Welcome. Welcome to the Q2 presentation of the ATEAGroup numbers. This has been another crazy quarter, and actually, it's the 5th quarter in a row where we are performing very well under difficult corona restrictions. Before we dive into the numbers, I want to tell you that you can ask questions digitally already from now on. We'll take some questions in the end.
As I said, these quarters are not easy. In this quarter, we really felt that people got really weary from 1.5 years in more or less lockdown. We had some serious supply chain problems, and we had a very tough Q2 2020 to compete against. And just therefore, I'm so very happy and proud of the achievements. So let's look at the highlights.
We had a strong intake and a strong revenue in Q2 coming mostly from hardware and software. Revenue came in at 10,900,000,000 A solid growth in constant currency of 8%. EBIT before share based came in at £243,000,000 and cash flow from operations was positive $582,000,000 which left us with a cash position of more than €400,000,000 at the end of the quarter. So another very strong quarter from the place to be. But as normal, I'll give the word to Robert to give you all the good news.
Thank you, Steiner.
We'll start by reviewing our income statement. ATEIA's reported revenue in Q2 2021 was a record high NOK 10,900,000,000, up 3.1% from last year. The underlying sales growth was higher than reported. Currency fluctuations had a negative impact of 4.4% on reported revenue as revenue in foreign currencies was translated into a stronger Norwegian krona. Adjusting for the currency impact, revenue growth in constant currency was 7.8%, with higher sales across all lines of business.
All of this revenue growth was organic. Hardware revenue increased by 2.2% or about 7% sales growth in constant currency due to higher demand for digital workplace and networking solutions. Software revenue grew by 5.9% or over 10% sales growth in constant currency. All countries except Finland reported double digit growth in software sales. Services revenue was flat from last year, but grew by 3% to 4% in constant currency.
Higher sales of consulting and managed services Offsets slow demand for on-site installation and support services as many customers restricted access to their office environments during the quarter. ATEIA's EBIT before share based compensation increased to DKK 243,000,000, up 4.6% from last year. Share based compensation costs were DKK37 1,000,000 up from DKK13 1,000,000 last year, due to a strong appreciation in ATEIA share price during the quarter. EBIT after share based compensation was DKK206 1,000,000, down from €220,000,000 last year. Last year's EBIT was exceptionally high due to currency fluctuations and temporary cost savings from programs implemented at the start of the COVID pandemic.
During Q2 last year, several 100 employees We're placed on government funded furlough programs and many others accepted voluntary salary reductions as ATEIA took immediate action to respond to an uncertain business environment. These programs are no longer in use by ATEIA. If we compare with Q2 2019, ATEIA's EBIT has increased by 42% over the last 2 years through organic growth and operating efficiencies. Despite the temporary cost savings An exceptionally strong performance in Q2 last year. Atea still reported higher EBIT in all countries in Q2, 2021.
In Norway, EBIT before share based compensation grew by 9.7% to a record high NOK 89,000,000. The profit improvement was based on growth and improved margin on product sales. In Sweden, EBIT before share based compensation grew by 12.7 percent to SEK 131,000,000. The profit improvement was based on higher sales of software and services. In Denmark, ATEIA continued to make major progress in its turnaround.
Revenue grew by almost 20% with strong growth across all lines of business. EBIT before share based compensation improved by DKK11 1,000,000 as higher sales offset the impact of increased personnel costs due to short term salary reductions last year. In Finland, EBIT before share based compensation grew by 7.2% to a record high €2,000,000 Revenue in Finland was lower than last year due to the loss of a large software frame agreement, But this was compensated by higher profit on sales of hardware and services. In the Baltics, EBIT before share based compensation grew by 1.7% to €1,200,000 ATEIA Baltics increased revenue by 11% from last year with high growth across all lines of business. However, operating expenses also grew compared with last year when many employees were placed on temporary leave to reduce salary expenses.
ATEIA Group functions, which include shared services and group costs, had a net operating expense of NOK 14,000,000 compared with an operating profit of NOK 11,000,000 last year. Last year's performance in group functions was unusually strong based on high demand for services from ATEIA Logistics and cost savings from voluntary salary reductions. In sum, ATEIA's EBIT before share based compensation improved by NOK 11,000,000 in the 2nd quarter, with higher operating profit across all geographies, partly offset by higher costs and group functions. Now for a word on our cash flow and balance sheet. ATEIA's cash earnings were an inflow of NOK307 1,000,000.
Working capital movements, excluding the sale of receivables, had a negative impact of DKK766 1,000,000 in the Q2 of 2021. ATEIA's working capital balances typically increased during the first half of the year and fall in Q4 due to the seasonality of ATEIA's public sector business. In Q2 last year, changes working capital had a very positive impact on cash flow due to a temporary extension of payment terms from ATEIA's vendors at the start of the pandemic. This extension of payment terms ended during the second half of twenty twenty and does not affect ATEIA's working capital balance today. Adjusted for working capital movements, but before the sale of receivables, ATEIA's cash flow from operations was an outflow of NOK459 1,000,000.
In order to reduce the volatility of its working capital and debt balances throughout the year, ATEIA sells specified accounts receivable through a securitization program organized by its bank. Due to increased working capital requirements, ATEIA sold more of its accounts receivable into the securitization program during Q2 2021 than in the previous year. This had a positive impact of NOK1 1,000,000,000 on operating cash flow in the Q2 of 2021. After adjusting for fluctuations in the volume of sold receivables, cash flow from operations in Q2 2021 was an inflow of NOK582 1,000,000. Moving on to our financial position.
ATEIA had a
positive net cash position of NOK 405 1,000,000 at the end of Q2 as defined by ATEIA's loan covenants. This corresponds to a net debt EBITDA ratio of negative 0.3. ATEIA's loan covenants require the company To maintain a net debt EBITDA balance of less than 2.5, which would mean that the maximum net debt balance allowed by ATEIA's loan covenants I'll now hand the podium back over to Steiner to provide further detail on market trends and how ATEIA is competitively positioned as the Nordic region recovers from the COVID pandemic.
Thank you, Robert. So we get a lot of questions. So what post corona. And let me try to give you a little bit of the view that we have now and looking forward. Just before the pandemic, Satya, who is the CEO of Microsoft, were quoted saying, This is the first time in history where we have to cope with accelerated and not linear rate of change.
And I remember when I started in this business, we always said we have a tendency to overestimate the change in short term and underestimated in long term, and this was all because we were living in a linearly rate of change. We are no longer in that state. Things are moving much faster, and it started before corona, and it's not slowing down because of corona. The technology are ahead of our use of it for the first time, at least as long as I can remember. And so the opportunities in all walks of life of solving problems using technology that are here today are better than ever.
This will change a lot of business models going forward. This is probably also why we see companies today being worth more than any companies even though they didn't exist more than 10 years ago. In that environment, it's so important to create a culture and a structure where you're able to change fast even though you are large. That's what we've been trying to invest in over the last many years, a culture where we are decentralized with 85 offices around in 7 countries and where people are allowed to take decisions locally closest to where the problem exists are created or the opportunity are presenting itself. I remember reading a quote from Charles Darwin written in 18/59 in the book on the Origin of Species.
He wrote, It is not the strongest of the species who survives. It's not even the most intelligent. It is the most adaptable. This is the strategy of Artea, and we have seen it time and time again, Going back to the financial crisis in 2,008, 2009, we had the strongest year ever in 2010. We have seen it through the corona pandemic, and we expect to see the same as we did in 2010 in the couple of years to come.
So how is our business put together? 10 years ago, it was more or less all hardware. Today, many times bigger, the company is about 50% hardware and 50% services and software. This is not 100% correct for Q2 or first half, where software were actually bigger on behalf of hardware. But if you look at the whole year, this was our expectations going into the year.
We see that software is growing somewhat faster than hardware. So we might be closer to 35% software and 45% hardware. That is the direction. We are not fighting the trend to go one way or the other. We are talking to the customers and solving their problems.
So a little bit more details on what's going on. First of all, as I write on this slide, We have had not only Altea, but the whole industry have had serious supply chain problems. Most of you have read about it. It's actually not only in our industry. It's in a lot of industries, but let me focus on our problems.
So there is a component shortage, but It's also the shortage is also created about because of a demand which is larger than expected. So let me give you an example. A year ago, the expectations for the number of sold notebooks In 2021, in the world, was €270,000,000 Now the expectations is €400,000,000 and there is no way the production is going to close that gap, and we expect that the Sold, expected to be used, but not able to be delivered in 2021. So what we thought was more of a production capacity problem looks more now as a problem created by stronger demand. We see this because we see the shift from stationary PCs or tools to portable tools.
We see the shift in many places from sharing tools to having a room to bring home or to use at home. This trend We will not stop, and we expect the PC sales to be strong for the next couple of years. What we do see will change in second half of this year when offices hopefully and plan to open again with our customers is that on premise work where we as our colleagues in Altea can enter the buildings and do work On meeting rooms, networking and data center facilities, we will see services start growing again. Leaving this quarter, our backlog had increased from last year of 2,000,000,000 to leaving this quarter by $4,000,000,000 So we have almost a full quarter of hardware in our order books, which have never ever happened before. When we look at the solution Where we really see a strong demand because of the accelerated change that we talked about earlier is in the hybrid multi cloud area.
People are not moving from to, They're expanding into a hybrid cloud environment. We see a very strong demand in networking, not only driven by 5 gs and Wi Fi 6, but in general, connectivity, as you can understand, has become more important and we rely more on it than ever, which creates a demand for more security or more holistic approach to the security area. The demand for analytics and AI will continue to grow and this will not change anytime soon. The trend that has been going on for years of buying IT as a service, Not necessarily the all time full outsourcing, but buying certain things as a service It's a trend we see accelerating. This goes for desktop as a service, network as a service or data center as a service.
This includes the public cloud, of course, but is not excluding the on prem solution. In fact, what I think comes as a surprise to our American friends, Some of the Nordic countries and also some EU countries are banning use of public Cloud for privacy reasons, and this is not something which one of the American public cloud companies can solve themselves. This is a legal issue, and this is a position that the Swedish government has taken, and the Swedish business for ATEIA is 43%. The public is tilted to or the business is tilted to public in Sweden, so 50% of our public business in the Group is in Sweden, where public cloud is not an option. So what we are working on is providing these services from our data centers in a combination with on prem solutions for the customer.
But it also creates an opening into another part of the market, which we haven't talked to you about so far, and it's called data classification. If we're going to get our customers through the public cloud or the multi cloud with the legal battles that are fought right now, we need to classify data so that they can use the public Cloud where the data is not a risk factor. This is a new opening. To classify data and to Select data and know where you have what kind of data is not an easy task, but it's one that we'll be have to be that we have to deal with in the years to come. Very briefly, we are very dependent on our strategic vendors.
You see the 10 of them here. They've helped us through the pandemic with payment terms, deliveries, which We're thankfully, they prioritized us so that Q2 and even Q1 before that became strong cores. They've helped us move to digital customer events and to develop the competence of the ATEIA employees through digital tools. They strengthened their margin programs and they funded heads to help us, and these are things we will take advantage of also going forward. Lastly, we have in Artea invested heavily in sustainability and everything that comes with compliance and work ethics.
This is not new to us, but what we see now in the market is that especially are starting to put this into their tenders. And we now have multiple tenders, not only in Q2, where we have won because ESG is as much as 40% of the criterias of the bid. We are way and above our competition. And to mention a couple of things, In 2021, the Financial Times ranked ATEIA among the selected group of European companies that made the greatest progress in curbing their greenhouse gas emission. One big element of that is that we, during 2020 recycled or put in reuse more than 450,000 IT products.
We launched our 10 year plan, our 2,030 plan for corporate responsibility, which you will be able to read in that report. And we were recently recognized in the transparency partner by NASDAQ. Only yesterday, We was awarded the highest rating for environmental and social performance by EcoVadis for the 2nd year in a row, which means that of more than 75,000 companies around the world that they have looked at, We are among the top 1%. This will become more important after the pandemic. We see it and we know it and we are ready for it.
So to summarize H1, we had a very strong first half to 2021. 8.6% growth in revenue in constant currency under very difficult circumstances. EBIT of €382,000,000 up 52% and a net financial position of more than $400,000,000 which gives us all the possibility in the world to invest in further growth. I hope you liked it. Thank you, and we will go to possible questions.
Thank you, Gustaf and I. We have some questions here from our viewers. The first one is from Christopher Wang Bjornsson. He is stating, great to see solid growth in revenue during the quarter, But you note that you saw headwinds from supply chain constraints. Could you please quantify how much growth would have been if you didn't face this headwind?
And maybe some indication of What kind of development the backlog is indicating for the second half?
So let me He tried to comment first briefly on the first thing, which I think he asked how much of this could have been or should have been delivered in Q2. Let me first comment and say that this is hardware. So it's the hardware revenue line in our P and L that you have to look at when you look at this. We do not have any constraints on other things, even though some of the services are dependent on delivery of hardware. So we are not going to quantify 100% what we could have delivered without the constraints, but we're talking about 100 of 1,000,000 of NOK in revenue that were bumped from Q2 to Q3.
So to the second part, how will this influence the future? Well, the orders are there. The customer needs the products. And so the fight is going to be again in September to get things into that quarter, into Q3, and who am I to know what's going to happen in the future. We have a lot of things to work with in the backlog, and we are very, very Hopeful that Q3 will be positively influenced by the backlog.
Thank you. Second question is from Christopher. You note a net cash position of NOK 405,000,000 including resold receivables, which is compared To be more levered. Any reasons you should stay at these levels? Or should we expect the company to utilize the balance sheet Strength for M and A in the near future?
Well, you will you can expect that we will use The cash or the financial position that we have to increase growth, both from investing in organic growth, but also M and A. I'll not comment on the time frame on this as that would not be The right thing to do right now.
Okay. 3rd
question from Kristoffe. Denmark now Back to significant growth and black numbers. How much should the unit contribute to EBIT this year? And how long Do you need to turn it back to the kind of normal Norway type EBIT margin?
While Norway is doing really well. So I really hope Denmark can get to that level. But let me give some Background to this. So Denmark did not now have 4 quarters without losing money. If you look at the last 12 months rolling, so the last 4 quarters combined, we have improved over the last over the 12 months before that by $130,000,000 So in 12 months, we have improved by $130,000,000 and we are at breakeven.
For the rest of the year, we plan to make money in the level of €50,000,000 or €60,000,000 And we hope that the next 12 months from now, we will be able to improve as much as we did, meaning EUR 130,000,000. So that gives you a little bit of pieces to put together, Christophe, in your puzzle.
Thank you. One question here from Alexander Lager at Artech. Could you expand on the supply chain issues? And are there any specific projects where ATEIA deliveries are delayed?
There are many projects around in the Nordic and Baltic where projects are delayed because of delivery problems. When we have a backlog of $4,000,000,000 in hardware and the average order is $25,000,000 to $30,000,000 You can do the math. So yes, we are absolutely negatively influenced by the supply chain. We are better though than competition because of the relationship we have with the vendor and the size we have and the type of customers we have, We are prioritized. So if the customer wants delivery this year, they better come to Altea because if they go somewhere else, Probably, they won't get deliveries this year.
But yes, there are projects, and yes, we are putting in hours right now, which are going into just keeping the project alive, the customer happy or to get the goods from somewhere in the So it's a real problem. We're dealing with it. We are very happy that we had growth in hardware in Q2, which is a proof that we are okay at handling the situation, but it certainly is something which will be with us for the next 6 to 9 months.
Thank you. Then we have a few questions from Daniel Duyberg at Handelsbanken. Congrats to solid numbers. Can you please comment on 1 comment component shortage situation Entering Q3 and possible also on the year over year change in the order backlog in the hardware segment.
Okay? So I think I have commented briefly on it, but just to be very short and to the point, the shortage is not changing in Q3. So we don't feel it's going to be worse, it's not going to be better. We're still going to struggle. We have a backlog which we are working with, hopefully being able to deliver most of it, but the problem is real.
It's not going away and it's not fixed overnight. When it comes to the development in the backlog in hardware, so the numbers I gave earlier where we've gone from 2,000,000,000 A year ago to €4,000,000,000 now is Hardware.
2nd question, if you have seen any lost market share in the Baltics on Back of the component shortage?
We have no information that we have lost backlog sorry, market share in the Baltics or anywhere else. On the contrary, we the information we have, And this is not from the market intelligence companies yet because they haven't come up with their numbers, But coming from the vendors themselves, they're all telling us that we are taking market share. Specifically for the Baltics, I don't have those numbers. So this is more for the group.
I'll just Say a couple of words on that. It's in the report. But if we look at Q2 in isolation, hardware revenue is up 8.3% in the Baltics. Software revenue is up 14% in the Baltics. So in Q2, we absolutely did have this market share.
Okay. Thank you. Question Number 3 from Daniel. Can you give a short overview on the current COVID-nineteen impact on your on-site services operations? What are you preparing in second year half of the year in terms of COVID-nineteen impact?
So first of all, the impact to our business on the services side is the people business, the hourly business, let's call it consultancy and technicians, that do their work in the customer's building. It could be their data center or it could be their administrative part of their building. And that part of our work is have a big, big impact. We're talking about 50% or somewhere around that. It's not the biggest part of our services because a lot of our services can be done remotely and have been done remotely, But the work that we are doing in the buildings are severe have a severe impact.
The part of that is that that also impacts the products because these people work closely with the products. It could be meeting So okay, they can't go in and install it, and we can't invoice the services, but we can't invoice the meeting room either. And the same thing with print and the same thing with Wi Fi and data center products. So we believe that there will be an uptake in the growth when people open the buildings. And again, just to be very clear, that's not going to be one starting date.
We are in 7 countries. Some of them are open like the Baltics and Denmark are mostly back to office. Norway, Sweden and Finland are not so much and that will happen hopefully in Q3 and we will start to see that impact as Norway, Sweden and Finland are some of the bigger markets for us.
Thank you, Sanjay. One more question from Kristians Petalen at Arctic. Would you say That your OpEx is still below normalized levels or should we expect it to grow at a normalized basis from here?
The OpEx level we have today is not influenced by any abnormalities. So this is a normalized OpEx level for us today. There is a little caveat to it, of course, and that is that we are still not fully back to having travel. So there will be some but that is a small part of our total OpEx. There's a little bit of closedown effect on that part.
Going forward, yes, We expect to grow, and we expect to follow normal cost increases in the society, so It will slowly grow from here. But on the other hand, we do have programs that we have talked about earlier to increase efficiency, which makes it possible for us not to grow OpEx as fast as revenue.
Thank you.
Okay. From what I understand, that concludes the questions. Thank you to everybody who has watched, everybody who has interacted. We look forward to a good summer but also a great Q3. Thank you.