Good day, and welcome to Sitowise's Q2 result call. My name is Mari Reponen, and I am responsible for strategy and investor relations here in Sitowise. With me today are Acting CEO, Jannis Mikkola, and our CFO, Sanna Sormaala. Before Jannis and Sanna start the presentation, I would like to remind you that you can ask questions via the chatbot, and we will take the questions after the presentation. Now I will hand it over to Jannis and Sanna.
Thank you, Mari, and good day to you all. Let me begin with the key highlights from the second quarter. First, the divestment of Sitowise Sverige marks an important new phase for the group. It sharpens our focus and allows us to direct resources towards profitability improvement, sustainability growth, and technology advancement. In a simple way to say, we are now focusing with what we can do best. Following the divestment, we are reporting our figures by the continuing business. As communicated earlier, the continuing business is more profitable than the previous Nordic entity. This quarter, our adjusted EBITA margin was 7.4%, and it was in line to the comparison period. Infra continued to perform strongly with broad-based growth and solid profitability. In Buildings, the overall market remained weak, but growing demand from the data center projects supported our sales activity and also our order intake.
Group order intake was high at EUR 50.8 million, supported especially by the Infra project wins and the data center opportunities in the Buildings. The order book stood at EUR 145 million at the end of June, giving us a solid base for the future. We also clarified our direction and roadmap for AI. Our focus is now to translate the technology into practical benefits, smarter expert work, better project performance, and scalability value for our customers and for Sitowise. I will return to this topic in the end of my presentation. Overall, Q2 had several encouraging developments. At the same time, we have faced some headwinds. In Digital Solutions, the market remained challenging. Customer investment decisions were postponed, sales cycles were longer, and the tender pipeline was soft. In response, we completed change negotiation and took reconstruction and efficient actions during Q2.
As an outcome, our headcount in Digital Solutions will decline by 30 FTEs in Q3. The market environment also remained polarized. Infra continued to benefit from resilient demand, while the recovery of the construction market was delayed. Residential construction remained especially weak, and the price competition continued. In Buildings, data centers, and renovation activity provide opportunities, but they did not yet offset weakness of the broader market. While demand remained healthy in selective segments, the overall environment continued to require disciplined capacity management, project execution, and cost control. With that context, let us now go to the group key figures for the second quarter. For the continuing business, that is without the Swedish operation, net sales increased to EUR 43.1 million, supported by the strong organic growth in Infra. Our adjusted EBITA margin was 7.4%, and it was within for the comparison period.
Utilization rate was 74.2%, and it was slightly declined, mainly because of Digital Solutions. The Buildings utilization rate improved clearly. Order book total was EUR 145 million, and Sanna will tell more about it. Operating result was EUR 1.2 million. Now we go to the group figures to our business areas. First is the Infra. This image shows the West Tram project in Helsinki, which moved into the implementation phase during Q2. Sitowise acts as a design in the alliance project. The project is a good example of the type of work supporting Infra performance. Large long-term assessment where our expertise contributes from planning through implementation. During this quarter, our strong role in urban rail and nationally significant rail connections was also reflected in further project progress and new planning asset assignments. These projects provide visibility, support the order book, and demonstrate the depth of our infrastructure expertise.
Next, let us look at Infra Q2 performance and outlook in more detail. Infra growth was fully organic and broad-based across all our Infra business. Net sales increased by 5.4% year-on-year and totally was EUR 20.2 million. It's now 47% of the group net sales. Utilization rate remains at a good level, reflecting continued operational disciplines and helps the balance between resource capacity and project demand. This supported both efficiency and profitability, which remained above the target. Demand from private sector customers continued to strengthen, especially in the data centers, energy infrastructure, and security critical projects. These areas are in our long-term target. Infra environmental expected to be very mixed in the future. We see very attractive growth opportunities in the green transition, environmental services, and security critical investments.
But at the same time, we see that the public sector is not investing as much as they used to have, and it mainly concerns the municipalities. The government is still investing for Infra in the future. Then we go to the Buildings. First I want to comment Building sales development. As said, data center were clear growth segment in the second quarter, and it was almost half of the new sales in the business, the total Buildings business area. This image that you see is, however, from a normal project, Otakaari 3, where our Buildings business won tendering for construction management, site supervision, and coordinating services for the Aalto University project. Net sales in Buildings declined 1.8% year-on-year to be EUR 13.8 million in the second quarter, and it's about 32% of our whole group sales. At the same time, the FTE were down by 6.2%.
Market conditions in Buildings business remained challenging during the quarter, and overall environment continued to be affected by weak residential construction activities. Demand relating to data center investment continued to be strengthened and create new opportunities across the businesses. In addition, the renovation construction market saw signs of gradual improvement, supporting activity levels compared to our previous periods. Operationally, we improved our utilization rate, like I said before, and for that we are quite happy. The generally shared view is that the Finnish construction market will remain challenging in 2026 and also in 2027, with the residential construction activity continued at the low level. Despite of the delay of the market recovery, our order book has remained at the moderate level, supported by positive developments in our growth segments. Like I said, example, the data centers. Our focus will be improving project execution, operational efficiency, and restoring profitable growth.
Temporary layoff will continue as needed to optimize our capacity. At the same time, we are still doing recruitments for our growth areas. Then we move to the Digital Solutions. The highlight in Q2 was Digi had the significant three-year contract extensions awarded by the Swedish Transport Administration, Trafikverket, at the end of June. In Q2, net sales in Digital Solution remained at EUR 9.1 million, representing approximately 21% of our group net sales. The market environment in Digital Solutions remained challenging during the quarter, which was reflecting in lower project business volumes. ARR grew by 4% year-on-year, and SaaS products accounted for about one third of our net sales. Growth was impacted by longer sales cycles, postponed investment decisions, especially among the public sector. Profitability fell below the target level due to the weak demand. Strong product margins continued to support the profitability.
The 2026 market environment is expected to remain demanding and challenging. Despite our market environment, our order book remained supported by the extension of our major Trafikverket contracts. Sanna, can you tell more about our numbers?
Yes, I can. Thank you, Jannis, and welcome on my behalf also. Let's start as a recap from the summer. Sitowise signed on June 9 an agreement to sell our Swedish technical consulting business with approximately 265 employees to Sweco. This sale was completed now on the last day of July. The sold business covered structural engineering, building services, infrastructure design, and project management. The 2025 net sales was around EUR 26 million, representing 14% of group net sales. The parties agreed on an enterprise value of approximately EUR 3 million, and there is also a potential earn-out up to EUR 2 million, which is related to the long-term lease liabilities. This will be recognized in the P&L during 2027, 2029. The assets and liabilities of our Sweden business area have now been classified as assets held for sale and as discontinued operation in the Q2 reporting.
The business area continued being loss-making in Q2. Related to this sale, Sitowise expects to recognize a write-down on the remaining book value of Sitowise Sverige AB shares in the parent company during the third quarter. From the strategic point of view, the divestment is supporting the allocation of capital and resources to businesses where we can see the strongest potential for profitable growth and long-term valuation, thus enabling a clear profitability improvement for the group. However, as a reminder, we will not exit the Swedish market entirely. Our Digi Solution business will continue to operate in Sweden and pursue growth in product business. If we then move and take a look at the order book and order intake. The group's strong order intake, EUR 50.8 million during the second quarter, was supported by Infra rail project wins and ongoing phases of the previously won projects.
The data centers contributing positively to Buildings' order intake development, and Digi secured a major contract extension mentioned already. The overall demand in Digi was remaining on subdued levels in a challenging market environment, however. The group's order book amounted to EUR 140 million at the end of June and remained at a healthy level. Adjusted for the write-down of parked projects, which is a new curve on the graph over here, the active order book continued to strengthen for the fourth consecutive quarter. At quarter end, suspended projects in the order book amounted to EUR 5.1 million. Looking at the development during the second quarter, group's continuing business net sales remained solid and adjusted organic growth was slightly positive despite the prolonged weak market environment. Our net sales was supported by strong organic growth in Infra, whereas Digi and Buildings development fell below prior year.
The lower amount of FTEs was also impacting Buildings' overall net sales level. The profitability on the quarter was on par with comparison year, benefiting from the strong Infra performance and healthy utilization rates, which together with the improved sales execution contributed positively to the operational development. Buildings performed better than in the comparison year, whereas Digi performance was suffering from weak market activity, mainly in the project business. The second quarter didn't have any calendar effect, as the number of working days was unchanged year-on-year. Here to start with, I would like to remind you that the comparison periods in both graphs have also been adjusted with the divested business. Our headcount and FTE development, which is reflecting our operational capacity, continued the declining year-on-year trend during the second quarter. This was also, of course, following the personal measures taken mainly in the Buildings in H1 2025.
Like Jannis said earlier, Buildings has been continuing the temporary layoffs as needed to optimize capacity, while at the same time also continuing the recruitments on selective growth areas. In contrast, FTE levels in Infra increased, driven by strong organic growth, and Digi FTE levels were slightly below. The impact from this change negotiations executed in Q2 will be visible from Q3 onwards. Here on the graph on the right-hand side, the utilization graph is, of course, presenting our operational efficiency and productivity. The group-level utilization rate was close to comparison year, supported by strong Infra and continued improvement in Buildings. Each utilization rate was negatively impacted by the lower project volumes. Improving the utilization rate further remains, of course, as one of our key priorities going forward, and supporting also our profitability and scalability during the challenging market conditions.
Going to the following slide, as mentioned in the below of the slide, following the IFRS 5 standards, our comparison period's balance sheet figures have not been restated. Our operating cash flow before financial items and taxes landed at EUR 1.3 million and was mainly negatively impacted by the net working capital changes, as well as the divestment of the Swedish business area. Our liquidity remained stable during the quarter, providing adequate headroom to support our operations. The net debt development benefited from solid cash flow generation together with the lower IFRS 16 lease liabilities following the Sweden sale. Net debt EBITDA leverage improved to 4.2. As a reminder, still in March, we signed the EUR 89 million secured financing agreement extension with two relationship banks, and this facility is valid until June 28. We continue the close review of our covenant compliance.
If you take a look at the next slide, I think that these summary slide topics we have already covered in the previous slides, and Jannis's part of the presentation, so we can continue the outlook. Overall, the current performance level in our business areas remains mixed. Here in the slide, we have the familiar percentage of sales of each business area during the quarter, the market outlook for the next 12 months period, and the current profitability level. As a summary, we expect the Infra market to remain stable. Healthy demand for services related to green transition, security, and digitalization will support the business performance, specifically in the Infra business, while demand for the municipal infrastructure projects will remain modest. In the Buildings business area, growth in the data center market is creating new demand, while the broader construction market is expected to remain weak.
The regional market environment is expected to remain subdued both in Finland and in Sweden. As mentioned earlier, Infra continued to deliver adjusted EBITA above our target level of 12% for Q2, whereas Buildings and Digi's profitability was below target levels during the quarter. With this financials walkthrough, I will hand over back to Jannis.
Thank you so much.
Jannis will continue.
How we see the future. We think that the technical consulting market is expected to remain very mixed in 2026, like I said earlier. The demand in the green transition, security, critical and digitalization supporting Infra and Digital Solutions. But in the Buildings, the broader construction market is expecting to remain weak, and maybe we are seeing it picking up earliest in 2027. Of course, the data center projects support the demand, while the weak residential construction limits our activity. The renovation market is thinking to be stable in the future and recovering modestly. We are not seeing that geopolitical tensions have so far impacted our business, but of course, it's affecting the total market environment in Finland also. AI and automation are becoming more visible across the whole industry, supporting the efficiency and quality improvement while reshaping ways of working and skills requirements.
Looking ahead, our strategy update. Our medium-term strategy direction. Finally, let's turn to the future, and we have published our medium-term strategy guidelines. The previous strategy period ended at the end of 2025, and we released our strategy in last March. At the same time, our operating environment is changing rapidly, and it requires continuous changes to our strategy. For this reason, we have not linked our update to specific calendar year, and the time horizon for our strategy is two to three years. Before going to our mid-term strategy, I want to briefly explain the megatrends shaping our demand. I think that the megatrends, they are supporting our business. The urbanization is still going on, and it needs a lot to do in the building environment.
There is lot of renovation debt in our industry and the green transitions and the technological change is making us new opportunities. Of course, the geopolitics are challenging us, but at the same time, we are investing lot to our security, and that is helping us. This picture is familiar, I hope, to all of you, and this is our strategy in the one page. I want to say that in the future, we will focus to our people. We are focusing to our customers. We are focusing to do the things more digital way, and working smart. That is our focus and our core. Then I will tell you more detail with our AI strategy. I think that in the future, the way of working should be changed, and it will be changed.
Today, 90% of our work is, in Sitowise and in the whole industry, is manual work. People are doing manually things with help of computers and the technology. In the future, the people are talking with the technology, and the technology is doing the things. This will change the whole industry. So where we are standing now? Our AI vision is that the AI will be the natural part of everything that Sitowise does, in every project, in every service, and in every customer interaction. In practice, this means that we are embedding AI into Sitowise expert work to improve productivity, strengthen service quality, and create more value for the customers. As already highlighted in previous slide, this is people-led change, not a technology program. We will see AI-enabled benefits materialize when our 1,700 experts start thinking, working, learning, and leading differently on their own work.
People and adapting is not a soft topic here. It is the execution risk. If people do not change how they work, the tool will not create the value. This change will take the time. We have to remember this, that the AI is processing all the time. We are going to the future. This slide defines where the AI must create value for Sitowise. We can have hundreds of ideas, many of them will change as the technology develops. There are five value areas. High-value expert work means reducing routine work and freeing experts' time for more valuable tasks. Stronger project performance means better planning, control, forecasting, and profitability. Faster digital delivery means faster software development, better quality, and shorter time from idea to release, especially in Digi business. Better decisions from data means turning projects, designs, and building business data into the foresight and actions.
New AI-enabled service means new customer value, differentiation, and future growth. This is what we are thinking, that AI creates value for this company. Now it is time to thank you all, if you have questions, we can answer them.
Okay. It looks like we have a couple questions here in the chat. The first one comes from Atte in Inderes. You mentioned in the outlook that demand for municipal infrastructure projects has softened. The question goes: how materially do you expect this to affect Infra in the second half of the year and in 2027?
Yes, like I said, the market is challenging, it is especially the public sector and especially the municipalities. The cities are not investing as much for the Infra that they have used to. I think that our order backlog is strong. We have won all our must-win projects in Infra in this year, so our order backlog is strong. The growth we are seeking from the private sector. Example of Infra is doing many projects to data center areas.
Okay, then a follow-up question from Atte Jortikka. Market outlook in Digital Solutions was downgraded to weak. Do you expect sales decline there also during the second half?
Yes, like I said, I think that it will be challenging and that it's harder to get the new projects, but our digital business is specialized to those areas that we are having strong expertise in other business areas. It's hard, but I think that for us it's not so hard comparing to other companies.
We are benefiting from the synergies also.
Yeah.
Then, one more question from Atte Jortikka. Are you expecting to win a lot more data center projects during the remainder of the year?
Yeah, we have a lot of data center project in our tender backlog, so we are all the time negotiation for more data center projects. The answer is yes.
Okay. As a follow-up to that question, a question from Miro Peltomäki at Danske. How many projects are you expecting to be involved during the rest of the year? This concerns the data centers, and can you give a number on the tendering amounts or somehow quantify the.
Okay, we are not saying exactly the numbers, but I can say that at the moment, there are tens of different data center projects going on.
In Sitowise?
Yeah, in Sitowise. Not 100, but many. Nearly.
Can you still comment on your position from competitive perspective in data center projects?
I think that it's quite strong.
Okay. Those seem to be the questions here online. I would like to thank Sanna and Jannis for the comprehensive presentation and all you listeners, viewers, for attending this results call. I also like to remind you that our Q3 results are due on 5th November, so we hope to see you all online at the latest then. Thank you.
Thank you.
Thank you.