Welcome to the Atea Q2 presentation from beautiful Oslo. Before I start, I want to encourage all of you to put in questions already during the presentation that we will take in the end of the session. A really strong Q2, the best Q2 ever for Atea. This comes as we still struggle with supply chain and other imbalanced factors in the world. The demand is very strong, and the supply chain becomes better and better during Q2. To the numbers. Revenue came in at more than NOK 12 billion. This is up 11.5%, but even higher in constant currency. The EBIT came in at NOK 281 million, which is a growth of 36.5%. Net profit, even better, at NOK 222 million, up more than 55%.
You should believe with that kind of revenue number and growth that backlog would fall, but that's not true. Backlog actually increased during the quarter by 10%. This means that the actual booking, the sales during the quarter, increased by almost 20%. As normal, I'll leave it to Robert to give you all the rest of the good news.
Thank you, Steinar. I'd like to start by reviewing our income statement. Atea had rapid growth in revenue and profit in the second quarter. Gross sales were a record high NOK 12.2 billion, up 11.5% from last year. The underlying sales growth was higher than reported. Currency fluctuations had a negative impact of 2.1% on growth as sales in foreign currencies were translated into a stronger Norwegian krone. Adjusting for the currency impact and an acquisition in Finland, organic sales growth in constant currency was 13.8%. Sales were strong across all lines of business. Hardware gross sales increased by 13.5% or about 16% in constant currency, driven by higher demand for digital workplace solutions.
Software gross sales grew by 10.9% or over 13% in constant currency with strong demand for cloud subscriptions. Services gross sales increased by 7.7% from last year or 10% in constant currency based on rapid growth in the consulting business. Our gross sales is then converted into net revenue based on the principal-agent criteria in IFRS 15. As you may remember, Atea and its peer group have changed their accounting policies to comply with a recent decision by the IFRS Interpretations Committee. Under this agenda decision, sales of standard software and vendor services are recognized on a net basis with revenue equal to gross profit. After this adjustment, net revenue, according to IFRS, was NOK 7.6 billion, up 13.4% from last year. Organic net revenue growth in constant currency was 15.4%.
Total operating expenses grew by 2.5% to NOK 1.9 billion as higher personnel costs were partly offset by a gain from the sale of Atea's mobile service provider business in Norway. Atea had a net EBIT impact of NOK 40 million from the sale of Atea Mobil in April after provisions for sellers' guarantees and other liability provisions. With higher revenue and low growth in operating expenses, Atea's EBIT grew by 36.5% to NOK 281 million. If we exclude the impact of the sale of Atea Mobil, Atea's EBIT still grew by 17.0%. Finally, net profit after tax grew by 56.5% to NOK 222 million. Net profit growth was driven by higher EBIT plus a financial gain on foreign currency balances.
We'll now take a closer look at sales and profit development across the countries in which we operate. Atea's rapid growth in sales was spread across nearly every geography in the second quarter. In general, despite concerns about the economic environment, we're seeing a very strong market for IT infrastructure in the Nordics and Baltics. In Norway, sales grew by 18.9% to NOK 2.8 billion. EBIT was NOK 119 million, up from NOK 84 million last year, as a gain on the sale of the mobile service provider business offset higher operating costs. In Sweden, sales grew by 15.7% with strong demand across all lines of business.
EBIT grew by 17.8% to a record high SEK 139 million. In Denmark, sales were DKK 2.1 billion, a flat trend from a very strong comparable period last year. EBIT grew to DKK 2 million, up slightly from last year. Q2 is seasonally the most challenging quarter for Atea Denmark, and the business has historically lost money in this quarter. Atea's operating profit in Denmark in the second quarter is a very strong improvement from the longer-term historic trend. In Finland, sales grew by 22.4% to EUR 92 million. EBIT grew by 32% to a record high EUR 2.4 million. Atea Finland is now back on track after a year in which the business was impacted by the loss of a major public frame agreement.
In the Baltics, sales grew by 20.8% to EUR 36 million, and EBIT grew by 21.6% to a record high EUR 1.3 million. Atea Baltics had strong growth across all lines of business, with very high demand from the public sector. Atea also improved results in its shared service subsidiaries. Atea Group Functions, which includes shared services and group costs, generated a net operating expense of NOK 11 million, compared with an operating expense of NOK 25 million last year. The difference was primarily driven by higher profits from Atea's logistics operations in Växjö. Now a word on our cash flow and balance sheet. Atea's cash flow from operations was an outflow of NOK 507 million in the second quarter, which is an outlier from the historic trend.
As you can see from this chart, Atea's cash flow from operations typically has a very consistent seasonality, with a strong cash inflow in the second and fourth quarters. The decline in cash flow from operations in Q2 is based on a strategic decision by Atea to increase inventory levels during a period of extraordinary supply constraints in the electronics industry. Atea normally operates with a low inventory balance and procures most customer orders on a just-in-time basis with its vendors. During the past year, Atea has faced long and uncertain lead times with hardware vendors due to supply constraints. This has caused delays in invoicing projects when the shortage of a specific hardware item prevents a project from being completed. To secure inventory for customers, Atea has been procuring hardware in advance of customer delivery dates.
Furthermore, Atea has acquired some buffer stock of standard PCs and other workplace items to capture market share from competitors which are facing supply issues. All of this has led to higher sales, but also a higher working capital balance due to a lengthening of the cash collection cycle between payment to vendors and collection from customers. Atea is now changing course and actively reducing its inventory levels as supply chain constraints have eased greatly across most product categories since the start of 2022. As inventory levels fall, Atea expects working capital to reach a more normal balance by the end of the year. This will result in higher inflows of cash during Q3 and Q4. Moving on to our debt balance.
Due to higher working capital requirements, Atea's net debt balance grew to NOK 1.2 billion at the end of Q2, as defined by Atea's loan covenants. This corresponds to a net debt EBITDA ratio of 0.7. While Atea's debt has grown from last year, the company still has a relatively low leverage ratio and is well within its loan covenants, which require the company to maintain a net debt EBITDA ratio of less than 2.5. Atea has significant additional debt capacity within its covenants to pursue its growth strategy. As inventory returns to lower levels and cash is collected, we expect Atea's net debt balance to fall during the course of Q3 and Q4. That concludes the presentation of the second quarter financials. I now hand the podium back over to Steinar to provide an update on market trends.
Thank you, Robert. A quarter to be proud of. As Robert said, I wanna give you a little bit of insight to what's going on in the market. Why is it strong? What happens with supply chain, and how is Atea positioned in this time? I have spent some time with IDC so that these statements are not only ours or mine, but also supported by the market analysts. IDC came out with a report not many weeks ago saying that we are entering the digital first era, or that the world has become digital first. What is really meant by that? Well, with my words, what really happened during 2018 and 2019 was that everybody was available digitally at all times, at any place because of the devices we have.
Secondly, all we need, all information, all services were available at all times for everybody. Digital first really is possible because we're all available to buy or to consume services and products digitally. There is no need to go through the physical route. This leads to completely new investments in go-to-market models, in new services, and you see it around you both as a consumer, but also more and more as a person in the working life. When IDC asked the customers, I think we should be aware that most people will be more positive on their own position here than what they really are. Or when they ask the market, only 13% of the companies and organizations feel that they are on top of this development.
This is really what fuels the investments now and in the years to come. When IDC looked at their predictions, so they predict every quarter, December, March, and now in June, they have constantly increased their growth predictions. The green on this slide is from February and March, and the gray from May and June. As you can see, they now predict the next several years to have 6%+ in growth in the IT area. This is the complete IT market. If you look at the infrastructure market, the prediction is actually that the growth will be around 8%.
This is in the Nordics, by the way, and this is different than what it is some other places in the world because we didn't really have this spike during pandemic that you saw many other places. The Nordics were more or less ready, and there is no spike to fall down from. What we see now is a normal, aggressive, but normal market. If you look at this from a customer point of view and look at their IT budget, you will here see how much of the total budget goes to support the IT investments. Approximately 50%, both of public and private, has an IT budget below 2.5%.
What's interesting is that the number of customers or companies and organization that are in the bracket between 2.6%-5% is increasing every year as we have measured this KPI. Now, more than 30% of all private companies spend more than 2.6% of their total budget on IT. It's not many years ago where no one spent more than 2%, so this is also supporting the IDC prediction. The market is strong. It's predicted to be strong going forward. How are we positioned? Well, again, this is a little bit of a busy slide, but what it's trying to show you is actually two things.
First of all, if you take the whole IT services market, not only the infrastructure which we normally talk about, but the whole services market, Atea is the third-biggest services player in the Nordics with 5.3% market share. As we've talked about many presentations, this is about 15%-20% when we look at the infrastructure market only. The second information from this slide is that Atea, together with Capgemini, are the only two players in the Nordics who are green in all four areas that IDC follow. So I would say, you know, these are IDC information. I would say that we are well-positioned, if not perfectly positioned, to take advantage of a strong market going forward. From the predictions, I would like just to end on this slide.
This is from another analyst firm called Canalys, which are well-known in Europe and around the world. What they say is that the customer demand for technology have never been stronger. It's never been hotter than now. The biggest problem is not that the market is not strong enough, it's how we as an industry can meet and support that demand. How can we, in a position where there's lack of skills, there is lack of products, support this high demand? They're also saying that customers really need help. Customers lack skills. They need a safe harbor or someone to help them through this transformation. They need a trusted IT partner.
At the same time, Canalys says that the vendors, the OEMs, the producers of the products, have no way to support the customers, even though some of this is produced as a service or in a service model. They're all pointing at companies like Atea, and again, we believe that we will be able to take advantage of this going forward. Then someone out there might say, "Well, we read that PC sales are down a couple of %," and so on, and that is true. The consumer market, which we are not operating in, is down because of inflation and because of other issues, or maybe there was a spike in that market during pandemic. In the business-to-business market in the Nordics, this is not the case.
The second thing that you have to understand is that price adjustments, price increases of 5% + is also making the market bigger even though number of PCs, number of products, is slightly down. To my last slide before we'll wrap it up on supply chain. I've categorized it into four areas on this slide to try to help you to understand how this has developed. These are average delivery times, there are certainly deliveries that are faster, and there are deliveries that are slower. These are deliveries from the producer, and as Robert were stating, we have inventory, so deliveries from Atea will be in many occasions faster than this. Let me just take a couple of examples for you. On the PC side, pre the problems, delivery times of 25-30 days.
During the pandemic, more than 150 days. Now, down to 45-60 days. It's not all the way back, but it's much, much more manageable than we've seen. On the other side, networking is still challenging, as you can see. The mix that we have in our books right now is skewed towards user equipment, but the backlog is there. The market is strong for networking, and we will work with that going forward. That concludes our presentation. A first half of 2022, which is by far the strongest first half we've ever had of a revenue of more than NOK 22 billion and a net profit of NOK 353 million, up more than 30%.
With that, we'll give you the opportunity to throw some questions at us, and we'll be happy to answer all of them. Christian, have we had any questions so far?
Yeah. Thank you, Steinar. We have received a few questions, already. The first one goes like this: Some analysts say that number of PCs sold is down. What is your comment to this?
Yeah. As I was just ending the presentation saying the in the world in total, the PC sales is slightly down or predicted to be slightly down this year but was slightly down first half. In the Nordics, that's not really the case, where it's slightly up, but the business-to-business market has been strong. It's the consumer market that really brings down the number of PCs. Again, when you look at not the number of products shipped but the revenue from this market, it's up in the world because the price increase of as much as 15% on some of the products.
Thank you. Next question. Inventory is up, and you no longer have negative working capital. What is happening?
Yeah. What is happening? I think Robert was talking about this in his part of the presentation. We took an active decision about a year ago to use the muscle that we have in the market by using some of the financial power to increase inventory, and so that has helped us. When we have almost 15% growth in revenue in a difficult time, it's because we spent some financial muscles. We now see that especially on the PC and the mobiles and the tablets, that the delivery times are going down. We will decrease this, so we will have a positive development in this area going forward and a negative working capital as people are used to seeing from us. This is an active decision which have worked really well for us.
Thank you. Next question. In our view, Atea is well positioned to excuse me, to weather the challenging macro environment ahead given its public sector exposure. However, can you comment a bit on what you are seeing among your private sector customers and how it differs across geographies?
Actually, when we measure the sales, public versus private, it increased in the favor of public during 2020, so from 60% to maybe 66%-67%. That's been pretty constant during the last two years. We don't see a very strong shift one way or the other right now. I think this is because when you look at the private sales we're doing, it's skewed more to bigger companies than the smaller companies. The bigger companies in the Nordics doesn't seem to decrease their investments in IT. I think on the contrary, and just on a personal note, I think this is because we're living in a part of the world with one of the highest cost levels, and so return on investment in automation or in IT is still very, very strong.
We haven't seen any changes so far. I do agree it is a kind of an insurance to be having more than 65% of the sales to public.
Thank you. Next question. Working capital increased significantly in the quarter. How should we expect this to develop in the next couple of quarters?
You wanna take that, Robert?
I think we addressed that. The question probably came in before we spoke about it. We expect working capital to go back down to normalized levels over the next couple of quarters as we take an active decision to bring down the inventory levels. What this means is it means our cash collection cycle normalizes, that we go back to something which is more like a just-in-time, where right now instead we have payments to vendors before we're collecting from customers.
Thank you. Why do you need to build buffer stock in PCs? This seems to be a category with quite good supply lately.
I understand people are interested in the cash flow here and the working capital. That wasn't the case only six months ago. We have huge deliveries to especially the public and especially school PCs in Norway and Sweden here in July and August. When we're past Q3, inventory will come down also on the PC side. I have to remind you that only six months ago, we weren't able to get PCs within the next six months, even when they were ordered. The reason why we delivered was that we did have buffer stock or inventory.
Huge deliveries in Q3, which are now in inventory, to be able to guarantee those deliveries to students as they start school in the first week of school, which is the contracted KPIs, but it will come down.
Thank you. Could you elaborate on your hiring plan going forward?
I think I wanna expand a little bit on that question. A lot of people talk about difficulties getting the right people, and they're also talking about salary increases in the market. We, as the biggest player in our part of the region, have not seen major problems of getting people. What we all see is that there is a lack of certain skill sets. As the biggest players, as I said, we can hire people that are younger and that we can develop and train within three-12 months. That both keep the salary pressure down, but also expands the number of people that we can recruit from.
I know that wasn't exactly what the question was about, and I will address the specifics of the question, but the hiring plans going forward will depend on the market and how fast we can get that skill set to fit the market. Probably a little bit slower than the last 12 months, if I should try to give a number.
Thank you. Is Denmark still suffering from lack of supply of, for instance, network hardware, or is this a more normal quarter supply-wise? How do you see second half outlook for Denmark?
Two parts to that question. First of all, Denmark is really suffering from the delivery of networking products. As we've said before, Denmark relatively is the country with the highest portion of their revenue from networking. Again, networking is the part of our product and services set that has the highest margin. They do really suffer both in Q1 and in Q2. This is one of the reasons that they're not having growth in the first or in the second quarter. I'm sorry. We expect Denmark to start growing again in Q3 and Q4 on revenue, which will also help them on EBIT, of course. The mix is important here.
I wanna just say, I don't know if everybody out there are aware of this, but we are not on the biggest frame agreement in Denmark, which is all the public on PC. That is a four-year frame agreement that was decided in June of 2018 that we were not on for certain reasons. That is up for grabs this summer. If we are good enough and well enough positioned to be on that contract, that will give Denmark a spike. Secondly, KMD, the acquisition, will come into play during August, September, which will increase the revenue in Denmark significantly. We see growth second half and maybe higher than the market.
Thank you. When do you see supply chain situation normalizing for networking, servers, and storage? What is the feedback from suppliers?
We believe that storage and servers will normalize during this year. I'm not saying it will be exactly back to where it was before the pandemic or before the supply chain problems, but it'll be normalized, just like PCs have during the last three, four months. Networking, we believe, will take a little bit longer, we'll be into first half next year before we'll see somewhat of a normalizing. Networking have always had longer delivery times than more standardized equipment, but it will normalize from what we see, from what we hear during or into next year.
Thank you. How much of the strong sales growth in Q2 is explained by price increases?
Well, I don't have a number for that to give the audience. To calculate what comes from what when you have hundreds of thousands of products going out is not really that easy, because it varies greatly during or over the product spectrum. It's a significant part of it. If I should try to give a judgment here, maybe as much as two or five percentage points, so a third of the growth.
One thing which tempers that is that much of what we delivered in the second quarter was actually ordered from us because of supply chain issues in the fourth quarter. We both established a price with a vendor and a price with a customer before the latest wave of inflation kicked in, so that tempers some of the inflation that we saw in the second quarter.
Thank you. Is there any risk of write-down on the inventory that was built up during Q2? Do you see inventory levels fully normalizing during second half of this year?
Yeah, again, two parts to the question. If I take the last part first, we don't believe that we will be back 31st of December at exactly or as low a number as we did three or four years ago. It'll be much closer than where we are right now, and we'll see an improvement already at the end of Q3 if we can follow the plan that we have. It'll fall greatly towards the end of the year. When it comes to write-downs, inventory, there's always a risk for that. With the demand that we see right now, it's not a big concern for us.
Okay. Thank you. CapEx was elevated during the quarter. What's going on here, and how should we expect this to develop going forward?
Much of the CapEx that we had in the second quarter was actually a postponement in data center projects, due to delivery times that was coming from the first quarter into the second quarter. On a first full half-year basis, we're on track with our expectations, and our expectations that we would have CapEx at or below 1% of revenue or of sales still holds. We've been well below that, and we expect to be below the 1% of sales level going forward. It's more a timing of projects than it is any change fundamentally in our CapEx.
Thank you. Okay, I think we have received the last question here. All are complaining on increased salaries and lack of skills. How do you see this?
Yeah, I think I commented a little bit on this earlier. There is a lack of skills in certain areas in the world. We have been able to manage that, I think, better than what I see and hear from other players. That also means that the pressure on salaries are kept under control, I would say, and we don't see any specific spikes in the salary cost per employee or on average per employee. I think you can see this in our numbers when you see number of hired or new hires and how the salary increase has been. We feel we've been able to handle this pretty well.