Ladies and gentlemen, welcome to the Momentum Group AB Q2 Report 2018. Today, I'm pleased to present CEO, Ulf Lilius, and CFO, Niklas Enmark. For the first part of the call, all participants will be in listen-only mode, and afterwards, there'll be a question and answer session. Speakers, please begin.
Thank you. First, a warm welcome to our web meeting, presenting our interim report for the first six months, together with my colleague, Niklas Enmark, Executive Vice President and CFO. I will give you some highlights if we move to slide four. Our main markets continued to display stable conditions during the second quarter, with favorable growth in Norway, enhanced by the upturn in the oil and gas sector. Our actions taken in tools and other areas have had a positive impact on the result. In total, for the quarter, we could see a slow pace of sales in the two summer months, primarily in Sweden, compared to last year. But in total, the sales volume rose by 6% and adjusted profit by 8%. We move to slide five.
As I mentioned, the overall business situation has been stable, and we have strengthened our position in the main markets in the Nordics during the quarter. The earnings growth and our improved operating margin are based on the efficiency work that we have carried out in several of the group companies in conjunction with increased sales, primarily to the industrial sector. I'm very pleased to see the positive earnings trend in TOOLS Norway, created by efficiency improvements due to the new ERP system, as well as the increased demand in the oil and gas sector. In addition, the acquisitions we have carried out in workwear have contributed as expected. The integration of Brammer's Swedish MRO business was concluded during the quarter, comprising eight local sales and service units across Sweden. Our general meeting was also held during the quarter, and we have paid out a dividend of 73 million SEK.
Our adjusted operating margin increased to 5%, and the adjusted profit increased by 8%. If you could please go to slide six. If you look at the business area, TOOLS and Consumables for the quarter, the sales decreased by 1%, mainly due to the slow start in Sweden in the summer months, as well as the winding down of 15 unprofitable stores. In Finland, the sales were almost the same, and they are now facing strong comparative months. Combined with sound cost control, a continued focus on customer cultivation resulted in a stable earnings performance for the operation during the quarter, and we had an operating margin that remained above 5%. Sales in TOOLS Sweden decreased due to the restructuring work carried out in the company.
The improvement activities initiated in operations to increase profitability are continuing and include an improved sales promotion, investments in e-commerce and digitalization, and also changes in purchasing and logistics. TOOLS Norway increased their sales during the quarter with a favorable trend, as I mentioned, in the oil and gas sector, and also with the stable demand in the other customer groups. Along with the actions taken to improve efficiency after the implementation, the increase in sales had a positive impact on the earning, earnings trend. We continued to focus on improved efficiency and reduction of cost in the TOOLS business, and we have started to establish a regional logistics hub in the Oslo area, which would serve 50% of the sales units in Norway. In addition, the group companies specializing in workwear and profile materials note the continued positive sales and earnings trend during the quarter.
All in all, this affected our operating profit in the quarter compared to last year, even though we had a positive earnings trend to some of our companies in the quarter. In the reporting period for the business area, we increased our operating profit by 30% and the turnover by 7%, with an operating margin of 3.5%. If you go to slide seven, I'll give you some comments about the Components and Services. In this business area, the sales increased by 8% during the second quarter, and the largest unit, Momentum Industrial, noted favorable revenue growth with high level activity for many existing customers. Momentum Industrial's consistent work by improving their businesses contributed to good organic sales trend during the quarter, and also added by the acquisition of Brammer sales units that is completing according to plan.
Momentum net sales increased during the quarter, and the business passed for the first time 100 million SEK in sales in a month in September. As I have mentioned before, Gigant was the company in the former B&B Tools, which was most affected by the split of the company, and has gradually changed its focus. We are now changing the way of doing business internally with the TOOLS chain in order to gain a higher profitability next fiscal year, both for TOOLS and Gigant. We will, by these actions, give clearer sales channels to the market, as well as decrease the internal cost to serve. For this business area, the adjusted operating profit in the quarter increased by 3%, and for the reporting period, it rose by 11%. We move to slide eight.
For the reporting period, when the board of directors of B&B Tools decided to propose a split of the group into two independent stock companies, Bergman & Beving and Momentum Group, the aim was to create increased shareholder value over time by giving each business better opportunities to develop based on its own conditions. For us within Momentum Group, the period has been eventful, and our development has been positive. Since the spin-off, we have continued to take important steps in the improvement journey for long-term sustainable profitability, and earnings performance has been positive every quarter since then. The last quarter was also positive, despite the impact of the slow summer months, especially in Sweden... but we summarize growth in adjusted operating profit to a total of 20% for the total reporting period, and the operating margin to 4.7%.
But of course, we have more to prove, as I have said before, and that is what we are working for in the coming months. So if we go to slide nine, I will hand over to Niklas.
Thank you, Ulf. My name is then Niklas Enmark. I'm the CFO with the Momentum Group. On slide nine, I would like to highlight some aspects of our cash flow for the period. The cash flow from operations increased to SEK 8 million for the period, compared to -29 million for the corresponding period of last year. This means that on a rolling 12-month basis, cash flow from operations amounted to SEK 129 million, compared to SEK 92 million for the last financial year. We have a firm focus on our working capital as we grow. Looking at the changes for the reporting period, some comments can be made. The inventory increased by some SEK 19 million in the reporting period, and SEK 22 million during the second quarter.
The buildup of inventory during the quarter is very much related to preparation for the active sales period of October and November, as we also commented on in the report today. Operating receivables increased for the reporting period by 41 million SEK. This increase comes from the higher activity levels we see among customers, especially in Norway, but also for Momentum Industrial in Sweden. The largest change in working capital during the quarter was, however, operating liabilities, which decreased by some 57 million SEK during the quarter, and for a total of -32 million SEK for reporting period. This is due predominantly related to customer changes in liabilities for holiday pay during the summer period.
Looking at the investment side, as we have completed the ERP investment in Norway last year, we see that the level of IT-related investments have decreased to SEK 7 million for reporting period, for a total of SEK 13 million, compared to 10 million SEK and 17 million SEK, respectively, for the previous year. Rolling twelve months, our total level of investments is at SEK 32 million. During the reporting period, we have made two acquisitions, for Profilhuset and MF Gävle, adding to the group of profitable companies within Workwear and product media, within business area Tools and Consumables, and also the Brammer MRO business in Sweden, which has now been integrated into Momentum Industrial. Turning to slide 10, you see some selected key ratios.
Our return on adjusted capital employed stood at 18% for the last 12 months. Return on equity increased to 18%, which then can be compared to our external financial objective of 20%. Our internal key ratio of profit over working capital reached 24%, increasing from 21% a year ago. We see that we have a strong financial position, with an equity to asset ratio of 42% and an operational net loan liability of SEK 419 million. The change during the quarter for the latter was mostly related to the paid out dividend of SEK 73 million, as also we commented on. So in conclusion, we have ample room to make further acquisitions with available liquidity of around SEK 400 million.
Turning to page 11, and looking at the rolling twelve-month numbers, we are glad to see a positive trend, both in terms of revenue, but foremost in our profit level. Rolling twelve-month adjusted operating profits amounted to SEK 275 million, up from SEK 207 million the corresponding period of last year, and up from SEK 252 million for the financial year 2017-18. Per business area, we see that the rolling twelve-month adjusted operating profit increase in both business areas. In terms of revenue, we are now at the level of SEK 5.8 billion, up from SEK 5.5 billion rolling twelve months a year ago, and SEK 5.6 billion at the last financial year.
This is a result of both organic and acquisition initiatives, also here, with increases in both business areas.
So if we go to slide 13, I give you some comments about what we will continue to do. As you have heard before, our focus is still concentrated on three main areas: changing improvement initiatives and tools, a second focus, continued development, establishment of niche offerings in current operation. And third, as Niklas mentioned, that we have ample room for its acquisition growth-driven strategy with focus on niche acquisitions. So if we go a little deeper in the first one, we turn to slide 14. In tools, we're focusing on changing, improving it by streamlining the sales focus on occupational health and safety products and services, and of course, our updated e-commerce platform, as well as increase the number of customer visits. In our offering, we're moving against the core assortment, as well as purchase direct from producers.
In logistics, we have established a central warehouse for TOOLS Sweden. We have one for Finland, and we are now in the preparation of making a regional hub in Oslo that will serve 50% of our sales units in Norway, which is 20 out of 38. The fourth initiative is to continue to adapt our local presence. We will continue to optimize or right-size our local presence for TOOLS in the Nordic to change and streamline several local sales outlets focused on the industrial customer. However, we will continue to sell to industrial customers in these areas, as we will continue to visit the customer with the field sales. Our customer focus is primarily against industry, civil engineering, and construction, and the public sector. This means that these are what we are adapting for, both the assortment and our logistics setup.
This will enable us in the future to have a clearer, cost-effective logistic operating and sales, as well as purchasing. If you take a second one, we turn to picture 15. As I mentioned, our second focus is to continue development of these niche offerings that we have within occupational health and safety, and increased operational safety for industrial customer in Momentum, as well as workwear and product media in Mercus, TriffiQ, and Blomquist. And we also continue to invest in digital solutions for target customers. Our web store in TOOLS Sweden is today our largest sales unit, with a turnover of SEK 80 million per year. And our total e-commerce in the group represent around 25% of the total transactions and 15% of the volume. So if you go to slide 16, Niklas will give you some about the acquisitions.
Right. On slide 16, highlighting some aspects of the M&A activities that we pursue. As we have mentioned before, we look for profitable companies with a strong local market position that can be further developed. We target companies that have a clear end customer focus in the Nordics. Within the existing businesses, we see opportunities to acquire both for geographical expansion and to broaden the existing product offer. In terms of market segments, we think that workwear, personal protection, and industrial components or services are especially interesting. This last 12 months, we have acquired five businesses with some SEK 240 million in annual turnover at the time of acquisition. We also see that we have ample room for continuing our acquisitions with a good cash flow and available liquidity.
Yes, and I can give you some, of course, final words before we open for questions. Finally, after summarizing this past period, we have made many good efforts to improve our business, and we will continue to improve us where earnings growth is most critical in existing units, coupled with reduced working capital, is on top of the agenda, of course, increased profitability. Therefore, we will continue to take actions in each company based on their unique situation and opportunities, and customer closeness and customization of our offering and sales channels, both local and digital, is very important, so we can do better than yesterday. So let's open for questions now.
Well, thank you. Ladies and gentlemen, if you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel. Our first question comes from the line of Karl-Johan Bonnevier of DNB Markets. Please go ahead. Your line is open.
Good morning, good morning. Just to kick off a couple of things. Looking first at the TOOLS operation in Sweden, how long do you still see the impact of these 15 closures that you have done impacting? Is that coming into the year-on-year comparison now?
Yes, it is.
So basically, as of your Q3, that impact is out of it?
Yes.
Excellent. And now, you described that you have had a couple of two slow summer months, and I can, say, understand that considering the heatwave we have had and all these kind of things. And I understand from your comments that you saw the expected pickup, so to say, heading into, say, your high sales season.
That's correct. That's correct. We saw a pickup in September, and we also have seen a better trend in the first weeks of October.
Excellent. And now when, I think you described your, your opportunity in a good way to looking at these three, three, say, target areas as you describe them. If you look at the first one, say, the initiatives within the TOOLS chains, what kind of, of, say, time lag do you see for, for also seeing this impact coming through in the profitability and an improvement, R over RK?
I will see if we take tools together, we will see a little bit better impact now in Sweden, because now we have run the central warehouse for a while, and we know what to have there and not to have there. And in, in, Finland, we have invested, but in Norway, now we are making the third regional hub. We made one many years ago up in Tromsø, north of Norway. We have one in Stavanger for the oil and, gas, and now we have this in, Oslo that will help us with the RK.
Basically, this is something that should come through over the next, say, 12-18 months or something like that?
I would say so, yes.
Excellent. What, what's your first impression of the Brammer acquisition? Has it come into your numbers as expected? Have you managed to keep, say, client volumes in the way you expected to?
Yes, we have. If you look at the Brammer acquisition, we decided to do the asset deal first in order to put the people with our people, so we didn't get the culture change and have branches at two places at the same geographical location. And that we managed very well, and that has been good. If you look at the volume, we had SEK 140 million we took over, and SEK 40 million was more tools and supplies, and that we are trying to move to tools in Sweden, or maybe not to do that, because that is not profitable for Momentum Industrial to do. So if we look at the volume, and we look at the rate, it has gone so far according to plan.
Excellent. And just one final thing, looking at now heading into this high sales season, and you describe you're looking at, say, establishing new niches and focusing on new niches. Are there any particular niches that you have added during this sales season compared to what you have had before?
No, it's more the niche that we add now is to get more in service in Momentum Industrial and pick that up. That's a niche that we are more focusing on, and of course, also the occupational health and safety more and more in Norway, now when we have the ERP system, and we have a common platform.
Excellent. Thank you very much.
Thank you.
Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. As there are no further questions coming through at this time, I'll hand back to our speakers.
Okay, thank you very much for taking your time, and don't hesitate to call us if you have any more questions. We're more than welcome to answer them. So thank you very much from me, Niklas, and Mats Karlqvist is also represented. Thank you. Bye-bye.