we expected, in terms of reducing cost. In managing our balance sheet, we are roughly on schedule, now in Q2, slightly below due to single deliveries of machines that we expected to happen, but broadly, the trend is down, as mentioned, with inventories and so forth. But slightly below expectations, yes. Continuing further, "Fixed costs were clearly lower in Q2 compared to Q1.
Is the cost level of Q2 representative for H2 as well, were all the cost savings already visible, and were there something extraordinary low in Q2?" I mean, in broad terms, yes, it's, it's quite, quite representative, the fixed cost level overall going forward. Of course, as many of you listening will remember, that there is a... there is a traditionally a history that, that the fixed cost level will be lower in Q3 compared to any other quarters. This we expect to happen as well. But I think that the, the, the deviation from Q2 to Q3 might be somewhat less than before, but nevertheless, expecting that the, the, the levels that we saw now are, are quite representative going forward. And, finally, there are not too many items.
There are some additional cost-saving items that will come toward the end of the year. They will all kick in rather in Q4 than Q3. But to... I would say from what we've planned to do so far, I would say 80%-90% is already there. Then continuing with trading questions going forward, expectations-related questions: "You said that the order books were down Q on Q, so Q2 versus Q1, and biggest individual deliveries are expected to take place in Q4.
Should we read this that group sales in Q3 are not expected to be much higher than in Q2? Straight answer is, I mean, yes, we expect, I mean, as, as we said, I think there is a strong—there is more solid ground in terms of concrete, concrete order book, for Q4 than Q3. So this might be a somewhat of a different trend compared to what we have, what we have seen in the, in the historical years. Q3 has been many times the best of our quarters. But I think in this situation, Q4 is... That's the way the, that's the way the world looks, looks like today. Then still continuing and publishing the latest questions. Let's take the financial ones first.
To which business was the acquisition payment reversal related to?" We did just adjustments to SSN. SSN, Fronius, and J-Matic, I think. Yes. So it's those three companies where those actions were taken. "How sizable are the orders for Putzmeister on Q4, and how many machines are we talking about?" Well, the financial value has not been disclosed, and has been agreed that will not be even disclosed between the parties of the transaction, so I will not comment that. The total order magnitude is comprises of a number, I mean, a number of different types of machines, but we're talking about roughly 15 machines. And expecting these deliveries to happen in Q4 and Q1 next year.
This is part of a larger investment plan, not only for the year 2024, 2025, but potentially for the future years as well. And those discussions on continued future development are ongoing as we speak. But a sizable order in light of the history of and untypical levels of machine deliveries of PM Nordic, remembering that in average, we're talking about concrete pump deliveries of roughly 20 to the marketplace, then smaller machines in greater magnitude, but nevertheless, a sizable order overall. You mentioned that, then next one, you mentioned that you're working on deleveraging. Does that require divestments or capital structure arrangements first, before you could be back to the acquisition path?
I mean, we are well, we are working and evaluating, let's say, all the tools we might have in, I mean, have in the toolbox. I refer to the strategy update that we did at the end of February, this year. As part of the strategy work that we've gone through in our companies, we have also evaluated the chances and the realism of companies meeting our long-term financial targets. Should there be companies that don't do so, or we don't expect them to do so, then we are willing to also consider divestments, divestments, of such companies.
So, we do evaluate those, but we comment on those in case there's anything to. Anything material or concrete to comment further. And capital structure arrangements, overall, are the same thing goes. I mean, we, of course, have continuously evaluate the possibilities for such actions, but we then comment further in case there's a need to do so. Then, two remaining questions as it stands now: Has research been continued on the acquisition front, or is all the focus currently on improving the efficiency of existing businesses? A great share of our resources are now directed to work with our existing companies. However, there...
We continue to do acquisition research on a lesser scale compared to history, or the recent history, say, the couple of few years. And there are ongoing a few situations which might be interesting from an acquisition point of view as well. So even though deleveraging and priorities are those, I mean, if we have a possibility to find transaction which... Transactions which fit the criteria and we see to be of, let's say, accretive from a shareholder value creation point of view, then we, of course, give us the possibility to consider such acquisitions or transactions as well. And then I think final question, a bit of a longer one, an interesting question.
The Swedish serial acquirers have had great success on average over the past year. Boreo has done really poorly compared to the comparison group. I've been thinking about what's inhibiting the speed, what kind of steps are needed for future quarters so that Boreo also can join at a similar pace. A good, good question. I mean, of course, it's good to remember that the starting point, where we compare to, operating a multi-billion business with 200 or 250 businesses, at being at 20% margins and 20% return on capital, operating from there is a bit of a different question or, or situation from compared to where we have started a few years back.
I mean, if you look at those organic growth rates on the other side, I mean, there are also pressures throughout the peer group. However, the company portfolio overall, as we see now from certain parts of our portfolio, is more cyclical compared to at least one of the, let's say, the top peers as we look at them in Sweden. So of course, the quality or the characteristics of the business portfolio is one, let's say, consideration. The other thing is good to remember that if we look at the portfolio today, we're still operating at... Compared to history, rather, at decent profitability levels.
We have had, in our case, of course, the loss of the Russian business, 25 to one-third of operations and profits of the company overnight, pretty much. I mean, that has pretty much caused us the balance sheet challenges that we have. And it's good to differentiate between the balance sheet position and the PNL, so to say. So that's of course one key consideration related. And finally, of course, if you look at how the Finnish I mean, our portfolio is exposed greatly to the Finnish market, so which we've on the longer term continue to see as a competitive advantage.
I mean, 70% of our profits come out from this country. Finland's performance overall as an economy, any sector, is well down by any other, pretty much any other European economy in the last couple of years. So that's of course one key consideration also to this aspect. So there are some thoughts around that question. And then going forward, I think the playbook is clear. We know what we should be targeting for and the path to transform the company's profile is quite clear from the 5% margin history where we started from in 2020. But maybe I end with that.
I think that was the last question, and then next time, I look forward to seeing you and taking the update together with this, and all the best for Aku once again.
Thank you.
Thank you, everyone.