Good day, and welcome to Sitowise's Q1 result webcast. My name is Mari Reponen, and I am responsible for strategy and investor relations here in Sitowise. With me today are our CEO, Anna Wäck, and our CFO, Sanna Sormaala. Welcome, ladies. Before Anna and Sanna start, I would like to remind you that you can submit your questions via the chat feature under the presentation, and we will address the questions during the Q&A session after the presentation. We kindly ask you to provide your full name when presenting questions. Now I will hand it over to Anna and Sanna.
Thank you, Mari.
Thank you.
Good day from my side. Looking at the first quarter operationally, we actually saw quite good start to the year, with several encouraging developments across the group. Our top line increased, and adjusted organic growth turned slightly positive, reflecting improved sales execution and better capacity management. Utilization rates continued to improve across all our businesses, supporting profitability development. Infra once again delivered a strong quarter with high profitability, and Digital Solutions delivered a stable quarter, outperforming the general IT market peers. Net sales in Sweden increased year-on-year, thanks to improved order intakes in Q4, as well as now in Q1. We also successfully completed our refinancing, and Sanna will come back to this later on.
Finally, during the quarter, we updated our strategy and introduced new midterm financial targets, which are now setting a clear direction for the next phase of our development, and I will come shortly back to this at the end of the presentation. At the same time, it's fair to say that our top-line profitability, as well as order book development, would have been stronger without certain headwinds during the quarter. In Buildings business area particularly, we had some project-related write-downs already in Q4, and therefore now with a new management, we decided to run a more thorough project review from our entire portfolio. This focused especially on older and suspended projects. Following this, project review, we made write-downs from older projects that impacted net sales and profitability.
We also removed certain suspended projects from the order book, which impacted Q1 and order intake as well. In Sweden, the development clearly continued on the right direction with net sales growth and still improved utilization. The business remained loss-making, and the profitability turnaround is still ongoing. Finally, the overall market environment remained mixed, with subdued demand and high price pressure in parts of our businesses. Let me next walk you through the key figures for the quarter. Despite the aforementioned write-downs, our net sales increased to EUR 49 million, supported by strong organic growth in Infra and improved top-line development in Sweden. Our adjusted EBITDA margin was 3.8%. Excluding the impact from the project write-downs in Buildings, profitability would have improved year on year.
Utilization rate increased to 73.2%, clearly up year on year, with positive development in all business areas. Our order book totaled EUR 150 million at the end of March. Again, the decline in the order book was mainly driven by the removal of the suspended building projects. Without this adjustment, the order book would have been stable year on year and improved from the end of 2025. Our operating result was at break even, thus improving from the comparison period. Next, I will be walking through the business area results, starting with Infra. This image shows a picture from P-Hämppi, which is a parking facility in Tampere.
During the review period, Sitowise, together with our partners, Finnmap Infra and Ramboll, was selected to design the underground traffic connection to Viinikankatu in central Tampere, as well as an expansion of the parking facility. In Infra, as said, we continued to grow faster than market, with strong profitability. Net sales in Q1 increased by 6.3% year-on-year to EUR 18.8 million, accounting for approximately 38% of our group net sales. Growth was organic as well as broad-based across Infra's business lines, especially supported by road and rail projects, as well as green transition-related projects. Our profitability remained clearly above target, supported by improved utilization rate. Very intense price competition continued in public sector tendering, while state investment activity showed signs of gradual recovery, with several mid-sized tenders underway.
Moving forward, Infra's market environment is expected to remain mixed, so public sector investment budgets for 2026 are expected to remain modest, limiting the number of large-scale tenders. Demand is expected to remain at a good level in green transition, in environmental and security-related services, and driven particularly by the private sector clients. Infra's order book was at a good level at the end of March, supported by private sector projects and public sector frame agreements. Overall, Infra delivered a strong start to the year, supported by a strong market position, broad multidisciplinary expertise, and opportunities to create new business together with our Digital Solutions business area, as well as with our Buildings business area. With that bridge, moving on to Buildings. First, a brief comment about the sales development. In Q1, data center market clearly stood out as a growth segment for us.
We won several new multi-service assignments across our whole Buildings portfolio. During the quarter, to give an example, we entered into an agreement with SRV to provide MEP design services for CSC - IT Center for Science's new LUMI AI Factory data center project in Kajaani, which is portrayed in this slide. As said earlier, we had the write-downs in Buildings business, but excluding these, the Buildings business showed improving underlying performance in Q1. Net sales in Buildings declined by 7% year-on-year to EUR 13.2 million, accounting for approximately 27% of group net sales. At the same time, our FTEs was down 6.7%. The overall market environment remained weak, with significant variation between the different segments. Data center standing out as a clear growth segment, and renovation construction also recovering compared to the comparison period.
At the same time, construction management services remained subdued, due to the project cyclicality. Buildings utilization rate improved clearly, both year-on-year and quarter-on-quarter, supported by our improved workload balance and the active sales efforts. Sitowise clearly strengthened our project reviews during the quarter, which resulted in the write-downs related to the old projects. This obviously impacted our net sales and profitability. Excluding these Buildings, business would have been profitable and would have also showed a clear annual improvement on adjusted EBITDA level. Commenting a bit on the markets, the generally shared view is that Finnish construction market will remain subdued in 2026, with recovery expected to take place gradually after this. I think success is in our own hands despite the market environment.
Our focus is on improving project execution, operational efficiency, and restoring profitable growth. Active sales efforts are continued, especially in the segments with above market demand, particularly data centers, energy and industry, public sector properties, especially defense and security-critical sites. Temporary layoffs will continue as needed to optimize capacity. At the same time, we have engaged and we continue to do recruitments to our strategic growth areas. Moving to Digital Solutions. One of the focus areas in the recent months has been cross-selling our existing products between Finland and Sweden. In Q1, we progressed as planned and gained new clients for two Finnish products in the Swedish market, so for Routa and Foresta.
Highlighting Foresta, which is our digital forestry and forest resource management system, we signed the first agreement in Sweden with Älvdalens Besparingsskog. I'm really pleased about this progress overall. In Q1, net sales in Digital Solutions remained at EUR 9.3 million, representing approximately 19% of Group net sales. ARR increased 5.8% year-on-year, and SaaS products accounted for about 1/3 of net sales. Although SaaS growth was, in this quarter, constrained by postponed public sector investment decisions and slightly longer sales cycles. Digital sales activity remained high. The order book stayed at a healthy level despite continued intense price competition. Profitability overall remained at a good level given the market environment, supported by strong product business margins. At the same time, investments in cybersecurity-related development weighed somewhat the overall profitability of the quarter.
Overall, our Digi business clearly overperformed the IT market. For Digi 2026, our market environment is expected to remain demanding, with relatively modest investment levels and intense price competition continuing. We see that the adoption of AI is continuing to reshape the demand. At the same time, for us, AI is enabling internal efficiency gains, which is bringing benefits especially for our product business, enabling faster development and also faster monetization of new services and features. Overall product business continues to be less sensitive to weak economic conditions. We have opportunities to create market demand independently, particularly for Louhi, Routa, and Smartlas products. In 2026, Digi is focused on scaling product business, growing selectively in the healthy parts of the project business, improving utilization rates and profitability through disciplined project management, and increasing efficiency with AI.
Medium term and longer-term outlook for Digi remains good. Finally, let us review performance in Sweden, starting with sales, as with other business areas. In the first quarter, sales consisted of growing number of small and mid-sized projects, but also the number of longer projects increased, which has been a strategic focus for us. Pharma continued to be the very strong segment, and within industrial customers, especially projects related to prefabricated elements developed positively. Demand related to the defense and security sector also increased, particularly within building services engineering. In Sweden, the market environment remained challenging, but performance improved, particularly in structural engineering and building services engineering, supported by higher utilization rate. Net sales increased by 10% year-on-year. The growth was supported partly by favorable currency effects, but also underlying operational performance improved.
Our focus during the quarter was continuously on sales, utilization improvement, and disciplined project delivery, which are contributing to the better operational trends despite the continued pricing pressure. Although the overall performance in Sweden improved, the business remained clearly loss-making, and the profitability turnaround is taking longer than anticipated despite several earlier adjustments. While we have already implemented cost saving and sales measures, they have not yet been sufficient, and we currently have too heavy cost structure arising, especially from the fixed costs in Sweden. Therefore, we are now more broadly assessing the cost base and reviewing additional actions to support improved profitability. In addition, we continue to focus on improving profitability through high sales activity, deepening customer relationships, maintaining the high utilization, and continued disciplined project management.
The market outlook for 2026 remains fairly stable, with gradually improving demand in structural and building services engineering, while overcapacity and price pressure still persist. Growth opportunities for us are emerging, particularly in industry, security, and pharma segments. With that, I now hand over to Sanna for group level financial performance. Thank you.
Thank you, Anna. Good morning on my behalf also. The Group's order intake declined in the first quarter, totaling EUR 6.8 million, down year-on-year and quarter-on-quarter. Our project order intake development was negatively impacted by the removal of all suspended projects in the Buildings business as discussed. At the same time, the quarter included significant project wins in both Infra and Buildings business, supporting underlying sales momentum. Order intake continued to pick up in the Sweden business areas, while Digital Solutions saw a decline in order intake amid challenging market environment. The Group's order book totaled EUR 150 million at the end of March and remained at a solid level. At quarter end, suspended projects in the order book amounted to EUR 5.5 million, substantially low, below the comparison period.
Looking at the development during the first quarter, Group's net sales stabilized and adjusted organic growth turned slightly positive, despite a prolonged weak market environment. The operational measures taken across business areas are beginning to show results. Profitability in the quarter was below the comparison period, mainly due to project write-downs in Buildings. At the same time, performance in Infra remained strong and Digital Solutions delivered a stable quarter in a challenging market. Our utilization rate strengthened across the Group, and this together with the improved sales execution supported the underlying profitability. Buildings performed clearly better than in the preceding quarter if we exclude the impact from write-down. In Sweden, the business progressed in the right direction with improved business performance and topline. The profitability turnaround still requires higher sales volumes and further efficiency gains.
The first quarter didn't have any calendar effect as the number of working days was unchanged year-on-year. The left-hand graph illustrates our headcount and FTE development reflecting our capacity. FTEs declined year-on-year in the first quarter, continuing the adjustment trend with reductions mainly in the Buildings and Sweden businesses during 2025. In contrast, FTE levels in Infra increased, driven by strong organic growth, while Digital Solutions remained broadly stable with prior year. The Group level utilization rate increased clearly year-on-year to 73.2%, with the strongest levels in Infra and continued improvement in Sweden. This development indicates that our efficiency and capacity management measures are beginning to deliver results.
Further strengthening operational efficiency remains, of course, our key priority, supporting both profitability as well as the scalability as market conditions gradually improve. Looking at the cash flow, in Q1 our operating cash flow before financial items and taxes increased to EUR 1.9 million. Our tighter working capital management and our operational performance contributed positively despite profitability pressure arising from the loss making businesses. Liquidity remained stable during the quarter, providing adequate headroom to support operations in demanding market environment. Our net debt decreased compared to the previous year, supported by improved cash flow generation. Our net debt EBITDA leverage improved to 4.5. IFRS 16 lease liabilities are included in the ratio.
During the first quarter, we signed an EUR 89 million secured financing agreement extension with our two relationship banks, and the facility is valid until June 2028 and replaced the previous EUR 90 million agreement maturing in June 2027. Naturally, we continue to monitor our covenant compliance closely. Details on this slide we have already covered on the previous slide. As a summary, our net sales improved to EUR 49 million, and our organic growth was 0.7% year-on-year. Our adjusted EBITDA landed at EUR 3.8 and our earnings per share is still slightly negative, yet on par with the prior year. Overall, the current performance level in our business areas remains quite mixed.
This is a familiar table and summarizing the percentage of share of each business area during the quarter, the market outlook for the next 12-month period, as well as the current profitability level. The market outlook comments Anna has mainly been covering already, but as a summary, we expect the markets in Infra and Digi to remain stable, whereas the softness in Buildings and Sweden prevails. As mentioned earlier, Infra continued to deliver adjusted EBITDA above our target level of 12% in Q1. While Digi's profitability was below target level, considering the market environment, we can be quite satisfied with the result. Buildings business turned negative due to the write-downs. Excluding these write-downs, Buildings would have improved its profitability considerably from the previous year.
Sweden was unfortunately still clearly loss-making this quarter, but as said, we expect our continued actions and enhanced actions to support Sweden's positive development in the future. Now I will hand over back to Anna for the market outlook.
Thank you, Sanna. The technical consulting market is expected to remain mixed in 2026 with demand in especially green transition, security and digitalization, which are clearly supporting Infra and Digital Solutions businesses. In Buildings, the broader construction market is expected to remain weak and broader recovery is expected earliest in 2027. Data center projects are clearly supporting demand while weak residential construction limits new build activity. Renovation construction is expected to recover modestly already this year. In Sweden, performance is expected to improve gradually as implemented efficiency measures take effect, although some market uncertainty remains. The ongoing geopolitical tensions have so far had a limited impact in our business. Should they escalate, this could slow down economic growth and further delay the construction market recovery.
At the same time, it could create further opportunities in both energy as well as security and defense sectors. AI and automation are clearly becoming more visible across our industry, and we see it as an opportunity supporting efficiency and quality improvements, reshaping ways of working and skill requirements, and also enabling us to develop and monetize new types of services for our clients. Other factors impacting 2026 include working days. There is one more in the fourth quarter, cost inflation, including salary inflation, as well as the exchange rate movements and higher financing expenses. Looking ahead, we have updated our medium-term strategic direction as well as published new medium-term financial targets. The past strategy period ended at the end of 2025.
In many ways, our company strategy still remains relevant, and there hasn't been a need to do broad-based strategic overhaul. At the same time, the operating environment is expected to continue changing rapidly, it requires continuous adaptability from us. For this reason, we have now not linked the strategy update to specific calendar years. Instead we communicate that the time horizon for the new strategy is two to three years, and we review the targets and focus areas annually. Before going to the midterm strategy, I'd like to briefly explain the mega trends that are shaping demand and the way our industry is changing. The top row highlights the main drivers behind long-term demand: urbanization, the growing renovation backlog, the green transition, rapid technological change and a more complex geopolitical environment. These trends continue to support demand for our services.
The bottom row shows how the industry and how we are adapting. We see new business and pricing models emerging faster than ever thanks to AI and the technological development. There's greater use of AI in project delivery, which is driving efficiency. We see increasing specialization in talent and higher expectations from our clients, especially when it comes to transparency and close collaboration. The key message is that while these trends support our long-term growth, they also require us to work differently, and this is exactly why our strategy focuses on improving how we deliver and ensuring we are well-positioned for the environment also moving ahead. Here is our updated strategy in one page. I will go through what has changed from the past, starting from the top.
We've updated Sitowise's mission and vision to reflect our current service offering, our operating environment, and the growth opportunities that we see. Our mission, engineering the foundation of Nordic resilience, describes Sitowise's role in ensuring societal reliability. In concrete terms, we design infrastructure, buildings, and cities that stand the test of time and that ensure smooth everyday life for people. We improve societal resilience by developing critical infrastructure, both built and digital, we accelerate green transition and ensure that natural resources are used sustainably and the environment thrives. Sitowise's updated vision, number one preferred technical consulting and digital partner, describes our ambition to be the first choice both for our customers as well as our industry professionals and current employees. The most important part of the new strategy is the revised focus areas. These describe our strategic choices where we will invest going forward.
Naturally, in our business, people comes first, so empowering people, meaning that we attract and retain talent by offering development opportunities, by differentiating with excellent leadership and management support, and a strong, people-centric culture. Second, grow with customers. Our goal is to grow faster than the market by focusing on selected customer segments in the growth areas I have previously mentioned. Third, we clearly differentiate with digital, and we want to scale. Our goal is to increase revenue from digital products by developing digital capabilities and recurring business as well as accelerate international growth starting from Sweden, where we now see the first steps taken. Finally, work smart. Our goal is to simplify ways of working, improve project profitability, and increase efficiency, and clearly, AI and automation have a big role to play in here as well.
We monitor the execution of our strategy through operational key performance indicators, which are directly linked to our focus areas. We believe that driven by the updated strategy, the clear business-oriented focus areas, and our determined actions, we are on the path of achieving our revised medium-term targets, which are, first, focusing more on organic growth, where we want to grow faster than the market. Second, having our adjusted EBITDA margin above 10%, and third, our net debt to EBITDA multiple below three. Finally, looking specifically at this year, our key priorities are to deliver the turnaround in Sweden, improve profitability across the group through continued action on sales, resourcing, and project execution. Third, strengthen our competitiveness and market positioning.
Fourth, actively leverage AI and automation to improve both productivity and customer value and also support the execution of our strategy. Thank you. We are now ready for your questions. Inviting the Mari also back on stage.
Yes, hello. Let's go directly to the questions we have received, and the first is about the project write-downs. They again affected Buildings. Are you done now with the write-downs, or can we expect more of those in future?
Good. I think, as having a new management in the company, it's a key priority to, first of all, ensure that we have a clean and kind of strong understanding of our project portfolio, being in the project business. We did a very extensive review during Q1. We focused essentially on the Buildings business, which has been most exposed to the challenging market, which has caused or resulted in lower pricing, employee turnover, also suspension of longer projects. As a result of this review, we indeed needed to do some write-downs that were impacting twofold, first in our sales and profitability, then the suspended projects also in our order book.
Obviously, we are kind of starting on a clean slate. That said, I would not anticipate that we would see this magnitude of need for write-downs moving forward. At the same time, in project business, obviously there is always some element of risk.
Okay, thank you. Going to the order book, can you comment on the majority and also the margins in the order book?
Sure. Overall, as said, both for Infra and Digital Solutions, the order book is on a healthy level. Moving to the second quarter, the order book both in Sweden and in Buildings is on a lower level clearly, we have seen that the improvement in our order intake has been contributing of course positively. We don't comment the margin levels specifically, maybe I can say that the current market environment with a strong price pressure, especially in the public sector, is impacting partially the margin levels in the order book. To some extent, I see that it's being compensated by the clearly healthier margins in our growth sectors like data centers, which formed a big majority or a large part of our order intake in Q1.
Obviously now with the project reviews, we have also been able to ensure we have a clean and truthful view into our existing order book.
Okay. Well, that sounds very good. About the balance sheet, the leverage ratio is still very high, so how resilient is your balance sheet, in your opinion?
The current balance sheet can still handle some volatility of the market without immediate additional equity impacts, additions. Let's say that we will focus on the operational performance. We will focus on strengthening the cash flow generation as well as tight cost control and the [inaudible] management. These are focus areas on the balance sheet.
Okay. All well in control then. Those were the questions for today, thank you Anna and Sanna for the presentation, and thank you audience for joining us and viewing this webcast. Our Q2 results are due on 12th August, we hope to see you back then. Thank you.
Thank you.
Thank you.