Ladies and gentlemen, welcome to Norconsult's second quarter presentation. My name is Egil Hogna. I am the CEO, and I will share today's presentation with the CFO, Dag Fladby. After the presentation, we will take questions. We will start with the auditorium, and for those of you following us on the web, we will take questions which you can put into the chat in the webcast. The second quarter for Norconsult was characterized by strong growth and stable profitability. On the front page, we have a beautiful rendering of our newly won project for the Stad Ship Tunnel, which we will revert to later. Norconsult is Norway's largest design and engineering company, and we have a strategy with decentralized operations spread out on 140 offices. At the end of the second quarter, we were 7,200 employees.
Our business is roughly 1/3 buildings and architecture, 1/3 infrastructure, and 1/3 energy and industry. We have a history of consistent growth and profitability, both before and after our stock exchange listing in 2023. For those of you who look at the details here on this chart, you will notice that our last 12-month profitability is back at 10%. The last quarter it was 9%, but due to the strong profitability of the first half this year, we are now back at 10%, which is in line with our targets. Let me present some more details. During the second quarter, we had a net revenue growth of 17%, from NOK 2.5 billion to NOK 2.9 billion. Adjusted for calendar effects, the organic growth was 6%, and our adjusted EBITDA ended at NOK 255 million.
When we adjust for the calendar effects, that means that the profitability of the quarter was exactly the same as the second quarter last year of 6.2%. Our order book became NOK 7.8 billion, which is a nice increase from the end of the first quarter this year and the largest order book we have had so far in our history. Due to the fact that there were more working days in the second quarter of this year compared to the second quarter last year, it is very much relevant to look at the first half performance where the calendar effects were quite small.
When we look at the first half of this year, we see a net revenue growth of 15%, ending at NOK 5.9 billion, 6% organic growth, same as for the second quarter, and an adjusted EBITDA ending at NOK 586 million, approximately a NOK 100 million increase. The adjusted margin ended at 9.7%, slightly up from the year before. A result which we are very happy with. When we look at the people and organizational side, our number of employees increased to 7,157 from 6,586 one year ago. During the first half of the year, the number of employees was quite constant. We, of course, had some hirings, but we also made some adjustments adapting our capacity to the demand for our services.
It is very much normal in our business that we see a fairly stable number of employees, when we do not have significant acquisitions or divestments during the first half. In the third quarter, and just about this time, we normally see a significant increase due to the fact that we have new hires and freshly educated graduates. I will soon tell you more about that. We also executed our employee share program in the second quarter of this year. Approximately 60% of our employees participated, which is a very high participation and very much in line with the employee share ownership culture in Norconsult. Approximately 85% of our employees own shares in the company, which we think is a very important part of the culture. During the second quarter, we were also ranked Norway's most attractive employer in the consulting engineering industry.
This is a ranking made by Universum, asking engineering students. This year, in Norway, we have had 140 summer interns working in our company. This is on par with the highest level we have ever had, and we have approximately the same number of graduates starting now in the third quarter in Norway. We also executed our largest digital event during the year, our Sustainability Week, which is followed by several thousand people, several thousand external people, with more than 50 webinars demonstrating how we implement sustainability in every part of our business. I would also like to highlight that in the second quarter, we completed the integration of the Aas-Jakobsen Group acquisition, which we made last year.
This is something which we have taken a deep interest in because the integration of Aas-Jakobsen is very important for our activity, in particular when it comes to infrastructure and advanced construction activities. We also announced the acquisition of a small landscape architecture firm called Østengen & Bergo. That acquisition is completed in the third quarter of this year, so we will revert to that in the next quarter. The markets remained broadly stable. Buildings and architecture is divided in two parts. The private part is subdued, but the public part is doing well. The recovery expected in this market continued to be slow and gradual without any major changes. The public part of the market, in particular, defense and healthcare-related spending, continued to offset the weak private sector.
Infrastructure, which has become the most important part for Norconsult, continued stable, and Norconsult was successful in winning many important projects, which I will revert to later. Energy and industry is a strong market segment. Energy is the strongest one, both relating to power production and power transmission, where in particular, hydropower and transmission projects were strong. For industry, there is a mix between different sub-segments. The strongest ones are data centers and defense, where we have numerous projects. Somewhat weaker are some of the non-energy-related export segments. So it is a mixed picture. But all in all, our markets in the second quarter remained stable. Then on to some project examples, and here we have some of the colleagues in Norconsult working with marine environment and aquatic biodiversity specialists on training in river safety.
It is a nice illustration of the fact that a lot of the work Norconsult does actually imply being out in the nature, in the environment, taking samples, taking measurements, making sure that the quality is appropriate when we do calculations and engineering afterwards. The Stad Ship Tunnel is the world's largest ship tunnel and the only full-scale ship tunnel existing. We won this project together with the Norwegian construction company, AF Gruppen, and we have been engaged by the Norwegian Coastal Administration, which is the customer for this project. This tunnel, which will be 1.7 kilometers long when you measure the tunnel itself, and 2.2 including the ending sections. It will be 50 meters high and 40 meters wide, making it a very unique tunnel, securing ship safety, but also, I think, becoming a very interesting tourist attraction.
It is an example of a project which attracts a number of candidates to Norconsult because it is a very exciting project. An example of a more typical project is a new transformer substation in our renewable energy segment. There is a strong demand for these kinds of substations to both secure transmission and the supply of electricity to new industry. Here we see, as I mentioned earlier, a continued growing demand. Another segment is defense, and in Sweden, in Gothenburg, we are working on one of the largest defense shelters in the country, which after decades of not being prioritized, now is getting high priority, and we are supporting the municipality in rehabilitating this defense shelter so that it will be a safe place to shelter if something should happen, which we are hoping it will not.
This is part of the upgrades which we are now experiencing in many countries. I would then like to say a few words about the hospital and healthcare segment, which is a segment that is important for Norconsult and where we see growing demand. It is also a segment where the combination of Norconsult, our architect colleagues in Nordic Office of Architecture, which is a 100% subsidiary of Norconsult, and Metier, our acquisition from last year, is turning out to be very competitive in the market. By combining these entities, we are able to supply all of the services which are needed associated with designing, engineering, and the management of these kind of projects. We see demand increasing. This is relating to the demographics of the society in all of the countries where we operate.
We also see that there are a number of hospitals that require modernization, both because they have become old and because new equipment and new methods for healthcare are creating new needs also for the buildings and the infrastructure of the hospital. So, let me show you a few interesting projects which we have won during the second quarter. A very interesting one is the Center for Mental Health in Trondheim, Norway, at the St. Olavs Hospital. This is then the project which we have won with a combination of Norconsult, Nordic Office of Architecture, and Metier. We also have one other architect partner called A-lab. The contract here is also interesting. It is a so-called IPD or Integrated Project Delivery contract, which is not time and material-based.
It is a contract which enables us to both share in the upside and the risk of the project based on our proportional input to the project. It means that we are aligning interests with the construction company doing the building itself and the owner of the project, which in this case is Sykehusbygg. This kind of contract, we believe is an attractive way of organizing large projects because it aligns incentives and interests between all of the providers and the value chain. We see some other examples of this in large infrastructure projects, and we believe that this gradually is going to become a very important contract mechanism for large projects. On the other hand, for very small projects, still time and material is the easiest way to manage them. But for large projects, aligning incentives is a very important feature. Another example is the Sunnaas Rehabilitation.
This hospital is Norway's largest specialized hospital for physical medicine and rehabilitation. They are building a new low-rise patient building, which again is executed both by our engineers in Norconsult and our architects in Nordic Office of Architecture. Finally, on the hospital side, we have a concept study for Vestfold Hospital, where we are looking into how we can create the best possible future healthcare infrastructure for that region and that hospital and healthcare structure. With that, I would like to give the word to our CFO, Dag Fladby, who will tell you more about the financials.
Thank you, Egil. Our net revenue in second quarter ended at NOK 2.89 billion, up from NOK 2.47 billion. A 14% growth if you adjust for the calendar effect of NOK 82 million in the quarter. Our organic growth was 6%, driven by increased FTEs, increased billing rate, and also improved billing ratio. Our billing ratio in second quarter was 75%, up from 74.7%. Adjusted EBITA NOK 255 million, up from NOK 152 million. The underlying margin adjusted for the calendar effect is 6.2%, in line with the same quarter last year. As Egil mentioned, this quarter we have completed the integration with Aas-Jakobsen, and that has also affected the EBITA margin, and the EBITA is affected approximately -NOK 9 million due to the integration work. That is now completed and according to plan.
Net finance -NOK 24 million, which includes a currency loss of NOK 2 million, so in line with guided level previous quarter. Pre-tax profit, NOK 134 million up from NOK 114 million, which also includes ERP cost for the new implementation of our ERP system of NOK 40 million. EPS 0.43 up from 0.37. To our first half figures, where we have a net revenue of NOK 5.9 billion, up from NOK 5.1 billion, which is an increase if you adjust to a smaller calendar effect, so NOK 17 million an increase with 15%. Organic growth also first half, 6%, driven by increased employees and also increased average billing rates and improved billing ratio. Year to date billing ratio is now at 73.8% versus 73.0%. I will soon revert back to some additional comments on the billing ratio. Adjusted EBITDA NOK 586 million, up from NOK 487 million, nearly NOK 100 million increase.
That is due to improved operational performance and also contributions from the recent acquisitions. The positive development was partly mitigated by increased personnel expenses and other operational expenses. Underlying EBITDA NOK 9.7, up from NOK 9.5. In terms of amortization, we ended at NOK 50 million, which is an increase of NOK 35 million due to the amortization of the recent acquisitions in line with the guided level. Net finance -NOK 64 million versus +NOK 12 million the same period last year. The change is due to the acquisition debt we took on and due to the acquisition on Metier and also Aas-Jakobsen, and also currency loss of -NOK 14 million versus +NOK 7 million the same period last year. Profit after tax NOK 328 million, which now includes cost for the implementation of the ERP system of accumulated NOK 57 million first half. The EPS NOK 1.05 versus NOK 1.23.
Now a few words on the billing ratio. We have been very clear that our target is to get back to the 74% level, which we had some years ago. We were also clear about that when we communicated in our Capital Markets Day in November last year. We have done several measures during the last 18 months in our organization, both streamlining the operation, movement of people across market areas, and also optimalization of the organizational structure. We are satisfied with the measures so far. As you will see now, this is the fifth quarter with improvement. Year to date, we are at 73.8%, rolling 12 at 73.5%, meaning that we are satisfied with the improvement, but we still have more to go. We will continue our effort of improving our billing ratio to get back to the 74% level. Now into the segments.
We will start with Norway head office to the left, where we have a net revenue of NOK 901 million, up from NOK 750 million. Adjusted for the calendar effect, that is an increase of 17%, while the organic growth is 6% in Norway head office. EBITDA NOK 90 million, up from NOK 73 million, adjusted for the calendar effect, the underlying margin is 7.7%, down from 9.7% the same quarter last year. This quarter is also affected by the integration work with Aas-Jakobsen, and this is the final quarter we have the integration work, and the effect is estimated to -NOK 8 million in Norway head office. In addition, we have a slightly lower profitability in parts of the building segment, but that is partly mitigated by improvement in the architect business. Looking at first half figures, the adjusted EBITDA, where we have minor calendar effects, is 11.5%, slightly down from 12.6%.
Accumulated effects for the integration work is -NOK 13 million first half in Norway head office. Then to Norway region, where we have a net revenue of NOK 790 million, compared with NOK 714 million the same quarter last year. The organic growth is 4%, mainly driven by higher billing ratio and also improved billing rates. The billing ratio continues to improve in Norway region. Adjusted EBITDA NOK 89 million, up from NOK 57 million, and the underlying margin is now at 8.3%, which is an improvement from 8.0%. The improvement is mainly explained by improved billing ratio. Looking at first half, we have net revenue of NOK 1.6 billion, up from NOK 1.5 billion, and the adjusted EBITDA margin is 10.7% versus 10.9%. Then to Sweden, where our net revenue was NOK 456 million compared with NOK 449 million.
This quarter is affected by significant calendar effects in Sweden, and that is mainly due to that we have changed the summer and winter work hours, meaning that we in the summertime now work more hours than we did before, and in the winter, slightly lower. For the full year, the effect should be zero, but this quarter has an estimated effect. In addition, we have currency effects of -NOK 27 million, and organic growth adjusted for this was 1%. Adjusted EBITDA NOK 26 million, up from - NOK 1 million. Adjusted for the calendar effects, which was significantly affected also by the summertime works, we have -0.5% profitability. That is part to the calendar effect, but also the market is more challenging in Sweden.
We have price pressure in certain building segments, and we also have slight changes in the product mix in this quarter, leading to slightly lower profitability. If you look at the first half for Sweden, the profitability has improved the adjusted EBITDA margin from 4.3% to 5.2%. Then to Denmark, where we have a net revenue of NOK 190 million. Also for Denmark in the Norwegian kroner, the currency effect was -13%, leading us to an organic growth of 5%. Adjusted EBITDA - NOK 4 million compared with + NOK 6 million the same quarter last year, and that is mainly affected by final provisions for earn out of NOK 11 million, compared with NOK 5 million the same quarter last year. We see improvements in part of the business based on the measures we have taken during the last quarters, but there is still too weak profitability in parts of our building segment.
In the second quarter, our new CEO and Managing Director for Denmark was in place, and he has also changed his management team as they will continue with measures and to improve the profitability. Then to renewable energy, which had another solid quarter. Organic growth was 22%, driven by improvement in hydropower and transmission, and also related business. EBITDA NOK 41 million, up from NOK 24 million, and the underlying margin was 13.7%, compared with 11.6% the same period last year. That is due to continued high billing ratio and also continued good levels on rates. For the first half, we have a strong development in renewables, 22% organic growth and EBITDA margin of 17.5%, up from 15.7%. Then finally, the consulting segments, which had a total revenue of NOK 450 million, up from NOK 272 million. The main contributor is Metier, but we also have slight improvement in digital.
The EBITDA +NOK 26 million, up from NOK 6 million the same period last year, where Metier contributed by NOK 14 million. As you may remember, the integration was completed in the first quarter and we are now on track on the profitability. In addition, we have improved profitability also in digital, partly due to improved operational performance and also slightly higher capitalized development cost. Technogarden, a slightly lower profitability, mainly due to a challenging market and also some additional cost related to adjustment of workforce. First half, 8.7% in margin versus 5.8%. Then to the cash flow. Our operational cash flow ended at NOK 234 million second quarter, compared with NOK 395 million the same quarter last year.
The change is mainly due to increased working capital, partly due to our growth of 17% in the quarter, but also due to changes in the withholding tax payments schedule in Norway, which amounts to approximately NOK 70 million in this quarter. Cash from investment activities was NOK 311, versus -NOK 11 same period last year, mainly explained by sale of bond funds. Finally, cash flow from financing activities, -NOK 1.1 billion versus -NOK 610. In the period, we have done some debt repayment of NOK 410 million, whereof NOK 350 voluntary repayment. Also part of the decreased cash flow from financing activities is related to increased dividend payments. Then to our balance sheet, which is strong. During the quarter, we have done some restructuring of our loan facilities in order to optimize that better.
We have done additional repayments during the quarter in total with NOK 410 million and for the first half with NOK 570 million. That is also affecting the cash at the end of the period, which is now at NOK 535 million. The restructuring of the loan facilities includes also amendments in the term loan facility we have with improved terms, meaning reduced interests. Also we have increased our overdraft facilities from NOK 500 million to NOK 800 million with the same terms as previous. Net interest-bearing debt, NOK 189 on our leverage ratio at 0.18, excluding the IFRS 16. Finally, from my side, a few comments on the order book, which is now at NOK 7.8 billion, up from NOK 7.6 in first quarter. Order intake in the quarter has been a good mix of small and medium contracts, and also call-offs from the framework contracts, including call-offs from Arna-Stanghelle, which is now moving ahead.
The ship tunnel, which Egil mentioned in the beginning, is not included in the order book in second quarter. That will come into the third quarter order book. Now, Egil, I will leave the word to you to sum it all up.
Thank you, Dag. Let's have a look at the outlook. We continue to expect the overall market to be quite stable. However, I think everyone knows that there is a lot of uncertainty relating to the geopolitical situation, and that may affect interest rate levels, which of course is one of the factors which affect Norconsult. It may also affect political decisions, that those political decisions may imply both an upside relating to new investments and a potential downside relating to reprioritization. The demand in infrastructure is expected to be stable going forward, in line with public spending plans. You may notice that we put infrastructure at the top of the list, where previously we have started with buildings and architecture.
We put the infrastructure higher now because we have gradually, in Norconsult, shifted our engineering competence and our services, making the infrastructure side now more important than buildings and architecture. Because of that, we put it at the top of the list. When it comes to the private market for buildings and architecture, we expect that to continue as is. We do not expect any significant short-term improvement, but we also do not experience or expect a deterioration. The public market, we continue to expect to have a stable level, and as we have showed some examples of in this presentation, we have a strong position in that market. I would like to add that when it comes to Sweden, the Swedish market is quite challenging now.
We are more exposed to the public market in Sweden, and in Sweden there is an upcoming election, and we see that there is some hesitation in public spending and public projects in Sweden, which is affecting the entire market. We have experienced that previously relating to elections, and we do expect the activity in Sweden to pick up some time after the election is concluded, in line with what we have seen during previous elections. When it comes to the energy sector, we continue to expect a high and growing level of activity with, again, a more mixed development in other industry segments. I mentioned previously that we see data centers and defense industry as strong segments when it comes to industry.
In Norconsult, we do have considerable flexibility, and we think that that is one of our competitive advantages, being able to shift competence to the segments where there is the most demand. We will continue to use that capability to make sure we service our customers where the demand is and use our competence where it can create the most benefits, both for our customers and for our owners. We will continue to take proactive measures to improve the underlying profitability. You have seen that some of our segments do need some improvement going forward. We will take the relevant actions in order to make sure that we continue to deliver a stable profitability and a strong growth going forward.
With that, I think it is time for some questions, and we will start with questions here in the auditorium, and then we will move to the online chat. Yes. Maybe you would like to just state your name and where you come from, Magnus. Yes.
Magnus Rasmussen, SEB. I wanted to ask you about Aas-Jakobsen and how you think it has been progressing. I understand that you, because it is integrated, do not anymore have a separate P&L, but we can look in your notes, you have acquired revenue, for example. If we sum that up for the past year and add something for the beginning of Q3, it seems like it is at best in nominal terms, on par with the 2024 figures. I assume there has been some wage inflation, et cetera. Have you lost some people? Is the billing ratio lower? How are things moving in, yeah, compared to your expectations and to the levels Aas-Jakobsen showed in 2024?
Would you like to start, Dag?
I can start. I will say that we have used significant time with the integration. Why have we done that? That is because there are so many top skilled people. We had need to reorganize our existing setup in order to stimulate for growth going forward. That was the main purpose of that. Saying that, we said also in fourth quarter and first quarter that you can say the order intake in Aas-Jakobsen had been slightly slower when the acquisition was ongoing. So we had slightly lower order backlog that has been picking up with this Arna-Stanghelle and some other infrastructure project, like the ship tunnel.
What we see is that at the end of this quarter, where we are more finalized with the integration, also the billing ratio for these people are starting to get on a normalized level. We are expecting that to improve quarter by quarter, and get back to the level they were at.
Yes, I would just like to add that, for us, a very significant milestone was achieved in the second quarter because we then completed the integration. In addition to what we have been able to quantify, there are effects which have hampered somewhat the profitability. But we noticed also from May to June a significant improvement because May was the last month of integration activity.
Thanks. On the FTE counts, there was a drop in the quarter and quite spread. Most of the segments were down Q1 Q. Is this just normal fluctuations and that will pick up again in the second half when you hire some more people? Or are you doing some sort of cost measures, et cetera?
I think yes to both. We are doing some cost measures. We do that every quarter, so there is nothing, in a way, very special about this quarter. But like our CFO showed, we have improved our billing ratio, and in some of the segments, we have pulled back a little bit on capacity, not relating to Aas-Jakobsen, which was your previous question, but we have also had net hiring. As I mentioned in my presentation, having a roughly flat employee count, excluding acquisitions during the first half is quite typical. We expect to see growth in the third quarter.
Thanks. A final question from me, if I may. The balance sheet is very strong. How should we think about M&A dividend opportunities going forward?
We are seeking for M&A all the time. We have a good pipeline. However, we are patient. If the companies are not matching our criteria and also the company culture, including that it should be accretive for our shareholders, we would rather wait. You can expect more M&A going forward, but when that will happen, we do not know. But we are working hard on it. When it comes to the dividend, the dividend policy remains. I guess the board will decide what level that will be when we come back to the Q4 results.
Thanks.
Yes.
Vetle Wilhelmsen, SB1 Markets. Could you give some more color on the activity level on the Arna-Stanghelle contract right now and how you see this facing developing moving forward?
Well, the activity is high. Many of our people are working on that. I would say it is full speed, and there will be a high level of activity in the coming quarters. I do not know if you have anything more to say.
I think the two last months, we have used significantly ramp up of all the organization and the setup for the organization, and the first really call off, the large call off from the contract was in June. Now it is really starting to move.
Also, the contract structure of the, I think it was the St. Olavs Hospital contract, do you see that becoming more common across other segments as well? I guess you've previously commented or communicated that you have roughly 20% of your projects on fixed price contracts. Can we see that figure tick up in the future?
We see that this type of contract, which I mentioned, it's called Integrated Project Delivery. Some call it alliance contracts. We see that growing and expect it to continue to grow. It is neither a time and material contract nor a fixed price contract because it has an upside and a potential downside. We do expect time and material to gradually drop over time. I would like to emphasize that Norconsult also has a large number of very small projects. For those projects, there is a very high degree of convenience and practicality in continuing to have time and material. So even if large contracts gradually will change into having more incentive structures like the example we mentioned, we still think time and material is going to be a very important and, at least for Norway and Sweden, a dominant mechanism.
If I just add on the cooperation agreements and the alliance, the downsides is limited to our self-cost. So it's not going to be a lost contract if it's getting really bad. So it's an upside and a lower level.
It's a very good way of aligning incentives. It also makes it easier to invest in new technology when that is relevant in order to improve the total productivity and quality of the project.
Thank you.
Øyvind Vangsnes from Pareto Securities. Following up on the new contracts, do you see any changes in the margins, or is it expected to be the same as the time and material contracts?
Well, it's too early for that particular project to talk about the margins, but we have experienced good results in the past from those kind of contracts. But it's something which we have not had many projects of, but we do see that those kind of mechanisms are mechanisms which we handle well. I could add that, for example, the Aas-Jakobsen Group, now part of Norconsult, has had a good experience with similar type of contract mechanisms.
What is the reason that this kind of contract appears now? Has AI something to do with it, or is it just that the scale of the projects get too large?
These type of contracts have been quite common in North America, for example, for many years. Also quite common in Finland for infrastructure projects. We think it has been a gradual development, but it also makes particular sense when you see that there are new methods, new tools coming, which can create benefits for the total performance of the project.
These kind of contracts also, you can say, reduce the risk for the customer, the construction company, and also type of companies like us.
Just one technical question on your-
Bengt from ABG.
Bengt Jonassen from ABG Sundal Collier, I am sorry. One question on your calendar effect and the set of changes in Sweden, how you calculate it. Is that the reason why you have a positive effect in Q3 on your slides on the guidance? Does that mean that you are basically stealing from Q4, which you actually have one day more? So it has been pushed into the third quarter instead of the fourth quarter. Is that the way of looking at it?
The practical thing is that due to change in the regulation in Sweden, we now work eight hours in the summertime instead of 7.25, while in the winter we worked 8.25, now we work eight. So it will be a change, since we also include this in the calendar effect. When you look at the aggregate effects in this quarter, it is also, you can say, adjusted to whole figures. So it could be calculated in hours. When you look at the broad figures in terms of number of days, keep in mind that that is whole days and it is rounded. But we will guide, as we always do, on what we expect the figures to be.
This exact issue is one of the reasons why I highlighted the first half results and why also the second half can be sensible to look at in order to compare results.
The second question is about scale in Sweden and Denmark. Is it a scale issue that leaves you with very low margins, or is it a weak market in Sweden and maybe internal things in Denmark?
In Denmark, it is an issue. The largest effect in Denmark has been the non-recurring issue of the earn-out mechanism associated with an acquisition, which has been really successful, but it means that the earn-out we have to pay to the seller is higher than previously. That is not counted as an investment, it is counted as a cost. That is the most important effect in Denmark. Then, in Denmark, our architects are performing really well. Our engineers in the Jylland area. What is that in English?
Jutland.
Jutland area, yes, are performing really well. But in the Copenhagen region, they have been struggling a bit more. It is partly also an internal issue. But we have a new management in Denmark who has taken some really good action. I have to say, I am very optimistic about Denmark going forward. Sweden has been a bit more challenging. We have had a very good growth in Sweden. We have shown an improvement in the profitability in Sweden this first half, compared to the first half previously. But we are not happy with the total profitability in Sweden, we do expect Sweden to improve going forward. They have taken many measures in Sweden, but the market has been quite challenging, and we have seen most companies in Sweden struggling during this period.
But we have seen some exceptions to that, some that are performing quite well, and we are looking at those, working to improve our business. Scale, I think, has some relevance, but it is not the only explanation. If there are no more questions in the auditorium, I ask if there are questions in the chat.
First question from Jesper Stugemo at Handelsbanken. Could you add some more flavor to the summer/winter work hour adjustment in Sweden? How does this affect the reported organic growth and adjusted EBITDA? Is the calendar effect included in the 1% organic growth figure?
Yeah. I mentioned previously when Bengt asked the mechanism and the reason for this calendar effect of summertime winter work, that is included in the calendar effect. When we look at organic growth, we always adjust out the calendar effect. So it's apples and apples. Was it more on that question?
No, I think that was good.
Yeah.
There's also a question about the improvement in Sweden and which end markets are currently the most challenging, and where are we seeing better momentum in Sweden?
I would say it is a fairly mixed picture. Some parts of the industry are doing well. Energy is doing the best also in Sweden. Buildings, a little bit mixed. We have seen a downturn in the market, so we are seeing a little bit of shortage of volume when it comes to building in Sweden. Infrastructure is doing reasonably well, but there is quite some price pressure in Sweden when it comes to infrastructure. Sweden is a mixed picture, but overall challenging.
Going to Denmark, Handelsbanken noticed the earn-out impact in Q2. Excluding this, how should we think about the underlying margin trajectory in H2 for Denmark?
Also, when you exclude the earn-out, you should expect increasing margins in Denmark based on the actions which have been taken and my very recent statement that I am optimistic about the development there going forward. We know that in our industry, things do not change completely overnight. We have quite a decent order book in Denmark, so we expect to see improvement there also when you exclude the earn-out.
A follow-up on Denmark. How does the billing rate develop compared to the cost inflation and currency effects in Denmark?
I can take that. The billing rate is increasing, but as it is also in Sweden and Denmark, the billing rates are increasing less than the cost inflation. Right now, meaning that we need to have more productivity in our organization, hence focus on billing ratio.
Moving on to the consulting segment. You mentioned that higher capitalization of development costs contributed to the improvements in digital. Can you quantify the year-on-year EBITDA benefits from higher capitalization and describe the underlying profitability development excluding this effect?
Yeah. The quarter-by-quarter increase in capitalized development cost is NOK 5 million. So that's underlying in the quarter.
Reverting to the market more in general, could you elaborate on your data center exposure, both in terms of current activity and the growth opportunity you see ahead?
Well, our current activity is good. We have had some important project wins during the quarter. One of them was shown on the slide showing the order book here for Bulk Infrastructure. We have many customers working with data centers. Some of the projects are fairly developed, while others are in the early stage, where we are looking at plans to be submitted to municipalities, for example, and looking at different applications. Some of them are in a more detailed engineering stage, some of them are early, but this is growing. There is a lot of activity. There are also political decisions here which may impact how many of these projects are in the end realized completely. That might affect, of course, how many end up in the detailed engineering stage.
This is an area where we are optimistic, and we think that this is going to be one of the important industries in the Nordic sector going forward. We have a strong position there, both Metier and the rest of Norconsult, as we can deliver a total package, a bit similar to what I showed in the hospital segment during the presentation.
Thank you. Moving on to Simen Mortensen at DNB Carnegie. The tax rate was low in Q2, 18.9%. How is this expected for the rest of 2026?
2026 will be more normalized as previous years, so approximately a slight above 22% for the full year. This is the reason why it is lower this quarter, is temporary variations.
Another kind of technical question. Working days were one more than guided. Could you please elaborate on why?
That is roundings when we have the full days and we calculate the exact amount and also the summertime into work hours. It is when we get the accumulated figures, it is rounding.
Thank you. The order book increased to NOK 7.8 billion, while FTEs declined quarter-on-quarter, and private sector demand remained subdued. How much of the order book growth was organic versus acquisition-driven? How do margins on new orders compare with the project currently being completed? Does the order book support both organic growth and margin improvements going forward? Or should investors expect a trade-off between growth and profitability?
Well, that was a long question. The order book is not relating to acquisitions for this quarter. We had a little bit of that when we made the Aas-Jakobsen Metier acquisitions, but that has been included previously. When it comes to the development of this, future rate increases are not included in the order book. What we also typically see for many projects is that they start out with an initial scope, and then there are additions to that. Historically, we have on average seen that the initial scope doubles actually, due to the fact that simply, a customer does not want to include everything in the initial call or for what initially goes into the order book. This varies a lot from project to project.
Still what it means is that you can expect the existing orders or existing projects in the order book to create increased demand going forward. There is no major change for the future compared to how this has been historically in our order book now.
In terms of the question for the profitability, we do not guide on the profitability, but I will say that the order book is healthy.
Thank you. In Q2, Denmark's EBITDA was affected by the final settlement of earn-outs. How much remains to be recognized in earn-outs across the group, and what quarterly cost profile should investors expect for any remaining earn-out obligations given recent M&A?
In Denmark, we do not have any more provisions now for previous acquisitions related to earn-out. As you have seen from our notes in the annual accounts, we have, you can say, an option to acquire 49% of our subsidiary, SQL. That is not an earn-out as such, but that is, you can say, something which can come up in 2028, 2029. The figures there are included in the financial accounts for 2025. Otherwise, it is no significant earn-outs. We have some stay-on bonuses which continues in Aas-Jakobsen, but that is all. So no major figures going forward.
Thank you. That concludes the online questions.
Okay. Thank you everyone for attending our presentation, both here in the auditorium and the webcast. Hope to see you again next quarter. Thank you very much.
Thank you.