Welcome to Netel Q1 report for 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO and President, Jeanette Reuterskiöld, and CFO, Fredrik Helenius. Please go ahead.
Good morning, and welcome to our presentation of our first quarter results. My name is Jeanette Reuterskiöld, and I'm President and CEO of Netel. With me, I have, as usual, Fredrik Helenius, our CFO. During today's presentation, I will start by running through the key developments in the first quarter, as well as a recap of our seasonal pattern. I will also give you market update and highlights from our recent business wins in the quarter. Fredrik will then, as usual, go through the finances in more detail before I make a short summary, and then we will open up for your questions. A weak first quarter, but in line with our expectation. Our growing order backlog and continued savings measures lay the foundation for increased profitability during this year.
After a year in 2025 with major writedowns of all projects in two of our companies in Sweden, combined with lower sales, we accelerated several activities to restore our profitability and increase our sales to be more competitive. We initiated large saving programs with full effect for 2026 and long-term saving program for 2027 and beyond. We also discontinued our operations in Finland and the U.K., which have been loss-making operations and naturally required a lot of resources from management. Now, we have full focus in 2026 to deliver on the saving programs and continue to build a healthy order backlog for a successful improvement during the year in sales and results. In our industry, the first quarter is normally the weakest of the year since many projects are in the startup phase.
As communicated already in connection with the year-end report in February, we expected a slower start of the year as the winter implied delayed project starts. This year's long winter, as well as the ongoing transformation of the Telecom market, had a negative impact on sales, earnings, and cash flow for the quarter. However, we remain optimistic about the full year 2026 and expect both growth and margin improvements. One of the reasons for the expected improvement is our ability to grow our order backlog and our successful strategy of securing new customers and expanding into new geographies, both in Norway and in Sweden. We are showing that we are competitive. At the beginning of the year, our order backlog for 2026 amounted to approximately SEK 2 billion.
After the first quarter, the order backlog for projects to be implemented during the remaining nine months of the year amounts to SEK 1.8 billion. This corresponds to an increase during the first three months of approximately SEK 400 million, an important signal for the continued development of the year. The increased order backlog is an indication that we are doing well in the competition and continue to be an attractive supplier in our markets. As I earlier said, we carried out a series of changes to restore profitability last year. One of the measures was to reduce layers of managers and shorten decision-making processes. Two years ago, we organized our operations into three distinct divisions: Power, Infraservices, and Telecom to strengthen focus and increase collaboration within each business area.
This work has laid a solid foundation, and we are now taking the next step to collaborate even more strongly between the divisions and where relevant, submit joint tenders. The aim is to increase our competitiveness, improve the quality of tenders, and ensure better capacity utilization. The agreement with Stångåstaden is a prime example of this, with the Telecom and Power divisions working together. This means we are utilizing our resources more efficiently, which gives us the opportunity to also retain a larger share of the project profits. This year, we will start to merge our Swedish operating companies, which is a key action in the program that will reduce cost by SEK 15 million-SEK 25 million, with full effect from 2027. About 10 Swedish companies will be merged into one operating company, Netel AB, in the autumn.
The merger will shorten decision-making processes, reduce overhead costs, and make us more efficient in such areas as purchasing, tendering, and project management. In addition, it will enable us to establish standardized ways of working, faster exchange of knowledge, and more efficient communication channels. We can also build a broader team spirit and enhance the attractiveness of the branding of Netel. In the fourth quarter last year, we gave a clear description of our seasonal patterns. It is essential to understand our seasonality in order to interpret our performance correctly. Our operations follow clear recurring seasonal patterns related to product life cycles, customer investment plans, and weather conditions. These patterns impact volumes, result, and cash flow. Our first quarter of the year is normally our weakest quarter. This is due in part to many products in the startup phase, which includes preparation work such as design and planning.
In this year, we also had a particularly long winter, which delayed the startup of the projects. When we now get started a little later with production in Q1, it also affects Q2, but we will make up for it in the second half of the year. We expect larger production volumes primarily during the second half of the year. Now, I would like to present some new wins under this quarter from each division to show example on how we deliver on our strategy. The level of activity we have in the Infraservices market is high, and we are participating in more tenders requests now compared with last year. For an example, Infraservices announced a new public customer during the quarter, the city of Stockholm.
The contract with the city of Stockholm is worth SEK 30 million and covers civil engineering work in the former gas works area in the Hjorthagen. We are now involved in transforming old industrial land and port areas into a modern, mixed-use city with housing, offices, services, and culture. Profitability for Infraservices declined in the quarter as a result of the high proportion of project starts and delayed projects. Given the highly competitive nature in the Infraservice market, we've made significant cost adjustments to our operations last year, while also improving our project management and risk control. This means that we will now be better prepared and competitive when volumes increase during this year. In the Swedish energy market, customers were cautious in 2025 within substations, but activity is now increasing, and we see more business opportunities in the near future.
In Norway, demand remains high with new and extended framework agreements, broadening our geographical footprint and strengthen our position in the Norwegian market. Power remains the main driver behind the increase in the order backlog. Overall, the market is strong, but the long project times mean that the volumes are being realized gradually. We announced an agreement with E.ON regarding the construction of a substation in Norrköping worth just over SEK 40 million. We also during the quarter, announced a new framework agreement with the Norwegian energy company, Glitre Nett, which were a new customer for us last year, covering a new geographical area and services in operation and design in the regional networks. The agreement is worth up to NOK 300 million until the end of 2031.
We also signed a new framework agreement with Elvia, covering approximately half of Oslo municipality, which is yet another new geographical area for the Power in Norway. This agreement, together with a renewed framework agreement with Elvia for Sandefjord, south of Oslo, are valued as just over NOK 110 million for a term of four years. In Power, project times for design and construction of substations are very long, often several years. The substation, for example, in Norrköping for E.ON, is scheduled to be completed in the spring of 2028, which means that the final invoicing will be in two years' time. It is important to understand our long product timelines for Power when assessing our future performance. The Telecom market is undergoing a transformation whereby our traditional customers are moving from hardware installation to service and maintenance.
This means that our customers are reducing their investments, which we have noted in all three of our geographic markets, with volumes and our profitability falling in the quarter. However, we can adapt to this decline in volume more easily due to our flexible business model with a high share of subcontracting in our Telecom projects. We are adapting to the transformation by increasing our focus on service and maintenance and by winning new customers. During the quarter, we present a new three-year agreement with GlobalConnect in Norway for service within the customer's B2B segment. We have also presented larger agreements with the Swedish Transport Administration, Trafikverket, a new customer for Telecom. The framework agreements cover the design and construction of Telecom masts and towers for the new European railway communication system.
The agreements are three-year with the possibility of extension until 2030, an estimated value of just over SEK 130 million by 2030. We have also signed a framework agreement with the housing and property company Stångåstaden in Linköping. There we'll implement a comprehensive upgrade of the network infrastructure, commissioning security and electrical measures in all apartments and premises. Important contract as we gain a new major customer and establish ourselves in a new geographical area. As I said earlier, the agreement with Stångåstaden is an example of the collaboration between our divisions by joint tenders. Let's move on to our financial performance in more detail, Fredrik.
Perfect. Good morning, everyone, and thank you, Jeanette. Certainly, we do have several key takeaways in the quarter with the important and recent contract wins with new customers, the ongoing consolidation of our Swedish business and the evidence of our and Netel's ability to adapt in a changing market. Another key takeaway is our order backlog at the end of the first quarter here in 2026. The backlog is reported at approximately SEK 4.2 billion, a backlog above the position at year-end, and with new contracts and margins supporting our progress towards the financial targets of 5%-7%. Our backlog has benefited from our strong contributors within Power and especially in Norway, with the new contracts from Glitre and Elvia.
As just recently communicated, we have also now added important wins within Telecom during the start here in the second quarter, adding light on the necessary volumes to continuously support our process for improved financial performance and margin growth. With the reported backlog, we note that around SEK 1.8 billion to be produced during the rest of 2026, as previously described here by Jeanette. That means that coming from approximately SEK 2 billion at year-end, we have, during these first three months, managed to add approximately SEK 400 million for production during the remaining nine. Our net sales in the quarter amounted to SEK 575 million, and as communicated already in connection with the year-end report, we expected a slower start here of the year as the winter implied delayed project startups and low volume activities during most of the three-month period.
Our net sales are down with 14.9% from last year, with the winter and project phases being the underlying reasons. That's in addition to the weaker NOK and euro with negative effects from FX. The transformation of the telecom market with the operators providing significantly lower rollout volumes and our customers moving from hardware installation to service and maintenance, that also impacts our net sales negatively as expected. March, on the other hand, in the quarter accounted for more than 40% of the sales. While it's needless to say that we were slow in the start, we now look forward to continue to pick up speed throughout the year and in line with the defined and expected seasonality that we have in our operations. We continue to be cautious and thorough on our strategy, being flexible in the market and competition within the Telecom and Infraservices sectors.
Nevertheless, with the SEK 4.2 billion backlog and SEK 1.8 billion referring to 2026 with new additions based on healthy margins in line with our financial target range, we do look forward to an improved performance, especially during the second part here of 2026. As previously stated, our first quarter is normally our weakest, with many projects in the startup phase and focus on the low volume activities of preparation works, design, and planning. In this quarter, we also had a particularly long winter, which delayed the startup of projects and confirmed the expected lower rollout volumes.
With the SEK 575 million in sales, we report an adjusted EBITDA of SEK 10 million and a low but positive margin of 1.7%. The Power operations in Norway continues with a very strong momentum, increasing profitability as a result of running contracts and with the addition of the now all set operations in the southern regions.
We do expect that our seasonal pattern with a stronger H2 will be visible also here in 2026. Closing 2025, we said that we do expect to improve during 2026, but it's likely that H2 in general or the last and fourth quarter in particular will be the strongest cash-generating period for this year and for future years as well. Now, in Q1 here in 2026, we closed with an operating cash flow of SEK -60 million. In general, in line with our seasonal pattern where we need the working capital during the early phases of the projects, and this year affected by consideration of the relatively long winter and delayed project starts with lower volumes driving our cash flow.
The cash flow from operations before our net working capital is SEK -8 million, and the quarterly cash flow of SEK -60 million is mainly due to the working capital need as described of SEK 50 million, relatively evenly split amongst our divisions and countries. Liquidity-wise, we have SEK 277 million in available funds, and we are well in line with our new financing agreements that we finalized during the end of 2025. We did put in a lot of work in our financing processes during 2025, and we are now well prepared to focus on our strategy and improvements over both the short and long term. If we move on to the divisions, Infraservices delivered net sales of SEK 121 million in the quarter with a negative growth of 16%. With the relatively lower volume, the profitability was reported at SEK 1 million or with a 1% EBITDA margin.
The year-on-year decline was in general due to lower sales resulting from a high proportion of the projects in startup phases and the long winter delaying many project starts. We still need to add additional projects and volumes for the yearly production. Our average projects are both relatively small and short in time, and a lot of bids and tenders that we work with now during Q1 and here in Q2 will be both started and finalized during the year. This is a normal process for our Infraservices division. A continuous work with new interesting opportunities in a market characterized by high activity from the client side. Within Power, we reported 9.4% lower sales totaling SEK 229 million in the quarter, with an EBITDA of SEK 4 million and 1.9% as the relevant margin.
The season and slower project starts in combination with fewer substation projects running over the same, or at the same speed, implied that Sweden were trailing last year, and though Norway was just below last year in volume, we note an increased margin in Norway as the momentum in that region provided positive opportunities from the 2025 agreements. We continue to win interesting contracts, and we have successfully confirmed the expansion to the southern regions of Norway, now running as ongoing business. Market activities are still good in Norway, enabling additional growth and continued focus on client and sector diversification. The activity in Sweden has shown positive signs here in Q1 with improvements and additional projects to bid for.
As said previously, the transformation of the Telecom market with operators providing lower rollout volumes, moving from the hardware installation focus to service and maintenance, that impacted our net sales for Telecom and profits negatively in the quarter. The transformation is visible in all three geographical markets. The decline was partly mitigated in Norway with our running frame agreements and ongoing cost-saving actions. Our Telecom division generated SEK 225 million in sales in the quarter, down 19% from last year, and the EBITDA amounted to SEK -2 million. As with our other divisions, the winter did impact the timing of our intended production starts.
Sweden has been focused on rollout volumes within mobile networks, volumes that are now expected to come down during the transition towards service and maintenance, and we are now taking advantage of the underlying and flexible business model that we operate, moving towards new client and sectors. As said, the quarter was impacted by the delays of project starts and lower volumes regarding the rollouts and mobile networks. Rollout volumes within fixed and mobile networks in Sweden and Norway are now significantly lower, and we are moving fast towards other interesting opportunities within the defense and public sectors to name a few. Germany too, were behind last year in the quarter as the early winter in our regions became a long winter with delays in the starting phase.
We continue to run profitable projects in Germany despite the lower volumes from the uncertainties in the Telecom sector and the German economy. With that, I think that we can move on to a few concluding remarks.
Well, thank you, Fredrik, for this presentation. I will now finalize today's presentation with some concluding remarks. After all the actions we made in 2025 to restore profitability, we enter 2026 as a stronger company, although we still have much to do. Our underlying business is strong, and we operate in three attractive market segments that can provide balance if demand fluctuates. We have skilled employees and good long-term customer relationships, which is reflected in our growing order backlog. We still have new attractive contracts with new customers. At the same time, we have already made or are in the process of making significant savings to reduce our cost base. Considering the above, I'm confident in our ability to generate long-term value for our shareholders and other stakeholders. We have a clear plan to improve profitability and are completing the measures we have communicated.
We're maintaining a high pace to win new contracts and implement the savings programs. An important activity is the merger of the Swedish operating companies, which is one of the central measures within the program that will reduce cost by SEK 15 million-SEK 25 million with full effect in 2027 and forward. About 10 Swedish companies will be merged into one operating company in the autumn. The merger will shorten decision-making processes, reduce overhead cost, and make us more efficient in such areas as purchasing, tendering, and product management. In addition, it will enable to establish standardized ways of working faster exchange of knowledge and more efficient communication channels just to secure our risk management. We can also build a broader team spirit and attractive activities to improve the branding of Netel. 2026 will be a transition year from where we came from.
We expect to pick up speed during the second half of the year. We are now stronger and more competitive and will continue to grow and work with our operational excellence to improve further on. With that, we now 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. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time. So, I hand the conference back to the speakers for any written questions and closing comments.
All right. Now, no voiceover questions. Let's see if we have any written ones. One question. We reiterate growth and margin improvements for 2026 from Q1's 1.7% adjusted EBITDA margin. How should we think about the bridge to that improvement? How much is cost saving versus volume mix versus spread project execution? Well, I think that we have been quite clear on the fact that we expect to have a better H2 in comparison to H1. That's also in line with our seasonal pattern. I think further on the additions in the order backlog with the recent contract wins, where we also confirm that we tender for and bid for contracts that support our financial target range of 5%-7% will contribute to our margin improvement here in 2026.
Cost savings have been discussed, and confirmed from us that we had SEK 25 million, referring to 2026, of which SEK 10 million refer to Sweden. Those were finalized during 2025. Now the consolidation of the Swedish operational business, that we will continue to work with during 2026 will have additional effects for the cost savings during 2027. A lot of this will be about our operational improvement, a lot of the actions that we did during 2025, divesting our Finnish operations, the U.K. operations, and doing the necessary adjustments that we had to do for two subsidiaries in Sweden. That itself gives us the foundation that we need in order to have the improvement here further on during 2026. Let's see if we have any other. It's about market credibility. Let's see if we can view these questions. All right.
Share price development suggests a gap between communicated expectations versus delivered results, regarding backlog quality and margin visibility. I think in general, we have added additional information here since the year-end report, shedding light on the seasonal pattern in order to have a better understanding of our underlying business and operations. That's to provide better expectations on our progress here quarter-on-quarter and year-on-year. In terms of the order backlog, I think that we add additional information here saying that we have SEK 4.2 billion in backlog for the total, and adding some information on our progress, basically the order intake during Q1, to aid our understanding of the improvements in the order backlog. In terms of the margin visibility, again, we have confirmed that we are going for and tendering for projects that support our margin target range of 5%-7%.
Another question on guidance and transparency. If we're making changes to our forecasting processes or guiding approach. At this time, I think that we have provided the guidance for the year of 2026. We do expect to see growth. We do expect to have margin improvements for 2026. Yet again, we are very keen on shedding light on the seasonality pattern for Netel in order to have the correct expectations between our quarters throughout the year. We have another question on shareholder value, and liquidity. With the current valuation and limited trading liquidity, what initiatives are in place to strengthen shareholder value? I think that then refers back to liquidity, if I interpret your question correctly. I think that if we look at our position today, obviously, we have a slightly different position today than we did a couple of years ago in the IPO process.
Still, though, we have two analysts covering the company, providing necessary and very important information to the market and to the shareholders. In addition to that, we of course evaluate alternatives to that, considering the position and the value of Netel today, looking at alternatives to provide additional information to the market and to the shareholders. You have several channels that we will be able to provide that kind of information. I think that we will be able to get back on that topic now during the coming months here during 2026. In addition to informing financial data to analysts, we also work with other market participants.
We have engaged, as communicated a couple of, I think, maybe years now, that we work together with ABG as the relevant investment banking firm to support the liquidity in the stock, making sure that we have a relevant order value for the trading in the stock. They are not affecting the trading as such, but they are making sure that there's always liquidity in the stock to improve the value for shareholders looking at Netel stock. A final question from the investor engagement and coverage, I think that I answered that one basically in the response that we obviously are evaluating alternatives. Moving on to another question, the liquidity financial covenant in the annual cycle, when do you see the seasonality making you be closest to it, and when do you start creating headroom again? The liquidity, I'm not sure if I get that question correctly.
I think, yes, we do have a liquidity financial covenant. We confirmed during the earnings call now that we are very well in line with our financial agreements that we have. We do not expect to be close to any covenant for any time soon. Maybe this is a question for you, Jeanette. Looking at strengthening Power market, can we find the resources to scale the demand that we see in the market?
Well, as I said earlier, it is a very strong market. When you see a strong market, there are always a lot of interest to take part of that market. That's one of the reasons for us to build the attractiveness of our brand as well and show that we are a profitable, and a company who invest in the employees further on. If we could, for example, in Norway when we had the possibility last year to grow with customers with 40% and a good margin, that attract employees to come to join our team in our Power company in Norway. We need to improve our results and continue to grow with our customers, but also to be able to scale further on and to grow even faster, if possible, on the Swedish market and in the Norwegian market.
It is to have the business model as we have, not only to be dependent on employees, also work with subcontractors as well as a complement further on. That will always be important for us further on to scale up.
All right. I think that we have answered. Please feel free to write if you have any additional questions. Here's another one: To realize cost savings, do you foresee further substantial non-recurring costs? We will continue to work with the consolidation of the Swedish operational business, working with these restructuring measures. That will incur some additional non-recurring costs, and I think that the level here in Q1 gives, in general, a good approximation of what we will see throughout the year. I think that Q1 will probably be a bit north of what we'll see going forward. But yes, we do see additional costs here during 2026 to finalize the operational consolidation of the Swedish business. Okay. I think that's it. No additional questions.
Thank you all for listening in, and we look forward to see you all for our presentation of the quarter two results in April the 24th. Have a good day, and bye for now.
Thank you.
Thank you.