Good morning, everyone, and welcome to Norconsult's Presentation Of The Second Quarter Results. My name is Egil Hogna, I'm the CEO of the company, and I will share today's presentation with our CFO, Dag Fladby. In the second quarter, Norconsult continues to show solid growth and stable profitability. We have had a solid market during the quarter, and we've had several important wins, out of which you see the largest one on the front page, which is the Norwegian Broadcasting Corporation's new head office and media house in Oslo. For those of you who are new to Norconsult, we'd like to just briefly give you an overview of the company. We are Norway's largest and the leading Nordic engineering and architecture company. We have six reporting segments. The two largest are the Norwegian head office and Norway regions, while the others cover the rest of the Nordics.
We have roughly half of our customers in the public sector, half in the private sector, and we have our business fairly evenly spread between buildings and architecture, infrastructure, and finally energy and industry. We have shown a stable growth and profitability over time, and we currently have approximately 6,600 employees and 140 offices, mainly in the Nordic region. During the second quarter, we had net revenues increasing to NOK 2.468 billion. We had an organic growth of 6%, adjusted for calendar effects. Calendar effects is important in our business because we charge according to the time worked. In the second quarter this year, we had Easter, while in the second quarter last year, we had Easter during the first quarter. That resulted in calendar effects of approximately NOK 140 million, and this was the direct reason for why our adjusted EBITDA ended up knocking NOK 152 million.
If you add the calendar effects on top of that, it was a better EBITDA compared to last year. This we also see in our margin, which adjusted for the calendar effect was 11.2% this year compared to 11.0% last year. The main event during the second quarter was the announcement of our acquisition of the Aas-Jakobsen Group, and I will revert to that later. That was a major strategic development due to the strong competence of the Aas-Jakobsen Group in particular infrastructure and complex construction projects. Our order book continued to increase to NOK 7.1 billion, and we have a solid starting point for the second half of this year. For the first half, we saw again an increase in net revenues to NOK 5.1 billion, and our adjusted EBITDA was approximately the same as last year at NOK 487 million.
There was a small negative calendar effect, and adjusting for this, which was NOK 20 million, our adjusted EBITDA was slightly higher than last year. All in all, the EBITDA margin adjusted for the calendar effects was 9.9%, which aligns very well with our communicated financial target of 10%. On the people and organization side, we had a stable number of employees from the first quarter, 6,600, while the number of full-time equivalents increased by 4.5% compared to the same quarter last year. In Norconsult, approximately half of the company is owned by our employees. Every year, we have a share program for the employees. Again, we had a record participation in this employee share program, as 66% of our employees participated and bought shares.
This is significantly higher than at other comparable companies, something we are proud of and something which we believe aligns the interests between employees and shareholders. During the second quarter, we also had our Sustainability Week, which is our largest conference, a digital conference where we invite both customers and other partners. We had approximately 60 webinars during the week, approximately 6,700 viewings, and I think in total now, in retrospect, we have passed approximately 10,000. The market has been quite stable. All in all, it has been maybe slightly more positive than in the first quarter, but there are no major developments. The private buildings and architecture market continues to be slow, with indications of slightly growing optimism. Public projects, including the defense sector is stable. Defense is growing, and this is then partly compensating for the somewhat weaker private sector.
Infrastructure continues to be stable, very much aligned with the long-term public spending plans in all of the Nordic countries. Energy and industry is still one of our strongest markets, in particular the energy market for power production and power distribution. In industry, there are differences between different industries. Some are quite strong, others are a bit weaker. Most recently, we've seen that the weaker segments have been mostly in the green industry sector and some export industries. I'd then like to give you some examples of recent project wins, and let me start by talking a little bit more about the Norwegian Broadcasting Corporation, NRK's new head office, which we are very proud to have won, both on the architectural side and the engineering side.
On the architectural side, we competed against, I think I have to say, all of the leading Scandinavian architects, and we won this design competition. The construction of the building was awarded to Hent, which is a part of the Sentia company. When they won the award, they awarded most of the engineering disciplines to Norconsult. This is a major project where the design has already started, and it will continue for several years. I would also like to add a comment about, in general, the architectural business because the architectural business has been quite challenging. What we are seeing now is that in Denmark, for example, our architects are very much catching speed. We are hiring architects, and we are growing.
In Norway, in the Nordic Office of Architecture, which is the name of the architectural business where most of our architects are working in Norway, they have also started hiring freshly educated architects, which is a positive and happy development in this part of the industry. Another important win was the planning and zoning for the extension of Buban in Bergen. This is a light rail development in Bergen going to Sandviken. We've done work for Buban in the past, and we are very thankful for the continued confidence from our customer to continue to develop this. Another important win, both on the architectural side and the engineering side, is the new university hospital in North Norway, where the Asker Hospital for Mental Health and Substance Abuse is going through a major renovation and expansion.
This is again a project where we are benefiting from working together with our architectural colleagues in the Nordic Office of Architecture, as well as the Norconsult engineers and also Norconsult architects. The final project example I want to show you is the North Sea offshore wind development on the Norwegian part. This is called Sørøya Nordsjø 2, where we are working for the joint venture Ventyr. Here we have won a major front-end engineering and design study for the onshore grid infrastructure, together with the environmental impact assessments. This is a strategically important project for Norway. It's the first major wind development offshore, and we are looking forward to developing this together with Ventyr. With that, I would like to give the word to our CFO, Dag Fladby, who will take you through the financials.
Thank you, Egil. We will start with the two figures, of course. Net revenue in the first quarter ended at NOK 2.47 billion from NOK 2.4 billion the same quarter last year. As Egil mentioned in the beginning of the presentation, this quarter has substantial calendar effects, as we had three less working days, amounting to - NOK 141 million. Adjusted for that, our net revenue growth was 9% in the quarter, and the organic growth was 6%, driven by increased billing rates, and also increased FDs. Our billing ratio at the end of the quarter was 74.7%, up from 74.6%. The main driver of the improvement is Norway region. EBITDA was NOK 152 million compared to NOK 263 million the same quarter last year. Adjusted for the calendar effect, we have an EBITDA margin of 11.2%, up from 11.0%.
The improvement is mainly due to Norway region, but also Norway head office. Profit after tax was NOK 114 million compared to NOK 138 million last year. Last year included one-off cut of the gift shares, so NOK 87 million pre-tax, while this year has a really strong negative calendar effects. A quick look at the first half, where we have a minor calendar effect, just - NOK 28 million. Net revenue at NOK 5.1 billion, which is up from NOK 4.76 billion. Increase of net revenue was 8%, while organic growth is 8%, driven by increased FDs and increased billing ratio, not billing rates. The billing ratio is at 73%, slightly down from last year. As we saw from the Q2 figures, the improvement is now coming in quarter two. EBITDA was NOK 487 million compared to NOK 490 million.
The adjusted EBITDA margin adjusted for the calendar effect is 9.9%, slightly down from 10.3%. That is mainly due to a soft quarter in the first quarter. As we've seen, the second quarter is improving, mainly as we see effects from measures we have taken in selected business areas in previous quarters. In the first half, we also have a negative EBITDA effect of the integration of Sigma Civil amounting to NOK 9 million. The integration plan is going as planned, and we will come back to more details later in the presentation. Profit after tax was NOK 371 million compared to NOK 242 million. Last year included cost for gift shares of NOK 167 million. EPS was NOK 1.23 versus NOK 0.85. Now back to the second quarter figures again.
Before we deep dive into the segments, a short look at the contributors, where I mentioned that Norway region is contributing EBITDA the most, but also Norway head office and also renewable energy is a positive contribution adjusted for calendar effects. Sweden, Denmark, and Technogarden and DDPL are slightly behind last year. Moving into the segments, starting with to the left, Norway head office, where we had a net revenue in the quarter of NOK 735 million compared to NOK 740 million. The organic growth is 6%, driven by increased FDs and billing rates. The calendar effect is negative with NOK 54 million this quarter. EBITDA was NOK 69 million compared to NOK 109 million the same quarter last year, where we have the adjusted EBITDA margin in the second quarter now at 15.5%, up from 14.8%.
That is mainly due to increased revenue, but also continued high billing ratio and good performance in project execution. Looking at the first half figures for Norway region, we have an organic growth of 5%, adjusted EBITDA margin of 12.6% versus 13.3% the same period last year. That is mainly due to a soft first quarter. Norway region net revenue was NOK 714 million, up from NOK 706 million. The organic growth in the quarter is 9%, driven by increased FDs, increased billing rate, but also increased billing ratio. The billing ratio is now, for the first time in several quarters, higher than last year. That is due to the measures we have taken in the previous quarters. That also is positive to the EBITDA and the underlying EBITDA margin, which ended at 14.4%, up from 12.5%.
Looking at the first half for Norway region, we have an organic growth of 8%, and also now due to the performance in the second quarter, a better underlying EBITDA margin of 11% compared with 10.4%. Moving to Sweden to the left, net revenue was NOK 464 million in the quarter compared with NOK 398 million. It's negative calendar effects, so -NOK 12 million in the quarter. Adjusted for that, we have a growth of 20%. Sigma Civil is included from February with NOK 23 million. The organic growth in Sweden is 6%, and that is driven by a higher number of employees and also increased billing ratio. EBIT ended at NOK 3 million in the quarter compared with NOK 20 million, and adjusted for the calendar effects, we have an EBITDA margin of 3.2%, which is down from 5.1%.
As I mentioned in the first half results, Sigma Civil is now integrated in the company, but that has also affected the quarter two slightly negative with NOK 6 million. We are seeing positive development on the billing ratio from the integration, but it will take some time before we get up to a satisfactory level of performance. Egil will come more back to details on the integration plan at the end of the presentation. In Denmark, organic growth was 7%, driven by higher billing rates and also increased FDs. The calendar effects is -NOK 6 million in the quarter, and adjusted EBITDA margin is 6.2%, slightly below the second quarter last year. We have invested in senior recruitment in this quarter and also year to date. This quarter is affected negatively by NOK 3 million, while the first half is around NOK 6 million.
The investment is to secure long-term growth. In renewable energy, organic growth this quarter was 7%. However, there was strong organic growth in hydropower and transmission, amounting to approximately 17% organic growth. That market is strong. This is partly offset by lower revenue in the international operations. EBITDA at NOK 24 million, down from NOK 36 million. Adjusted for the calendar effect, we have a strong EBITDA margin of 17.8%, slightly up from 17.5% last year. The maintained solid margin is due to a continued high billing ratio and also increased rates. Finally, on segments, Digital and Technogarden, the total revenue declined by 11%. That is mainly due to lower volume in Sweden and also less FDs in both Digital and Technogarden. Adjusted EBITDA at NOK 6 million, down from NOK 10 million, and the profitability is slightly lower.
We have improved profitability in Digital due to the measures we did in 2024. However, Technogarden is performing under expectation. We have done some measures, and we will continue to take measures to improve profitability. Now into cash flow, and the focus on this slide is cash flow from operation, where we have in this quarter NOK 395 million in terms of cash flow from operation versus NOK 501 million same quarter last year. The second quarter of 2024 was affected by a positive cut-off effect, as payments which were due first quarter and was in a bank holiday, and then we received that payment in the second quarter in 2024. That is approximately NOK 80 million. We also have some increased working capital due to seasonal changes.
Cash flow from investment activities is more or less at the same level as last year, while cash flow from financing activities is - NOK 610 million, increasing from NOK 454 million, mainly due to increased dividend payment in the second quarter. A few words on the balance sheet. Our balance sheet is strong. This is the end of June. Cash and cash equivalents are NOK 1.2 billion. We have a leverage of - 1.33, excluding the IFRS, and net working capital is slightly above zero with NOK 33 million. In the third quarter, the balance sheet will be affected by the acquisition of Aas-Jakobsen, where we also will have external debts. Egil will come slightly back to that later when he talks about the integration process of Aas-Jakobsen.
Finally, from my side, a few words about the order book, which increased to NOK 7.1 billion, up from NOK 7 billion in quarter one. The order intake in the second quarter has been a good mix of smaller, medium, and also larger projects in the different market areas. We have also won several important framework contracts, where two of them are on this picture, which secure us for the revenue growth going forward. Without Egil, I leave the word to you to talk about, give some more flavor on how we work with integration.
Thank you very much, Dag. I would like to tell you a little bit more about how we integrate our acquisitions because we have recently made one in Sweden and one in Norway, and they are so far progressing well. First, a few words about our Swedish acquisition of Sigma Civil. This is a company working mostly in the construction and infrastructure segment with approximately 100 employees. When we acquired it, it was a company where we knew that it was a turnaround case, but we also knew that they had strong competence in the company in the form of the engineers and the fundamental operations. We had a low acquisition price in this case, as it was a turnaround case, but we had the opportunity to integrate all of the five offices into existing locations where Norconsult already had offices.
At this stage, all of the Sigma Civil teams are fully integrated into our operations. We have put in place actions to improve the billing ratio. After the acquisition in February, we've seen a steady improvement in the billing ratio since the month of April. Administrative functions have been streamlined. There has been a demanding taking place there because there were overlapping functions. These costs have not been separated out. When we look at the negative effects presented by our CFO, the NOK 6 million in the second quarter, the NOK 9 million in total over the first half, approximately half of that is one-time cost associated with restructuring. The other half is associated with a somewhat lower billing ratio at the start of the integration. All in all, we are progressing well on track. Three of the five Sigma Civil offices have now been relocated into the Norconsult offices.
We see the cost synergies. When we look at the total number of Sigma Civil employees, two-thirds of them have been integrated into existing Norconsult office space, meaning that we have not had to rent further space. The remaining one-third, we will have to rent some more space. All in all, we expect to see considerable synergies here. On to our largest acquisition this year, and actually the largest Norconsult has done historically. For those of you who know the construction industry in Norway intimately, you will be very familiar with the Aas-Jakobsen name. It is a company with approximately 90 years of experience, mainly with advanced and complex structures, and in particular, infrastructure. They are very similar to some of the departments we have in Norconsult, where we have assembled a very strong expertise over time, actually fairly similar to the one we see in Aas-Jakobsen.
One of the features of the company is that they have experienced quite a stable growth at approximately 5% per year and a consistent profitability with an EBITDA margin at approximately 20%, or actually consistently above 20% for the last decade. This is higher than the average of Norconsult, but it is actually very similar to those parts of Norconsult which are similar to Aas-Jakobsen because this is a business in a particularly high expertise area where the value of that expertise captures high margins with customers. This is done in particular for large roads, bridges, rail, and metro projects where the complexity is particularly high. Aas-Jakobsen has 230 employees in Trondheim and Oslo, close to where Norconsult has its offices. We believe that Aas-Jakobsen will further strengthen our market leadership. It will increase our ability to deliver large and complex infrastructure projects.
We have cooperated historically on a number of projects because we see that the combination of Aas-Jakobsen and Norconsult is particularly relevant for the most advanced projects. This has been highly appreciated by our customers in the past, and we believe it will continue to be even more appreciated as we now will be completely integrated. In terms of some transaction highlights, we have now closed the transaction. It was closed on the 6th of August following the approval from the Norwegian competition authorities. The enterprise value was NOK 1.43 billion, which represents a multiplier of 13.9 compared to the adjusted EBITDA of 2024. Final equity purchase price was approximately NOK 1.5 billion, and it was paid with 80% cash and 20% of shares, resulting in the issuance of a bit more than 7 million Norconsult shares to the former Aas-Jakobsen shareholders.
The financial impact is that our net debt to EBITDA ratio, including the IFRS 16 leasing commitments, is approximately at 1, meaning that it is far below our long-term debt target ceiling. Pre-tax cost synergies, we estimate to NOK 25 million. They will not be fully phased in before 2028 due to some existing leasing commitments of Aas-Jakobsen, which expire in 2027. The financials will be included from this month, August. In terms of the seasonality, you should expect it is very similar to Norconsult, meaning that also the calendar effects are quite similar. We have now set up joint management teams, which are working on the integration plan and synergies. It is important for us to do this in full cooperation with our new colleagues from Aas-Jakobsen to make sure that they are well integrated in the best possible way.
The estimated integration costs are NOK 10 million, which we estimate half to come this year, half next year, and half in 2027. We will give a further update in terms of targets and what will happen at our Capital Markets Day on November 5, 2024. That is the same date as our third quarter presentation. I would like to give some final comments relating to the outlook. When it comes to the outlook, the main message is mainly boring, but we continue to see a stable market. There is uncertainty linked to the international political situation, but that is impacting a fairly small part of our business, mainly the export-oriented industries, which may be affected by tariffs. We continue to see signs of optimism in the private market for buildings and architecture.
I mentioned previously that our architects are seeing some increased demand, but here there is still a difference between the public and private sectors. There is no bonanza for the architects working in the private sector, while the public sector is at a good level, partly compensating for the private parts. Infrastructure is stable. When it comes to energy, we continue to see a good demand in renewable energy, mainly hydropower. It is a little bit slow in wind and in solar, but transmission is also strong across all of our Nordic markets. I talked a bit about the industry markets where we do see some variability between the sectors. When we had our first quarter presentation, we talked about taking proactive measures where we see weaknesses in our business.
All in all, our business is doing well, but as our CFO explained, there are parts of it where we see improvement needs, and there we continue to take action to make sure all parts of Norconsult are doing well on a sustainable basis. We would like to open up for questions. We will start with the questions here in the auditorium in Oslo, and then we continue with questions received online. The first question comes from Simen in DNB Carnegie.
Thank you for the opportunity and congratulations with the good billing ratio this quarter. Naturally, I can start with this right on. A competitor of yours was out with the Q2 results yesterday with some market comments about the price pressure and the cost pressure not necessarily matching. What is your take on those kind of statements about the Norwegian market at the moment?
At our first quarter presentation, we talked about the index adjustments this year being smaller than last year, meaning that our ability to adjust prices for multi-year contracts was a bit less this year on average compared to last year. That is still valid, and that has some impact on overall pricing. When it comes to the pricing for new projects, we do not see a particular pricing, so we do not recognize the same impact which you refer to.
Thank you. In terms of recruitment, we are hiring our students in Q3, typically a big quarter on that. Your competitor again said they were holding a bit back. What is your approach in this Q3 result?
This week, we are receiving approximately 200 new employees in our Norwegian operations. We will recruit plenty of new students, but we expect to recruit somewhat less than what we did last year.
Final question in this round. The Aas-Jakobsen transaction was done clearly at higher multiples than what has been in former M&A's. We've seen the last M&A deals going through have been a bit higher for a competitor as well. Is this price pressure upwards on M&A deals in the market? How do you assess and do the rational about the least lost valuations, especially on the multiple side in M&A, and what do you see in things that are moving in the market at the moment?
The pricing of M&A is completely dependent on the quality of the company and the situation the company is in. Sigma Civil was probably our cheapest acquisition ever. Aas-Jakobsen, in terms of multiplier, was probably the most expensive. They represent, in many ways, the full range of possibilities. I don't think I can say I'm aware of any company having the same consistency in terms of margins as Aas-Jakobsen. That was a record high multiplier, which I don't think I expect to see again. What do you say, Dag?
I will say, in general, the multiples have not changed in the market. It depends on the company, of course. Smaller companies should have far less multiple. In general, there is no change to what we see.
Thank you.
Magnus Rasmussen, SEB. Your closest competitor also yesterday was saying that they see some cost pressure on IT, for example. I see that your other OpEx is up just around 3%. Can you comment on how you've been able to keep costs that low and whether that will continue going forward?
Yeah. We work with cost efficiency all the time. Of course, it's a balance when you have people as resources. IT cost is increasing. However, we also have some benefits when we grow. The other cost could be volatile because it's not straight 12 months cost level, so it could go up and down. In general, we are extremely focused on cost development. It is a pressure on costs because, yeah, especially personal costs and the salaries.
For the Aas-Jakobsen transaction, can you say something about transaction costs and also what we should expect in terms of increased amortization after the transaction?
Yeah, I can start with the amortization. The PPA is not ready yet, so it's a little bit early. In general, amortization is 10% or less of the purchase price. It depends to be seen when we have done the purchase price allocation. We have just owned it for 14 days, so it's a little bit early. In terms of transaction costs, we haven't guided on that, but that will be limited.
One final question from me, and that's on the calendar day effect for the upcoming quarter. I think you put in $11 million in your chart deck with stable days working. Just explain a little bit about the mechanism. I understand that there are differences between areas and regions and geography. What's driving the $11 million plus and what kind of assumptions need to take that to be a negative number with stable working days year over year?
Actually, the working days are high level, so we calculate this on hours. It's actually slightly more hours in the third quarter than it was in the third quarter last year. That could be, for example, half a day off in Sweden or whatever it is. That is basic for the calculation. We said that it's slightly more hours. That is a positive effect of approximately NOK 11 million.
Understood.
I don't see any further questions in the auditorium. Do we have any online?
We do. You're listening to Christian Aasland from Norconsult. First question from Jesper Stugmo in Handelsbanken. Do you expect to implement additional efficiency measures to drive the utilization higher? Could we see a billing ratio north of 75% in H2 on back of the actions already taken?
I can confirm that we will continue to take actions some places where we are not happy with the billing ratio and utilization. At the same time, we do not give any guidance in terms of future billing ratio or results. All in all, I would like to say that we are pretty happy with the overall state of affairs.
In a large company like Norconsult, there will always be pockets where we need to work more to make sure we have a sufficient order book and a sufficient utilization. I can say to Jesper that we will continue working on this, and we will see. I would like to emphasize that, again, I think the second quarter shows that when we have an issue, we deal with it, and we are able to improve fairly and very fast, and we will continue to do that in the future.
I would like to add also the seasonality. It's very important to look at the historical figures. Quarter three is low on billing ratios since we have new employees coming in. It's always the lowest quarter, and it will also be affected this year. When you look at the history, the second quarter is normally higher than the other quarters. Our long-term target is still 74% on average. We're not there yet, but we have been there for many years, so we are working against that and towards that target.
Second question from Handelsbanken. We have already discussed a bit about Sweden, but we'd like to have some additional flavor on Denmark. Jesper notes that we have a positive architect development in Denmark, still underlying EBITDA contribution lower year- on- year. Have you increased visibility that projects will pick up at an increased level in H2? Does not yet seen yet here in Q2. A question about the performance in Denmark, architects especially. Maybe I start and then you continue. Actually, when you look at the information given by our CFO on Denmark, when you compensate for the calendar effect, the early leaver penalty or the leaver penalty, as it's called, and the senior recruitments, the underlying result is actually improving. We are pleased with the development in Denmark. We see a market situation in Denmark, which I think strong is the right word.
Personally, I expect to continue to see an improving underlying performance. We will continue to develop the business, and some of the costs I mentioned, for example, the senior recruitments and the leaver penalties, they are a function of our growth efforts, both organically and in terms of acquisition. You may see some of those also in the future. Underlying, the business in Denmark is doing very well. That concludes our online questions. Are there then any more questions in the auditorium? It doesn't seem like it. I would like to thank all of you, both those here in Oslo and those of you who followed us online, for participating. We look forward to seeing you again at our third quarter presentation in November. Thank you very much.