Ladies and gentlemen, welcome to the Coor Service Management Q2 report of 2023. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I am pleased to present President and CEO, AnnaCarin Grandin, and CFO and IR Director, Andreas Engdahl. Please go ahead.
Welcome, and thank you for listening in to Coor's Q2 report. I will start by giving a summary of our Q2, including a market update, and then continue to present our triple bottom line results. I will then hand over to Andreas to present some more details around financial performance before we sum up and have a Q&A. Starting with some highlights from the Q2. Within the business dimension, we continue to see high activity. In the Q2, we have won a number of small and mid-sized contracts. In Sweden, a new IFM contract with Fabege, and a cleaning contract with the National Agency for Education, just to mention a couple. A stable inflow of small and mid-sized contracts adds up to almost SEK 200 million of new contracts for the H1 year. We have also prolonged several important contracts in Norway.
Equinor has extended the offshore contract. In Sweden, we have prolonged the IFM contract with the Confederation of Swedish Enterprise. Also, the property contract with Hemsö and the contract for patient meals at Karolinska University Hospital in Solna have been prolonged. During the Q2, we announced that after a tender process, Ericsson decided not to extend the more than 20-years-old IFM contract with Coor. They have chosen to consolidate all of its FM services under two global FM players. The Coor's existing agreement with Ericsson includes services to their sites in Sweden, and the agreement expires at the end of August this year. Until then, we continue to deliver high-quality services, as well as driving a structured and professional exit process to support exit in their transition.
In combination with a quarter where profitability is below our long-term financial target, we are focusing even more on margin-strengthening activities as we are committed to continue to deliver on our long-term growth and profitability targets. The acquisition of Skaraborgs Städ was completed in the beginning of May. The company brings value to our business and strengthens our offering to deliver nationwide cleaning to our customers in Sweden. Our efforts in digitalization continues, and in the Q2, we have started implementation of our new digital interface for workplace service, Simply by Coor, and I would like to give you some more information. Simply by Coor is our new digital interface for workplace services that aims to simplify work life for service users. We gather all workplace-related services in one digital interface, where it is easy to add and remove service modules and functionality over time.
We have created a simple and intuitive user interface. A service user can access across all devices, and it is easy to configure and adapt look, feel, and content. Our platform is open for innovation, with a built-in capability to integrate with other applications, such as access to room bookings, IoT platforms, and sustainability platforms. With the Simply by Coor, we are using digitalization to create excellent user experience. In the social dimension, we have conducted our annual employee survey. The survey continues to achieve a strong 77% response rate and showed a very high Employee Motivation Index at 76. That is the same level as last year and well above our target of staying above 70. We also see improvements in our injury frequency.
We still have a long way to go to reach our zero accident vision, but with a structured follow-up process and strong focus on safety culture, we continuously see improvements in our injury frequency. For the Q2, we have a trip level of 6.8. Compared to 8 last year, we see a steady improvement. Finally, within social responsibility, we announced in the quarter that Jenny Lindén will join Group Management as CVP of Operation Development and Digitalization. I am convinced that Jenny's solid experience and background in change management and digitalization will contribute to new opportunities for Coor. Moving over to our sales pipeline, we continue to see growth opportunities ahead from a strong pipeline across the Nordics in all business segments.
The market outlook in Norway is favorable, with new potential contracts that will provide us with the opportunity to win both new first-time outsourcing contracts and on the market already existing contracts in both IFM and single services. Moving over to our triple bottom line results for Q2. Starting with business responsibility and some of the key financial metrics in Q2. Organic growth is 2% in the quarter. The growth results from new small and mid-sized contracts, as well as high variable volume. More on that later on. Acquired growth is also 2% in the quarter, fully related to Sweden, with the acquisition of Centrumstäd last year and our recent acquisition of Skaraborgs Städ. The EBITA margin for Q2 is 5.1%, that is in line with the previous quarters.
Compared to last year, we see fully normalized volume mix and use of resources. Cash conversion is an LTM number, and it continues to be stable at 90% in line with our target. Leverage is also an LTM number, 2.6 is an increase compared to Q1 after distributing ordinary dividend and finalizing the acquisition of Skaraborgs Städ. Moving on with our performance in social and environmental responsibility. First of all, as I mentioned earlier, we see a strong result of 76 in this year's employee survey and an improved trip level of 6.8. Gender balance continues to be stable at around 50/50, and on the environmental KPIs, we see a positive development in all areas.
On Scope 1, CO2 emissions from our vehicle fleet, we still have an increase compared to baseline from 2018 in absolute numbers. A decrease compared to previous quarters. All countries work actively with increasing their share of electric vehicles, a more effective fleet management, and to use HVO fuel instead of diesel where as possible, to turn the trend and to reduce CO2 emissions in absolute numbers. In Scope 3, from food and beverage, we see a positive development where our reduction compared to baseline has increased with 18%, and we are well on track towards our 30% target. For Scope 3 and science-based target aligned suppliers, we have reached 5%. That is improvement compared to last year's measurement at 4%.
With that, I hand over to Andreas to continue with the details on the financials.
Thank you, Annacarin. Starting with a look at net sales and organic growth. As Annacarin mentioned, organic growth for Q2 is 2%, and net sales amounts to SEK 3.2 billion. That is an all-time high for Coor. Growth in the Q2 is driven by high variable volumes and several new mid-sized contracts. That is partly offset by the ended contract with Volvo Group, as well as the completed large maintenance stops in the Norwegian oil and gas industry. Both items concluded during the Q2 last year. Looking at organic growth over a longer period of time, we see an average above 4% since our IPO in 2015, in line with our long-term goals. Coor's total turnover of SEK 12 billion, another all-time high for us, can be viewed in different dimensions.
From a contract type perspective, we see that the split continues to be stable, with IFM contracts just under 60% and single service contract just over 40%. Slicing the turnover by service line, we see only small variations compared to previous quarters, and the service makes fully normalized compared to the COVID period. Cleaning continues to be our largest service line, with 39% of net sales. On our customer segments, the split remains diversified. All in all, we see a well-balanced portfolio in all three dimensions. On EBITA and margin, Q2 ended at SEK 161 million and 5.1% in margin, a margin in line with the previous two quarters. Volume mix and use of resources are fully normalized versus comparable numbers.
Looking at average margin over a longer period of time, it has been in line with our financial target at around 5.5% since our IPO in 2015. Looking at Q2 country by country, starting with Sweden. Organic growth from high variable volumes and new mid-sized contracts, partly offset by the contract with Volvo Group that was ended in May last year. With a fully normalized volume compared to the COVID period, as well as normalized use of resources, we see margins in Sweden stabilizing in their 9%-10% range. In Denmark, growth is coming down due to more normal levels. The Q2 is partly influenced by a successive start of the contract with Danish Building and Property Agency in Q2 last year, and we also see high variable volumes.
Margin is slightly stronger compared to previous two quarters. The past year, our Danish organization has had a strong focus on startup activities and reinforcing central staff functions to handle the growth, also to identify synergies with the rest of the operations. To further support realization of these synergies, we implemented some adaptations of the Danish organization at the end of the Q2. Adaptations that will further strengthen customer relationship and build for continued profitable growth. In Norway, as we have described the past quarters, we had high project volumes in the oil and gas industry that completed in the Q2 last year. This negative effect is partly offset by high variable volumes in other contracts, as well as starting up new contracts that was won late last year. Margins are lower compared to last year, primarily an effect of lower volumes and scalability.
At the start of the Q2, the utilization rate for the offshore contract with Equinor was less favorable compared with the same quarter last year, that temporarily affects profitability negatively. In Finland, new small contract wins brings Finland back to growth. The lost contract with ABB is now fully included in comparable numbers. Margins are in line with both last year and previous quarters. Looking at the contract portfolio, we see that there is a positive net change in the H1 year of 2023. This is driven by a number of new small and mid-sized contracts being awarded, while two contracts ended in the same period. The contract with Ericsson continues until the end of August and will be included as ended in the H2 of 2023. For this quarter, we also include maturity for large contracts.
That is contracts with an annual turnover above SEK 100 million. For 2023, the 4% represents Ericsson that are still in our books. For 2024, we have 9% of our total net sales that expires. Small and medium-sized contracts represents just over 50%, of course. Moving on to cash flow, we see that our key metric, LTM cash conversion, remains stable at 90% in Q2, in line with our target of staying above 90%. As always, there is a strong focus on cash flow in our organization, and we also continue to see stable payment patterns from our customers. On the LTM cash flow, the M&A item is relating to finalizing the acquisition of Skaraborgs Städ. On the balance sheet, networking capital, as percent of net sales, is stable compared to Q2 last year, at around negative 7%.
Leverage ended at 2.6, sorry, an increase compared to previous quarter, and as AnnaKarin described, driven by distributing ordinary dividends and finalizing the acquisition of Skaraborgs Städ in the Q2. We are still well in line with target of staying below 3. With that, I hand it back over to you, AnnaKarin.
Thank you, Andreas, and before we go into a Q&A, I would like to summarize our Q2. Coor achieved a historically strong turnover of SEK 12 billion LTM, and we continue to see growth opportunities ahead from a strong pipeline across the Nordic, both in IFM and single services. In a quarter where profitability is below our long-term financial target, in combination with a lost Ericsson contract, we are focusing even more on margin strengthening activities, as we are committed to continue to deliver on our long-term growth and profitability targets. We have a solid cash flow at 90% and a leverage of 2.6, in line with our targets. We continue to focus on employee engagement and see strong results in our annual employee survey.
I would like to extend my warm thanks to our customers for the confidence you have in us, and equally big thanks to my colleagues. Together, we are contributing to building and developing a sustainable and successful company. With that, we open up for questions.
Thank you, ma'am. Ladies and gentlemen, if you have a question for the speakers, please press star one on your telephone keypad. Again, if you have questions for the speakers, please press star one on your telephone keypad. There seems to be no question from the phone line at this time. Oh, apologies for that. We have one question from KJ Bonnevier from DNB Markets. Please go ahead.
Good morning, AnnaKarin and Andreas. Follow up on some of the things you talked about. Looking at contract pipeline, seems to be a lot of activity going on out there in the market for the moment. How do you feel the temperature in the market is now compared to maybe six months ago?
Yeah, good morning, KJ. I would like to say that we have had quite a strong pipeline for half a year, and we have seen that some of that has been materialized during both Q1 and Q2, and we will continue to see that materialize for the next half year.
When you look at Ericsson going out the books, is there enough volumes out there in the market if you are successful in tender activities to balance that kind of headwinds that we're going to see on the organic side?
We are quite confident that to mitigate the loss of Ericsson over time.
Looking at Ericsson, should we expect any extra effects in Q3 due to the ramp down of that contract?
I think, Ericsson, we will end that contract, end of August. Obviously, the Swedish organization are working really hard to also phase out all the costs. Timing of that, there might be some costs left in September, that could be the case.
When you look at the employees that you now, say, get out of the Ericsson contracts, are you able to circulate that in other parts of your operation in Sweden?
I think there will be a combination, of course. Some of our employees will be transferred to subcontractors in the new contracts. Some of them, we use them, of course. They are valuable assets for Coor. People is one of our most valuable assets in Coor. We really try to take care of our people in the best way and use them because they have a lot of competence and knowledge that we need to further grow the company, of course.
You don't really have any, say, feel for how many of the people you see that you're able to, say, make use of other in other places, maybe in sourcing things that you are for the moment, subcontracting another contract or something like that?
I think it's a bit too early to just give you a number, but of course, we are working actively with that.
When we, I know it's early days, but I guess everybody's slightly worried about the development, looking at even, also looking at the share price. When you look at your gearing level for the moment, coming up a little, and I guess Q2 is the quarter where you normally have the highest gearing level, looking at the annual cycle, is there any reason to believe why, what, that you shouldn't continue to be a big dividend payer going forward?
I think, as we mentioned, the driver behind that is a stable cash flow, and we continue to see a stable cash flow and with a stable payment pattern from the customers, and we don't see any changes in that.
No changes to capital allocation as far as you see at this stage, at least?
No, we continue with the prioritization that we have on capital allocation.
Excellent. Now, thank you very much, and all the best out there.
Thank you. Thank you.
Thank you. Again, ladies and gentlemen, if you have a question for the speakers, please press star one on your telephone keypad. There seems to be no further questions at this time. Please continue.
Okay, it's time to end this call, and thanks for listening in, and I and Andreas, we wish you all a wonderful summer.
Thank you, ma'am. Thank you. That does conclude our conference today. You may now disconnect.