Welcome to Solwers Half-Year report webcast. My name is Jasmine Jussila. I'm the Head of Group Communications, and we are here today with Solwers CEO, Stefan Nyström.
Hello.
And CFO, Teemu Kraus.
Good morning.
Warmly welcome everyone behind the screen. Today, you will hear more about Solwers January-June performance in brief, and also the M&As and recent projects. Then Teemu will walk you through the financial review, and Stefan continues with events after the review period, M&As, outlook and strategic targets, and financial calendar. In the end, we will have some time for your questions. Yeah, during the webcast, you may write your questions in the webcast chat. Before we start, a little recap on Solwers, how we are today. We are altogether 29 companies across Finland and Sweden, and employ around 700 employees in the fields of design, engineering, and project management in the built environment consulting industry. Let's kick off. Stefan, go ahead.
Okay, thank you. So the market is still quite challenging. It has not, as it was predicted in the beginning of year, the interest rate is still quite high, and it has come down slowly. And of course, the interest rate has an impact on the investment activity, and it's still, let's say, in a waiting mode. We had a 20% growth, mainly from acquisitions, but we also have a positive organic growth. It's not big, but about 1%. The M&As we have made are actually three in total, two in Sweden, one in Finland, and then we have one where we are only. It's a strategic partnership, and we have 1/3 of that company.
The order backlog and billing rate, they have remained actually quite stable, but our profitability is lower, and it's partly due to, of course, the market situation, but partly also due to some costs that we have, could say that, additional cost. One is that we are preparing for a possible transfer to the Main List. That is one, and the other thing is, a recently acquired group company. They are performing excellent this year, which result in a higher contingent consideration and, decrease the reported profitability. So Teemu will explain more about this if there are questions.
Our performance, however, improved during the second quarter of the year, and the growth is actually bigger in Finland, because the low Swedish crown has an impact, of course, on our numbers when we are reporting in euro, and the crown is decreasing. But we think that the business climate is actually more positive in Sweden. Then we have also been strengthening our ownership in two subsidiaries. One is Dreem Arkitekter in Gothenburg, and the other one is KAM Redovisning in Stockholm. And we are having a new board member, Johanna Grönroos, joined the board of directors, and Mari Pantsar is not anymore available for this position. And we have also established these board committees. And Nordea has started to analyze our numbers, which is, of course, good, and or Solwers' numbers.
As said, we are ongoing in investigation on the possibility to transfer to the Main List market, Nasdaq Helsinki. Here is what has happened from the beginning of the year. I started with WiseGate Consulting and Demab. They are actually in south Sweden, about 50 persons, and they are consulting in engineering for the energy and process industry. This strategic cooperation with Kari & Pantsar. They are specialized in environmental consulting. We have Relitor in Luleå, North Sweden, and they are mainly doing plant engineering, calculations and things like that. We have a small company that's actually only a kind of supporting our Kalliotekniikka with certain products, rock excavation and products for the mining industry. Some interesting projects.
This first to the left is 130 kW transformer station. The company that is making the engineering for that is ELE Engineering in Västerås, and this is, of course, a project which enable transmission of more electricity, and these kind of projects will. There will be a lot of them, because the green transition need a lot of electricity, and the electricity need to be transferred to the right place. Then we have a sustainable project in Gothenburg. It's made of reused bricks, and it's a big building for 20,000 people, and actually, the CO2 emission that is saved is actually 2,200 tons of less CO2.
And then we have Established Schening our management consulting company in Stockholm, specialized in logistic. They are doing this GANT warehouse relocation, and interesting project. And then we have long-lasting hospital projects, and here is one of them in city of Oulu, health, city of Oulu, Finland, and it's a huge complex, and this is. It's divided in A, B, C, D parts. And we are involved there through Lukkaroinen Architects in Oulu. And then I give the word to Teemu, who will then tell about the figures.
Thank you, Stefan. And let's start from KPIs. So the revenue ended in H1 2024 at EUR 39.9 million. Compared to last year, EUR 31.1 million gives us growth of 20.2%. Furthermore, revenue growth in Q2 compared to Q1 this year ended up to 7.6%. Drivers for the growth lies on acquisitions, which were WiseGate, Relitor and Fine xplo, where of the two, first one were in Sweden and the latter one in Finland. Organic growth was marginal, but anyhow, positive. H1 EBITDA was EUR 3.8 million and 9.4% compared to H1 last year, EUR 4 million and 12.1%. EBITDA percent increased at, to Q2 slightly. H1 included EUR 293,000 on one-off costs, and excluding these costs, we would have exceeded last year absolute EBITDA.
This cost was EUR 78,000 due to the listing cost and EUR 215,000 due to the increased contingent consideration related to acquisitions, as our subsidiaries have performed better than expected, and this has also an effect to profit and loss. Anyhow, good performance is good news for us. H1 EBITDA was EUR 3.3 million and 8.2%, while H1 last year was EUR 3.5 million and 10.7%. EBIT in H1 was EUR 1.9 million and 4.9%, while H1 last year was EUR 2.5 million and 7.5%. Here between, we had some IFRS 16 related depreciation increased by EUR 300,000 alongside acquisitions.
Net result on the first half year was EUR 750,000, while a year ago, the first half it was EUR 1.5 million. Financial income reduced by EUR 895,000 from H1 2023, and respectively, financial expenses fell by EUR 594,000. EPS ended up to 0.07 EUR. Still continuing key figures. Turnover per employee grew to EUR 57,000 compared to last year, EUR 55,000. Billing rate stayed quite stable in 81.5% compared to last year, 81.7%. Equity ended up to EUR 40.2 million. Net debt increased by EUR 6.3 million from last year, H1, when it was EUR 17.3 million.
This increase was driven by M&A-related financial institution loan of EUR 2.3 million, increase in IFRS leasing debt of EUR 1.5 million, and acquisition debt by EUR 0.9 million. Then, decrease in cash of EUR 0.8 million. Leasing debt was EUR 6.2 million. Personnel at the end of the period increased by 79 from H1 in August 2023, being 690. Average was 699. There has been some adjustment of capacity, and thus, the number has fallen from Q1 figures. Moving to profit and loss. As already mentioned, turnover in H1 was EUR 39.9 million , while in 2023 H1, it was EUR 33.2 million . Growth of EUR 6.7 million and 20.2%.
The drivers for the growth were mainly acquisitions, but also organic growth was positive despite being marginal. Currency effect was marginally defective, negative. Other operating income in H1 2024 was EUR 104,000. Materials and services increased by EUR 1.6 million, and in proportion to turnover, they were 13.6% in H1 2024, and 11.6% in H1 2023. External subcontracting increased by EUR 1 million. Personnel expenses increased by EUR 4.3 million and calculated by the average number of employees, the group salary inflation was 3.5% . Depreciation increased by 275,000 and summed up to EUR 1.8 million, where IFRS 16-related depreciation was EUR 1.5 million. EBIT or operating profit fell by EUR 530,000 and 2.6 percentage points.
Financial net expenses increased by EUR 302,000, while net expenses were EUR 808,000 in H1. H1 taxes were EUR 0.4 million. Then moving to balance sheet and asset side. In H1 2024, total assets grew compared to H1 2023 by EUR 10.3 million and amounted to EUR 92.6 million, whereof non-current assets grew EUR 7 million and current assets EUR 4.3 million . Goodwill growth was EUR 5.8 million, and tangible assets increased by EUR 1.3 million. Short-term receivable increased by EUR 4.3 million, mainly due to the acquisitions. Cash and cash equivalents were EUR 30.2 million, decreased by EUR 773,000, but still remaining on a good level, facilitating our acquisitions strategy to continue. And balance sheet, equity, and liabilities.
In equity, increase was EUR 2.3 million compared to H1 2023, and ended up to EUR 39.7 million . Equity belonging to non-controlling interest was EUR 445,000. And here we have redeemed the minority shares from Dreem AB and KAM Redovisning AB in Sweden. Liabilities in total grew by EUR 8 million and ended up to EUR 52.4 million . Non-current liabilities decreased from EUR 27.3 million-EUR 24.5 million. In Q1, bank loan of EUR 2.3 million was drawn down, bank loan related to acquisition purposes. Non-current acquisitions-related contingent consideration decreased by EUR 5.7 million . Non-current leasing liabilities increased by EUR 944,000 , driven by the change in IFRS 16 application and acquisitions. Current liabilities increased by EUR 10.7 .
Current acquisition-related contingent consideration increased by EUR 6.6 million, mostly due to the maturity falling below 12 months level. Accruals and deferred income increased by EUR 1 million, and accounts payable increased by EUR 712,000. Current leasing liabilities increased by EUR 596,000. Then a few comments about cash flow. During the H1, the liquidity continued to remain at good level. Cash and cash equivalents ended up to EUR 13.2 million, being EUR 14 million in Q1, H1 in 2023. Cash and cash equivalents have decreased from fiscal year-end 2023 by EUR 2.7 million, mainly due to acquisitions and dividend payment. The company's operative cash flow during the reporting period was positive, EUR 1.1 million, being EUR 1 million in H1 2023.
Net cash flow from investing activities was EUR 2.9 million last year EUR 1.9 million, an increase due to high activity in acquisitions, which amounted at EUR 2.5 million last year in H1 EUR 1.9 million. Also from acquisition of non-controlling interests, which amounted to EUR 299,000. Last year such acquisitions did not exist. Dividend payments amounted to EUR 738,000, and M&A dedicated loan of EUR 2.3 million was withdrawn. Bank loan installments amount to EUR 1 million, and last year at the same period EUR 0.7 million. That's all from finance, and I will give the control back to Stefan. Thanks .
Okay, events after the review period. We have continued to with our acquisitions, and the first was Siren Arkkitehdit, which is the oldest architectural company in Finland, which remarkable references. And of course, together with ADT, they will form a super team with excellent references in different areas. Then we have Spectra Consult AB in Skövde and Åmål, and they are actually supporting WiseGate, and they are about twenty persons, and are operating in design and control of electricity and automation. Then about the outlook and targets for this year, end of this year, so the market pick-up, which we are waiting for, and investment activity has been delayed compared to what has been estimated, not by us, but by others.
And I think the biggest reason is that the interest has not come down very much yet. Then steel companies that are working with residential and office projects continue to struggle. And increased price competition we have seen, especially on the public sector in these cases where only price has been the and not quality requirement has been involved. So if it's only the price, they will drop very low. But luckily, in our projects, mainly quality has a big role. Then industrial projects perform better, especially in Sweden, where we are active, north Sweden. And then I would say that the infra sector is performing okay. But all in all, the market is a little bit waiting, I would say, what will happen?
Acquisition continues to support our existing business, and of course, in our M&As, the focus here is on areas where there are investment and production. For example, energy, automation, power transmission, also infra. We have a quite good backlog in both the public sector and also in the infra. We have a lot of schools under preparation, new projects there, and then we have also this long-lasting hospital project. I think that this is quite good. Then, of course, the majority of our projects are very small, below EUR 10,000 , and we have a lot of them, more than 3,000 active projects per year on average, and they are in-
Distributed in 29 different subsidiaries, so I think that that gives a quite kind of stable situation for us when we have a lot of companies, and they have a lot of clients, and clients are ordering small projects in both Finland and Sweden. So the Solwers business climate is expected to improve towards the end of 2024 with the general market pick-up. What can we do? We can, of course, we are depending on investments and, but the investment activity, we cannot impact, but we can actually, first of all, focusing on increase the sales in subsidiaries. We are now the slogan is "Sell as hell!" Then we have, of course, on the M&A side, we can focus on business where the demand is high.
And then, last, if nothing else helps, then we have to adjust the capacity where needed. But of course, focus on sales, focus on profit improvement in all subsidiaries. That is what we... Let's say in all subsidiaries where we have profit on a lower level. We have subsidiaries where the profit is very high and very good. So I think that that was still yes the midterm target, we have them still unchanged. Revenue growth more than 20% a year, we had that so far this year. And, EBITDA, we aim to get up to 12, and then equity ratio more than 40%.
Yes, that is just the financial calendar, our silent period window, and when we are coming out with the next time, November 29th, with the Q3 figures. Then I think the next is actually questions.
Yes.
We try to answer.
Thank you, Stefan and Teemu. We have quite many questions, but let's start with. Some of these you have already answered during the presentation, but let's still repeat some of them, so Sinikka would like to know: was there any organic growth, Stefan?
Yeah, I think that we said that it was about 1% of the growth was organic.
Then we have a question from Svante Krokfors, Nordea: Are there any acquisitions that have been particularly good, and any that have disappointed materially?
I would say that we have companies that are performing excellent, and we have companies that are struggling, so it's, but the average, I would say, is quite good.
Then Petri Gostowski is asking: How has the order backlog developed in H1, and are they now higher, in the end of H1 than the beginning of the year?
I think that it has been quite stable, but the order stock is never distributed equally over the company. So we can have a high order stock, but still, we don't have jobs for everybody in the company. So that is that doesn't exactly explain that. Because it's not equally distributed. But I would say that it has actually improved during Q2. It was a little bit lower in the beginning of the year, but as we also had a little bit more challenging in the first months of the year.
Then Svante continues that you have been adjusting capacity due to lower activity. How have layoffs and staff reductions looked like in H1?
We have now less layoffs than we had, and we actually don't have very many left, so, and we hope that we can, as soon as possible, get rid of them all, but we have still in some companies, layoffs, temporary layoffs, mainly ongoing.
Then a question that is coming up quite often here in the questions is: What is the status of Main Market listing?
The preparation are ongoing, but we- no decision has been made yet. It's, of course, the board who is then deciding when we go, but we have made preparation for that, which we have actually announced it already earlier, that we are preparing for that, but we have not yet made any decisions.
Okay. Then there is a question about the higher costs in H1. Costs related to the initial preparations for the main list, and also costs related to contingent considerations. Teemu, could you, you mentioned some numbers on this. Could you repeat some of them?
The costs related to listing initiative were EUR 78,000, and the costs which come from the contingent consideration is EUR 215,000, and this latter one is a result of our subsidiaries performing better than expected. And due to the accounting regulation, this differs from the normal case. We need to book it also to the profit and loss, and thus, it has a temporary effect in our profit and loss.
Okay, then, the last question for today is: How does the outlook for infrastructure look in Finland and Sweden, and has there been material changes? Stefan?
I think in Finland we know that the public sector there is. And the finance is not so good, so there have been a lot of talks about, for example, this Tunnin Juna. However, some parts of the design have continued, but I don't know what and when a possible investment decision for these projects will be taken. But there is a lot of small projects, and we are mainly involved in these small projects. For example, there are improvement of rail, road, and there are actually changing all these crossings of railroads, which is both rail and road design.
So I would say that the activity on the infra is in Finland still quite okay, and in Sweden there is a lot on the infra part, so I think that the infra is okay.
That's all. Thank you!
Okay, thank you.
Thank you.