Good morning, everyone, and welcome to Fasadgruppen's second quarter result presentation. Here in the room, we have our CEO, Martin Jacobsson, our CFO, Casper Tamm, and myself, Magnus Blomberg, Head of Investment Relations. With that being said, I hand over the word to Martin. Go ahead.
Thank you, Magnus, and good morning also from me. First of all, I would like to highlight that we had a tragic accident here during the summer where a colleague actually passed away during the line of duty in one of our subsidiaries. A tragic loss that has affected the entire organization. Our thoughts are, of course, with the deceased family, his friends, and colleagues. We're actively working to minimize the risk of this ever happening again. With that said, I want to dive into today's presentation. Some highlights for the second quarter then. We saw a continued decline in the organic sales, which was mainly then continued affecting from new build. We also saw here in Q2 that the results increased. They adjusted a bit up to 132, up from 81 the same quarter last year.
The margin also increased by roughly 300 basis points to 9.2% in the quarter. We saw rather flat organic development in the order backlog. We'll get back to this later. In England, we saw some delays from something called the Building Safety Regulator. At the same time, we saw an increase in the order backlog for Clearline. We'll get back to this later in the presentation. Looking on the important covenant fixtures, we saw that the net debt to adjusted EBITDA pro forma came in at 3.36, up somewhat compared to Q1. Still a continued focus to take leverage back down to 2.5. We also updated our agreement with our banks here, so we have managed to push the covenant step-down two quarters. We'll get back to that. Looking on the net sales, in total, there was an increase of 10% compared to last year.
It was mainly on the positive side from acquisitions, roughly 18%. Organically, we saw a decrease of roughly 6%. It was mainly Sweden and Norway that stood out on the weak side. Denmark and Finland stood out on the positive side. In general, we saw a continued low activity within new build, as I m entioned, especially in Sweden. Taking a look at our segments, the Total Solutions segment saw a decrease organically by roughly 12%. In total, it was down roughly 9%. Specialist Solutions actually saw a total increase of 7.4%, but a small negative organic drop here by roughly 1%. Clearline sales came in at roughly SEK 162 million, somewhat affected by the BSR, which I mentioned here initially. The BSR is the Building Safety Regulator, which is an authority in England that you could say more or less gives out building permits.
It's quite a new concept from 2022. That authority has had extremely busy times and has affected project starts for Clearline. Looking at the adjusted EBITDA, as I mentioned there initially, we came in at SEK 132 million. Strong development compared to last year. Margin was also up. I'm very glad to see the positive development of the results. Taking a look at the various segments, we saw a margin decrease here for Total Solutions down to 6.6% compared to 8.4% last year, and a total adjusted EBITDA for the quarter of SEK 48 million, roughly. For the Specialist Solutions, we saw an adjusted EBITDA of roughly SEK 51 million. Here we saw the different side where we saw an increase in the margin up to 9.4% compared to 6.4% last year.
Clearline came in on an adjusted EBITDA level of SEK 48 million, roughly, a margin of close to 30%. In the quarter, we had some adjustments of roughly SEK 11 million, which was mainly related to the earnout revisions. On the order backlog side, we saw roughly a flat organic development. It was somewhat down then to 0.8%. We saw a continued healthy demand from housing associations and the public sector. The order backlog came in at an all-time high, SEK 4.3 billion, especially a strong development for Clearline. In the various countries, we saw a strong development in Sweden and actually negative development for the rest of Norway, Denmark, and Finland. In Sweden, which we've had some struggles with during the last couple of quarters, I'm very glad to see that development.
It's a team effort into being able to land all of these orders, which I'm very glad to see. We've also seen some indirect effects of the Swedish tax authority that had a tax reduction incentive program started here in May, which is going through the full year of 2025. When I say indirectly, it's mainly then because it's related to smaller villas, which is not our focus areas, but some smaller competitors could focus more on that and leave more for us, so to speak. We also saw that the order backlog margin increased compared to Q1 2025. That was especially then following the strong contribution from Clearline. Going into our segments, we saw a decrease for Total Solutions. It was down roughly 6.2% organically on the order backlog side. On the Specialist Solutions side, we saw a different development that increased roughly 5.4% organically.
Of course, a strong order backlog for Clearline. Moving on to cash flow, we saw a strong cash flow following a negative Q1. I would say that it's following the seasonal pattern, more or less, where we see usually a ramp up from the start of the year until finalized at the end of the year. We've also seen working capital improvements throughout the company, especially in Sweden. I'm very proud of the work that has been done in Sweden regarding working capital development. Looking at the financial capacity and the net debt, we saw that our average interest rate here in the first six months of 2025 decreased somewhat compared to the same period last year. We still have an interest rate period of one to three months, which is nothing unusual.
On the important covenant, we saw a somewhat uptick from 3.25 in Q1 up to 3.36 here in Q2. As you can see on the bars in the bottom left corner here, the new orange dotted line is the new agreed level, meaning that the covenant level is then pushed two quarters compared to what it was before. I want to stress once more our priorities. The focus for 2025 here is profitability and the leverage until we give the full focus to growth once again. It's a reaffirmation of our priorities. Moving on to some concluding remarks before we open up for questions. We have an all-time high order backlog, but I want to stress once more that there are still issues in the market. I am cautiously optimistic, but the Swedish market is still having some struggles.
Yes, we can see that on the modernization side, it's improving, but on the new build side, it's still very low activity. I want to highlight that once again, we saw some delays from the Building Safety Regulator. There are still delays in the system going forward as well. This is not only for Clearline. It's a systematic problem for the full sector in England, not only on renovation, but also on new build. At the same time, we saw strong demand for Clearline, and the order backlog was clearly up. We had a covenant step-down pushed two quarters, as I mentioned. We are also focusing on profitability improvements and deleveraging, as I've mentioned. To sum it up, we have a lot to be proud of, but much left to prove. I think with that, we open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Max Bacco from SEB. Please go ahead.
Thank you, and good morning, Martin and Casper. Very sad news this morning. I hope you are all right under the circumstances. With that said, a couple of questions from my side. Starting with Clearline and the bottlenecks, the regulatory bottlenecks, you alluded to this yourselves, do you have any indication from your side how long you expect this to remain a bottleneck? Has it been more pronounced during the summer due to vacations and so on? Have you seen anything related to that?
Good morning, Max, and thank you for your kind words. Looking on to the BSR, it was actually on the last of June, the U.K. government sent out an announcement where they are doing a fast lane to improve the activity. That's a net positive for the full sector. I would say that the most dangerous kind of facades are still on the top of the line of the queue. The Clearline projects, which is all renovation, is of course a high priority and in the top of the queue here. We have seen some approvals of project starts. It's been delays in the system, but the government has sent out an announcement where they are pushing this through. This is on a very, I would say, prioritized agenda for the government in the U.K. Things are being done.
I think they mentioned there that they are hiring another 100 people to improve, let's say, the BSR administration. They are clearly focusing on this area. Hence forth, we are positive that this will play out, but it's hard to tell exactly when. You can't expect it to be some kind of floodgates that open. I thi nk you can see that there will be some small improvements, hopefully from the summary when they mentioned this. It's public information on the government's side. You can see that on the last of June, they sent out this announcement.
Okay, understood. Looking at Clearline, we have three quarters now where it has been part of the group, not all of Q4, but some of it. We have seen that the profitability has come down each quarter somewhat. I suspect some seasonality into it, and also impacted by the regulatory bottlenecks. Going ahead, you did some 29%, 30% margin here in the quarter for Clearline. Do you expect the profitability to stabilize at these levels, or what are you seeing in the order backlog? I think you mentioned that the profitability for the group was up in the order backlog here in Q2 sequentially, and I guess that's much driven by Clearline as well.
Yeah, that's a correct statement that it's a strong margin for Clearline's order backlog. Of course, the BSR delays are a factor that is affecting. Since, I mean, if you're planning to start a large project in April and you can't start until August, that's a big difference in our world. I've said it before, we are confident within the margins for Clearline. I'm not worried in that instance, but we're still, let's say, focusing on the margin for Clearline. It is a key focus area, of course, but I'm not worried regarding that they should be deteriorating from these levels, so to speak.
Okay, understood. That was all the questions from my side at the moment. I might come back, but thank you very much.
Thanks, Max.
The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.
Hello and good morning, everyone. I hope you're well, and I would just like to reiterate the message that Max said before me. Really sad to hear. I have a couple of questions that have been answered during the call here, but maybe some... If we begin maybe with the new, or should I say updated covenants, is it possible in any way to say how the discussion is now? I mean, or how firm these are, or do you still have any leeway to push them again if the ever-so-changing world were to change in any sort of way, or how firm would you say that these levels are now compared to previously when you've been able to push them?
Yeah. Good morning, Elvin, and thank you also for your kind words. If you take a look at our, let's put it like, our dialogue with our banks, it's, of course, as I've mentioned historically, a good dialogue. Everything is, you could say, a discussion. As we see it, this should be enough. Of course, we have this continuous dialogue. No one wants to end up at a place where we don't want to be, so to speak. I think with that said, we have very good dialogues still. I'm confident with our banks, and they obviously, with this agreement, also have an understanding for our situation, if you put it like that. Continuous dialogue, and I have strong beliefs that they could assist should we need so.
Okay. Perfect. We talked a little bit about Clearline and the Building Safety Regulator, but is it possible in any way to kind of isolate if there has been any significant impact here in Q2 on both top line and, I guess, earnings? How much of the backlog would you say is "at risk of not being able to execute on" if this situation were not to ease for the rest of the year, at least?
Okay, we can start with the order backlog. I see no risk that that should not be done because it is still very high on the agenda to fix all of these dangerous facades. That's a big, big issue in England. By the way, I can mention that this is still only in England. Now there are talks that this should go to Scotland and Wales next. There's plenty of... They have not even started. That's on a side note. Of course, there has been an effect on both on top line and on the results from these delays. I mean, you could say that if you're not able to start your projects, you have too large overhead at that time, if you understand what I mean.
Since the job will be executed, I'm not worried in that instance, so to speak, but it is a government delay that is affecting us.
Okay, perfect. Just the final question that hasn't been asked yet. Relating to these working capital improvements, primarily in Sweden, can you comment a little bit more on what you have done to improve that compared to previously? Does that change the overall cash flow profile of the company in any meaningful way? I mean, you usually have a more backwards tilted cash flow generation profile, but now it was quite strong here in Q2, which is as it has been some years as well. How should we think about cash flow as well for the rest of the year?
You can put it like this. When we acquire a company, usually cash flow has not been the top of the agenda for the entrepreneurs. If they've been able to pay the salaries and maybe a dividend, they've been quite happy with that. When they enter Fasadgruppen, we want to shift the mindset, and that's not done overnight. What we do is we sit down, have talks around what could be improved. What are the payment terms to suppliers? How does the contract look to the customers? It's a long, long list of what you could improve. You could also learn from the rest of the group. We also compare various companies. How could one company have this kind of cash conversion and the other one have the other cash conversion? It's a long process to improve.
I think there's more to be done here in the future, even though we've come some way now. I think in order to fully reach the full potential, we want to continue this work where we compare, we learn from each other, have the best practices, focus on this as soon as possible before you start a project, before you even calculate on how could we improve on these kind of figures. It's a long process, but I think there's more to be done. Yes, you could say that hopefully you could tilt it into a better cash position in general for the company. We always want to strive for development and enhancement. That's what we are doing, Elvin, and we'll continue to do.
Okay, thank you. I think that was all for me. Thank you so much for taking my question, and I wish you all a nice rest of the summer.
Thank you, Elvin. Same to you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
All right. We have some written questions here for you, Martin. The first one, if you could elaborate a little bit on the covenant step-down and if it has resulted in an additional cost for the group.
Yes. Okay, yeah. Of course, when you reach a new agreement with the banks, that's often connected to some additional costs. Yes, there have been some costs connected to this, but we saw it as necessary costs in this case.
All right. Thank you for that. Could you also please elaborate on the route, the tax authorities' deduction that you talked about a bit earlier?
Absolutely. That's in Sweden, I think as many people know, at least in Sweden, on the 12th of May, they introduced this new tax reduction where I think the labor cost was increased from 30% to 50% kind of tax reduction on labor.
That has affected us, as I mentioned, indirectly positively because that's to, let's say, to private individuals, that's tax reduction to businesses. We are mainly focusing on business-to-business, remember that. As these small competitors that could focus on business-to-consumers or business-to-business, they are then tilting, of course, towards the most profitable. As we see it, this kind of new tax reduction incentive program is then clearly positive for the B2C market. They have then tilted away from our main focus area, B2B, and henceforth leaving also what we've seen in the improvement in the order backlog. There has been some media coverage around this as well. It's a net positive for the whole sector, actually.
Thank you for that. The multiple developments regarding acquisitions in the market, how have they developed in the last, let's say, three years?
If we take it in a longer perspective, I think I mentioned it before. When we started Fasadgruppen, maybe our multiples were around closer to [three times. In the heydays, around 2021, 2022, maybe around five to six times]. We've seen a decrease in the multiples the last couple of years here. Maybe around three to five, something like that. If that was the question, I think so.
Thank you for that. I think we covered it all. We don't have any more written questions here. With that being said, we finalize this call with maybe a few...
No, no more from the telephone conference. No questions there.
No? All right. Okay.
There are no more questions at this time.
No, perfect. Okay. I'd like to thank you for your time and hope to see you again on the next quarterly call here in November. Thank you a lot and have a nice day.