Thank you very much, hello everybody. Together with me on this call, as I always have with me, also our CFO, Bengt Lejdström, who will walk you through the financial details. To start off, I would really like to say we're very delighted to present a strong report for the second quarter. We've had a good pace. Although we've had a very problematic pandemic for everyone around the world, Sdiptech as a company has been strong through that one. Health is always our first priority, and currently, the effects are fairly low on our side. About 38 people out of 1,300 are unable to work due to the pandemic, so it's a small share. The majority of those personnel are in the U.K. Our net sales are also stable through the pandemic, down about 1.7% organically.
The most important growth metric for us is, of course, our operating profit, EBITDA. There we saw an increase of 31%, about half of which is organic, which is very strong, of course. We're very happy to present that. It's always the same thing as before, but it's been proven a bit more in these tougher times that we have a solid and strong business model. Our focus on infrastructure serves us well. Infrastructure is prioritized in societies around the world, also through difficult periods as the pandemic has been. Our margin increase continues. It's, as always, apart from acquisitions, but it's also an effect that we focus on strong market positions. Continuously, when our business units grow in those positions, we also have the opportunity to increase prices and our profitability. We're very happy to present this quarterly report.
We can move on to slide number two. The agenda for today, a short business overview, and then an update on the market situation related to the coronavirus pandemic. As the third point, we'll walk through the current trading and also present to you the two acquisitions that we have done over the quarter. We can move forward to the next page, number 3. As an overview and introduction to Sdiptech, we are a technology group with focus on infrastructure. As of this quarter, our rolling 12 months, our net sales is at about SEK 1.9 billion. Our profitability margin operating is increasing quarter by quarter. It has increased in this quarter as well, currently at 15.7%. The most important growth metric is, as I said, our profit growth. We have a financial target to grow our operating profit.
Over the last 12 months, we've seen growth at 41%. We're happy to present that. That is a result of a combination that we have a strong organic profit growth within the group, but then that we on a continuous basis add growth through acquisition. That's part of our business model. After the two acquisitions that we have done over the quarter, we are at 33 business units. We started off the quarter with 32 business units, and we've acquired two. One of the companies that we acquired will be integrated into an existing business unit, and I will come back to you with regards to that. The development is strong in Sdiptech, and even though we have a pandemic in 2020, we will stick to our financial growth goals for 2020. We're happy to also confirm that. Moving over to next page, number four.
Our position and offering to the market is to provide technical products and services to critical needs within the infrastructure sector. There we have a strong underlying growth, not only during difficult times, but also over longer term. Infrastructure is a prioritized sector for any modern society. Our business model is to acquire and develop small companies. The third point there is important to us. For us, it's very important to acquire but also develop our companies towards strong market positions. A strong market position, the way we see it, is where you have a unique offering. The competition is weaker, it's lower, and the offering towards the customers are highly valued by our customers. We are also able to price our services and products in a good way. That is core of our overall generic strategy.
The decentralized structure is also important part of our business model, and it has proven to be extra strong through this tough period. The decentralized structure enables us to make business decisions in each business unit. Of course, a situation like a pandemic hits our business units in a very different way. The model is very flexible in that sense. Through strong leadership in each business unit, we have been able to make swift and effective decisions, depending on the current situation at hand in each business unit. Moving forward to next page, number five, an introduction to our three business areas, Water and Energy, Special Infrastructure Solutions, and Property Technical Services. Starting from the left, Water and Energy, their typical customers are, on the water side, water treatment plants. A typical customer is a municipality, but it can also be smaller communities.
On the energy side, a typical customer is energy company. All in all, the customers are strong and stable. The profitability margin currently at 20%, about roughly one third of the operating profit. A solid and stable area. Move over to Special Infrastructure Solutions. There, our customers are typically in the air and climate control area. Customers are typically property owners. For the safety and security area, customers are typically municipalities as well, but typically solutions for public spaces, for instance, the rail industry. In the transportation area, we have done two new acquisitions, and we will get back to those, present those a little bit more. This Special Infrastructure Solutions business area is our fastest-growing at this moment, and that is really due to acquisitions over the past 12 months. We have an active focus on acquisitions in the water and energy area as well.
For the time being, there are not so many, but there will come more in the future. It is a focus area for us. For the special infrastructure solutions area, the profitability development has been very strong due to contributions from recent acquisitions, but also that we have strong market positions and organic growth also creates increased profitability. There we will increase our guiding for the year to 22%-25%. The full year numbers 2020, we increase our guiding to 22%-25%. Currently at 26%, a bit higher than what we expect for the full year. Bengt will come back to you to describe more about the profitability dynamics over the past quarter. The property technical service area, customers there are typically property owners. We provide technical services to our customers there. The business model is slightly different in this area.
It's technical services, so it's more labor-intensive. The other areas more constitutes of product-based business models or product-based in combination with services. In the property technical service area, it's smaller in terms of profits. We have over a couple of years not prioritized this area in terms of acquisitions. We have prioritized in terms of ensuring good and strong profitability. We have continuous focus in this area to ensure profitability, currently at 8% over the last 12 months. Our aim there is to be between 8%-10% in terms of profitability. Moving forward to the next slide, number six, and move forward to the next slide after that one, number seven. I'll walk you through briefly the effects from the corona pandemic. We have carefully monitored all our business units on a weekly basis, starting off in March, to really understand the effects.
First of all, for us, it's really to understand for each business unit what the effects are, and also to support the business units to make the good business decisions. It's also been important for us to understand where on the curve, if you say so, our business units are, but also our group as a whole. We've also decided to disclose one of those KPIs to the market. It's the delivery KPI, and it measures the percentage level of delivery of the orders that was planned for the group. It's close to what we internally use as the budget for each business unit, but also for the group as a whole. Starting off in April, we had 85% in total effect.
The effects were typically of the characteristics that due to the restrictions in the societies, we were unable to actually come out to client sites and do our work. 85% there, but that was not the typical characteristics of that we lost sales. It was more in the sense of having delays. This also means that we have built up a backlog of deliveries that we have started to catch up currently. We started off at 85%. The restrictions started to ease in our markets, so we were at 90% in the beginning of June, and this positive trend continued, and we were at 95% in the beginning of July. Sweden has been a market where restrictions have been slightly different compared to our other markets. Our delivery KPI has been quite stable there, currently at 95%.
In the U.K., restrictions have been a bit stronger or quite substantially stronger. Due to the lockdown, it has been difficult for some of our business units to do their work, but it has gradually improved. Moving from 70% through 80% and currently at 90% of our planned delivery. Germany, Austria, Norway, smaller markets for us, but the effects there currently are insignificant, actually. That's very positive. All in all, 95% currently compared to what we planned for the group. Moving forward to the next page, eight, just to fill in some additional information. We do have decreasing negative effects, a positive trend. The underlying demand is good. We've also seen some increased sales in some areas, but overall solid and stable.
We also did some early actions in the beginning of the year when we saw the signs in China to build inventory, and that has served us well. We have been able to deliver with not so many issues in terms of our supply chain. We've also started off quite early to take actions to reduce costs. We didn't really know the exact effects on the pandemic, so we worked actively to improve cost efficiency, and some of those improvements, they will be maintained. However, we've held back some investments in terms of organizations and in terms of product development. Those investments, they are long-term important to us, so we will start to do those investments over the second half of this year. Some extra profitability due to extra cost efficiency in the quarter, and that overprofitability will slightly go away.
When you look at our numbers for the second quarter, the profitability currently is a bit higher than what you would expected, and the guiding that we present for the business areas, that's what you should aim for in terms of the full year. That's at least what we are aiming for. Further ahead, it's very difficult to predict what the political decisions will be, of course. That's impossible for anyone to do. Due to our focus on infrastructure, we are confident about the long-term outlook. We have begun to catch up on the delayed deliveries. We will do this catch up in the second half of 2020, but the catch up will continue in 2021. That's the profile of what we believe. The backlog is quite long, so it takes time to take care of it.
Some catch up in 2020 and some catch up in 2021. Based on our knowledge of the current situation, we stick to our financial goals, as I said, also for 2020. Moving forward to next page nine, I hand over to Bengt, and also I think we can now move over to page 10 for Bengt to walk through an update of our financial targets.
Yes. Thank you, Jakob. Right. We also issued a press release yesterday evening about our updated financial targets. The targets we have had was set some three years ago in connection with the introduction of our B share on the stock market, and was valid at that time for the stage our group was in. Now we have developed through the years, and we want to then focus on three of our previous financial targets. We think they are the most relevant and also the best to guide us into the future. Two of them are actually not different from what they were from the beginning, and that's the organic earnings growth. It's still 5%-10%. Also the acquired earnings growth. We still say that we should acquire a profit, EBITDA, of SEK 90 million per year.
We never know when those acquisitions come, but as we said, we have done two during the quarter. First for this year, the third target on this slide of the capital structure is slightly updated from previously. Now we stress and focus that it's our financial net debt that should not exceed 2.5. Previously, it was stated that it was our total net debt, and that should be 2.5. As we have developed, as you know, our acquisition model, we put a lot of focus to share risks, both upsides and downsides, with our entrepreneurs and the sellers of our companies. Because of that, in the accounts, we have to reserve for future payments due to these contingent considerations, and that debt is quite substantial for us since we are mainly consisting of newly acquired companies, almost as much as our financial debt.
Those conditional debts are then very much related to the profit levels and also aims at the higher profit level than currently. That has been a lot of misunderstanding or confusion about those numbers. We thought it could be good idea to straighten this out and have a simple and more straight target, which is the financial debt. That is debt from banks, financial institutions, and also perhaps in the future from the financial market, like bonds, et cetera. That's really the updated target. We also previously had some other targets relating, for example, to our return on capital employed, and that's really measured on, you could say the acquisition multiples we use since we include goodwill in our capital employed.
We think it's better and more easier to understand our growth when looking at how much earnings we should acquire than to focus on the capital employed. It's of course, still an important KPI, and we still will disclose that, and we follow that carefully, but not as a financial target. We also had a target for absolute numbers of profit levels that were set some numbers some years ago, but still, we think the growth targets are more important, so we stick to that too, organic and acquired growth. Lastly, we had a sixth target with the dividend policy, and that's actually a dividend policy, perhaps more than a target. We have then said that that's an unchanged policy, but we don't call it that a target.
All in all, three financial targets that we focus very much on, and we intend to deliver on those targets going ahead. Turning to next slide number 11, that's our financial development quarter by quarter on a last 12-month basis. As you can see, we have had a steady pace of increasing both sales and profits. Also as Jakob mentioned this quarter, we have improved the EBITDA margins quite substantially. Also, some of those are perhaps not everlasting effects, but still, as you can see on this slide, we have a very stable and positive trend on a 12-month basis. Our turnover increased in total 16% the last 12 months, and profit levels stand or profits 41%. Our EBITDA star is about SEK 300 million per year. Going to next slide, number 12.
Some KPIs for the quarter and the last 12 months. Net sales for the quarter increased 16%, of which organic was slightly negative, with 1.7%. We have some currency effects. It's negative for us right now because of the British pound mainly, which has decreased almost 10% since end of March, which of course hits our numbers. Also, as you may have noted, it hits our bottom line earnings per share since due to accounting rules, we had to consider the unrealized currency effects on our internal liabilities between our companies, even though in the balance sheet it's netted out, in the results, we have to take a loss at this quarter. It's unrealized, let's see what happens in the future, we take measures of course, to reduce effects as much as possible.
It's hard in the long run to make sure that the currency effect does not hit the results. Hopefully, this will not be so much in the future as it was this quarter. If you look 12 months back, the currency effects have been more or less zero for the group. Some other numbers on this slide. We mentioned the EBITDA growth, 37% in the quarter. Of those 37%, we had an organic profit growth of some 15%. Sorry, EBITDA margin 17%. The profit growth was 15% organic and 31.5% profit growth. Looking at our cash flows, we had very strong cash flow during the quarter. Some of those effects come from possibilities to withhold tax payments, for example, but that has not been utilized so much.
Still, it's an effect from that, but it's also an effect from working with the operating capital and of course, a good profit level in the companies. Our net debt to the banks or the financial net debt, as we will call it's now 1.13, and the total net debt through our rolling 12 EBITDA is 3.04 in the ratio. We can turn to the next slide, number 13. There we go into the business areas, and we start with the water and energy business area. In this business area, all units are comparable versus last year. As Jakob mentioned, we haven't done any acquisitions the last 12 months.
The sales decreased all in all by 12%, also the EBITA decreased with 4%, but it's still, we think, when looking at that we have some U.K. units within this business area, that it's still very good performance. As mentioned already, that some staff have not been able to do their work, but it has eased up then towards the end of the quarter. We saw, however, some increased profits in some units, especially in the power and energy sub-segment, while some companies within the water and sanitation had some reductions in their profits slightly. We stick to our guidance about the margins 17%-20% on the full-year basis for this business area. Turning to next page, number 14, we look at the Special Infrastructure Solutions. As Jakob mentioned, this is a very strong growing business area.
We have done some acquisitions, three in the last 12 months, and it has a strong sales growth, almost 40%. However, in the comparable units, it was slightly negative. Still we have three units that are in the U.K. in this business area, two of which is considered organic. It's still very good performance, we think. Especially within the air and climate control, we had good contributions to the growth. Of course, the acquisitions made the biggest effect on both the sales growth and profit growth. The EBITDA actually increased with 100% compared to last year, and which is very glad to see that 40% was in comparable units. That's also very much depending on the cost efficiency, but also on the underlying market demands in some of the business units.
Here we have perhaps, though, compared to the other business areas, seen the least effect from the COVID-19. Here, as also mentioned, that we increase our guiding, that coming from the 20%-22% on a EBITDA margin, we have increased that to 22%-25% due to the acquisitions and the strong performance. Right. Right. We can turn to also the next slide, number 15, which is business area property technical services. Here as you see in the graph up to the left that it's very stable development throughout the years and quarters. However, in the quarter we have increased the profits somewhat, some 15%, even though sales decreased. That increased the profitability and also increase in the units that have a bit higher margins in their business model.
For example, good order intake in our company working with shell completion for commercial and public properties, for example, have been very stable demand. Also some of the elevator business have shown good numbers during the quarter. We actually had a profit margin of 10% in quarter two, which is higher than the last 12 months where it is 8.3%. We are guiding in the 8%-10% for this business area, and as you can see also in the graph, it is very stable, that profit margin. That was from the business areas, perhaps Jakob will take on from next slide 16 with the acquisitions.
Yes, thank you. Page number 16, summary of our acquisitions. The graph shows the historical development over time. The status of this for 2020 is we've concluded two acquisitions so far. We haven't been waiting with regards to the corona pandemic, we have not been waiting for a different market state. We have a dedicated team working with acquisitions, and they have still been 100% focused on this work. We have continued our systematic work to identify interesting and profitable companies within the infrastructure sector. In that sense, our acquisitions work continues as normal regardless of the market state. We're happy to present two acquisitions, Hilltip and Stockholm Radio. I will present to them shortly to you. Also an important activity for us, the directed share issue that we concluded in June, where we raised approximately SEK 360 million.
For us, the reason why we did this was on one hand, of course, to broaden our shareholder base. Another aspect was equally important to us. Our financial goals are calibrated, as Bengt said, and our growth pace in terms of acquisitions, the target there is calibrated with our goal for financial net debt. In periods we have a higher acquisition pace, which in turn brings up the net debt temporarily. That has to some extent been limiting our work. This issue and capital raise gives us more flexibility to do the acquisitions when the opportunities actually arise. This was an important activity for us in terms of growth. Moving over to the next page, number 17. Hilltip, we concluded this acquisition in the quarter, and Hilltip is a leading supplier of road maintenance products.
The picture there really illustrates in a good way what type of products. It's typically snowplows, but salt spreaders as well. Hilltip is one of Europe's leading manufacturers. I've been talking previously about strong market positions and so on, Hilltip's position is definitely strong. They are profitable, about SEK 2.5 million of operating income pre-tax, 25% operating margin. The position is directed towards smaller vehicles, as you can see in the picture there. The need for road maintenance changes over time, and the need to take care of smaller roads, such as bicycle roads, for instance, is changing. The requirements there are increasing for pedestrians as well. The smaller vehicles are growing compared to the traditional road maintenance of the larger highways and so on. The position is towards smaller vehicles. The products, they are advanced.
The hardware is very good and durable. There's also important software that comes together with the hardware to steer and control the amount of spreaders. For instance, the driver uses a software monitor to control how much salt and spreaders to apply in each single moment. The requirements from the customers, which is typically municipalities, are strong in terms of the quality of the salting, for instance. It's important for the drivers to really present that they have done their job in a good way. The software also tracks and logs the GPS position and in which roads, at what time, and to what amounts of spreader that has been applied. It's a complete system of hardware and software that is highly competitive. Moving forward to the next page, Stockholm Radio AB. They offer radio coverage for the coastal radio.
Any of you that have a boat of your own perhaps, or you have had, the signal to get in touch with Stockholm Radio is Stockholm Radio, Stockholm Radio. We are very happy and proud to having the opportunity to acquire this company. The company is quite small. It generates SEK 1.7 million, and what we have done here is we have actually acquired the contract for the Stockholm Radio contracts, for the customer contracts, and also the permits from the authorities. We will combine these contracts with our existing company, which is called STORADIO, and that is an acronym for Stockholm Radio. Our existing company provides radio communication for commercial airlines. Our existing companies, they're also the single supplier for this part of the hemisphere.
We have an operations control center there, and we will coordinate also the coastal radio together with the air radio in the same operations control center.The name of the companies, they are similar, and that is because they have the same origin. We are happy to bring them back together again. Normally we do not integrate companies when we do acquisitions, but in this case, it made sense to integrate the contracts into the same operating control center, and it's, in that sense, highly value-adding. Okay. Two acquisitions completed in this quarter. We continue our acquisition work in a systematic way with our in-house team also for the future. Moving over to the final page. We don't need to repeat the information there, but we could leave that as the final page, and also open up for questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Fredrik Nilsson from Redeye. Please go ahead.
Hello. Fredrik Nilsson from Redeye here. One question regarding the delivery rate. Despite only being able to deliver about 85%-90% of the planned orders, you only lost 2% in organic revenue. How is that dynamic working?
Okay. The planned work corresponds to our budget for 2020, and of course we continuously work to increase sales. The budget is higher than the previous year. When we are at 85% of planned deliveries, 85% of our budget, but the budget is higher the previous year. The organic growth compares to the previous year. That's how it works. That's the dynamics.
Okay. Regarding property technical services, you grew almost by 10%. Was that mainly related to the shell completion, or did you catch up on some elevator services as well?
Thanks.
Yes, the shell completion business, the company called Castella, has improved our business compared to last year. That's one of the main contributors. We also had some improvements in one or two of the elevator businesses as well.
Okay. Very strong margin in SIS. Are there any businesses seeing a positive effect from the corona situation?
No. While you could see, for example, that the demand for secure communication increased during the pandemic because more people are working from home, and so many companies set up rules that their video conferences or phone conference must be over a secured line. That, of course, benefits our business. Apart from that, it's no real big effects on the demand side.
Okay. The increased guidance in SIS, is that mainly a result of the strong first half of 2020, or do you see a sustainable improvement in the segment?
Well, because of the acquisitions made within the business area of Special Infrastructure Solutions, we acquired companies with very good profit margins. Of course, that is to be sustainable over time. As we said, we had some extra boost in the margins this quarter because of cost efficiency.
Okay. As you mentioned, you made different cost cuts, some sustainable, some unsustainable. Could you give us some approximation about the mix, how much is sustainable and how much is not?
No, I'm sorry. We don't have that figure.
I think a good way there, Fredrik, is to look at our guidance for each business area. That's perhaps the most effective way for everyone to understand the end result over the year.
Okay. Thanks. That's all for me.
The next question comes from the line of Jon Hyltner from Enter Fonder. Please go ahead.
Good morning. I'd like to start off with some questions on the margins. We start with the water and energy segment. Here, I understand that all units are comparable, so no new acquisitions from Q2 last year. Sales were down a bit, but even excluding this, the received grants, the margin drop was fairly small to 18% from 19.3%, if I read it right here. How come the leverage on the downside isn't bigger? Have you really put the brakes on all costs, or have you done anything else, raised prices or something? You could just explain a little bit on the water energy side.
Well, we could say that, for example, that we have a few units which has had very good performance in the business area, which also have a good profit margin historically. Even though perhaps the profits have decreased with 4% overall in the business area, some of the high-margin business has been performing quite well. Of course, that is supporting the margins within the total business area. For example, our company working with water treatment products have been selling disinfectants during the spring and have a good boost from that. Yes, I would say it's mainly because of the high profit margin. These units that have contributed more in relative terms than the ones that have a bit lower margins.
Okay. These high-margin companies in the group, in the segment, have they delivered in line with what they had before? Steady margin there, it's mainly just the mix of the high margin.
Yeah
companies growing faster?
Yeah. Right.
Okay. More or less the same question for special infrastructure. Even here, it's pretty remarkably increased in margin, but here you had some new units boosting it or improving it. Underlying, how was the trend here?
Yeah, I could say similarly as for water and energy, that high-margin businesses have continued to be high margin and even increasing a little bit. Here you also have the absolute profit levels, an increase of 40% than for comparable units. Actually, I would say across the whole business area, we have very good performance this quarter.
How much have you pushed on the brakes on all types of costs? You mentioned it in the report that you will be less restrictive on forward, like R&Ds, et cetera, expansionary costs. How much of this had an impact in the quarter, if it's possible to say something there?
We're consisting of 33 smaller business units. Of course, for them, if they postpone the hiring of a new salesperson, for example, that is, of course, a boost in margins in the short term. Eventually, we have to employ that additional salesperson in order to be able to fulfill the goals. It's more on that smaller level, if you say so. R&D, we don't have much actually, because most of development is related to customer projects, customer demands. We don't have very high budgets for that. Of course, some cost as well, especially external costs then related to product development could be a little bit postponed. Yeah, as Jakob was mentioning, it's more our guidance that we can use as a reference for what we believe is going forward, the profit margins.
On your cash flow, which also was very strong in the quarter, big working capital release. Did you really emphasize to your subsidiaries that they should really focus on cash in the quarter, and maybe some of this will reverse going forward?
Well, yeah, will it reverse? I don't know. You could say that perhaps at end of March, you had some customers because of the insecurity was perhaps bigger in the society towards end of March than compared to now, at least from the financial view, which meant perhaps that some customers didn't pay towards end of March. They have now paid. The decrease of operating receivables have affected this positively. While operating liabilities have also increased, and that consists, for example, then of these tax payments that you could postpone a bit, at least here in Sweden, but that's not all of it. Some of that will be, of course, then reduced in the coming quarters for the rest of the year. I guess it's very hard to be on this very high cash conversion levels forever.
Yeah
You could say you expect a reduction on that in the coming quarters.
To more around a normal level that you've been at.
Yeah. Exactly.
Okay. Just finally on this financial negative unrealized valuation effect or what it was. It's non-cash now. If everything stays the same, will this be a cash cost eventually, or could you just say something more about that, please?
It's more that we have, since we are acquiring companies, for example, in the U.K., we make internal loans between the different holding companies, and even though they are netted out in the consolidation, eliminated in the balance sheet, the effects from the Swedish krona perspective have to be booked, whether up or down, and now it has been hit on the downside and because of the British pound. Of course, if the currency would stay at this level, they will eventually be realized sooner or later.
If it's an internal loan, I mean, if it's an internal loan that's netted out, the higher cost on one end will be offset by a lower cost in the other end. How could it end up as cash negative?
The borrower in U.K., our internal company in U.K., they don't have a currency effect because they are borrowing in GBP from Sweden, and they are then acquiring then a U.K. company in GBP. They have a zero effect on their side, but the Swedish parent has a negative effect on the claim, so to say, on the U.K. holding company. This is a bit strange, but anyway.
You borrow in effect to acquire something in GBP.
Partly, yes. We also have pound, external loans in GBP, but not as much as our assets and internal loans in GBP. That we will, of course, look into if we could change that a little bit to offset more of these effects.
When we take, for example, dividends from our holding companies, this will be then realized when we do that.
All right. Okay. Thank you.
As there are no further questions, I'll hand it back to the speakers.
Okay. Thank you very much for listening. We look forward to take another call with you in quarter to come. Okay. Thank you, everybody.