Good morning, everyone. My name is Egil Hogna. I'm the CEO of Norconsult, and today I will present the second quarter results together with our CFO, Dag Fladby. After the presentation, we will have a question and answer session. We will start with the questions in the auditorium in Oslo, and then we will continue with the questions we have received online. You may enter your questions into the chat of the webcast as we go along during the presentation. I will present the key highlights of the quarter, some of our new projects, then our CFO will present the financials, and then I will finally revert with the outlook.
For those of you who are new to Norconsult, I would like to remind you that we are Norway's largest design and engineering company and one of the leading companies in the Nordic region. Our purpose is to every day improve everyday life as we have a key role in the societies in the Nordic region in terms of building and development. We have six reporting segments: the Norway Head O ffice, Regions, Sweden, Denmark, Renewable Energy, and finally, Technogarden and Digital. Approximately 2/3 of our activities are in Norway, while the rest is almost entirely in the Nordic region. More than half of our revenues are from the public sector, and we have three main markets: buildings and architecture, infrastructure, and finally, energy and industry. We are a company with 95 years of history.
We were listed last year on the 10th of November, and as of today, we have approximately 6,300 employees and 140 offices across the Nordics. The second quarter was yet another quarter characterized by growth and stable profitability. Our net revenues for the quarter increased to NOK 2.4 billion , which is approximately 14% increase compared to the second quarter last year. However, due to the fact that Easter this year was in the first quarter, while last year it was in the second quarter, we have a significant positive calendar effects, which amount to NOK 144 million . So when we look at the underlying organic growth adjusted for these calendar effects, it was 7%, which we are very much happy about.
The adjusted EBITA, which is the most relevant way of measuring our operating result, was NOK 263 million . That was an EBITA margin of 11%, and again, if we adjust for the calendar effects, it was 5.3%, which is exactly the same margin we delivered in the second quarter of last year. I would like to draw your attention to the fact that we had a particularly strong operating cash flow during the second quarter of NOK 501 million . That was due to the strong result of the quarter, but also a significant working capital release based on very solid work by our finance team, together with the line making sure that we were invoicing and collecting all of the cash in due time.
I would also like to highlight that during the quarter, we have implemented sensible cost reduction activities to make sure that we continue to be competitive, even in a high-cost environment. And finally, as you will see throughout the presentation, we have some pictures from some of our new and good projects. This picture is from Sweden, from Växjö Energi, where we have two projects together with them on carbon capture and storage. The market is very much in line with the previous quarters. For buildings and architecture, we still see a weak and uncertain private market, given its dependency on interest rates and the general macro economy.
However, Norconsult is very much present in the public part of this buildings and architecture market, and this is a much more stable market, thankfully, which mitigates some of the weakness of the private market. Infrastructure, which is mainly a public market, shows a significant stability. Norconsult has a focus on rail and road-related projects, which are very much dependent on public plans. And even though there are some fluctuations across the Nordic and Scandinavian countries, we still see that this is a fairly stable market based on a fairly stable public spending in this part. Water infrastructure is another important part, and here, more strict environmental requirements are creating an underlying growth in the market. We still see investments being fairly stable, even if the need is higher.
But all in all, it is, as I mentioned, a stable infrastructure market in total. Energy and industry is the most positive of our three markets. We see a particularly high activity in the energy part, mainly in renewable energy, and this is a very important precursor for the development of green industry and electrification. When it comes to industry itself, there are differences between different industries, like commodity industries, food industry, and so on. But all in all, the weak currency in Norway and Sweden are benefiting the export industries, which are creating an underlying strong sentiment and good demand also for this part.
Most important in our consultancy will always be our colleagues, and we are very proud that we continue to be ranked as the most attractive employer for the third consecutive year in Norway by the Universum Awards within engineering consulting. We are experiencing a strong applicant pipeline, both from freshly educated engineers and architects and from more experienced, and this is something we are very grateful for. Nordic Office of Architecture in Iceland was named a model firm for this year in Iceland, which is also an important country for us. We are the largest architect company in Iceland. And in Sweden, we continue to be a so-called Karriärföretagen, which is also a coveted nomination amongst the best employers.
Norconsult has a strong history of being employee owned, and we continue to have a very high employee ownership also after being listed on the Oslo Stock Exchange last year. As of today, approximately 63% of the company is owned by our own employees, and when we had our new employee share program in June this year, 66% of the eligible employees, which were almost everyone, participated in the employee share program. That is a remarkably high percentage. When you look across companies, typical percentages for employee share programs range in the area of 20%-25%, so 2/3 in Norconsult was a very pleasant surprise to us. But we then had to implement the cap on the program so that the total estimated cost of the program was in line with what we have communicated to the financial market previously.
During the quarter, we also arranged our Sustainability Week for the fourth year in a row, with more than 50 webinars and 8,000 viewings. Approximately half of those were customers and externals, half were internal, and that's one way we share our knowledge of how to sustainably build in this world, and in terms of headcount, it has been flat during this year. However, we do expect this year to continue to show a growth compared to what we saw last year, also in the number of employees and full-time equivalents. During the quarter, we made one acquisition in western Sweden of Wermlands Infrakonsult , a small but important company specializing in infrastructure.
Going forward, we have an exciting M&A pipeline in the Nordics, but we are saying no to a number of opportunities because in order to acquire a company, it needs to fit strategically, culturally, and it needs to be a fair price for both parties. I'd then like to show you a few of the projects we have been working on during the quarter, and here is a project we have actually finished. This is the largest primary school in Norway in Fjellhamar, just outside of Oslo. In terms of projects where we have significantly increased the effort with new orders or completely new projects, we have the following, and we have two projects for Fortescue. Fortescue is an Australian company.
They are developing two green ammonia projects in western and northern Norway. These projects will decarbonize sectors such as shipping and mining and will be important developments in the more rural parts of Norway. Another project is the new terminal building or all of the buildings for the Bodø Airport. Here we are working together with the construction company, HENT. I'd like to say in general that we see the airport market globally improving. It was down during the pandemic when there was a lot of uncertainty relating to air traffic, and there is a certain catch-up which is necessary to do in terms of building and renovating airports, and so today we are, for example, working with the Gatwick Airport outside of London, Geneva Airport, and the Delhi Airport in India.
So for Norconsult, this is a fairly international market. Another new project is the Ibsen Library in Skien, Telemark. Those of you who know Henrik Ibsen, you will know that the writer was originally from Skien in Norway, in the Telemark part. And here we are working together with the construction company Backe on creating this wonderful new building, which will both celebrate the writer and be an important building for community events. Final project I will present today is the modernization project for the northernmost tram in the world, in Trondheim, the so-called Gråkallbanen. In general, railway, light rail, trams, and subways are an important market for Norconsult, and we continue to be one of the preferred suppliers in this segment when important renovation and new builds are happening.
With that, I'd like to give the word to our CFO, Dag Fladby, who will tell you more about the financials.
Thank you, Egil. Second quarter we had a net revenue of NOK 2.4 billion, up from NOK 2.1 billion in the same quarter last year. And as Egil mentioned, also, this quarter was affected by significant calendar effects of 4 days more, with an estimated effect of NOK 144 million, both on revenue and also EBITA. Our organic growth, adjusted for the calendar effects, was 7%, driven by increase in FTEs of 5%, and also increased billing rates, partly mitigated by lower billing ratio. And our billing ratio ended at 74.6%, still affected slightly by a weak building and architecture market, affecting Norway Region the most. We also have slightly lower billing ratio in Sweden, but I will come back to that later in the presentation.
Our EBITA ended at NOK 263 million, up from NOK 112 million, and the underlying EBITA margin, adjusted for the calendar effects, was 5.3%, in line with last year. Our pre-tax profit was NOK 138 million, affected by calendar effect, but also we have costs of NOK 87 million, is one- off costs related to the gift shares we informed about before the IPO. Few comments on first half. We have a net revenue of NOK 4.8 billion and organic growth of 6%, and the underlying EBITA margin of 10.9%, compared with 11.1%, the same period last year, so still continued growth and also stable profitability. Our industry is affected by changes in workdays between the quarters.
We have seen that especially in quarter one and also now in quarter two, and I showed on the bottom right here, we see the different workdays for Norconsult between the quarters, and I will like to put some attention to quarter three, where we have one more working day compared with last year. However, most of that effect is during vacation seasons, when our employees have vacation, so it is limited effect of only estimated NOK 3 million. While in quarter four, it's one day less. However, part of that is during Christmas vacation period, and the estimate is only minus NOK 16 million, so not that significantly changes due to workdays in quarter three and in quarter four.
In the beginning of July, we sent out a stock release, where we commented that our provisions for bonuses related to profit sharing in Norway was also indirectly affected by changes in the calendar, affecting then the underlying EBITA margin. In order to make this more simple, because it's a lot of variation between the calendar days, we have decided to change the method for the provisions for the profit sharing, and that has an effect of NOK 24 million in plus in this quarter. This is also in line with how we treat our other bonus provisions. What does this mean? Yeah, in quarter with low results, the size of the costs will be slightly higher, all figures like.
While in quarters with higher revenue results, it will be slightly lower. Obviously, for a full-year effect, there is no full-year effect. A quick look at the EBITA contributors, adjusted for the calendar effect before we dive into the segments. As you see from this picture, four of our segments are contributing positively to our EBITA performance, and two of our segments are contributing negatively. I will come back to that right now. We start with Norway head office at the left, where we have a net revenue of NOK 740 million, up from NOK 618 million. And adjusted for the calendar effect, strong growth of 9%. The growth is driven by increased FTEs of 6%, higher billing rates 9% higher, and also slightly higher billing ratios.
EBITA at NOK 109 million, up from NOK 47 million, where we have the underlying EBITA margin of 7.6%. And if you look at first half, continuous strong growth in headquarters and also slightly improved profitability to 14.2%, up from 13.4%. Norway region, at the right, is affected by a weak building and architecture market. Our organic growth, the last three quarters has been slow, while in this quarter, the organic growth picked up to 7%, no, to 6%. So our net revenue ended at NOK 706 million, up from NOK 612 million, and organic growth, as I said, 6%, is an improvement from 3% in first quarter. The growth is driven by increased FTEs and also in higher billing rates, and partly mitigated then by lower billing ratio.
EBITA NOK 88 million, up from NOK 41 million, and the underlying EBITA margin is then 4.8%, slightly down from last year due to lower billing ratio affected by the weak building and architecture market. As we said in quarter one, there are small signs of improvement in the building and architecture market. That is also the case for quarter two, but it will take some time before we see that materialize into billable hours. Moving to Sweden, on the left, Sweden continues with strong organic growth of 15%, adjusted for the calendar effects. Net revenue ended at nearly NOK 400 million, up from NOK 343 million last year. And the growth, organic growth is driven by FTEs of 12%, mainly due to the senior recruitment we did second half last year.
But also we have an increase in billing rates. Billing ratio is slightly lower than last year, and that is mainly due to some parts of the building and architecture market being slightly slower and also some market areas within the industry has been slightly lower this quarter. However, I would also like to point out that the geotechnical services, which was weak in quarter one, is now back on normal levels in Q2. EBITA in Sweden NOK 20 million, up from NOK 10 million, and the underlying EBITA margin is 3.3%, so improved profitability in Sweden, even though we have reduced profitability due to the senior recruitment of approximately NOK 6 million. For Denmark, where we ended at NOK 184 million in net revenue, the growth is still due to M&A.
We have a negative organic growth in Denmark, as we have had the previous quarter as well, and that is mainly due to still a weak building and architecture market. Our EBITA was NOK 13 million in Denmark, up from NOK 12 million. However, it's affected by the calendar, and adjusted the EBITA margin is 3.1%. And remember that, last quarter, we informed that we do a provision, an IFRS provision, every quarter is 4 million NOK related to leaver penalty and earn-out regulation in our M&A, in our acquisitions we did last year. And that will recur, the 4 million NOK will recur until fourth quarter, 2025. Renewable energy still performing very strong, organic growth of 12%, and the drivers behind that growth is increased FTEs, increased billing rates, and also stable high billing ratios.
Our EBITA, NOK 36 million, up from NOK 12 million, and the improved underlying profitability of 11.8% is mainly due to still good contribution from hydro and the hydropower unit, but we also see good performance in the wind power unit and also in some fixed price projects. Finally, on the segments, Digital and Technogarden, where we have a revenue growth, the gross revenue of 7%, mainly due to increased activity in Technogarden and more use of sub-consultants, and partly also due to increased sale of licenses in Digital. Our EBITA has improved from NOK 4 million second quarter last year to NOK 10 million. It's improved profitability in Technogarden and also slightly improved EBITA in Digital.
However, we are not satisfied with the performance or the profitability in Digital, hence we will take further measures to improve that. Then to our cash flow, and as Egil mentioned in the beginning, we have a strong operational cash flow of NOK 501 million in the quarter. That is up from NOK 192 million. And the main driver is working capital release. We have continuous focus in the organization, working with working capital. So that is the main explanation for the improvement. In addition, we also have positive calendar effects due to bank holidays, and that was a payment which was due in first quarter, which we received in second quarter, amounting to around NOK 80 million. Adjusted for that, still very strong cash flow.
Cash flow from investing activities, NOK -20 million compared with NOK -74 million, that is lower. Main reason for that is lower payment for acquisitions. While cash flow from financing activities has increased with NOK 100 million, and that is mainly higher dividend payment in quarter two compared with the same quarter last year. All in all, we have cash and cash equivalents and marketable securities of around NOK 1 billion end of June this year. That is also a fine bridge to talk about shortly on the balance sheet. As I mentioned, NOK 1 billion in cash and marketable securities. We don't have any interest-bearing debt except for the IFRS 16, hence our leverage ratio is -1.22%.
I will also like to put attention to negative working capital, end of June, so very solid financial position. And finally, from my side, our order book ended at NOK 6.4 billion, that is NOK 200 million lower than first quarter. As we have said earlier, the order book may vary from quarter to quarter, depending on what kind of projects we work on, what kind of project we win, and of course, the win rate. 6.4% is a level we are comfortable with. And by that, Egil, I think I leave the word to you to sum it all up and tell us about the outlook.
Thank you, Dag. So again, a quarter with a growth and stable profitability, and when we look at the market outlook for the coming quarter and the ensuing quarters, we see essentially the same picture. In building and architecture, we continue to see these small signs of improvement. Some of them materialize into projects fairly quickly. Other times, we see that the talk starts, new projects are launched, but it takes some time before the real work and building is starting. We do see one important development relating to defense-related activities across our markets with important considerable framework agreements being launched by the different defense entities. Infrastructure continues to be a fairly stable market.
We have been through a period now with a bit fewer large projects, but what we see coming now in the second half of this year is a number of larger projects also being launched, where we will compete amongst other suppliers to win those, but all in all, a stable demand still foreseen in infrastructure. Activity remains strong within the energy markets, and as I mentioned, there are some differences between the different industrial markets, but all in all, a strong market. One of the reasons why Norconsult has been able to continue to deliver stable results with these fluctuating markets is the flexibility we have between the different parts of Norconsult.
An engineer working with construction, for example, has the opportunity, the ability to work on different types of structures, and that means that we are less vulnerable for fluctuations in one particular market segment. It does take work, though. Sometimes it also takes a little bit of retraining of people in order to make that happen, but that is something we work very actively on. But it also means that sometimes when that flexibility is not possible, then we will adjust our organization up and down whenever that is necessary in order to adjust our capacity to the demand which we see in the markets. That we have done so far this year, and we will continue to do that and consider that to be a part of the ordinary business.
Finally, I'd like to say that we have a growth strategy. We expect to continue to grow both organically and through acquisitions. We have, as our CFO mentioned, a strong balance sheet, but our cash is not burning in our pockets, so we'll be picky and very selective in terms of the investments we will make going forward. So with that, I would like to open up for questions. As I mentioned previously, we would like to start with the auditorium. Please wait for the microphone before you start talking, and then we will finish with the questions we have received online in the chat. So with that, I think we have the first question from Martine.
Thank you. Okay. Martine from Nordea Markets. I was just wondering about three questions. Given the level of your billing ratio now, given the expectation front of the quarter, how do you see it develop now during the next half of 2024 ?
The billing ratio?
Mm-hmm. Yeah, would you like to comment on-
Yeah, as you have seen from the historical figure, it will be slower in quarter three. We will have new educated people coming in, in the, in our organization at the same level as last year, more or less. So, even though the increase in billing ratio was an improvement from first half, it's of course difficult to say exactly how that will be, but we expect no major changes compared with history, but depends on the market, of course.
Thank you. And also the same question regarding the backlog. You said you were confident with it, but given the level now, what are your expectations for this going forward? Will we see it kind of, like, stable at this level or increase? Yeah.
Yeah, that depends, of course, on what we win and where we are in the projects. As you may remember, since we have time and material, we have a lot of milestones during the project timeframe. So it could be that it's low on one project now, but now they go moving into another phase in the next quarter. And also, we expect to compete with the larger projects, as Egil mentioned, and one large project, of course, will hike also the order book if it's more, yeah, it's a larger project.
Great, thank.
If I could add one comment on the order book. Sometimes customers can choose between putting out a frame agreement or a specific project, and for some of our large customers, those kind of decisions can create fluctuations, which are seen in the order book, but which are not necessarily material for us. We have some seasonality in the order book. If you look in the long-term perspective, very often we see that the second quarter is somewhat weak and the third quarter is stronger because some nominations or suppliers are made in the third quarter, typically, so there is some seasonality, but there is also quite a bit of variation in this, so that makes it a little bit complex to follow and interpret.
Got it. And that kind of leads me to the last questions about that you say that there were some delays regarding larger, projects or more capital intensive. Can you say something about your expectation of those being okay? They are delayed, but they are there, further out in the horizon.
Yeah, I mean, if we, if we take one example, if we go back a year, we had one subway station in Norway, Majorstuen, which was delayed. That one is now starting up again. On the other hand, we have another project, the railway station, which is now stopped, and it's estimated that, you know, it will take six months before it's back to full speed. So in a way, this is normal business, but it's always a little bit irritating. And of course, it creates complexity for us because it means that we need to shift our people between projects, and for the large projects, this could mean a significant number of people. So, in a way, it's normal, but it's always a little bit unpleasant when it happens.
Thank you.
Thank you. Simen Mortensen from DNB Markets. You mentioned again, a bit in the Swedish hiring of senior staff, that there's some one-offs and ramping up. How long until you actually expect that to no longer be part of your figures?
I think you will see some effects also in quarter three, but I think now they have been there for nearly a year, many of them, and we will not comment on that anymore because we think that is part of the operational performance. So slightly lower, maybe also in quarter three, but we expect that to normalize during second half.
Technogarden and Digital had, like, when we look at the figures, combined overall revenue growth, higher margins, but you still communicate that there's still a work to be done in Digital. Can you comment a bit on what's behind that, behind the figures we actually see presented for both segments combined?
So essentially what that means then is that Technogarden is currently doing better than Digital. So Technogarden is doing, I would say, remarkably well, considering the you know the legal change and uncertainty relating to hiring in people. So there we are still experiencing some customers that are uncertain about how to interpret the change in the Norwegian legislation, but Technogarden has been able to perform very well. For Digital, we are still seeing that some of the segments where they are operating are not performing that well, and we are looking into cost reduction activities.
A bit in line with what I mentioned during my outlook statement, that we will adjust the organization when we see that there are shifts which are not short-term, but where there could be more long-term changes, which warrant also some changes in the organization.
Q3s are normally hiring season for you guys. You mentioned shortly that you're expecting the same level as last year. Can you comment and confirm how turnover of staff has been after the IPO? Is it replacement? Is it growth, when the lock-up is done, et cetera? What is driving this?
We have seen in the second quarter somewhat lower turnover than what we saw last year, and we are recruiting new hires with approximately the same speed and level as we did last year.
Thank you.
Hi. Magnus Rasmussen, SEB. Firstly, your closest peer stated earlier this week in their outlook that they see s ome increased competition in certain markets. Is this something you see as well, or do you not recognize that in your business?
I would like to say that there has been, and continues to be, a lot of competition in our markets. In the areas where we have seen a reduced demand, like private buildings, for example, there is definitely increased competition simply because the market has shrunk. But in other parts of the market, like those that are the most important to us, for example, the public, larger buildings, infrastructure, and so on, I don't think it's fair to say that we have seen an increased level of competition. I say it's fairly stable, which is a significant level of competition, but I don't think we can say that it has been increased.
Thank you. And one question also on the periodization of a bonus effect of NOK 24 million, just so we understand it correctly. The way I read it, the NOK 24 million should be then reversed in the second half, given that there's no full year effect, and primarily then in the third quarter. Is that correct?
Yeah, if you assume then that the figures are exactly the same, then it's correct.
Yeah. And that NOK 24 million effect, is that adjusted for in your flat margins year on year?
Yes.
Thank you.
Yeah, the underlying margin, you mean? Yes. Yes.
Are there more questions in the auditorium before we move to the online, received questions? Doesn't seem to be any more here in the auditorium, so then, I give the word to our Head of Investor Relations, Elin Spieler. Do we have any online questions?
Yeah. We have Bengt Jonassen from Carnegie. He's asking: How to view the capital allocation priorities ahead, given the strong cash flow and net cash position?
Would you like to start, Dag?
Yeah. As Egil said, we have a quite good pipeline of M&As, which we are investigating all the time. We are picky. We need to. When we acquire targets, it needs to be a match of the strategic part, of course, the culture part, and also we need to find a good balance of price, which is creative for our shareholders. So, I think that is the main answer to it. We have said no to quite many transactions during the first half due to that we have not, they have not fulfilled our requirements as such.
Thank you. Then you have Jesper Gustafsson from Handelsbanken, who's asking to give some more details on the cost reduction initiatives. Are these mostly related to digital and Technogarden, or will actions be taken across the group?
We continue to look at the cost optimization across the entire Norconsult. We do that as part of everyday business because when we see market conditions adjusting, for example, then we also need to adjust both the level of manning and the level of cost. We need to be competitive in the labor market to make sure we attract the best talent. At the same time, we continue to look for efficiency improvements in our business. So we are looking into cost everywhere in Norconsult, in the business areas, in staff, and so on. But it is probably more correct to call it optimization rather than reduction, because we are not talking about large reductions.
We know that our most important asset are our people, so making sure that we are very competitive in the labor market with our combination of normal salary compensation and the employee ownership in the company is extremely important to us. It's all about finding the right balance, but we are working hard on that balance in the entire company every quarter.
All right. Thank you. That concludes the questions from the web.
Very good. Then I would like to thank all of you who participated, both here in the auditorium and online, and we look forward to seeing you again at our next quarterly presentation. Thank you.
Thank you.