Ladies and gentlemen, welcome to the Sectra Q2 2019-2020. Today, I'm pleased to present CEO Torbjörn Kronander. For the first part of this call, all participants will be in a listen-only mode, and afterwards, there will be a question-and-answer session. Torbjörn, please begin.
All right. Good morning, everyone. Welcome to Sectra's Q2 report for 2020, and we go on with the next slide: highlights and trends. The financial targets for the group. Next slide. We have stability under control despite getting a redemption program here equivalent to dividends, so first, the highest priority target is in place. Second target is profitability. We are just above our threshold of 15% despite heavy investments in the first two quarters, as we have said in the before, and as for growth, EBITDA share should grow by 50% over a five-year period. We are right now below that target at 37.3%. Next slide, so we can ask, why is that growth target not fulfilled? And the main reason is that we had a very large order intake in the last fiscal year, the end of last fiscal year, and also in new regions.
Among others, we got a large order for new software in Australia. We had to build resources in order to be able to deliver that. That is an investment, and we cannot activate all that cost, so a lot ends up on the bottom line. This will gradually, as we have said now for several quarters, we have said that this would be the case for Q1 and Q2 this year. It should come to us no surprise. If we gradually move into both increased revenues and margin, after a while, we take a lot of these products into operation during the second part of this year. We have no reason to question this goal, and we will keep it as it. Of course, goals should be met. Next slide. Order bookings for the group.
As we said, we are still having a very good order intake for the last 12 months. Also, the quarter was good relative to the same quarter last year. The first quarter was a bit of a disappointment, but it should be noted that with increasing order volumes, we have several orders of ways above SEK 100 million now. The variation between quarters in order intake has increased substantially. It was large from the beginning, but it has also increased. Next slide. Sectra is positioned in we have direct sales in 19 countries now. In France, Medical, and Finland in Security. We established them in 2015, 2016. Canada in Medical, we established in 2016 and 2017 that year. These new markets are developing as they should. Of course, it takes time to establish yourself in a growth market or a trust market that we operate in.
Our systems have to work. They cannot fail, and people have to trust them. There is normally a long process before we get profitable in a new country, but it comes along as planned. Then we sell to our partners in other markets all over the world, and we have customers in more than 60 countries today, and the largest markets today are the United States, Canada, the U.K., and the Netherlands. Next slide. A little about Secure Communications and our cybersecurity operations. Next slide. We have got an approval by the Dutch National Security Agency for use up to including SECRET level of our most advanced mobile secret phone. Now, this is quantum- secure, quantum- safe, which means it will withstand attacks from the new quantum computers, which is a very important thing for the future, and especially so in the SECRET segment. Next slide. Trends in cybersecurity.
We see that we are expanding our secure mobile communications offering, moving towards mobile workplaces, not only mobile telephones, and mobile workplaces are environments where you can do your entire office, but doing it remote. That takes a little different demand on encryption and also demands good VPN, but I will come back to. We have growth in critical infrastructure. We started that three- or four- years back, and we are now monitoring several critical infrastructure in the energy sector, both in electricity and outside electricity, but all in the energy sector, and the initiatives is, of course, continued growth in critical infrastructure and starting selling. We have started sales in neighboring countries, Finland and Norway. We have no recurring revenue from those areas yet, but we have that in Sweden. Mobile secure ecosystems, as I said before, and we also do new geographic areas, as I said before.
Next slide. In order to provide the mobile workplaces, you need a Virtual Private Network offering that we haven't had. Therefore, we acquired a company called Columbitech or the assets of Columbitech, including the shares in their American or the U.S. subsidiary. And that has now been integrated into Secure Communications and means we have a world-leading VPN on a level 4 technical level in the OSI stack, which is very important for mobile operations. It also adds United States and especially then police departments in the United States to our Secure Communications offerings. Next slide. Imaging IT Solutions, our biggest area. Next slide. We have had very good successes in the Netherlands, where we are now clear market leaders.
We have new orders from the University Medical Center Groningen and Ziekenhuis Gelderse Vallei, and also Maastricht University Medical Center+, which means that we now have the majority of Dutch university hospitals as our customers. Next slide. We have also had good order income from the U.S., which is in accordance with our special focus during the U.S. last years. Grady Memorial Hospital, that is a large chain. It's the fifth- largest public health system in the United States. And we also got Marshfield Clinic Health System. And these are multi-hospital systems. They are not small individual hospitals anymore. Typically, they are long contracts over a long time with many hospitals. Next slide. Trend in the United States. It is, as we've said over several years, a special focus area for us. It's the world's largest market.
We top the customer satisfaction in large hospitals in the United States in our segment, and we have a small market share. That means and it's growing, but it means we have large opportunities of growth. While we in several of our old markets have completely dominant market shares, and then the option for growth is limited. We have also had recent orders on luminary customers strengthen our market positions in the United States, and we now have key references on the West Coast and the East Coast and the South and the Central United States, which is very important for us. Next slide. Trending in Imaging IT Solutions overall.
We are adding new customers, but we're also extending and increasing contracts with existing customers, both continuing or prolonging their agreements with us, staying as our customers, but also, for instance, Radiology customers who increase their business with Sectra by adding, for instance, Cardiology or Pathology into Radiology offering, which means you can sell more to install base, which is a very good thing for both customers and us. We have strengthened our delivery capacity by investment in the Q1 and Q2. As we said before, we have increased our staff. That means we now can grow and deliver the orders we have received. We still have a focus in the United States, and we are going into digital pathology and integrated diagnostics as well. We are selling Cardiology as an option to Radiology PACS in the United States. And we have several new markets and new states.
We have also, as I will mention later, filed a digital application for FDA in the United States, which I'll show on the next slide. Digital pathology is the next wave in the digitization of hospitals. Sectra is uniquely positioned in the largest penetration market right now, which is Sweden. We have a dominant market share to grow from. Next slide. There are large synergies with Radiology. We are currently the only vendor who has one platform, one single system for both Cardiology, Radiology, and Pathology imaging. This means that a hospital can, instead of buying three different systems, buy one system and solve the entire needs of digital image handling, which, of course, is good in an environment where hospitals are increasingly concerned about having several thousand IT vendors that want to consolidate on the vendor's side, and we're well positioned in that area.
In digital pathology, Sweden is, as I said before, world-leading, and we have an absolute dominant market share in Sweden, and this is a good platform to grow out from. We have a continuous stream of foreign customers, potential customers coming to Sweden and seeing what we do here. We have also received nationwide patient health pathology solution in the Netherlands, where they can share microscopy images between all the Dutch labs, and we see increasing sales in the U.K. And as I said before, we have FDA application filed in the United States now, and next slide. Together with Leica Biosystems, which is the market-leading and already approved scanner for digital pathology. With our general open systems approach to the PACS side or the IT system and their excellent scanner, we have a very competitive offering for the United States.
The United States is currently lagging in digital pathology, mainly because of FDA reasons. But when it opens up, we hope to be able to sell quite a large volume of digital pathology in the United States. Next slide. Financial figures, and then I'll leave the word to our CFO, Mats Franzén.
Thank you very much, Torbjörn. I will go to the next slide. Trend in order bookings. The order intake was fairly good, I could say, but as you all know, it's a volatile number by default. Net sales are just above 14%, but still in the double-digit areas when adjusting for currency and weaker Swedish krona. The rates you see on the PowerPoint, those of you who can do that, that 7.6% a weaker krona, especially in relation to the U.S. dollars, just short of 3% for Euro and Pound Sterling. That's balanced.
Sorry, that's the average rates we refer to there, comparing with the corresponding period last year. Next slide, please. The total growth you see here in revenue, in sales, it's a total of 86 million Swedish krona, whereof 17 of those are the effect of a weaker Swedish krona. And the largest impact where this comes from is in the U.S., with a share of 33 million out of those 86. And that comprises a growth of 24% in the U.S. So in nominal terms, 38% of the growth on top line in sales comes from the U.S. Next slide, please. Looking into the sales in the different segments, not surprisingly, Imaging IT, due to its dominant size in the group, contributes the most.
It is, though, a growth of 12% in Imaging IT, whereas the strongest four- to six-month period is Secure Communications, growing with some 41% compared with the corresponding period last year, and Business Innovation comes in on second, just above 19% in growth compared with last year, so all operating parts or segments are showing growth on top line. Next slide, please. As we also outlined in the report, and as Torbjörn touched on briefly, we do have a heavy cost base in the first half of the year to accommodate the rollout of projects, and when we find good people, we hire them. It's not that easy to match exactly when things in employment start and when you find the right people to do that, so I think we have done the right thing. If we find the right people, we take them on board.
We will see the effects, the positive effects on that in the second half of the financial year. So that's pretty much it. And you can see that Business Innovation had a good run in terms of sales development as well in this period in terms of the revenue side of things, although that's a smaller part of the group that does not contribute that much. Next slide, please. So this, as we also said in the previous report, means that cash is tied up a bit more than we have seen in previous periods, as you can see on the graph. We had a stronger performance, slightly stronger performance than we expected in the second quarter, but it didn't really compensate for the weakness in the first quarter.
So looking at the six-month period, we had a slightly lower cash inflow from operations than the corresponding period last year. But the closing balance on cash is pretty much the same as last year, around SEK 190 million. So next slide, please. And then I'll leave the word back to you, Torbjörn.
All right. Thank you. A little about our way forward. We are positioned in growing markets. And we are positioned in markets where the society environment or society dynamics enforces growth. Both cybersecurity and healthcare, especially for elderly people, will have to grow. And by being positioned there, we at least have a good position, and then if we behave well, we should grow with the market. Next slide. We also have the highest customer satisfaction in the most important segments in the most important market, which is the large hospitals in the United States.
And we see a tremendous consolidation in the United States between the healthcare providers. They are now buying, consolidating the healthcare market. And being strong in this environment means that we can grasp opportunity when it comes, and people trust us. And customer satisfaction remains our prime target. Without it, you cannot do good business long- term. Next slide. A new thing. In order to be very good with customers, you need good employees and employees at stake. And we've just been awarded to be the third best employer in Sweden all over. And that is done by anonymous votes by employees. And of course, that is a very good thing for recruiting, as we, as most IT companies today, are limited in growth by the good people we can take on board. So this was good news, and we are very happy about it.
We're also well mentioned in the U.S. equivalent that is called Glassdoor. And if you read into Glassdoor, you will see that we are very positively mentioned by our employees. Next slide. And as we have the philosophy with shareholders, if you have happy customers, happy employees, you have reasonable perseverance. You don't give up too fast, and you have a balance sheet to support that longevity. And you have reasonable cost control. And then if you have a good position in growing markets, then shareholders will be happy. It's almost impossible to avoid it, but it has to come in that order. And now we have external proof for many of those, and we think we are in for a good future for our shareholders also in the future. Next slide. And then we come to being a shareholder in Sectra. Why should you own shares in Sectra?
As I said, high customer satisfaction, high employee satisfaction, a strong brand in markets with trust is critical. If our cybersecurity systems fail, we risk nations, and if our systems and hospitals fail, the heart radiology departments have to shut down, and the hospital has to shut down. In that area, a trustworthy brand is very, very important, and we have that brand, so the brand Sectra stands for trust and is very valuable for us. We have a profitable, and we are profitable, and we have a strong cash flow and a solid balance sheet. We have substantial increasing recurring revenue, and we also, for the next year, we announced in the quarterly report that we will increasingly go over sales Software as a Service model in the United States, starting in the United States. We will do the rest of the world after a while.
That means there will be a little change in the cash flow going forward. The cash flow will be more spread out forward, but we will recognize a lot of that revenue upfront anyways. Position in niche markets with substantial underlying growth. All management here own shares, or the top management own shares, I would say. We can afford sustainable investment in R&D with exciting future opportunities. Pathology is such an example where we invested long- term, but we now have a very strong position worldwide in pathology by that research done five- to seven- years back. Next slide. We have our upcoming general meeting and financial report and Capital Markets Days. March 4, we will have a nine-month interim report and presentation. That will be telephone as now.
June 3rd will be an on-site in Operaterrassen in Stockholm or some other location because they're rebuilding Operaterrassen right yesterday. But we will come back with the exact location on that. It will be June 3rd in Stockholm. And then we have our Annual General Meeting that will be September 8th in Linköping in Sweden. Please remember your feedback is important. Please let us know what you think about these reports, and we'll try to modify and improve them after a while. And you can fill that URL, and you get a questionnaire of what you think about the reports. Then we open up questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero-one on your telephone keypad. Our first question comes from the line of Kristofer Liljeberg from Carnegie. Please go ahead.
Yes. Thank you. And good morning. Could you maybe spend some time on explaining better why moving into a service payment model will not impact sales so much versus selling through licenses?
Yes. Good morning, Kristofer. The primary driver, I would say, or the key issue there is that the customer gives a firm commitment— what was in the U.K. contracts called a breakage clause, which means, and we obviously have that in many cases where customers do commit for a number of years, which means that the performance obligations of the licensed in this instance are actually delivered to the customer. That was actually what did not hold for scrutiny in the U.K. contracts, where you, as you are aware, had to reverse that accounting in the year-end accounts.
So the deployment phase and the generic license is then effectively delivered from a revenue recognition point of view, whereas the payment installments will be from the customer and the subscription, which means that there will be a deferral on the cash flow. But it is a subscription nevertheless. So that's very short about this very technical area. The Q&A supporting document is 661 pages. So this is clearly not easy to explain in a few words. But it's something that customers require because otherwise I don't see the point really because you will have an operating profit that doesn't match with the cash flows. So you will build up a lot of receivables then, I guess. I can comment upon that. You are correct. But we do see this as a general trend.
And in all software areas, most companies are going over to this model, as you know very well from Microsoft and Office 365, etc. And we need to follow that. It has been, in general, very good for companies moving over to this model long- term. But you're right that you will have a discrepancy of the revenue recognition and the cash flow that will come gradually over the years. But the important thing that when customers sign up, they will sign up for an initial guaranteed period where they will commit to pay. And that period we will take up as revenue upfront.
Okay. The other question I have was regarding your repeated comment here that margins will improve in the second half of the year. Is this mainly from accelerating sales growth or lower cost, or maybe a combination of them both?
Sales is quite, I mean, the recognition of a sale, etc., is quite slow, especially in Imaging IT. The products take half a year to a year long typically. So what we see now is that we begin to get income for the very large order intake that we did in the spring. And that means that we actually get money from these products and that we start during this second half- year, as we've said now for three quarters. And so I would say that filling in there that it's primarily a revenue-driven margin expansion we are foreseeing. I wouldn't say that we look forward to any significant downturns in cost base as is. No, that's correct.
Okay. Great. I'll get back to the queue. Thank you.
And just as a reminder, if you do wish to ask a question, please press zero-one on your telephone keypad now. As there are no further questions, I'll hand it back to the speakers.
Okay. Thank you very much. Do we have any email questions?
No further questions.
We have had no further questions. That means we conclude the presentation. We thank you for your attention. We look forward to seeing you or hearing from you the next time. Goodbye.
Goodbye. This now concludes our conference call. Thank you all for attending. You may now disconnect your line.