Welcome to Solwers' January-June 2026 results presentation. My name is Jasmine Jussila. I am Chief Communications Officer, and I will be moderating this event. Today we have CEO Johan Ehrnrooth together with Teemu Kraus, CFO, presenting the results. Afterwards, we will go through your questions. During the presentation, you can write your questions to the webcast chat. Before we kick off, let's have a short recap on Solwers today. We are a group of consultancy companies that offer architectural design, technical and other consulting, as well as project management services in three countries. Altogether, we are 29 companies, all operating under their own brand identity and serving their clients locally in Finland, Sweden, and Poland. Let's start. Go ahead, Johan.
Thank you, Jasmine. Good morning also from my part. Let's have a look at our January-June results. The key figures, we produced a revenue of EUR 41.8 million. It was 1.2% down from last year. Our EBITA was EUR 0.3 million. We have updated our calculation method for that to correspond with similar companies in the market. We also now report the adjusted EBITA. It was EUR 0.4 million. There was not that much adjustments this time. EBIT was EUR 0.1 million. Another new KPI is the return on capital employed, which was 2.4% in the first year half. Going into this year, we expected Q1 to be challenging, and we had reason to believe that we would perform better in Q2. However, Q2 was a disappointment, and by that, the total performance in H1 was not satisfactory.
With the EBITA margin of 0.7%, and we, after discussions with the banks, had a waiver for our covenant testing in the end of June. We had reason to believe that we could perform better. Since this waiver, we have negotiated our terms to our financing agreement, and yesterday we came out with the notice that we have agreed on this with the bank. Behind this Q2 disappointment was especially the low billing rate in companies serving the Swedish industry. The performance in the architectural design in Sweden was also poor, and to some extent, we had challenges in the architectural design in Finland. We were not able to pass on the wage inflation to the prices. Last year we announced a program to save costs, and that has resulted in savings of EUR 0.7 million in fixed cost. Now the focus is turned to subsidiary specific actions.
There we are carrying out personnel and office space savings. The full effect of those will be visible during Q4. On a positive note, the order stock grew and most of the portfolio companies delivered. Specialist engineering, financial administration, and also infrastructure delivered good performance and the order stock there developed positively. Solwers is composed of 29 companies. Among those there are well performers but also weak performers. The weak result was concentrated in about a handful companies, mainly in Sweden, and there we now are carrying out the corrective measures. Looking at the performance in the country, in Finland, the performance was reasonable. The demand of infrastructure planning is at high level and Finnmap Infra, our largest company, had stable performance. Regarding geotechnical services, Geounion, as an example, continued their quite good performance.
In the structure design, we had a satisfactory level and for example, Pontec there had encouraging progress. In architecture, the market remained challenging, so we had to adapt capacity to demand. But we did see some picking up of request for proposals over the summer. In Sweden, H1 was challenging. Also there the infrastructure was, excuse me. Also there, the infrastructure was stable, and the order stock has long-running projects for Licab, as an example. In the companies serving the industry market, the competition remained tough. So ELE, WiseGate Consulting, Relitor, faced price pressure and had too low billing rate. Also, the architectural design had challenges in the first half of the year. Here is a snapshot of the projects we are involved in. Finnmap Infra acts as principal designer in the improvement of the Tampere underground infrastructure.
Peajämppi there is being enlarged, and this is a collaboration project with Sitowise and Ramboll. This project continues all into 2030s. In June, we won a general planning assignment for the east railway, Porvoo-Koria. This is also Finnmap Infra's project. North Bothnia Line continues to be a significant undertaking for us. Licab has about 20 experts involved there. This is also a long project. There are a lot of other projects as well, and as an example, we are involved in multiple swimming hall projects. For example, the Elmo, the Tapiola swimming hall in Myyrmäki in Kemi. Our Davidsson Tarkela Siren Architects have specialist competence in this area, and also other companies, Zenner and Planair, are participating in these projects with the building technology design. We are doing work to strengthen the foundation for the future.
As mentioned, we have renegotiated the terms for our financing agreement, by which we will reach a net debt EBITA ratio of 3.5x by end of June next year. We are doing subsidiary-specific measures. We are closing small offices. We need to reduce some staff, and we have a clear focus on sales and costs. We are doing competence development. As an example, we have conducted AI training in Finland and project manager training in Sweden. In the spring, we launched two new share-based incentive plans to commit our key personnel. We have also improved our financial reporting and IR communication. The EBITA calculation is now aligned with market practice. We now report the adjusted EBITA and ROCE. We have also implemented new IR tools to improve the transparency of our share. Teemu, please.
Thank you. Good morning from my side as well. I will walk us through the financial part of this webcast. Let us start from the top line. Group revenue for the first half was EUR 41.8 million, which was 1.2% below the comparison period. The development differed between the two quarters. In the first quarter, revenue increased by 2.9%, whereas in the second quarter, it declined by 5.1% year-on-year. Second quarter revenue amounted to EUR 20.8 million compared with the EUR 21.9 million in the corresponding period last year. This means that the decline in the second quarter was more than the offset of the positive start to the year and resulted in a modest decrease for the first half as a whole. Looking at the geographical revenue split, business remains well-balanced between Finland and Sweden.
Finland represented EUR 22.1 million of revenue during the first half, while Sweden contributed EUR 18.9 million . As a result, neither market dominates the group's revenue base, which provides resilience against market-specific fluctuations. Although still modest in size, Poland broadens our geographical presence and supports our long-term growth opportunities. Other operating income had only limited impact on the group's profitability. The item includes mainly non-recurring business-related income, and the biggest impact factor was changes in contingent considerations liabilities arising from earlier acquisitions. The development of variable cost was broadly in line with the underlying level of business activity. Cost control in project-related and subcontracting expenses remained satisfactory. As revenues declined slightly compared to the previous year, variable cost also adjusted accordingly. Personal expenses increased by approximately 2% year-on-year, while the average headcount remained broadly unchanged.
The increase reflects normal salary inflation and annual compensation adjustments across the group rather than growth in personal. However, profitability was affected by lower utilization levels, which had a direct impact on earnings. In response, we have continued to implement targeted cost adjustment measures in selected businesses. The benefits of these measures are expected to materialize gradually during the second half of the year. Financial expenses increased year-on-year, mainly due to the group interest rates. During the review period, the group also entered into interest rate swap in order to hedge part of our exposure to variable interest rates. Looking at profitability, the first half of 2026 was clearly below both our expectations and the comparison period. EBITA amounted to EUR 0.3 million, corresponding to EBITA margin of 0.7%. Adjusted EBITA was EUR 0.4 million or 0.9% of the revenue.
The main reasons behind the weaker performance were lower billing rates and pricing pressure in parts of the business, particularly in Sweden. Billing rate declined to 79.8% from 82.6%. At the same time, personal expenses increased moderately due to the salary inflation and compensation adjustments, while headcount remained broadly stable. The challenges were not evenly distributed across the group as several businesses performed very well, while a limited number of underperforming units, particularly in Sweden, affected on the overall profitability. As stated, we have already implemented corrective actions, including personal reductions, office rationalization, and tighter cost control. Our priority for the reminder of the year is to improve utilization, strengthen sales activities, and restore profitability. While the benefits will build gradually, we expect the impact to become mainly visible during the second half of the year, and particularly towards the end of the year.
Our balance sheet remained relatively stable during the first half. The equity ratio was 41.1%, slightly below the 42.3% reported earlier. Net debt increased by approximately 12% to EUR 28.2 million, mainly as a result of lower cash reserves. At the same time, return on capital employed declined to 2.4% from 7.7%, reflecting the lower earnings level. Operating cash flow amounted to approximately EUR 1.2 million in the first half, compared with the EUR 0.5 million in the comparison period. The improvement was mainly supported by working capital movements. On the other hand, lower profitability impacted operating cash flow. Investment cash flow was close to neutral at EUR 0.1 million, reflecting the fact that no acquisitions were completed during the reporting period. Financing cash flow was negative at 2.7 million EUR, driven by repayment of loans and purchase of non-controlling interest.
As a result, cash and cash equivalents decreased from EUR 11.2 million at the end of June 2025 to EUR 6.2 million at the end of June 2026. Improving profitability, cash generation, and working capital efficiency remain key priorities for the second half of the year. Other finance topics. As already mentioned, a temporary waiver was agreed with the group's main bank in June, followed by a financing agreement amendment signed 24th of August, which means yesterday. It is valid until 13 of June 2027. This amendment provides more stable environment for executing the profitability and improvement program and strengthening the financial position. Solwers also entered into an interest rate swap to reduce exposure to variable interest rates. This was all from finance. Thank you.
Thank you, Teemu. Let's go ahead with the outlook for the rest of the year. Regarding the market outlook in Finland, infrastructure demand stays strong. This is backed by the assignments already secured and the national transport plans. On this side, it is mainly rail investments and road repair projects that keep the engineering demand up. The construction is picking up slowly. Housing, especially residential, is expected to remain weak, but on other sides of the construction, there is some picking up expected. In architecture, we see opportunities in commercial, in public sector, and renovation projects. In Sweden, the demand for industrial clients improved gradually, and this comes a step behind the wider industrial recovery. As until now, it is mainly the green transition investments in electrification, renewable energy, and energy infrastructure, but also defense that support the market demand.
Also in Sweden, the infrastructure demand is expected to stay strong. Architecture, however, is held back by slow new housing projects. On the commercial and real estate side, we see some early signs of improvement. In Poland, accounting services outlook is favorable. There is a new mandatory e-invoicing system that drives the market demand. The business services sector keeps growing there, and the demand is also moving from bookkeeping to consulting. Our key priorities for the second half of the year, we need to improve our billing rate. We need to ensure that we have right-sized resources. We continue the focus on sales to strengthen that, and we closely manage the cost structure for all Solwers companies. We do not provide an outlook for H2 for the time being. The market situation for our sectors remain mixed. For most of the portfolio companies, we expect them to deliver stable results.
As I said before, the order stock level is higher than it was this time last year. But the visibility to the development of the profitability is limited for rest of the year, and this is especially true regarding our Swedish companies serving the industrial engineering clients. We have already started measures to improve the efficiency of our Swedish companies, and we expect that the results are visible then during the fourth quarter. We maintain our midterm financial targets. We target a revenue growth of about 20%, an EBITA above 9%, and an equity ratio above 40%. Now there is time for some Q&A.
Thank you, Johan and Teemu. We have a couple of questions here. Johan, you mentioned that the development in Q2 was a disappointment. Why positive development in the order backlog did not result in a favorable net sales development already in Q2?
The Q2, as said before, the main challenges are there in a handful of companies, and the problem was there in the billing rate of those companies. Solwers consists of 29 companies, and among that there are several good performances as well. But this time, the handful of companies draw the situation to what it is now.
You mentioned that the billing rate was down. How was the pricing?
The pricing in average, as we mentioned, we were not able to pass on the salary increases to the pricing, so it remained stable.
Do you have insight on how much did your sales decline organically in Q2 or H1?
We have not reported that figure.
We do not have organic growth in H1.
Again, for Johan, do you have loss-making companies also in Finland, or is it only Sweden?
We have also in Finland. They are particular in Sweden. In Finland, there is the better possibility to manage the capacity. But there are some companies in Finland also where we need to improve our performance.
Are your staff reductions mostly in Sweden or also in Finland?
Staff reductions are in Sweden. In Finland, it's more a question of potential temporary layoffs.
Is there significant one-off costs related to the layoffs?
There are some costs related to that. When we are doing layoffs, there is some time that we have the salary cost for the persons that are going out, and this is the reason why the full effect of the savings are visible in Q4.
Okay. Regarding the recent acquisitions over the last 12 months, how have those companies performed?
We are not opening in detail the performance of our companies, but on a general level, we can say that Odigo has had a good half year and Poland as well.
Maybe a question for Teemu. Do you think your debt level is at an appropriate level given your operations in general?
I think that the question in case is a problem with the profitability level, not the debt levels.
Okay. Then a couple of questions regarding the financial agreement. Teemu, what kind of cost does the covenant waiver bring to your financial costs?
We consider that as business secrecy, but it has some costs, of course.
The covenant levels require quite drastic improvement, especially for H1 2027. Is the driver expected earnings growth or lower net debt levels, or both?
Actually, we have estimated the top-line growth quite conservatively, and the performance increase comes from the savings and cost level discipline.
Okay, let's see. I think these were all the questions. Then, in the end, just a reminder of our Q3 business review. It will be published on November 12. We also have a couple of investor events still this year. We have two analyst houses following us, Nordea and Inderes, and they will give their insight separately. Thank you for listening, and see you next time.
Thank you all.