Hello and thank you for joining Sitowise's Q4 Results Webcast. I'm Mari Reponen, Head of Investor Relations at Sitowise. With me today are our CEO, Heikki Haasmaa, and our CFO, Hanna Masala, who will begin the presentation shortly. They will first review our Q4 and full-year performance, and afterwards Heikki will discuss our outlook and the progress of our strategic initiatives. As usual, please feel free to submit any questions via the chat feature below the presentation, and we will address them during the Q&A session. We kindly ask you to provide your name when asking questions. Let's then get started with the presentation. I'll hand it over to Heikki next.
Thank you. Thank you, Mari. Welcome on my behalf as well. Let's start with the key figures for the fourth quarter. As a whole, the group net sales was down by 7.6%, which was pretty much in line with the FTE decline of 7%. Our adjusted EBITDA margin was down to 2.4%, and this is clearly below our expectations. The margin was heavily burdened by the performance in buildings and Sweden business areas, and I'll come back to this shortly. The adjusted EBITDA decline was then naturally also reflected in our operating profit, which decreased, and in our leverage, which, however, remained rather high, even if slightly better than at the previous quarter end, thanks to the good cash flow at the year end. As said, cash flow remained strong. I am especially happy with this considering the net sales decline and the negative operating result.
Our order book totaled at EUR 151 million at the end of the quarter. Let's review then the full-year performance. It's clear that the year turned out to be much more challenging than what we expected at the start of 2024. Key reasons behind the weak performance were the delay in the construction market recovery against what was like a generally expected still one year ago, and also the challenges that we have been facing in our Sweden business area. In 2024, the group net sales declined by 8.5%, and our adjusted EBITDA margin was down to 5%. Again, the adjusted EBITDA was reflected in our operating profit, which also decreased clearly. Overall, the cash flow was good for the full year, and it was before financial items and taxes at EUR 21.5 million.
EPS was negative in 2024, and that's also the reason why the board of Sitowise proposes that no dividend would be paid. We made three acquisitions in growth areas during the year, and these were Almann Group's expert business in January, acquisition of KM Project in April, and acquisition of LendPro in September. All of these supported our profitability already during the year and will be supporting next year or this year. There were several highlights during the quarter as well. I really would like to start with our infra and digital business because they continued solid performance in a quite mixed market environment. Both businesses were also above our targeted profitability levels also in the fourth quarter, and I'm very pleased with this performance.
Furthermore, the product business under the digital unit continued to grow at double-digit growth rate and represented close to one-third of digi business in the fourth quarter. Even through the fourth quarter in Sweden and buildings was loss-making. We also saw already clear benefits from the earlier streamlining and adjustment measures taken under the building for the future program. For example, the utilization rates clearly improved in other business lines than purely in the structural engineering, which is the challenging area for us now, both in Finland and Sweden. Anyhow, we have a clearly better basis now improving the performance in those business areas going forward. We also won several important projects and frame agreements in the fourth quarter, especially in infra and buildings. Also in this picture, you can see an illustration of a project won by buildings and which is related to the Tampere Rail Yard.
Great, great win for us. We've had a very heavy focus on the sales last year, and I'm very happy to see that our efforts are bringing also results in terms of tendering activity in actually all business areas, and also the hit rates have been improving. Last year, we also focused on strengthening further our data and analytics capabilities, especially in terms of the AI usage. In third quarter, we already then launched our own internal ChatGPT called Saga AI, and that's a key driver also for the utilization rate improvement now this year. As already mentioned, we were able to improve both utilization rates and tendering volumes in buildings and Sweden thanks to the actions taken in third quarter and during the fourth quarter. However, we still continue to have workload, insufficient workload, and utilization rate challenges in structural engineering in both countries.
The market there was even tougher than what we anticipated due to almost complete halt in new housing production in Finland and the low levels of commercial property construction in Sweden. Structural engineering is now roughly 16% of our net sales, so it has a sizable impact on our performance. The two business areas were also affected by revenue write-downs for suspended projects and also some other project overruns, mainly because of the over-resourcing as a result of the insufficient workload overall, what I just went through. Of course, at the same time, we were also refining our processes to address these kind of issues, and that's also one reason why we also were able to firstly improve our processes, but also we identified a couple of issues, what I just mentioned.
All in all, the very low workloads in structural engineering and the project adjustments caused the buildings' business to fall clearly short of expectations, and the anticipated turnaround in Sweden to materialize only partially. Sales continued to be a high priority in the fourth quarter, and there we have been making clear progress. Let's move on to business area reviews, starting with infra. This image is actually related to the Western Helsinki Tramway, which is one of the three light rail projects included in the Helsinki Urban Development and Tramway Program Alliance, which we won. Overall, this is a big, big thing for us, as it's also bringing us a solid foundation for the next years in the infra business. During the quarter, infra's net sales increased by 2.6% year- on -year to roughly EUR 18 million, making up already 37% of our group's consolidated net sales.
This growth was driven by acquisitions, what I mentioned earlier, but also a rising demand in the high growth areas like green transition services, which also led to an increase in the personnel. However, we also had some challenges with low demand for traditional infrastructure planning and the price competition. However, we have been able to mitigate a lot of this impact with our otherwise good performance. We did encounter some pressure on our utilization rate due to larger and also more complicated tenderings, and of course, overall improving the utilization rate is a key target for us this year in the infra business as well. On a positive note, our order intake was up year -on- year, and infra's order book was at a good level at the end of the year.
We secured several rail projects during the last year and also important frame agreements, which gave also a very good base workload for us also in 2025. However, the market continues to be mixed. We expect the infra to benefit from high investment activity in the energy, industrial, and security sectors, and also the sustainability services. Overall, the infra market is quite post-cyclical, and also the public sector investment budget for this year are generally expected to be quite modest. Overall, we are very well positioned to continue the profitable growth in infra. Next, I'll go through our buildings' business performance, but first also highlight a recent win from this area. This image is from the winning proposal for the design competition of the new Malmi Hospital in Helsinki, where our HVAC and traffic planning were involved.
This is again an important win for our buildings team and combines our various expertise. The buildings business area saw a 15% year-on-year decline in net sales, while FTEs declined by close to 17%. Buildings now comprise about 28% of the group's net sales. The decline was influenced by the weak construction market, especially in the new-built residential housing, and that impacted the structural design especially. Other services remained stable during the quarter. On a positive side, the construction management and also the renovation services showed a stronger quarter than the previous one. As mentioned, the performance in the buildings was also burdened by project-related adjustments. Of course, during the quarter, the focus was already a lot on the operational adjustments, and we continued temporary layoffs wider than earlier and also made some further permanent personnel reductions to adapt to the weak market situation.
This applies especially for the structural engineering business. Looking ahead, the outlook for buildings remains weak. We expect the first half of this year to remain challenging due to the low volumes in market and also the overcapacity overall in the industry. Of course, the timing of the recovery continues to be highly uncertain. In general, it is now expected that the recovery would start more in the second half of 2025, but clearly the likelihood in our view has increased significantly. We will continue to adjust our operations to match them to the order book and to have a healthy utilization rate in buildings and minimize project management challenges. We'll also concentrate heavily on the sales efforts and segments with long-term demand, such as industry, energy, and also the security-critical services.
Naturally, we'll continue to execute on the building for the future program I mentioned earlier. Of course, on a medium and long term, we see that overall the mega trends are really on our side and the buildings business has a bright future due to the increasing renovation depth and also the new regulations related to the CO2 emissions, energy efficiency, and also the data management. We will dive deeper to our digital business. During the quarter, we secured several continuation orders for existing long-term projects. In the product area, Vince included, for example, the selection of the Louhi service to support the planning of the West Railway between Helsinki and Turku. Net sales in the Digital Solutions business area were stable year -on- year, now accounting for 16% of the group's net sales.
Digi was able to improve its average prices clearly and also utilization year -on -year, which supported its profitability. Overall, the market situation remained quite challenging during the quarter. Public sector budget pressures and also the investment prioritization slowed down net -sales growth, and also the private sector demand remained low. However, the market environment for the product business remained favorable, and we are also able to create the market by ourselves. That is why our software as a service product business is already having now 30% of the business area net sales. Especially strong demand is in the market for this Louhi solution, which is important for the municipalities and forestry sector. We also expect that the market environment for the digital solutions to be like a twofold in the coming months. Clearly, the public sector faces pretty strong budget pressure, likely affecting the project volumes.
At the same time, the private sector demand is anticipated to remain good among energy and also the industry clients and strong in the forestry sector. Overall, the market outlook is stable. The weak economic cycle is less visible in the product business, and there we see big opportunities to further grow. Digi's order intake increased from the previous quarter, and the order book was at a good level at the end. During the fourth quarter, we also organized a special digital solutions event for investors. In this event, we outlined our future goals for our digital business. We want to double our digital solutions business by 2030. In the short term, we are focusing on our home markets and growth within our existing client segments and also capturing more market share in Finland. In the midterm, we start to implement our geographical expansion strategy.
Already today, we are in the phase of starting to evaluate more closely the best entry strategies for each product and market, whether it's direct sales or strategic go-to-market partnerships. Finally, towards the end of this decade, we are looking to scale our products even wider internationally. Overall, I'm really confident that our strategic focus and also a very dedicated Digi team will achieve these goals. Going to Sweden and starting with recent wins. In Sweden, too, the market was characterized with low volumes, as said, and mainly smaller tenderings. In the fourth quarter, we had several wins in Sweden, especially in the life science sector, where we have been strong. Now these kind of leading indicators for better business performance are also clearly visible.
During the quarter, our net sales, however, declined by 17% year -on year, and that's roughly one fifth of the group's net sales. The decline was very much driven by the weak market conditions in the commercial segment, where we have mostly our presence, and a reduction in the number of full-time employees, and also the lower utilization rates in certain parts of the business, namely the structural engineering. I really would like to also thank our team in Sweden because they have been doing a very good job now in right-sizing and streamlining the organization during the third and fourth quarter. These actions have already yielded clear benefits, but we are not yet there where we want to be and where we see that our potential is. Net sales and profitability were impacted by project-related adjustments also to a certain extent.
Looking forward, the key priority for us now is to further enhance client and sales activity. We also continue to further optimize organization and reviewing the project base to ensure profitability improvement. In the fourth quarter, we also made a decision to grow in areas with immediate growth opportunities, such as infrastructure, also like a bigger project, and thus project management services, and then sustainability services. Today, these are like a smaller part of the operations compared to structural engineering and building services, but we see that this is a good investment for the future and builds further resilience in our business. Short-term growth opportunities are seen especially in the life science sector and in security-related and sustainability services. As said earlier, the medium and long-term prospects in Sweden remain positive thanks to the mega trends driving growth in the technical consulting.
Next, we are moving to the group financial performance. I'm handing over to Hanna. And you didn't have much voice yesterday, but now already a bit better, so please.
Thanks, Heikki. Yes, sorry for the low voice, but I'm sure we'll get through the numbers anyways. Yes, our sales activities have focused, as Heikki said, especially on the defined growth segments: energy, industry, sustainability, and security. Some wins we already discussed. These helped, and then also the normal seasonal fluctuation, so that our order intake was clearly up from the previous quarter. This was valid for all the business areas, most notably in infra, but all business areas increased their order intake.
It's worth noting that for some of the key wins, like the large rail projects, the order book only includes the part which is secured, and the whole project that we expect to perform will be bigger, but the broadening will be only included in the order book when it's secured. The order book totaled EUR 151 million at the end of the year, and we made a special review in the buildings business area for the projects that have been put on hold and made some revisions to the order backlog. That was not a very big impact, but anyway, cleaning up part of the orders that are on hold. Still, roughly EUR 12 million of the order book is the projects which are currently paused, and mainly in the buildings business area.
Here I want to share some information on how we are progressing in sales to our defined growth segments that were mentioned. The chart on the left shows our net sales split by client segments. As you can see, the construction-related client segments have clearly declined in 2024 from the previous year, whereas other segments are growing. Obviously, the decline in the construction sector had already started and was already visible last year. If we took this two years back, the difference would be even bigger. Very positive to see that the fastest growth we see is in energy and industry segments. The other growth area is security, and that is mainly related to the government part in the chart, whereas the sustainability services and product business are widely spread across all client segments.
Altogether, the net sales from growth segments represented approximately one fourth of our revenue in 2024. Here we are growing at double-digit rates in all of these areas. At the same time, some parts of our business were clearly shrinking. The biggest decline is related to the new builds and structural engineering taking the hit in the larger scale there. Obviously, the majority of our business is on stable markets. It's good to note that our sales mix differs quite a lot from some other players in the industry, and we do not get so much tailwind from some of the growing markets, but obviously working to improve that. As said, the net sales during the quarter were down 7% from the comparison period. The lower number of FTEs and the market headwinds in buildings and Sweden were the main drivers, as already discussed.
Looking at the profitability, Infra and Digi again delivered over the target level profitability. However, Q4 was clearly below expectations with an adjusted EBITDA margin of 2.4%. A key driver is the low workload in structural engineering in both buildings and Sweden. Obviously, we also see the effects of the prolonged weak market environment. It is showing in tendering volumes being lower, smaller project size, lower utilization, very tight pricing, some project overruns, and also clients being very strict about making claims towards their consultants. Some with some better basis and some quite often very old cases and maybe more questionable basis then. Other factors impacting included certain project adjustments and overruns, especially in buildings and Sweden, as Heikki said. FTE number was down 7.6% in Q4, especially in buildings, but also in Sweden.
As you can see, the headcount has declined a bit less as the temporarily laid-off persons are included in the headcount, but not in the FTE when they are not working. The utilization rate was slightly up quarter on quarter, but stable year- on- year. Here the Swedish utilization rate improved from a very low level of Q3, but still it was below the level in other business areas, so the improvement will need to continue there. Overall, we are putting a lot of focus on improving the utilization rate in all business areas. In Sweden, the further downsizing of structural engineering is part of this, and this is now happening in the early part of this year. In the buildings, the temporary layoffs continue to be a key tool.
We continue to follow up this on a weekly basis and make adjustments all the time to the number of people we have work to offer to. Of course, the most important measure is to keep up the sales activity and there use that channel to secure good workload for our professionals. Similarly to the previous quarters, our liquidity remained good at the year-end and actually even improved. You can see from the middle graph that the net debt level declined, and this was thanks to higher cash amount at year-end. Last quarter of the year is typically good in our cash flow generation, and it was also this year despite the weakened profitability. The invoicing was very active, and looking at the year as a whole, we were able to reach more efficient networking capital levels.
As you probably remember, we renewed our ERP systems in Finland late 2023, and this impacted the pace of invoicing. During year 2024, we improved this, and this partly helped to keep the cash flow up. Net debt to EBITDA was broadly at the same level as in the previous quarter, even if the rolling 12-month EBITDA weakened, the lower net debt countered this impact. As we mentioned earlier, the financing contract we have is valid until March 26, and we are currently engaged in a process to extend this financing package. We actively manage our solvency, have maintained close dialogue with our financiers throughout the year. The covenant in our financing agreement is based on net debt to EBITDA, and as we've said earlier, we've agreed with our banks on a temporary easing of the required leverage level.
Most of the figures on this slide we've already covered, but a couple of points on the items below the adjusted EBITDA. The last quarter of 2024 had clearly less items affecting comparability than the previous year, but for 2024 as a whole, these costs increased slightly, and the vast majority is linked to the personnel reductions during the year. The amortizations on intangible assets also increased during 2024. These are partly linked to our new ERP system, and as 2024 was the first year after taking it into use, the related amortizations were started. Additionally, we made a couple of write-downs, the larger one being related to the value of our previous Latvian subsidiary, DVG, that we communicated in Q3, and these are recorded in the same line with the amortizations. The financial expenses increased as well, mainly reflecting the higher interest rate applicable to us.
On this slide, I want to highlight how our business area mix has been developing during the past two years. Both in terms of net sales and the share of FTEs, Infra and Digi have been increasing, while buildings have declined clearly. These changes have been driven by the market changes, but also by our own actions and focus to grow in selected areas. We expect this transition towards a more balanced business portfolio to continue as we progress in sales in our growth areas in Finland and diversifying our business mix in Sweden, as discussed earlier. This table summarizes the percentage of sales of each business area during the quarter, the market outlooks for the next 12-month period, and the current profitability level.
As our current performance level in the business areas is quite mixed, we hope this table helps to understand the different parts of the group better. The other parts we already, most of the topics we've covered, but just to summarize, both Infra and Digi continue to deliver adjusted EBITDAs above our target level of 12%, whereas the quarter was loss-making both in buildings and Sweden, and we continue our actions to improve this situation. I will give it over to Heikki. Thank you.
Thank you, Hanna. We have already commented on the market outlook in a comprehensive manner, so maybe just the main points then. We will have a mixed market environment in 2025, as described. There is a strong demand for green transition, security, and also digitalization-related support services, which we are also providing.
Building market is and will continue to be weak, and the timing of its recovery is uncertain. Overall, of course, we see that the likelihood of the new construction recovery being delayed to 2026 has also risen significantly. In Sweden, the construction market recovery has been postponed to the second half of this year, even to 2026, and especially the markets where we are present, so the commercial segment and also overall the structural engineering services. There, the demand is weak. However, the outlook for the building services and also the infra market sustainability is also clearly stronger in Sweden. Overall, due to the uncertainty related to the timing of the construction market recovery, we really need issue guidance for this year at this stage. Clearly, we need to and want to improve our profitability, and that's our key priority for this year.
Secondly, we want to maintain strong cash flow, and thirdly, to increase our business resilience by further diversifying our business in areas that have good growth opportunities. To reach these goals, we see growth by focusing on our strategic growth segments, maintaining the high sales activity, increasing the cross-selling, and also introducing new business models that support value-based pricing. We also need to continue to adjust our operations to the current workloads and order books in buildings and Sweden, where completing the ongoing business turnaround is a high priority for us. We also aim to improve utilization and rate and seek efficiencies in all areas. Of course, one driver for this one is also the use of AI and automated processes, where we have been advancing well. Finally, of course, it's about mastering our core processes.
We are building a new, like a commercial and also sales culture and mindset, and also the actions will be supporting that one. We also need to improve our ways how to approach the client and project work. Finally, just a few words about our strategy and the progress with that one, which has been overall very good. Under the most innovative strategic pillar during last year, we first of all generated approximately EUR 1 million of new revenues from the new product innovations on top of what we have in this digital business, what I went through earlier. We also completed 16 AI proof of concepts and introduced two new AI tools with increasingly active AI users also. Additionally, we identified untapped potential in new business models, which will become even more important as also the AI utilization develops.
Overall, I'm very pleased with the progress we have made in this area, and I'm also very excited about the future possibilities this will be bringing for us. Under the most sustainable strategic pillar, we were able to increase our sustainability services compared to 2023 by over 50%. In the fourth quarter, we also made the strategic decision to organize and expand our sustainability consulting services in Sweden. Finally, under the most efficient strategic pillar, we achieved significant organic growth in our strategic sales focus areas and also saw an increasing usage of the automated and AI solutions across the organization. We naturally need to continue to work further on developing and implementing, especially the best practices through our Smartest Ways to Work initiative when it comes to sales project management and also AI.
Overall, we have progressed well in these areas, and I'm also very convinced that the actions taken in 2024 will support us to reach our targets in 2025. This is all for today, and we are then ready for the questions.
Yes, thank you for the questions to the audience. Let's start with the ones related to project work. First of all, what are the project overruns and challenges about, and how much did they affect you?
Yeah, first, they had a quite sizable impact during the fourth quarter. They are coming from basically from three different angles. The first one, especially in the buildings business, we have been, or there have been several projects that have been now suspended, and also then we needed to take an action on that one.
Of course, we've been, as we also said, when there is insufficient workload, that easily is seen both in the utilization rate and to some extent also in over-resourcing the projects. That is, of course, in our hands and what we definitely need to improve. The third one is that there are also some projects which are more like a business-as-usual type of things, that there might be some errors then also always when you are in the project business. Still, I would say that the two first ones are more the negative, like clearly bringing the negative bigger impact in the fourth quarter.
Okay. I can maybe complement in shortly so that obviously the low volumes in structural engineering still had a bigger impact, but this was, as Heikki said, a substantial impact from this isolated project impacts as well.
Do you expect these challenges related to project work continuing in the future, or are they now handled, so to say?
Yeah, if we use these same categories, of course, now we've been clearly going through well these parked projects or the ones which are suspended, and at least for the time being, we don't see similar ones. Of course, it's tough to say what happens in the market. These are not in our hands, I would say. There might be some, hopefully not. As said then, we have clearly tightened our practices what comes to the workload or like basically resourcing. In Finland, we have also these temporary layers what we need to then manage even in a more stricter manner. That will be definitely helping.
What comes to these kind of design errors, of course, our quality assurance is something that we develop all the time and want to naturally develop it to that extent that this would not appear. However, I cannot promise that there won't be any. I would say that it's typical to this kind of project work that there might be some in the future.
Okay, thank you. About refinancing. You are refinancing your loans this year. What are the key themes there in negotiations, and should we expect big changes coming in regards to your financing costs?
Yes, as we said, we are in the process right now. I think kind of the overall framework is expected to stay more or less the same. The financing facility in terms of size is kind of suitable for us.
We'll come back when we are ready with the negotiations.
Okay, thank you. About employees, comparing the current situation to Q4 2022, also two years back, the number of employees in group functions is up from roughly 60 to 64. Why are costs in this area not managed and adjusted to reflect that top-line development?
Yeah, of course, the number is correct. Still, I would like to emphasize also that we've been saying that we've been investing in these strategic growth areas. Actually, in our case, the salespeople are in the group functions for these specific areas. Actually, if they are not taken into account, then the figures are quite different. We see that this kind of account management and client work is, of course, naturally the most important thing for us, and it generates then leads for the other parts of the business.
When going backwards, 2022 or even like 2015 or something like that, the market was just so hot that actually there was not need for this kind of salespeople, sales teams, but now it is different. Good to also mention that, of course, we have also taken several actions for our group functions otherwise to reduce costs. Also now for the H1, we did not mention it, but we have now also ongoing temporary layoffs for our group functions.
Okay, thank you. We have a final question about the no-guidance matter. How should we read this no-guidance guidance? Do you see that even weaker year is possible for you?
As we said, the reasoning for the no-guidance is that there is very big uncertainty about how the market will be developing.
If we get to the beginning of 2024, I think the general consensus was that the market will be improving towards the end of the year. That did not happen. By the way, the same was also in the beginning of 2023; that did not happen. We now want to take a bit more conservative view here and see first at how the market is really developing because it naturally has a big impact then on our business performance.
Okay, thank you. Those were the questions today, and thank you, audience, for following this webcast, and we hope to see you next time in connection of the Q1 results on 13 May.