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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome, everyone, to Karnov Group's earnings conference where we will present the outcome of the first quarter of 2024. Please go to Slide 2. I am Pontus Bodelsson, President and CEO of the company. With me, I have our CFO, Magnus Hansson; and our Head of Investor Relations, Erik Berggren. Magnus and I will present the outcome of the quarter using a few slides, and then we'll open up for questions.
As you may have noticed, the bid consortium consisting of Greenoaks and Long Path, as earlier today announced a cash offer on all shares in Karnov of SEK 84. The Board of Directors has unanimously decided to recommend shareholders of the company to accept the offer. We refer any questions regarding the Board's recommendation to our Chairman, Magnus Mandersson, through our Head of Investor Relations, Erik Berggren and any questions regarding the offer to the consortium. With that said, let's get started with the presentation of the first quarter. Please go to Slide 3.
Karnov Group delivers on our promises in the first quarter. We continue to expand our mission-critical legal information solutions for our customers, creating value for all stakeholders. We have a strong focus on delivering profitable growth and harvesting synergies while at the same time, launching new innovations, including AI. Net sales grew to SEK 632 million. The organic growth was 3%, with Region North driving organic growth in the quarter. While Region South now reported organically was flat in line with what we earlier have communicated. The adjusted EBITDA margin was 23% in the first quarter with synergies coming through as expected in Region South, while we have taken actions on our newly launched acceleration initiative.
I'll dig deeper into the harvesting of synergies in the coming slides. At the end of March, our leverage was at 2.7x EBITDA last 12 months, an improvement compared to Q4. Let's move over to Slide 4. The synergies from the Region South integration come progressively over the period. And at the end of the first quarter, the annual run rate synergies amounted to EUR 3 million. We reiterate our ambition to generate synergies of EUR 7.5 million on annual run rate basis by the end of 2024 and EUR 10 million by the end of 2026. Next slide, please.
In February this year, we announced our Acceleration Initiative. The ambition is to further strengthen customer value while also improving the group profitability. The synergies are being harvested in Region North and group in the first phase, while synergies in Region South are part of the second phase. At the end of the first quarter, the annual run rate synergies amounted to EUR 2 million. Our ambition is to generate cost efficiencies of EUR 10 million with full effect on run rate basis, at the end of 2026.
Next slide, please. In this slide, you can see our 2 cost efficiency initiatives running until the end of 2026. With the ambition of harvesting efficiencies of EUR 20 million in total. And that we now, by the end of the first quarter of 2024, have harvested annual run rate synergies of EUR 5 million.
Next slide, please. Our industry is changing with 2 tailwinds driving growth opportunities for Karnov Group. The first tailwind is the rising number of laws and regulations, which are also increasingly complex to comprehend. The second tailwind is Generative AI, which transforms how professionals work with legal information. Karnov Group has, through the decade consistently developed our solutions to generate mission-critical value for our customers. We are well positioned to capture these opportunities with our proprietary content, strong local market positions and robust capital capacity from our free cash flow. Please go to Slide 8.
So what are our strategic focus areas to capture the market opportunities? Well, in the beginning of October at the Capital Markets Day, we presented our medium-term strategy and the strategic enablers, talent and culture, common tech infrastructure, implementing AI, all contributing to profitable growth. Talent and culture is all about fostering a culture which drive profitable growth, implementing an even greater commercial mindset and customer centricity. Common tech infrastructure is about developing with many markets in mind and then enhancing with local authored content. Generative AI enables great interaction with our content and make our customers more efficient. We have an ambitious pipeline of AI innovation to come. Please go to Slide 9.
I will now comment a little on our segment performance, starting with Region North. Region North continues to have a strong development with organic growth and robust margins. Growth is driven by increased subscription-based online sales, especially within the public sector. We are also performing well within EHS and tax and accounting. Our Norwegian business, DIBkunnskap, has recently launched its ESG solution across Scandinavia. The solution helps businesses with ESG compliance and the sales numbers have been impressive since the launch. We are continuing to expand within EHS and recently closed the acquisition of QSE Conseil in France. The acquisition provides Karnov Group a strong presence in the local French EHS market and also accelerates the European expansion. Turning the page to Slide 10.
We continue to progress ahead of plan with the Region South integration and the financial performance is in line with our short-term expectations. Net sales are flat compared to Q1 last year, following our progress with product rationalization and optimization of the Spanish sales force. Magnus will speak more about the optimization of the sales force. The adjusted EBITDA is improving as synergies are coming through as expected. Close to 70% of the Aranzadi content is now merged onto the common content platform. Cross-selling initiatives in Spain are making progress, and we have launched a common sales team in Spain. During Q1, we launched AI-based notifications of the product Aranzadi Fusion, which is combining content and workflow. The notifications are making customers more efficient in their operations. Turning to page to Slide 11.
With that said, I will now hand over the floor to our CFO, Magnus Hansson. He will tell us more about the financial results in the first quarter. Magnus, the floor is yours.
Thank you, Pontus. So let's start with an overview. Switching to Slide 12. The net sales grew by 3% in the first quarter, reaching SEK 632 million. The growth is driven by increased online sales and legal training. The increased online sales were due to a mix of volume and annual price adjustments. Currency effects had a slight positive impact on net sales. Please go to Slide 13. Breaking down net sales on segment level. We see continued strong organic growth in Region North and stable development in Region South. Organic growth is driven by online sales within the public sector, supported by our EHS businesses and tax and accounting business. As we've mentioned before, we expect continued flat sales in Region South throughout the first phase of the integration. In the first quarter, we have managed to maintain net sales flat despite the significant number of sales reps in Spain have been made redundant, and we have initiated product rationalizations. Furthermore, printed materials continues to decline throughout the group. Next slide, please.
On Slide 14, you see net sales development within online and offline, split into segment. In Region North, the online sales increased by 15% compared to the first quarter last year and accounted for 86% of the net sales in the quarter. In Region South, the online sales declined by 1% compared to the first quarter of last year and accounted for approximately 76% of net sales in the quarter, again related to product rationalizations and redundant sales reps today. Please turn to Slide 15.
Subscription-based sales increased during the first quarter and represent 86% of the sales in the quarter. Subscription-based sales also generated a solid free cash flow. Please change to Slide 16. The adjusted EBITA amounted to SEK 143 million in the first quarter. This corresponds to an adjusted EBITA margin of 22.7%, which is in line with last year. Key synergies falling through and with lower operating expenses, offset by increased G&A of SEK 6 million in the first quarter. Items affecting comparability amounted to SEK 36 million during the first quarter and is mainly related to the integration of Region South, but we have also made some initial investments into the group-wide acceleration initiative.
At the end of the first quarter, we have harvested synergies within the group of EUR 5 million on an annual run-rate basis. EUR 3 million from the integration program and EUR 2 million from the Acceleration Initiative. The synergies from the Acceleration Initiative have had limited impact in the first quarter. As earlier announced, we are delivering on our plan to harvest synergies of EUR 20 million with full effect on an annual run rate basis by the end of 2026. Let's move to Slide 17, please.
As mentioned, Region North has had a strong net sales below it. In the first quarter, net sales amounted to SEK 294 million. Organic growth was 5.7%. The growth is driven by online sales. We continue to strengthen our market position in the public sector, EHS and tax and accounting. Compared to last year, we have divested our training business, Sweden, although with a small financial impact. Adjusted EBITDA reached SEK 127 million in the first quarter. This is an increase of SEK 7 million compared to last year. The adjusted EBITA margin amounted to 43.2%. The slight decline is explained by increased depreciation of SEK 3 million compared to last year due to completed capitalized development project.
Please move on to Slide 18, which is the region South segment. Net sales in Region South increased by SEK 2 million compared to Q1 last year. [indiscernible] is due to currency effect. We have defended the top line decide optimizing the sales force in Spain. The adjusted EBITDA margin was 10.5% in the first quarter. Compared to the first quarter of last year, depreciation of capitalized development have increased as we have completed development project for future growth. Furthermore, a recalculation of the lease agreement in Paris have increased depreciation. Compared to Q4 last year, depreciations have decreased with SEK 3 million and amortization of capitalized development costs have increased by SEK [ 1 million ]. The adjusted EBITDA margin improved to 16.2% in the first quarter. We have harvested synergies of EUR 0.8 million in the first quarter of 2024 and the adjusted cost base have been -- have decreased by EUR 0.5 million compared to the baseline. The difference between the decrease in expenses and the synergies is entirely explained by the increased depreciation and amortization of development costs that I just mentioned, how the synergies, annual run-rate basis amounted to EUR 3.4 million by the end of the quarter.
Moving to Slide 19 which presents the segment group functions. Group function consists of functions taking responsibility for group-wide task. Expenses in the first quarter was SEK 19 million compared to SEK 26 million in the fourth quarter. Please go to Slide 20. Karnov Group has a strong cash generation in our invoicing seasons. The adjusted free cash flow was SEK 107 million in the first quarter. The lower free cash flow compared to the first quarter of last year mainly relates to the timing of tax payments of SEK 45 million. Increased payment of leasing liability and as well as timing of invoicing in Region South, impacting our net working capital. The leverage was 2.7x EBITDA last 12 months the end of March, meaning we are well below our financial target of 3x EBITDA last 12 months.
I'm now handing over to Pontus again who will present our last slide.
Thank you, Magnus. Please switch to Slide 21. These are our highlights of the first quarter. Region North continues to generate strong results. We are expanding within EHS and recently closed the acquisition of QSE Conseil for future growth and accelerated European expansion. The Region South integration progresses ahead of plan, and synergies are coming through as expected. Net sales are flat compared to Q1 last year, following our progress with product rationalization and optimization of the Spanish sales force. We are taking action on our cost efficiency initiatives to advance our profitable growth strategy across the group.
At the end of Q1, the annual run-rate synergies amounted to EUR 5 million. Please go to Slide 22. And by this, I'll end our presentation, and we are now ready to take questions. So I'll hand over the conference again to our host.
[Operator Instructions] There are no questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.
No other written questions. So I would like to thank everyone for listening. We will disclose our Q2 report on the 21st of August, and we hope to hear from you then, if not earlier. Thank you, and have a nice day.
Thank you. Bye.