Good morning, and welcome to Sectra's Six-Month Report Presentation with CEO Torbjörn Kronander and CFO Jessica Holmquist. My name is Helena Pettersson, Investor Relations Officer, and I will be the moderator of the Q&A session later. The chat function is open from start, and you are welcome to write questions during management's presentation. With that, I hand over to you, Torbjörn.
All right. Welcome to our half year or six-month interim report. We will start with interim highlights. We'll go into financial development presented by Jessica, our CFO. Then I will briefly tell you a little about our way forward. Then we'll have the Q&A session. Note that, as Helena said, the chat function is open all the time. Sectra's main business line is Imaging IT Solutions, handling image management or handling images in healthcare. We started doing radiology, but we have extended that into pathology and other ologies as well. Image management is a very large portion of what is needed or at the data usage in hospitals. Imaging IT Solutions is our largest business area between 85% and 90% of the company.
We have IT security solutions, mainly encryption for communication purposes and some monitoring of critical infrastructure. We have our growth opportunities, little greenhouse. We have medical education, which is kind of It started by removing the cadavers or the dissections by medical students, but we now extended that and we have had very large good progress in growing that, though it comes from a small number from the start. Orthopedics IT, developing specialized tool for the largest customers of radiology, which is orthopedics. We do research in inside Sectra Communications. We have also IT security for critical infrastructure, and we have in imaging IT, digital pathology, and integrated diagnostics.
We've added in the last quarterly report we reported, we added now Genomics IT, a rapidly growing, more or less extension of digital pathology, which is called molecular pathology. Future highlights. We have all-time high contracted order bookings. It's a combination of very large systems. Consolidation of healthcare is ongoing, and we see larger and larger customers. Of course, that means also fewer contracts, but if you win them, they are very often very large. It can be hundreds of hospitals in one deal. We have longer term contracts, which means the order intake becomes very large, though spread out over a long time. We have made two substantial Sectra One contracts during the period. Now, we want to point out again, we have significant quarter variations due to very large individual orders.
If we do license installations, as we still do in some cases, we might have large revenue change between quarters also because when these are delivered, it makes a big difference when these large contracts are so substantial in our figures. We are transforming from a license-based company to a software-as-a-service company. This we have discussed for several years now. We are in the middle of that. We see a rapidly increasing wish from customers to buy a service instead of a pro-product with an upfront license sales. That is we have good progress in everything, but we have a very interesting recurring revenue increase, which of course, in a software service becomes the major parameter you look at on. This is a six-month compared to six-month previous year.
The financial targets for the group, which are from the left here, a hygiene factor of equity to assets ratio. Many customers say today that the PACS, the imaging management system that we deliver is the most critical IT systems of the overall systems in a hospital. You don't buy these from three guys in a garage. You need a trustworthy company that you trust, and that is long term. Customers also want financial stability. Our equity assets ratio should be above 30%. It's currently at 52%. When this is fulfilled, the priority number two, also in our view, a hygiene factor, is profitability. That's more or less a check that we do have the business, and we have a target of 50%. Some people say that's too low. We think it's okay.
If we use what comes over that, or we could use that for growth of profits, which is the third priority product goal, but the most important. Long-term EBIT per share growth over the five-year period should be above 50%, and we are well above that at 84% now. We do invest, but we could have taken out profitability in future growth instead. In Sectra Communications, our encryption division, we have had seen growing demands, larger, more prospects, not the least driven by the Ukraine security situation, but also from a general trend in society that cybercrime is becoming a very big problem for society, and that means you need more cybersecurity. We have a lot of procurement and deliveries in focus right now. We are working on component shortages.
We see a light at the end of the tunnel with that. We have a new President, Magnus Skogberg, who joined us in June but became the President of Sectra Communications in August 2022. The impact of the Ukraine crisis, we see increase in demand for cybersecurity overall. We see especially Secure Communications encryption needs. It's also an interesting thing that the critical infrastructure of society has become very highlighted by the crisis, and we see an increasing understanding of the importance of critical infrastructure and how it's important to protect that also for cyber. As Sweden has now applied to become a member of NATO, it's, it will increase our market because we're already approved for usage in both EU and NATO with our most of our products.
That means that when we have that larger market, we can sell into it much more easily. Business Innovation, our greenhouse, we see increase in recurring revenues. We have orthopedics, and we have increasing synergies with radiology. Orthopedics is the largest individual customer group of radiologists, and we have by far the best tools for orthopedics and musculoskeletal disease functionality of all our competitors. We see increasing synergies with radiology there. Medical education, we have started a new web portal that has led to a dramatic increased usage from our users all over the world. We also have the genomics product that we just started. When we did a press release of that, we saw large clinical interest. Genomics is a problem in healthcare today.
New generation sequencing or becoming something you do in all patients in cancer treatment or cancer diagnosis. Of course, that needs to become un-industrialized, and that was what we see today happening, though we are far away from revenues in that sector yet, the interest is promising. Imaging IT Solutions, our biggest area, we see a growing customer base all over the world, but especially in the United States. We have transition into software as a service and cloud deliveries, and we have a cloud recurring revenue. Our measure of how much recurring revenue we sell as a cloud service increased by 30%. We are more and more selling what we call Sectra One that compared to Microsoft Office in normal Office applications.
We can have all of these different Word and Excel, et cetera, one single contract. We are going there as well. We are selling Sectra One subscriptions. Then you can use all our products within that area. There is a large increasing interest in that from all over the world. We are now adding genomics. You can also do in the future genomics analysis and diagnosis in the Sectra One framework. We just came back from our largest exhibition, that is Radiological Society of North America. That is the week after Thanksgiving every year. We had a very good booth. We had an extremely busy show. Our number of booth visits was increased by 1/3. Nothing short of success on that one. You see a picture of our staff of that exhibition on the picture.
We were also there named a Cybersecurity Transparent Leader by Censinet and KLAS, two independent organizations on Sectra. This shows synergies, increasing synergies between our cybersecurity department or area and medical. This is becoming a major issue for healthcare IT today. Healthcare is one of the most vulnerable industrial areas of all society for cybercrime, and CIOs all over the world are increasingly concerned about it. There we have good recognition between the two parts of Sectra, major parts. I'll leave the word to Jessica, who will tell you the financial development of the company.
Thank you and good morning. I will start this part of the presentation by doing a quick recap on the changes to our financial reporting that we are having this year and triggered of course, by the transition into selling software as a service. With the change in business model towards more and more service delivery over time, we will gradually see an increase in the share of revenues that are recognized over time. Therefore, in Q4, we communicated that we introduce new reporting measures this year.
The changes mean that during a transition period of two years, we will provide more detail on order intake than what we have done previously, and then after two years, we will stop reporting order intake as it will become less important for understanding our business going forward. Instead, we will increase the focus on recurring revenue, and as part of that, we introduced an alternative performance measure called cloud recurring revenue, telling us what share of the recurring revenue that comes from our cloud contracts. Contracted order bookings are at SEK 2.9 billion for the first half of this fiscal year, and guaranteed order intake is just about SEK 1.3 billion. The inflow orders has continued to be strong during the second quarter.
In addition to the multi-year contracts secured during Q1, several smaller and mid-sized orders or contracts have been signed, such as Sectra One for Boston Medical Center and Sectra One Cloud for University of Rochester, to mention just a couple. In Secure Communications, the Dutch Ministry of Defence placed an order for expanded use of Tiger/S. Looking at net sales and recurring revenue. Net sales for the first six months increased by 27% to SEK 1,046 million. This is a result of a growing customer base and also increased sales on existing customers. We also do have a strong currency impact, a strong currency tailwind, with substantial impact on our sales.
Adjusting for currency impact, sales, net sales grew by 16%. Recurring revenue continues to grow, up 19% versus the comparable period, representing around 60% of total revenues. Looking at cloud recurring revenue, we also see a positive trend with the 30% growth up to SEK 110 million for the first six months of the year. Looking at the second quarter isolated, sales increased by 34% to SEK 562 million. We grew in all business segments. Majority of growth comes from Imaging IT, up 27%.
In Secure Communications, top line increased by 20% to SEK 93 million. We see that the market situation is gradually normalizing, although with certain challenges in terms of an increased demand in combination with the strained labor market and shortage of components. We also have growth in Business Innovation, +12%, and a positive trend on recurring revenue. We grew in five out of six geographic markets where we are present. In the sixth, we're in line with previous year. The pattern from previous reporting periods remain. We have the highest growth in the U.S., the U.K., and the Swedish markets.
In what we call rest of Europe and rest of world, we increased, we had the highest growth in Denmark, Portugal, and Australia. Moving on to operating profit. Operating profit for the first six months of the year amounted to SEK 172 million, which is in line with last year, but at a somewhat lower operating margin of 16.4%. We continue to invest in delivery capacity and to secure execution of the large customer contracts recently won, and also, of course, to support further growth. There have also been much more activities around the world in terms of events and user group meetings and internal trainings and, of course, a need to meet with customers again after the pandemic, which has impacted the overall cost level. Operating profit by business segment.
Imaging IT has year-to-date generated SEK 191 million at the margin of 20%. A solid start or a solid first half of the year, with earnings impacted by the strengthening of the organization as well as higher costs for marketing and travel versus the comparable period. Secure Communications has a negative operating profit year-to-date, but reached break-even in the second quarter, which is a step in the right direction and focus on deliveries, marketing and sales is expected to improve earnings over time. Cash flow from operations are negative year-to-date by SEK 25 million, mainly as a result of settling of current liabilities during Q1. Cash flow from operations in the second quarter was positive at SEK 39 million.
The overall cash position remains strong with cash and cash equivalents of SEK 544 million at the end of October. With that, over to you, Torbjörn.
Right. Thank you. I'd like to reiterate our philosophy for shareholders. We think that with a good position in growing markets, you have to select your market. You start there, and then you go very much together for happy customers. You cannot have happy customers unless you have happy employees. If you have some perseverance, a reasonable cost control, shareholders will be happy. I think we approved that over the last years or all of Sectra's history, actually, and that is the general way we handle our business. In cybersecurity going forward, we see that, as said before, demand for cybersecurity is increasing. Society and defense communications must function and must be secure.
We have built a very sensitive society, and the demand for cybersecurity will continue to increase, both with increasing tensions in society, but also after a while, will make society more and more vulnerable to IT attacks. The crisis in Europe drives demand. We see a clear increase in demand on that one. We protect society both against criminals, mafia. There's cyber mafia out there attacking not the least healthcare, but also against national actors and terrorism who can attack very critical functions in society by internet, which is of course, very, very dangerous. In medical markets, we see the demographic situation means that society must address primarily the age related diseases. We have a demographic situation in most of the world. That means we will get more aging people and less people to provide healthcare for them.
In order to handle that cost explosion in healthcare, society must address the age-related diseases, which is neurodegenerative disease, cardiovascular disease, cancer, musculoskeletal disease, and vision and hearing. That is where we really are focusing our general capabilities. We of course, do medical imaging for all areas of healthcare as well. We have added Genomics IT, which, in our at least first version of it, will address solid tumors and sequencing of cancer for cancer diagnosis. Compared to competition in medical, you see some of the most important comparisons of the years. Many of those have acquired and been acquired, and this is a very disturbing situation for customers. You buy one system and then that company is acquired, and you end up with something completely different. Now, Sectra has been doing the same business.
We have never sunset the customer, we have no forklift upgrades. If you were our customer, like Visby Hospital, which is first hospital we ever did in 1994, they're still our customer. We are much more long-term than our comparison, which is increasingly appreciated by the market. We have also, as we said before, increasing recurring revenue. We have a large interest in pay per usage. Liquidity of healthcare is reduced after the COVID crisis, not the least in the U.S., and people like to pay for usage instead of having a large upfront investment. Sectra One will clearly dominate future sales in medical IT. We anticipated a strong growth in cloud deliveries, but it's definitely even more than we anticipated. Now we see almost all businesses, all these were discussing cloud business.
The transition will mean that upfront revenue and profits will look smaller despite really large growth in real usage. That is because the upfront license is not anymore there. It's spread out over many years going forward. Long term, the financial effects will be very strongly positive because customers continue to pay the same amount also after the normal amortization period is over. Sectra is well-positioned in this market analysis. Profit growth, as I said, is easier in growing markets, and ideally it's a market forced to grow by external factors. Both cybersecurity and healthcare are such markets. Healthcare must address the disease of the elderly, or it will be really troublesome to keep the welfare states we've gotten used to.
In cybersecurity, because of the increasing complexity and increasing attack vectors into computerized societies, these markets have to invest. Might be a low tide or a high tide in the general economy. Investment in these two markets has to go on anyways. We also have added Genomics IT for clinical production. Genomics IT or genomic sequences of solid tumors have been going on for a long time, but it's been done with research tools, and it's now becoming mainstream business. We, many hospitals do it more or less for all cancer patients. That means it becomes in-industry production, and efficiency of the tools become paramount. That's exactly our soft spot. We are very good on taking medical practice into production, so-called industrialization of healthcare, in a very positive way.
Industrialization means you do things very efficiently but also with the predictably quality of care. This is what we add. The predicted market CAGR of genomics as a large is 90% over the foreseeable future. Repeating our upcoming financial events, we have a capital market day, which is in-person event in Stockholm. We really invite you to come there. We will go much more in-depth than we do in this, both in our old areas and also the new areas. Then we have a nine-month report in March 10, and we have a year-end report on June 2nd, and we have our annual general meeting September 7th, 2023. Remember, your feedback to these presentations is important. If you have any, we do this for you, not for us.
If you think we can do it better or it can be clearer, please give us feedback, and we modify the presentations if we can along your wishes. We leave it over to questions. If you follow online, please use these chat functions. We have received a few emails already or chats already, and we will, Helena will read these now, and we can try to respond to them. Helena.
Yes. The first questions come from Kristofer Liljeberg at Carnegie. Would it be possible to give a figure for how large portion of the order intake year to date is for SaaS versus traditional license model? Has the proportion changed in the last 12 months?
We don't publish out the portion of the order intake. We of course tell now the proportion of the revenues, but not the order. The order intake is very often mixed. A typical large installation of a software service customer is both services, which always come up front, but also the long-term contracts. We don't publish that. I can be very clear about it has increased a lot. We don't break it down on that way right now.
A follow-up question on that from Kristofer is, are there any large SaaS contracts that will trigger a step change in recurring revenue, or will it continue to gradually increase?
Some of our contracts and some of the discussions we're doing are very large. Of course is if you lose them, you see nothing, but if you win them, you see something. As they are so large, mainly because consolidation in healthcare contracts are much bigger now. It might be hundreds of, at least tens of hospital ones in one contract. We will definitely see increases stepwise, though as also these are spread out over time, they will not be enormous. Any such change is important.
Okay. Thank you. I know Kristofer has more questions, but I will take a few from online first. The first one is, could you please comment on customer behavior in the U.S. in Imaging IT, notably how many customers are you engaging with currently, and how does that compare to previous quarters?
I don't really understand that question, but I'll try to give my interpretation. We have about a couple of 100 customers in the U.S. They are, as I said before, centralized. The behavior is more or less the same, but we see a liquidity problem in U.S. healthcare we have not heard before. There's a huge cost pressure on U.S. healthcare right now. That is more pronounced, which has also led to the customers like the idea of paying as you go instead of paying up front. That is the main difference in customer behavior we've seen over the last year.
The second question from online, could you comment on your win rate in competitive bids?
It's difficult. It varies very much on different markets. Some deals we do not want to win. Of course, we lose those, so it's very difficult to say the win rates. It's also different deals. Some are for enterprise imaging. That means people want or customers want all the imaging handled in a hospital. In those, we very often win because we are still the only vendor who can do pathology, radiology, and all those different image types in one single system. If it's a oneology single, like pathology alone or radiology alone, it's more of a equal race, then we sometimes lose, and we sometimes win, as normal in all businesses.
Next question. Do you have significant go live or ramp up in pay-per-usage contracts incoming?
As I said, the interest is increasing. There's a much higher percentage of customers, and the majority, by far the majority of big deals we're discussing now are recurring revenue deals.
I have one more question from Kristofer Liljeberg at Carnegie. Can you please comment if the high non-recurring revenue for Imaging IT came from a specific large contract?
There has been quite a few license deals sold before we saw that big change that has been delivered over the quarter.
Right now, there is only one questions left online, and that is, could you help us understand better your cardiology solution and how it is positioned in the market versus competition?
We see cardiology as an extension of the general imaging system we do. Cardiology, one of the areas where we also use partners, so we have a fully factual system, but we have subcontractors that do part of the very advanced functions you need for cardiology. We are increasing those ourselves, we still are mainly the advanced functions are delivered by partnering with other companies.
Okay, thank you. We don't have any more questions for today.
Right. Thank you very much for your attendance and looking forward to see as many of you as possible on our Capital Market Day in January. Goodbye, and merry Christmas to you all.