Thank you all for joining us today. I'm Niklas Willstrand, Head of Communications here at Fagerhult Group, and it's my pleasure to welcome you to our Q2 2025 results presentation. On the call, we have our President and CEO, Bodil Sonesson, along with our CFO, Michael Wood. Bodil will begin with a brief overview of our second quarter results, followed by highlights focusing on the premium business area. Michael will then provide a deeper dive into the group's financial performance. To close, Bodil will summarize the key points before we open the floor for your questions. We start with questions from the conference call participants and then take questions from the webcast. To ask a question, press pound, key, and five, and I will present them to Bodil and Michael. Please note that today's session is being recorded and will be available on our website later today.
With that, I hand over to you, Bodil. Please go ahead.
Thank you very much, Niklas, and welcome to everyone joining us today. I will start with the Q2 results, and we continue to navigate ongoing market volatility, and the operating results are not satisfactory. In addition to that, in May, we had, in our Whitecroft business in the UK, the experience in an IT incident, and the issue has since been fully resolved, and the business returned to full operational capacity in June. While the incident had a significant financial impact in May, it is now behind us, and we have taken all necessary measures to address the situation and also strengthen our systems in all our other brands to prevent similar events in the future. On a positive note, we continue to improve on our strong gross margin.
We benefit from the cost improvements that we've been carrying out over the last six months, and we see a higher order backlog. Sales activity levels remain very high, and we have a very high focus everywhere within the organization to focus on order to increase our order intake. Also, very positively during the quarter, we had a high M&A activity. It was marked by the closing of Tratto and then the signing of Capelon. Both companies bring extensive knowledge and align well with our overall strategy. They also both bring very strong customer relationships. I spoke a little bit more about Capelon in our Q1 calls. I would just briefly highlight on them, and then I'll give you a more detailed overview of Capelon as we go along here. In leadership news, Oscar Wallsten, as we press released, was appointed our new CFO, and he started on July 7.
To ensure a seamless transition, Michael will remain with us until the end of August, and as you heard before, he's also the one doing the call today. If we then move to the numbers very briefly, order intake for the second quarter came in at SEK 1.905 billion, showing an organic decline of 6.5%. We saw low activity early in the quarter, and business picked up at the end of the quarter. For the quarter, net sales declined, but gross margin before EAC continued to increase, and selling and administration expenses reduced by 7% to SEK 629 million. During the second quarter, from a financial perspective, I highlight the 3.9% organic order intake growth in collection, the recovery in operating cash flow, and the reduction in the cost base. Earnings per share before EAC were SEK 0.32.
If we look at the year-to-date numbers, the organic order intake is flat compared to last year, and since the start of the year, the order backlog has grown by SEK 316 million, driven in part by the KSP project that we spoke about last time in Saudi Arabia, as well as strong contributions from iGuzzini, Fagerhult, and Whitecroft. The group's half-year net sales of SEK 3.788 billion show a 10.7% decrease when adjusting for a currency effect of SEK 93 million. Earnings per share before IAC were SEK 0.76. As always, Michael will give you more information when we come to the financial section. As Niklas said, I will give you a flavor. I'll give you an update on premium, but also some of the other activities that have happened in the quarter.
We decided this year to go through our four different business areas, and this quarter we've come to premium in order to have you gain a better understanding of how the group operates. The premium business area is our most profitable and stable of the four business areas, and it's focusing on delivering high-quality lighting mainly across the Western European markets. It contributes to 35% of the group's revenue, and it's defined by very close collaboration with specifiers and partners to deliver tailored and often what we call bespoke lighting solutions. Bespoke means that they're done specifically for the project. Most of the sales come from indoor application and then selected outdoor offerings in the Nordics. The customer segments are offices, hospitals, education, and retail customers. There are two brands, which are Fagerhult and LTS, and they have both development and manufacturing located in Sweden, Germany, and China.
Let's have a brief look at each of the two brands. As I'm sure you know, Fagerhult is where we started, and they stay close to their Swedish roots also in the design of their luminaires. It started 80 years ago with Bertil Svensson. Today, Fagerhult operates in nearly 20 countries and has expanded. It's a very modern factory, which was the one that you saw on the cover page, just watching over the Vätternsee. This factory has been modernized more than 40x , and there is a very strong importance of light and a very strong drive for innovation that is continuing to define the Fagerhult brand. I think this is evident. You can see some of the pictures of the projects to the right. You have like World of Volvo in Gothenburg.
Another notable one is Slussen in Stockholm, or the recently delivered Västlänken that we spoke about in Q1. Fagerhult stands out among our brands as a global leader in innovation for very sustainable and energy-efficient solutions. I think this is reflected in how we work with materials, for example, recycled aluminum, wood, and paper, and together with the integrated smart lighting to reduce CO2 footprint even more. You might remember they've launched several products in wood and carbon, and also it's a very good business model for renovation. If we then look into LTS, a brand that was founded in 1985 in southern Germany. From its roots, it's grown into a trusted name in high-quality indoor lighting, mainly for the European market of office, retail, and hospitality. They have a track record of delivering smart and very design-driven lighting in Europe.
Here, you very much have a bespoke concept for retail change, which you also can see on the pictures, where it's very important to be flexible and high requirement on prototyping. That was business area premium, and then we'll go to our two acquisitions. You saw maybe the press release that we communicated on the 2nd of July that we had completed the acquisition of 100% of the shares in Trato TLV Group. That means that the numbers will be integrated into our numbers for the full part of Q3. Trato provides lighting solutions for retail and healthcare interiors, and its two segments where they hold a leading position in the French market. As we said in Q1, they will be part of our business area professional. We see several growth potentials with mutual cooperation within the business area. For example, Trato is very strong in healthcare equipment.
As you also can see on the picture here, they do bedheads, for example, which could be a very good addition to Whitecroft Solutions. Whitecroft is very strong in healthcare lighting that will be complementary to Trato Solutions. We move to Capelon, where you probably also saw that we announced this week the acquisition of Capelon in a press release on Wednesday. Capelon is a Swedish technology company and a pioneer in connected street lighting and smart city applications. They have more than 20 years of experience. The acquisition strengthens the group's position in smart lighting and supports our goal that every luminaire we sell by 2030 is ready for smart decisions. Capelon, from a technology perspective, brings a scalable and open IoT platform that enables integration with both our own brands and external partners.
It's the only solution in the market that combines so-called cabinet controls with smart outdoor lighting, supporting broader smart application, which is also a very good entry path for the cities when they start with smart lighting. They have a strong base of recurring revenue, so they add valuable and future-ready dimensions to our offering and open up new opportunities for international expansion. I also wanted to take you through, because I think it is very interesting as it is in line with our strategy, to give you some of the reasoning why we decided to do this. I think there are many strategic reasons. As I said, key focus is to accelerate the development of smart lighting, supporting our target and vision of having smart lighting in everything we do. There are also several strong factors which are influencing the outdoor lighting market over the next five years.
Because today, currently, most outdoor lighting in the market is still using outdated technology, the so-called high-pressure sodium lamps. This is the equivalent of the fluorescent lighting that we've been speaking a lot about on the indoor side. The EU ban for high-pressure sodium is not coming in effect. It hasn't been as the fluorescent came in effect in 2023. For high-pressure sodium outdoor, it's coming into effect in 2027. That will bring more cities and municipalities investing into new LED luminaires with smart technology, either to get connected now or to be ready for future connectivity. The provision for the market in outdoor is that smart lighting is expected to grow in Europe by around 22% in the coming years.
Also, the reason for the municipalities to go in this direction is that electricity costs for outdoor lighting in cities are more than half of a municipality's electricity costs, which of course is driving the shift towards energy-efficient and sustainable LED-based solutions. In addition to that, 2G networks are phased out, and many existing connected lighting systems will need to be replaced or upgraded. Okay, with that, I thought I'd also give you a little bit of market information because we think the Euroconstruct numbers are very relevant for us, and the latest release came as late as the end of June. We'll have a brief look at them, what they're saying. They forecast a gradual recovery where renovation is the key driver. I think the support behind this is, of course, lower interest rates, stricter climate regulations, and targeted incentives for energy efficiency.
The market is moving towards improving what already exists, not building more of the same. You know we are very well positioned with our renovation business model in a landscape that prioritizes smart solutions, digitalization, and long-term operating efficiencies. If we zoom in with the next slide to the renovation market, I think this shows very clearly that every quarter the renovation market gains in traction. I think we will see this for quite a few years to come, and it is driven by the fact that the buildings and the building industry account for 40% of Europe's carbon footprint. We need to renovate Europe. You can see, of course, this is fueled by climate targets, the need to modernize existing infrastructure, and from a lighting perspective, the customers are demanding smart, easy, and easy-to-integrate solutions into their operational environment.
I think that is very much in line with the technologies that we have, and they will extend life of buildings, lower operational costs, and support circular goals. With that, I will hand over to Michael to give a more detailed outlook on our numbers. Please, Michael.
Okay, thank you, Bodil. It sounds as though there certainly have been a lot of things going on in the last 90- 100 days. I too welcome everybody to the call. A good morning from me as well, as you've heard from Bodil and Niklas. Whilst many strategic topics continue to make very good progress, we are, as Bodil has already stated, not happy with the operating unsatisfactory results. From an all-time high order intake in Q1 to an organic decline of 6.5% in the second quarter, it just shows how inconsistent and volatile the markets are. Also, currency headwinds on order intake and net sales have increased, with an average of SEK 31 million per month in the second quarter of the year.
A reminder to us all that the second quarter is negatively impacted by SEK 42 million on net sales and SEK 21 million at the operating profit level as a result of the IT incident that Bodil has mentioned. The improved gross profit margins and the reduced cost base are both positive signs of increased future profitability, but at the current activity levels, they are incapable of supporting a double-digit operating margin. As mentioned, we are disappointed with the 6.5%. The cost-based reduction programs continue to benefit the result, and more of this will be seen in future periods. The costs are 7% lower in the second quarter compared to the comparable quarter. Some of this is, of course, due to FX. At SEK 162 million, the operating cash flow was improved compared to the low first quarter.
However, it is the operating profit that creates the gap to last year's SEK 280 million. Coming to the year to date and being aware of the impact of the IT incident, it shows that the first and second quarters were very similar. Both quarters were tough from an invoicing and net sales perspective, but positively, both quarters delivered improved comparable gross profit margins and reduced comparable cost reductions. There has been and continues to be a very high focus on sales activities to rapidly improve order intake levels, and when the markets begin to return, we expect a sharp improvement in our levels of profitability.
The rolling 12 net sales development clearly shows the impact of the ongoing new build construction industry decline, which was capable of being overcome by the growth we experienced and continue to experience in the renovation segment in the years 2022- 2023, but the continuing nature of this makes it difficult in the 2024-2025 period. We do look to mention the Euroconstruct statistics coming through towards the end of this year. As Bodil Sonesson mentioned several times, there remain many opportunities almost everywhere on the market, and our order backlog is over SEK 300 million higher than at the start of the year. The market and sales volume challenges have a direct and clear impact on the profitability, despite good gross margin development and increasing benefit from cost reduction programs where there is more to come. Drop now into each of the business areas.
We first of all take Collection, as you are aware. For the first half year, Collection has delivered a healthy 6.5% organic order intake growth, and we begin to see an uptick in the level of profitability. The business area has more than 60% of the first part of the King Salman Park order to deliver in the coming months, with just less than 40% already delivered, and VF remains engaged in trying to secure the next pass on this large project. A new cost reduction program was initiated at LED Linear in the quarter, and the results of this will be seen in Q3 and beyond. The whole program carries a 10-month payback, and the SEK 12 million cost has already been taken. Coming to Premium, in 2023 and the first half of 2024, the net sales levels in Premium were at a higher level.
For the last four quarters, however, the net sales have been flat at SEK 650 million- 670 million. We don't see an ongoing trend in a bad way in Premium. What we see since Q3 of last year, we see a relatively flat position. Gross margins have improved, cost base has reduced, and the operating margin remains at a very good level, 14%, you can see on the chart. The 14% for the second quarter compares to 12.4% last year, where in Q2 last year, the sales were SEK 80 million higher. The level of profitability in Premium is at a very good level. Again, for the Fagerhult brand, there is quite reasonably mixed order intake activity levels, and the high focus remains on spreading the improved order intake across each of the regions they operate in. Coming to the third business area, which is Professional.
As is clearly stated in the report, the Professional business area has had a very tough first half year, and this was not at all helped by the IT incident at Whitecroft in the UK. More positively, the year-to-date order intake growth is a healthy 4.9%, and the order backlog has increased by SEK 92 million in Professional, some 31% compared to the earlier periods. Despite a tough half year, the business area is quite well positioned for an improved performance with a healthy backlog, improved gross profit margins, and a lower cost base. Looking at the fourth business area, Infrastructure, the significant cost reduction program at Veko carried out towards the end of 2024 continues to make a positive impact, but the weakening order intake delivers a poor result. Veko is the dominant business in the business area.
Design Plan is doing quite well with an improved second quarter performance compared to Q2 2024, and the order intake situation, particularly at Veko and I-Valo, but also Design Plan, is the highest priority for all involved. Moving around onto cash flow. On the cash flow side, we continue in a positive way now, 13 quarters of generating a positive cash flow. For the first quarter, the cash flow of SEK 26 million was impacted by lower profitability and an increase in working capital, whereas in the second quarter, the cash flow improved to SEK 162 million as working capital was better controlled. Again, the lower comparable number is due to the levels of profitability. The group has a good cash-generating process. However, there are continued areas for improvement in the working capital on the balance sheet.
Net debt, during the last three to four years, you can see our strategy has been to reduce the net debt, and this has been very successful, with the Q1 debt being the lowest the group has carried for over seven years. During the second quarter, the debt increased as a result of the SEK 248 million dividend distribution. The ratio is impacted by the dividend and the lower earnings, of course. Earnings per share, we repeat the message about not being pleased with the earnings per share level and are working very hard to get this trend going back the other way. The SEK 0.32 for the quarter or the recent trend in recent times. Gross profit margins are having a beneficial impact, so too the lower cost base, and increased volumes will benefit further. With that, I hand back to Bodil for closing questions and answers.
Okay, thank you, Michael. Let's have a short conclusion and recap. We see that the market volatility remains a key factor shaping our industry landscape and affecting our results, but we also see our focus on cost reduction continues to support our results. We will, of course, continue on a very high sales focus within all the brands in our group to continue to create order intake. We also note some continued positive signals in the renovation segment, along with some early, very early, but some encouraging signs in the new build activity. As you said, Michael, we've had very high activity in the quarter with different parts and also on the M&A activity, starting our collaboration with both Trato and Capelon. That will further strengthen our position and capabilities going forward, and they're both very much in line with our strategy.
I'm very happy with both of those acquisitions. I think with that, we can see if we have any questions that we should answer. I hand over again.
Thanks, Bodil. There are no questions from the telco, so I hand the word to you, Niklas, for written questions. I'll get back if there are questions here.
Thank you very much, Einar, and thank you very much, Bodil and Michael. We have a few written questions, and I will start with the first one. We read about the volatility on order intake and the market. How do you view the second half year from growth?
I think if you look into the second half year, you saw the numbers I showed on Euroconstruct. I don't expect any drastic change in the market. I think what we will see is a gradual improvement. I think also what we said and what both me and Michael highlighted is that we have a higher backlog than we had in the first half year, and that should give some positives, the number of a bit more than SEK 300 million. I also see that our new and especially Trato being part of us from the full quarter will also give us some positive contributions from the third quarter.
Thank you. We have a second question here as well. Capelon sounds like an exciting acquisition that fits well with your overall small strategy. When do you expect that closing would be?
We expect this to be quite quick. I see a closing after the holidays, hopefully during the first part of August. It's always easier when it's in Sweden, so we should be able to move quite quick here. That would be a good contribution as well.
Thank you. Let's see. Can you tell us something about when you expect to see an improvement, a turnaround in both BA Professional and BA Infrastructure?
Yeah, sure, sure. Perhaps I'll jump in here, Bodil. Two different responses for the two different business areas, I suppose. We did report a challenging Q1 leading into Q2 for Professional. Again, I'm not going to mention the IT, but if you look behind the six months, whatever's happened in BA Professional, to come out of that period with an almost 5% growth in the order intake compared to the prior year and nearly SEK 100 million increase in their order backlog at the start of July, then you can anticipate a much improved second half year compared to the first half year in Professional. Now, when you look at Infrastructure, as I've reported earlier on, the dominant business is Veko in Holland. Design Plan runs quite well, and I-Valo is, compared to last year, more or less a little bit flat, but improving.
Every focus and every activity in Veko is about pipeline, pipeline management, go-to-market strategy, and really trying to understand converting opportunities. The business is not short of opportunities; it just needs to improve its conversion on those that it sees on the market. That is the 110% priority for that Veko business. We do anticipate, with a higher focus and a higher energy going into conversion and order intake in Infrastructure, particularly Veko, we do anticipate to see some of that start to come through. Maybe not Q3, but maybe towards the end of Q3 into the fourth quarter.
Thank you. One question here as well. You mentioned that Capelon is the market leader in Sweden and that you see great possibilities for expansion to other markets. When do you see this can start?
I think they've already seen it within Capelon because they already have customers outside Sweden, both in Finland, Norway, and Netherlands. They have already seen that the technology solution works very well outside of Sweden as well. I think that is where it's a very good match with us as well because we will be able to use our global sales networks, so that we can accelerate this in a much more rapid pace. That will be very much part of how we're going to work on the future together. That is exciting as well.
Thank you, and thank you to everyone joining here. With that, we are done with the questions today. Before we end, Bodil, any last comments from you?
I'm just going to say thank you to everybody for joining today and for your questions. I think from bringing with us from the call is for, of course, to continue our growth within smart outdoor lighting, and that will help us shape a more connected environment with our customers in the future. Of course, I wish everybody a happy holiday season as well, as we are in the middle of the summer. I think with that, we will say thank you to all of you.
Thank you, everyone, for joining today's conference call. Next, we will publish our Q3 results on October 27, 2025, and we will host the webcast on the same day. Have a nice day, everyone. Thank you.
Thank you.