Hello everyone and welcome to Lassila & Tikanoja's Half-Year Result Webcast. The webcast is hosted by L&T's CEO Eero Hautaniemi and our new CFO Joni Sorsanen. There's an opportunity to ask questions at the end of the presentations by using the phone or via the chat functionality. But before we start, would you, Joni, like to introduce yourself briefly?
Yes, absolutely. So hello everyone, my name is Joni Sorsanen and I started as CFO of L&T Group in the beginning of July. I joined the company from Consti Plc, where I also acted as CFO. I have roughly 15 years of experience from Finnish listed companies such as Cramo, Caverion, and Consti, all of which are so-called decentralized service businesses. My target here at L&T is to help the company in planning and implementing the new operating model, whereby we would like to increase the cooperation between our divisions and the group functions. I will also focus on developing the overall financial steering of the company going forward. Okay, but Eero will begin the actual agenda of this webcast.
Yes, thank you, Joni, and warm welcome to our team. I'm really happy that Joni was able to join us already here in the Q2 earnings release. Right, but let's get into our agenda and first start with what is in focus in the first half of 2024. Overall, the economic situation in Finland has been slow, and especially slow in the construction industry, but also across other customer segments like the hotels. In certain areas of retail, we have seen a lot of slowness, and also in general industrial and engineering companies, the beginning of 2024 hasn't been that hot. We do not foresee that the economy is recovering much by the end of the year. Hopefully, 2025 will be a stronger year.
When it comes to our businesses in environmental services, we did strengthen our position amongst the producer responsibility organizations and also got quite a few municipal contracts due to the municipalization wave that we have been experiencing since 2024 after the new waste law legislation was passed in 2021. In industrial services, we had a strong first half of 2024. Demand was good and we did succeed quite well in our resourcing. In facility services in Finland, the turnaround is progressing really well. And in Sweden, despite our hard work, we have still work left, and the results were not that much visible in the first half of this year. Hopefully, we can see some results now in the second half of 2024.
When we look at the net sales development, we can see that in environmental services we had a slight decline in sales, 1%, but considering the market conditions and especially the slowness of the construction industry, I'd say that is a pretty good result. In industrial services, very strong first half of the year, almost 10% higher than the previous year. But when it comes to the facility services in Finland, we can see that we have, as planned, ended certain customer contracts, and that is visible in the top line development. Obviously, the general slowness of the economy impacts as well.
In Sweden, we lost a large customer at the end of 2023, and that is now very visible in the top line development especially. Adjusted operating profit, we had a pretty strong second quarter, and also the first half development was better than a year ago. This is especially due to strong performance in Industrial Services and Facility Services Finland. In Environmental Services, we were a little bit behind last year's performance, as expected. In Sweden, the development in the second quarter was improving, even though the numbers do not fully show that improvement.
As I said, hopefully in the second half of the year, we can see that improvement also in the numbers. Overall, as I said, a good development, especially in the second quarter, but the whole first half of the year was good considering the market conditions. Let's move on to Environmental Services. As I said already, the economic environment was challenging, and the political strikes that we had in Finland at the end of the first quarter, beginning of the second quarter, did impact our volumes and also slightly to our profitability.
Demand and price level of recycled raw materials has now stabilized, and maybe there are slight positive signs in the development, but nothing significant so far. When we look at the overall economic development, I do not expect to see a quick recovery in the recycled raw material prices either. We did strengthen our position, especially amongst the producer responsibility organizations and municipal contracts, and that helped us to offset the decline in construction customer segment, but also in the hotels and retail segment.
Also, what did help us when it comes to the profitability development was that our restructuring and efficiency measures progressed well and helped us to offset the impact of the municipalization and also the decline in certain B2B segments. In Industrial Services, very strong first half of the year, and the seasonality was slightly different this year compared to the previous year. We saw a very big second quarter, and probably we will not see as big a third quarter this year as we did last year. So the seasonality is a little bit different. But as I said, the second quarter was really strong.
There were quite large maintenance breaks, planned maintenance breaks with our customers, and our staffing and manning was done very successfully, and that helped us to have a strong result in process cleaning. Also, in hazardous waste and environmental construction, we had a very good first half of the year. As we said already, in connection of the first quarter earnings release, we did expand in north of Sweden in April, and that will help us to strengthen our position in the Swedish market. We have now some 100 professionals working for us in industrial services in Sweden.
Our plan is to continue to develop that business and our position in Sweden. In Facility Services Finland, the hard work that we have been doing the past couple of years is yielding results, and I'm really pleased with that. We have had a fairly successful second quarter of this year, and there is a visible improvement in profitability in all of our business lines within Facility Services Finland. Obviously, there is still work to be done, and work continues, but now the development has been strong, and the starting point for the second half is much better than it has been in the past few years.
In Sweden, as I said earlier, the one big thing that is affecting us is this loss of a large customer end of last year, and that shows really well in the top line development, where we have had a significant decline, almost 20%. We have done restructuring measures, and we have expedited our restructuring measures, and I hope that they will show in the profitability in the second half of the year. But certainly, our number of employees has declined significantly. If we compare to the same period last year, we have almost 200 employees less, and that is sort of reflecting the decline in the top line.
Also, we have other measures to improve the margins and efficiency, and all of those combined should be visible in the second half of this year. I will move on now to the sustainability and take two highlights from our sustainability work. First of all, our customer satisfaction, our NPS score has increased quite significantly, and it has increased in all of our business lines, and that makes me very pleased because, as I said, the market is challenging, and it is very good to see that we have been able to fulfill our customers' needs and expectations much better than earlier.
And especially in Environmental Services and Industrial Services, the development has been very strong. Also, the occupational safety improvement has been significant. Our TRIF is 20, compared to 26 a year earlier. And especially in the Facility Services Finland, we have seen very significant improvement in the work safety. And that is due to very systematic and hard work that has been done all over the organization. Obviously, we will continue that work, and I'm optimistic that we will exceed our target for this year and get closer to already 26 targets if the current development continues.
But as I said, the work needs to continue. This is a continuous effort and will never end. Also, our sick leaves have declined from the previous year. So overall, very good development in the sustainability area. Now, I'd like to hand over to Joni, and he will go through the highlights of the financials.
Thank you, Eero. All right. Just like Eero said, so we will have a look at the other key performance indicators and the development of those during the first half of the year. Let's start by looking at net working capital, which is an important balance sheet indicator for us. We can see that the net working capital at the end of the first half amounted to minus EUR 34 million compared to minus EUR 42 million in the comparison period. Also, we can see that there was working capital tied up by EUR 14 million compared to the year end 2023. There are two specific reasons mainly behind this development.
The first one is the development in trade payables. Since we have now a lower level of investments in H1 2024, we also have less trade payables in our balance sheet at the end of the period. Another development we can see in personnel related liabilities, which have decreased as a result of a decrease in the number of employees. Then moving on to capital expenditure, we can see that capital expenditure amounted to EUR 21.7 million in the first half of 2024 compared to EUR 31.8 million in H1 2023. So there's a decrease of EUR 10 million, and it mainly comes from the machinery and equipment section.
Then we can also see the small amount of business acquisitions, EUR 2 million. And this is exactly the acquisition of PF Industriservice AB, which Eero already mentioned in the industrial services section. Then if we look at the cash flow development, we have here the accumulated cash flow development, and we can see that the net cash flow after net operating cash flow after investments amounted to -EUR 3.7 million compared to EUR 19.3 million in the comparison period. The net working capital impact in cash flow or on cash flow was minus EUR 8.2 million compared to release of EUR 1.4 million in the comparison period.
So there is a clear impact from the net working capital on cash flow. Also, in the comparison period, we have quite material tax refunds received, which also supports the comparison period's cash flow. Also, we can see here that the second quarter was cash flow positive, so the main negative cash flow impact comes from the first quarter. Then if we look at the financial position development, we can see that the balance sheet or the financial position remained strong during the first half of the year. Gearing amounted to 89.3% compared to 86.7% at the end of June 2023. Also, very stable development in equity ratio, 34.6% compared to 33.4%.
On the right-hand side, you can see the split of our gross interest-bearing debt, which amounted to EUR 214.5 million compared to EUR 209.6 million. The liquid assets totaled EUR 20 million at the end of the first half compared to EUR 30 million a year earlier. Also, it's good to note that the company's credit facility of EUR 40 million, as well as the credit limit of EUR 10 million, were unused at the end of the review period. The maturity structure of our long-term loans, there is no change compared to the previous quarter. We have this EUR 40 million bank loan maturing in 2026, and then we have a bond of EUR 75 million maturing in 2028.
The weighted average effective interest rate was 4% compared to 3.4% in the comparison period. Then looking at return on capital employed, we have divided this key performance indicator into two components. So we have first operating profitability development, which is the blue line here, and which is slightly burdened by this one-off items we have in the first half. And then we have capital efficiency described in green line, which is also slightly decreasing now as a result of a decrease in net sales. And the company's financial target is to achieve return on capital employed of 15%.
Also, here it's good to note that this operating profitability figure here includes financial income, and in the comparison period, we had a termination of interest rate swap contract, which supported the financial income by EUR 1.3 million. And then finally, looking at earnings per share and cash flow per share, earnings per share amounted to EUR 0.16 compared to EUR 0.24. There are also the basic or the reasons behind this development have already been mentioned. So one of costs slightly burdened this, and also the development in net finance costs.
If we look at the share of profit from associated companies and joint ventures, there we can see a stable development that was EUR 2.1 million compared to 2.2 in H1 2023. All right. Then I will hand over to Eero again.
Thanks, Joni. Good. And as you probably know, we updated our outlook first of August 2024, and we keep now that updated outlook. And it is that our net sales in 2024 are estimated to be at the same level as the previous year, and adjusted operating profit is estimated to be the same level or better compared to the previous year. But now we are ready for your questions, and please ask your questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Niko Ruokangas from SEB. Please go ahead.
Hello, this is Niko Ruokangas from SEB. Thank you for the presentation. I have a couple of questions, and I'll start with industrial services. So as you said, you had strong Q2 in industrial services, but you say that you don't expect as strong Q3 as some projects were this year earlier than last year. So how big was this timing impact on sales and EBIT in Q2?
It is impossible to say. Every year is different, and the customers have sort of different scope in their planned maintenance breaks. But this year, we expect that the third quarter is not quite as big as it was previous year. Certainly, we do not expect any sort of dramatic drop in the third quarter, but the seasonality is slightly different this year, but it is impossible to say exactly what the impact was.
Yeah, but the outlook overall has not weakened, but this is just a timing effect.
Yes, yes, yes, that is correct. Yes.
Yeah. Okay. Thanks. Then you mentioned also that some projects were transferred from Q1 to Q2 due to Finnish strikes. So how big was that effect?
That was not very big. That was quite small.
Okay. All right. Then Facility Services, we in which you already described a bit. But if you look at your outlook there and where you expect to be in the end of this year, so has that changed compared to your expectations, what you had for end 2024 before we entered 2024? And then what kind of improvement have you seen, what you mentioned that was not visible in numbers?
Yeah. Well, clearly, the first half is a disappointment, and we are not where we expected to be when we entered 2024. The decline on top line was bigger than we expected, and that sort of made us to do a larger restructuring than we foresaw before we entered 2024. At the same time, as I said already, we have done a lot of measures. Some of those will continue in third quarter, and our number of personnel is coming down rapidly, and our cost base is coming down quite rapidly.
So I expect to see a clear improvement in the second half of 2024. And what I meant about the note that things are not visible is exactly the significant reduction in number of personnel that will be visible in the numbers in the second half of 2024.
Yeah, I understand. Thanks. That's helpful. Then about your slightly updated guidance. So in which situation do you see that you would be reached the high end of the adjusted EBIT guidance? I mean, adjusted EBIT growth, and I guess that's more than a couple of %. And then what should happen that the adjusted EBIT would not grow or would decline?
Yeah, well, obviously, if our plans or things go as planned, then we probably will be at the upper end of our guidance. And should there be some unexpected negative surprises, then things may be towards the lower end. But the target has been given with the current view on the development, and it is, as said here, that the adjusted operating profit to be at the same level or better. So it remains to be seen how the fall develops.
All right. Understand. Thanks. That's all from me.
There are no more questions at this time, so I hand the conference back to the speakers. We still have a few questions online. The first one is, have the announced plans to potentially divest the Facility Services divisions been discarded, or is this still an option?
Yeah, the strategic review is still ongoing, and as soon as we have something to report, we will obviously report on that. But the process is still ongoing.
Then we have a second question about Facility Services Sweden. Sales in Sweden dropped clearly more in Q2 than in Q1. What was driving this?
What was driving that is mainly the loss of this large customer, as I said already. But also there is a, or has been a slight change in the customer behavior, and sales of additional services has been on a lower level than it has been in previous years, and that is also visible in the sales development.
Then a question about operating model. Can you specify the one-off cost amount and timing and explain more about the new operating model?
Yeah, well, the one-off costs are related to this strategic review, and they have been, if I remember correctly, EUR 3.4 million. They are mainly external advisor costs, and we expect them to continue still in third quarter.
And still one question. Are these new efficiency methods and other actions, again, just minor changes, which will not make an actual difference in performance? Have you been planning any new major changes in company culture and/or management?
Yeah, well, these plans are still in their initial phases, and once we are a little further and have made some decisions, then obviously we will report on those. But as we have said in our strategy, we as a company will focus on circular economy, and recycling will be in the center of our strategy, and that will be reflected in the eventual decisions. Exactly how, I don't know yet because we are still at the planning phase, but we will get back to that once we have concluded the plans and made decisions. Okay, there are no more questions. Thank you for excellent questions, and I wish you a good continuation of the workday. Thank you. Bye-bye.