Good morning. Welcome to the presentation of Komplett Group's second quarter results. My name is Kristin Hovland, and I'm Head of Communication. We will start today with our CEO, Lars Olav Olaussen, who will summarize the quarter. Then our CFO, Krister Pedersen, will give some more details about the financials. The presentation will take approximately 20 minutes. During the presentation, you are welcome to pose questions on the web, and we will answer them together with the questions from the audience at the end. Lars, the floor is yours.
Thank you, Kristin. Good morning. The second quarter was a quarter of very challenging market conditions drove a disappointing top-line performance for Komplett Group. Firstly, consumer confidence is at its lowest since the 1990s in both Norway and Sweden, reducing consumer spending, and especially reducing spending on more expensive goods. Secondly, consumers are shifting more of their spending from goods to services and leisure. Thirdly, consumers are making a short-term rebound from e-commerce to physical trade. If we, however, take a longer view of the results, including the poor performance of the last quarter, Komplett Group has a top-line organic growth CAGR of 12% since 2019. That puts us in a place where we're outgrowing all of our key competitors and taking market share in the period.
In addition, high inventory levels, both in Komplett and in the industry, puts significant pressure on the gross margin for the quarter. As mentioned in the last quarterly update, reducing inventory level and creating a healthy stock composition has been a key priority for the group, but also a priority that will put pressure on the gross margin in both quarter two and quarter three. We have succeeded in significantly reducing our inventory levels over the quarter, which in turn also leads to a strong improvement in both net working capital and cash flow for the quarter. Our industry-leading cost position is maintained. We're making material cost reductions in the quarter, showing that we can scale the business, both in periods of growth but also on the next slide.
Our total revenue in the quarter increased by 48% to NOK 3.5 Billion , driven by the combination with NetOnNet. If we were to exclude NetOnNet, the organic revenue declines by 14%. The disappointing result is driven by the decline in the B2C segment, where consumers are spending less in our core categories, and we see a short-term rebound to physical retail. In B2B and the distribution segment, demand is stable. Following a few years of exceptional demand, we have also acquired significant new customer agreements. It's a disappointing quarter, but the results come after a period of exceptional growth. As said, since 2019, we have an average growth rate on our top line of 12% and we're growing faster than all key competitors, and we're taking market share.
The softer demand has led to high inventory levels, both in Komplett Group and in the industry as a whole. In an effort to normalize inventory levels, this has increased both promotion pressure and an increased pricing pressure in the industry, impacting both the B2B and the B2C segment in the second quarter. We're pleased to see that our efforts to reduce inventory has been effective over the quarter and will continue to work diligently to ensure that we have an attractive product offering and a normalized stock level. Reducing inventory level does, however, take its toll on gross margins, and we expect this effect to continue in quarter three as well.
However, as we return to a normal stock level, I am confident that also gross margin levels will normalize and return back to its attractive levels. On EBIT. The quarter ends with a -NOK 10 million EBIT. The volume decline in the B2C segment and the lower gross margin driven by the high inventory levels are the key drivers of the negative EBIT. NetOnNet is included in the numbers for the first time, and operationally are contributing marginally with a - NOK 1.5 million on EBIT, and also an amortization of acquired customer value contributes with a - NOK 12 million on the EBIT line. We maintain our industry-leading cost position, and we've shown now that we can scale the business both in times of increased volume, but also where volumes are in decline.
Excluding NetOnNet, our cost, our OpEx percentage as a percentage of revenue, it lands at 10.3% for the quarter. Including NetOnNet, we reduce our OpEx by 8.5%. We have also several other initiatives in the pipeline that will further reduce our OpEx in the quarters to come. If we move to the segments and start with B2C, driven by the inclusion of NetOnNet in our numbers, top line grows by 82% over the quarter. If we exclude NetOnNet, revenue is declining by 27%. There are several factors driving this disappointing development, but the market is obviously challenging.
There's more conservative consumer spend, lower demand in discretionary high cash outlay categories like TVs, you know, computer gaming, and PCs, and there's a short-term rebound from online to physical trade. In addition, over the quarter, we've had a strong focus on reducing our inventory. In hindsight, I think it's fair to say that we didn't strike the balance of reducing our stock of slow-moving goods, while at the same time maintaining a healthy level of inventory of a more fast-moving products. That has led to a situation where we had just too much out-of-stock situations over the past quarter. We've placed now the necessary orders to get all those products back in stock.
Products are on their way into the warehouse as we speak, and we've put in place the necessary processes to ensure that going forward, we'll strike the right balance in stock composition, and we'll do this without having any material effect on our net working capital. Gross profit was, of course, also impacted by the efforts to reduce inventory, along, of course, with the increased price pressure in the market. We expect the pressure on gross margin to sustain through quarter three as well. In sum, we deliver a disappointing EBIT of -NOK 21 million, driven by low sales volume and gross margin pressure. In B2B, the segment grew by 6% over the quarter, and we still see momentum in the SME segment.
However, the momentum is more skewed now towards the upper end of the segment, meaning the medium-sized customers, while the smaller customers has a shopping pattern more similar to the B2C market, where we see a somewhat more soft demand at the moment. This impacts us negatively over the quarter, both on top line and on gross margins, as these are more profitable customers. Further, the top line was negatively impacted by a shortage on Apple products. The gross margin declines to 16.6%, driven by the previously mentioned customer mix and efforts to reduce our inventory. In sum, B2B delivers an EBIT of NOK 22 million over the quarter and an EBIT margin of 6.1%.
In the distribution segment, we saw a slight increase in top line after a few years of exceptional growth as we took on major new distribution agreements. Top line growth in the quarter was also restrained by significant constraints on Apple products. On gross margin, we saw a decline in gross margin over the period due to mix effect, primarily due to customer mix as smaller customers saw a softer development who are also more profitable. We do, however, maintain solid cost control, but driven by lower gross margin, the EBIT fell back to NOK 14 million for the quarter. I'm now gonna hand the word to our CFO, Krister Pedersen, who will take us through the financial performance.
Thank you, Lars. Yes. As we have seen, we have a growth of 48% for the quarter driven by M&A. On a like-for-like basis, we have a decline of 14% driven by a difficult B2C segment. Further, a combination of a difficult market and reduction of inventory has impacted gross margin negatively. On the positive side, we have cost control. We have taken the necessary actions to reduce OpEx when the top line is challenging. Of the purchase price allocation of NetOnNet, NOK 319 million is allocated to customer value. This value need to be amortized going forward with approximately NOK 12 million per quarter, including this quarter. The net financial cost has increased by NOK 19 million for the quarter compared to last year.
The increase is related to, the initial cost and interest cost on the bridge facility of around NOK 12 million, increased IFRS cost of NOK 2 million, and increased, or higher utilization of existing credit facilities. On cash flow and net working capital, we had a positive effect of a reduction of inventory of NOK 359 million. Since year start, we have reduced including NetOnNet, we have reduced inventory by around NOK 500 million. This has been a targeted initiative to put us in a better position going forward and especially in front of the peak season. The flip side of the inventory reduction is to reduce the gross margin and the impact on EBIT. However, we have cost control and we have inventory control.
In the investing activities, the figure is dominated by the acquisition of NetOnNet, and in addition, we have NOK 42 million in CapEx, where most of it is related to the supply chain and IT program. In the cash flow from financing activities, we have increased the financial facilities by the bridge facility of NOK 1.5 billion, which is expiring in May 2023. The update on the financial position is now reporting including IFRS 16 effects. Earlier, we have reported it without. The net interest-bearing debt by the quarter was close to NOK 3.2 billion compared to NOK 937 million last year. Of this debt, NOK 1.5 billion is related to the bridge facility and NOK 633 million is related to the lease liabilities.
The lease liabilities has increased by NOK 307 million with NetOnNet and is driven by rental agreements. An important note here is that the bridge facility is without financial covenants, giving us a leverage ratio of 2.6 compared to 1.9 last year. Net interest bearing debt without the lease liabilities and the bridge facility is NOK 1.038 billion. The liquidity reserve was NOK 685 million by the end of the quarter, compared to NOK 474 million last year. We will continue to improve the net working capital. As mentioned, we have reduced inventory by almost NOK 500 million the first half of the year. In the coming two quarters, we will aim to improve net working capital by additional NOK 500 million, where we look at both accounts receivable and payables.
In the last two years, we have grown significantly in the B2B and distribution segments, which is strong, but also driving up accounts receivable and net working capital. We will consider using factoring as a tool to free cash, and we have confirmed that this tool is available for us. Back to you, Lars.
Thanks, Krister. It's a quarter with disappointing results, but it's also a quarter where we must continue to progress on our strategic initiatives. The combination with NetOnNet is completed, and it improves our competitive position and sets us firmly in the position of the leading online first consumer electronics player in the Nordics. The synergy realization is progressing well and is on track, and we remain very confident that the NOK 200 million of announced synergies can be delivered. Further, over the quarter, we've implemented a new packaging line in Sandefjord that will reduce our annual use of plastic by 17 tons, supporting our ambition of zero emissions from our operations. We're making material headway on cost reductions.
We're reducing our operating expenses, we're reducing our inventory and our working capital, and we are creating a more healthy balance sheet for the future. As Krister said, we have several initiatives planned for the coming quarters. Finally, the work of creating a unified supply chain and IT setup is progressing according to plan. Once completed, we will have a setup that supports our unique cost position and a setup that improves our customer value proposition as well. If we sum up the quarter, since 2019, Komplett's had an average growth rate of 12%, growing faster than both our key competitors and the market, taking market share. We're now, however, in a situation where temporary market decline and fluctuations in consumer behavior are impacting us negatively.
As we ride out a period of slower market, a poorer market environment, we're confident that we're creating a company that is well-positioned for the future. The combination with NetOnNet is complete, and the synergy realization is on track. We're reducing our OpEx, sustaining our cost leadership, and creating a more healthy balance sheet as well. We're also taking all the necessary measures to reduce inventory levels, reduce working capital, and several other measures are on the way for quarter three and quarter four. As markets normalize, Komplett Group will be well-positioned to again be the winning party in the consumer electronics in the Nordics and drive further profitable growth. Thank you. Over to you, Krister.
Thank you, Lars and Krister. I will now hand it over to Carina for the Q&A session.
Right. We have received a couple of questions from the online audience, and the first one is: What is more reflective of long-term margins 2021 or 2022, and why?
I think 2022, as said, is not reflective of our current margin as we are currently under significant pressure to reduce our inventory. That takes a real toll on our margin, both as we see the level of promotion increasing and the pricing pressure in the market is also quite severe as this goes for all other retailers. I think 2022 was maybe a bit in the other extreme, right? Because then you were in a period where there was less promotions as there was a shortage of product. At the same time, weighing that, we do have NOK 200 million of synergies at least readily available through the acquisition of NetOnNet. I would argue that 2022 is more of a relevant benchmark than 2021.
So.
2020 you mean?
Sorry. 2021 is the relevant benchmark, right? Last year, not 2022. Sorry.
That's all right.
Mm.
What do you consider to be a normal inventory level for Komplett and NetOnNet combined?
I think that the inventory will change between the quarters. I think the level of the inventory is not too bad. We still have some composition of the inventory to improve, but the inventory level is not too bad at the moment. It should come down some, but not significantly.
NOK 38 million in one-off costs, is all of that related to NetOnNet? Will there be any further one-offs related to the mergers or are those taken now?
We don't expect any more significant cost. It can always come in an invoice or two, but not in that size.
All right.
Mm.
That concludes the questions that we have received online. Are there any questions from the room? Nope. Okay, that concludes the Q&A session.
Thank you. We will be back presenting our third quarter results on the 25th of October. Thank you all for watching, and we wish you all a great day.