All right. Everyone, we'll start in a minute or two. We're just waiting for everybody to log into the conference call, so please bear with us for a second. Thanks for joining. All right. It's 2:00. Jonas, are you ready?
Yes.
Good. Thanks, everyone, for joining here this afternoon. I know most of you are probably longing for vacations, at least if you're in Scandinavia. Jonas and I will go through the Q2 results that we announced just an hour ago. We'll go through the agenda as it looks on the slide. A super, super quick introduction to Proact for those of you who do not know us. Summary of the quarter, some key developments since we met last, the financials, and then we'll summarize. You will be able to ask questions along the line here, but you may have to raise your hand here in the Teams window or at least unmute yourselves. We try to keep everyone muted along the presentation, but feel free to ask questions as we go along. Remember that you're muted. You need to unmute. Good. This is Proact.
You know us pretty well. Most of you were turning 26 years old this year. We are a specialist in data handling, IT infrastructure for securing and managing data both in a traditional systems business as well as what we call a multi-cloud business where customers are deploying infrastructure in any type of cloud architecture. That could be a private cloud or a Proact cloud or a public cloud with a big international provider. We are a specialist, and we're very focused on securing and managing data. We're turning over about SEK 3.5 million and are just above 1,000 employees across our 37 different offices in the countries that you see on the mapper to the left. We're headquartered in Stockholm, and we are operating in four different regions, and each region has what we call a service delivery hub.
That is an important structure for us to make sure that we are harmonizing and standardizing our way of delivering our services to our customers so that we are securing our quality, improving efficiency, and can continue to develop our offering to our customers. All right. Q2 turned out to be a great quarter for Proact. It is the best second quarter ever in the history of the company. Our revenues landed just below a billion Swedish kronor at SEK 987 million, which is up 22% from last year. EBITDA result a little bit above SEK 56 million, which is 50% up or 53% up from last year, and we improved our EBITDA margin to 5.7%. In particular, we are, of course, very, very happy to see that our cloud and the services businesses are growing at a healthy rate.
Cloud is up 48%, and we have an organic growth of our services business in general of 7%. The main difference here in terms of organic, just to help you compare the numbers, is, of course, the acquisition of PeopleWare in Netherlands and Belgium in October of last year, as well as the divestment of Spain in the second quarter of last year. We also announced in the report that we released earlier today that we have been executing a cost-saving program in the light of the corona pandemic. It'll give us a SEK 40 million savings on a yearly basis Q4. Last but definitely not least, we had a very, very strong cash flow in the quarter as well. Across the board, there are quite a few strong points in the report that we're announcing today.
The main thing that we're a little bit less happy with is the new contracts for managed cloud services, what we call TCV. Total contract value landed at SEK 77 million compared to last year's SEK 96 million. This is a direct effect of the COVID-19 impact where technically we're seeing two consequences of this. One is it's more difficult for us to engage with customers when we cannot meet face-to-face, and selling contracts with a three or even a five-year run rate is typically a long sales cycle and requires a lot of interaction with the customer, and it's more difficult in times of corona. The second piece that also relates to corona is that we see some of our customers being a little bit more reluctant to sign long-term contracts when the uncertainty of COVID is still with us.
That is obviously also then the second, let's say, less positive point in this report that while we have a very strong Q2, we do see uncertainties also ahead of us, and obviously driven largely by macro effects that you all see in your day-to-day business as well. Good results. One reason, but not the only reason, is that we've worked very hard with our improvements in Business Unit West. For those of you that have been following us, know that exactly a year ago we were sitting here and had less of a good quarter. We had challenges in both Netherlands and Germany. In Germany, primarily, we were falling short on sales after having too much focus, frankly, on the services, and we were lacking the systems business to backfill. In Netherlands, we had challenges with system sales, but also some margin pressure on our consulting business.
We took a lot of actions already back in Q2 or Q3 of last year, and we saw some recovery already in the fourth quarter of last year, particularly in Germany, where sales were significantly improving already in the fourth quarter of last year. Obviously, we also did the acquisition. In the first quarter of this year, we took some further actions. We closed down what we called Area North in Germany, which was an investment we made about a year and a half earlier, trying to organically get a presence in the northern part of Germany. We felt that the investments were too high for the return, so we made a decision to close that down. That was one key development here in Q1.
We also see positive contribution from PeopleWare as the integration moves along in Q1, and we saw some good EBITDA improvements already in Q1. We continued some of the actions. We now have new managing directors in both Germany and Netherlands. We have finalized the integration of PeopleWare, and we are now running one single organization and operations in both Netherlands and Belgium, where PeopleWare and Proact are a single team. We see really good revenue growth in the U.S., 10% of which is organic. While we have seen challenges here over the past four quarters, we feel confident that we made the right actions along this time, starting already in Q2 and Q3 of last year.
In Q2 of this year, we see some really good effects of the initiatives, and we're glad to see that's contributing to our results here in the second quarter. More developments. We've launched a couple of new products also this quarter, and we continue to focus on what we call multi-cloud. Our area of specialty, as we mentioned already, is to help our customers around managing data, anything from giving them advice to helping them store, connect to their data, secure and protect their data, and ultimately get the value out of the data that our customers are desiring. In that context, it's more and more important, of course, to help customers with modern infrastructure deployment. Any type of cloud infrastructure is important, and that's what we call multi-cloud. Typically, any customer will have a variety of architectures.
They will run infrastructure and old applications that may be running in their own data centers on legacy technologies. They may have modern data centers that they are managing themselves based on cloud technologies. They may have solutions running in Proact data centers on cloud technologies, and they may be running things on top of a public cloud like Microsoft Azure or Amazon Web Services. Any combination of those is what we call multi-cloud. We are now doing a lot of investments in innovation in terms of making sure that our portfolio can deliver the same value across these different versions of the multi-cloud. We delivered a product we call Service Management for Public Cloud, helping customers to manage infrastructure when it's deployed in the Microsoft Azure cloud.
We've deployed a new service called Wide Area Network as a Service, connecting customers so that the data can flow between data centers, public clouds, office facilities, and make sure that data access is secure and high-performing. The last new product here is what we call Backup as a Service for Enterprises and added and supported to make sure that we can back up any type of data, also cloud data. Last but not least, we've updated our own Proact Hybrid Cloud product to a 2.0 version. Very happy also to see that throughout this first half of the year, we launched and updated a number of our products in our portfolio and also this second quarter. Another very positive news is that we've done some very interesting deals with customers throughout the quarter. I just wanted to highlight a single one here.
Fort Knox is a Swedish software as a service company. They are delivering financial applications to small and medium-sized companies. They're running a very modern and cloud-focused way of delivering their services. They came to Proact here because they needed to develop a more scalable and modern cloud platform, and they needed to make sure that the data was very robust and secure and deployed in a redundant way, meaning that the data is stored safely in multiple physical locations. We're very proud that Fort Knox selected Proact as the partner for this deployment, and we've now landed a solution with them where they are both running cloud-based infrastructure in their own data centers. They're using Proact's managed cloud services for some of their backup and disaster recovery services, and Proact is managing this through our support and service management services.
It's really a very holistic deal from Proact's perspective where all our different products and service lines come into play for a customer of ours that's very forward in their way of deploying technologies. It's a great proof point and example of a multi-cloud deployment where both systems and managed cloud services and public cloud services come into play, and we have a key role here together with Fort Knox to make it work and run it for the future. All right. With that, I jump into the numbers. You've seen most of this already. Again, the revenue grew to SEK 987 million, systems increased by 19%, and services by 28%. Again, we had a very strong growth of EBITDA up 53% to SEK 56.3 million and a total EBITDA rate of 5.7%.
It's worth noting here that we have some one-off-like costs to implement the cost program that I mentioned, an order of magnitude SEK 5 million. They are not reported separately, but they are carried here in the results. Just to highlight that in this 56.3%, we're also carrying the cost of implementing the cost program, which again will give us a saving of about SEK 40 million on a yearly basis. Year-to-date, also pretty good with a growth of 7%. Here we see that systems is a little bit weaker. As you remember, we had a decline in revenue in the first quarter of the year, although we had good control of cost and delivered a decent EBITDA result also in Q1. You see a 24% growth of the results year-to-date.
Putting in a rolling 12 perspective, it looks like this: a 3% growth, more flat in terms of our EBITDA, but strong growth in terms of our services. I'll continue here at a pretty high pace. Again, if you have questions, don't hesitate to raise your hand, and we'll unmute you. We'll also pause, of course, at the end for further questions. If we dig a little bit deeper into the results in Q2 on a per-business unit basis, excuse me, you'll see that Nordics definitely had a very strong quarter. I would say it's stronger than almost exceptionally strong, a growth of 24%, very, very strong systems, and also a good net margin, EBITDA margin here of 8%, and also good growth in terms of services. Overall, a good quarter for Nordics. It's great.
U.K. is the only business unit where we had decline, still managed costs really well. The EBITDA result is relatively flattish. We see that U.K. has been spending a lot of time on redesigning and revamping their sales capacity, and we are expecting positive development of that for the remainder of the year. West, again, good improvements, improved the revenue mix. We have seen a good effect of the improvement measures that we implemented. A good development of both EBITDA and revenue in business unit West. East increased by 9%, slightly lower profitability and some margin pressure here, but decent growth in the quarter. I mentioned it already, the EBITDA result here across the group includes costs for the cost program, about SEK 5 million, a little bit short of SEK 5 million, frankly.
If we look then year-to-date, still see a strong development in the Nordic business unit. U.K. declining as expected, given the previous numbers or the previous slide here. Good growth on cloud, and they retain a good EBITDA margin, so good cost control in the U.K. Beyond that, I think we have roughly the same comments and development in the business unit as in the second quarter. With that, Jonas, I'll hand over to you. We had record cash flow as well, so take it away.
Yes, thank you, Jonas, and good afternoon, everybody. My name is Jonas Persson, and I'm CFO. I will talk about cash flow and the balance sheet, and then Jonas will end this presentation. As Jonas said, we have a really positive situation when it comes to the cash position and cash flow. We have a positive change in working capital after week Q1. As you can see, the cash flow from current operation is SEK 179 million, so that's really good. When we look at the investments in fixed assets, 17 of them are related to Proact Finance. That's our Proact Finance is the leasing company we have set up in-house. That means some investments. We have repayment of leasing liabilities to the IFRS 16 SEK -36 million. We have no change in bank loans and overdraft facilities during this period.
As said in the beginning of the presentation, we have a cash position of SEK 389 million, so that's all-time high. We are really dressed, a good dress for the future. If we move to the next slide. If we look at six months, January until June, we have a small negative change in working capital of SEK -25 million. As always, we always look at rolling 12 months. That's because, I mean, it's really related to how much product we are selling. Over time, it should be a small positive situation from changing working capital. It's plus SEK 72 million right now, rolling 12. That's really good. During the period, we have invested in Proact Finance and SEK 28 million and repayment of leasing liabilities of SEK -70 million. Again, no change in bank loans and overdraft facilities and the end of SEK 389 million.
It's all-time high. Extremely impressed of what our team have done when it comes to cash flow. Thank you. Next one. If we look at the balance sheet, we have a solidity of 20%. As said before, our target is to be somewhere in between 20% and 25%. At least it's in the lower end of that target. That's good. That's positive. It's important for the banks and other investors. As said again, cash position of SEK 389 million and a net debt of SEK 108 million. That's an improvement since the end of December. That's good. We have unutilized overdrafts of SEK 245 million for the daily operation. When it comes to investments or acquisitions, we have unutilized three-year revolving credit facility of SEK 120 million. With that said, I think we are well dressed for the future.
That is, of course, extremely important in days like this. I hand over to you again, Jonas.
Yep. Thank you very much, Jonas. Just to put this in context of our long-term financial goals, we're still a bit short of the 10% growth target. This is now rolling 12 months. EBITDA is 5.2, as we mentioned on the previous slide. Our net debt over EBITDA is well within the target range. Our return of capital employees is 15%, where we have some impact from IFRS 16. As you guys know already, we announced a few months ago that we will hold back on dividend during the uncertainties of the COVID-19 pandemic. Good. We're rushing through this. In summary, a record quarter in terms of sales, the results, and cash flow. Strong growth in services.
We're happy to see that the demand for mission-critical solutions among our customers to manage and secure their data is still there and has been very strong during the second quarter. We mentioned already, we remain careful and uncertain with regards to the future of COVID. That was the main reason, I should say, of the cost savings program to make sure that we are dressed and right-sized for whatever the future has. Obviously, the Q2 here is very strong, and we're very positive about that. Cool. Thank you. We'll open up for questions after this quick run-through of the slides. Any questions?
Please raise your hand.
Yep. There's a couple being raised here, Anna. If you unmute them in some order, just let us know who's unmuted.
Yes. Daniel Thorsson, I think you are unmuted.
Okay. I can try. Do you hear me?
We hear you loud and clear. Welcome. [crosstalk]
Excellent. Okay. First, a really, really good quarter. I think that surprised many of us. It's impressive to see. I have a question regarding the cost savings to start off with. Spending SEK 5 million in the quarter to do annual savings of SEK 40 million per year, effective already in Q4. Can you please elaborate on what that really is and why that has not been addressed before?
It's a range of things. Some of them are long-term work, and some of them are more just adapting to, frankly, to a COVID situation. It's a mix of consolidating and harmonizing our data centers, which will primarily impact the margins and costs of our services going forward. There are staff reductions in some areas across both group and in our local countries, facilities in terms of seeing that we need, frankly, not need as much office space as we've been used to. It's a mix of a range of things. We have been working with costs all since, definitely since I started, but also since a good year back. With Corona, we had an opportunity to just take a step back and look through what can we change more drastically or more focused in a program structure.
Okay. Thanks. Geographically, will the cost savings be tilted to any geography in terms of staff reductions, for example?
No, not really. They are across the board, obviously. Bigger entities will have a bigger number simply because of their size. I think proportionally, it's relatively evenly spread.
Okay. Okay. Another one on the quarter in such year. Have you seen any customer behavior and what they actually demand from you in terms of services, advice, products, whatever that makes you more or less relevant than your competitors that have changed, basically?
No. I think we've seen some changes and what I would call some acceleration of previous trends. I think the changes we've seen is, and they may or may not have long-term impact. If you would force me to make a bet, I think they have a long-term impact. A lot of our customers have had to spend their own IT resource and IT efforts on helping their internal users and running their own IT operations in time of change, meaning people moving from being in the office to working remotely has required a lot of effort from internal IT. Therefore, they've asked Proact for help to manage and run their infrastructure.
That, I think, could be a good long-term trend for us as well, where customers see that, "Hey, Proact can do it better, cheaper, more efficient than internal staff." We've seen, obviously, some of the obvious trends in business segments. It's more difficult to do business with companies in travel, whereas public sector typically have been executing according to the original plans or even accelerating some of their plans. We definitely see some differences between business segments.
There are some new use cases coming up here, where maybe the most obvious one is to make sure that people can work remotely. That impacts and creates some demand for networking, which we mentioned here in terms of one of our new products, security, but also that whole multi-cloud context of running more of your applications, such as Office and the Office 365 and your email solutions up in the cloud. This means also for our customers that they need to rethink how they store and manage data and how they secure through backups and disaster recovery and security in general. Some new use cases are also driving new products and innovation from our side.
Okay. That's a good answer. The final one here before letting someone else ask questions. Do you see that your competitors have performed similarly well as you in this single quarter, or is it just the demand for your services in general has increased for everyone?
No. I think competitors that are playing now typically will be more niched and a little bit more of a specialist than most of our competitors. I think in our niche with IT infrastructure in primarily medium to large enterprises, I would think that our competitors have been doing equally well or relatively good as well. We don't think we've lost market share. If anything, we've gained market share.
Okay. Thanks for that.
If you look at market research, you'll see that the IT industry is impacted very differently depending on which segment or which area of the IT industry. I think we have been in a part of the business which has been less impacted negatively by the COVID-19 virus.
Yeah. Exactly. Just a question on that. Because some of the market companies, they are forecasting a 15%-20% decline in the IT budgets for this year. Where do you see that coming from? If your niche market is actually growing and you do not see that at all and your second quarter is the strongest in the company's history, basically, how does it compare to the market expectations and estimates?
No. I think, like I said, the IT industry is significantly larger than the segment we're playing in. Other areas of the industry will have had a tougher quarter, I'm sure.
Okay.
Thank you. Next, Anna. I think we had a question from Frederik, but I do not know if you got kicked out here, Frederik.
Yeah, I think he.
I'm back again. Can you hear me?[crosstalk]
Yes.
Yeah. We hear you loud and clear.
Nice. Very strong quarter, as you mentioned, and the overall growth was really strong. If you look at the non-cloud service revenue, it continued to be rather weak despite an uptick in the system revenue. Could you explain a bit why does it look like that? Is it any particular markets that were strong affecting that or the Corona situation maybe?
I think all our business lines have been strong in terms of revenue and margins in the quarter. The weakest point that we mentioned was new contracts for cloud business, which I think we explained. I'm not sure exactly which part you're thinking is not as strong as the quarter.
The actual revenue in the quarter, the service revenue, if you look at the part that is not cloud.
Yes. I think the so in service revenue, we include cloud services. We include support services, and we include consulting services. The support service is flat to some minor growth, and that's expected. It's a business that is very important to us, but it goes hand in hand with the overall, well, two things. It goes hand in hand with the overall system business, which has been strong, and that will have a positive impact over the longer term. In general, it's a business that has increased competition from alternative solutions. Support, flattish, slightly up. Consulting, however, started out a little bit weaker in the beginning of the quarter. Obviously, that's one of the first areas that customers would be very careful with or even discontinuing in the beginning of the Corona crisis and when uncertainty was very high.
We started out the quarter with lower revenues on the consulting business. It actually then picked up relatively well towards pretty much the last month of the quarter, driven to a large degree by then the deliveries of the strong system sales. There was a slow start of consulting revenue, but it picked up in the last month of the quarter.
Okay. Very strong Nordics. Could you elaborate a bit about the significant margin increase? You mentioned Fort Knox, for example, but it's a very strong level compared to what you've done before.
Yeah. It's a mix of things. I think there's some really good deals. It's not one single deal. I think we've had quite a few deals in the Nordics with a higher than average deal size. Good product mix, good cost control is the primary drivers here. Like I said in the beginning, I wouldn't say this is going to be a new normal. We perceive it as a little bit of an extraordinary quarter for the Nordics, where a lot of things fell into place. Those of you who've been tracking us for a while know that Nordics is heavy on systems, and systems is a little bit volatile. We get really strong quarters like Q2, but then we had a less good quarter in the first quarter of this year.
On an average, we think this will keep, in the short term, running Nordics, I mean, running at the same levels as we've seen historically over the past year or so.
Okay. Thanks. That's all from me.
Thank you. Any other questions? Daniel, your hand is up again. Lilya as well.
Yeah. Do you hear me now?
We do.
Okay. Good. A question regarding acquisitions. You did a PeopleWare last year, it turns out to look fairly well for us, at least. Do you look for similar acquisitions going forward here with service-tilted revenues on the European continent, or how should we think about that?
No. I think we've been clear. We want to do acquisitions on a regular basis. We have deliberately held off a little bit here in the beginning of the year because of the uncertainty. Now we're ending up here with a quarter that's been very strong and a very strong cash flow as well. Obviously, the situation from that perspective is looking better, which means that we will increase our efforts here going into the second half of the year. We held back a little bit in the second quarter. I think that we believe it'll ramp up here again in the second quarter. Our target remains to do one to two acquisitions per year. That's what we're geared up to do in terms of financing processes, our ability to integrate management capacity.
Okay. You look for service-tilted companies as you do with PeopleWare?
Yeah. We look for two things to simplify. We will look, frankly, for market share. In that context, it is primarily U.K. and Germany, two very big markets and where we are relatively small players or very small players. Market share in Germany and U.K., that could then be companies that have a similar mix to our existing mix. Recurring revenues, and it is key for us. Obviously, we are doing good. Our recurring revenues are increasing here quite strongly in the quarter. That will be a focus for us also in the acquisitions to accelerate that revenue mix towards recurring and contracted revenues. A mix of those two, complementing the portfolio with recurring revenue services and gaining market share. Sometimes we will be able to do both of those in one single acquisition like PeopleWare.
Yeah. Have you rebranded PeopleWare to Proact, or?
We're halfway through. Good question. If they're now Proact, a PeopleWare company or a PeopleWare Proact company, I don't even actually know. We will have rebranded them by the end of this year. The size of their logo is decreasing month by month, and the size of our logo is increasing month by month.
Okay. Good. Thanks.
Lila, your hand is up.
Yes. Can you hear me?
Yep. Loud and clear.
Perfect. First of all, congrats to a strong Q2 report. Happy with that. I have a question regarding the cloud sales, or you have been seeing pretty slow growth within the cloud, the new contracts, both in Q1 and in Q2. You refer as to the clients are hesitant because of the coronavirus. Have you seen any change of that later in the quarter going into Q3? What kind of visibility do you have for the second half of the year on that note?
No. We have pretty good visibility. We're running structured sales processes. These processes, when it comes to contracted cloud services, are typically relatively long. There could be an affair between, in a good case, 6-9 months all the way up to 18 months. We have good visibility of that. We try not to give too much forecast ahead of time. Like I said before, we do see customers hesitate as part of COVID, which means that we believe when COVID eases off a little bit and everybody starts to see some light in the tunnel, things should go back to normal.
Okay. That's all from me. Okay. Thanks.
Thank you.
Currently no more raised hands.
No more raised hands. Okay. Thank you very much for joining. Jonas and I are the only one between you and the beach or between you and the next quarterly debrief. We will let you go. We wish you a great summer, and we'll meet you back in Q3. Let me then end with one final thing. Jonas, first, you've decided to leave the company after 21 years. You've also been managing our relationships with all our analysts and investors. Next time, it'll be somebody else in this chair. Thank you very much, Jonas, for these 21 years. It's been great. Much appreciated from my side. Big thanks and best of luck.
Thank you. Thank you.
Have a great summer, everyone. See you in October.