NRC Group - Fourth quarter 2018 result report and presentation
Today, 12 February 2019, NRC Group has released its financial results for the fourth quarter of 2018.
The company will present the results at 12.00 AM (CET) at SEB offices, Filipstad Brygge 1, 8th floor, Oslo. The presentation will be held by CEO Øivind Horpestad and CFO Dag Fladby.
If you want to attend the presentation, please register by email to invitations@seb.no.
Below you will find a summary and highlights from the report.
Acquisition of VR Track OY
- Creating the largest Nordic rail infrastructure player with the acquisition of Finnish VR Track Oy
- A strong platform to capture future growth opportunities within strong and growing market segments
Key events
- Reorganisation in Sweden to optimise strategies, realising synergies and improve operational execution. New management team in place
- Awarded NOK 360 million Storgata tramway contract in Oslo
Key figures Q4 2018
- Revenues of NOK 971 million vs NOK 674 million in Q4 2017
- Total EBITDA* of NOK -7 million. EBITDA of NOK -60 million in Sweden because of expenses and loss related to business being reorganised
- Order book of NOK 2,748 million
Key figures 2018
- Revenues of NOK 3,176 million vs NOK 2,373 million in 2017
- EBITDA* of NOK 132 million including expenses and loss related to business being reorganised in Sweden
- Proforma** revenues for 2018 was NOK 6,472 million
- Proforma** EBITDA* was NOK 475 million, including expenses and loss related to business being reorganised in Sweden in Q4
- Proforma order book of NOK 6,145 million
* Excluding M&A costs
** Acquired companies incorporated based on management accounts with estimated IFRS adjustments on financial lease
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Comments on fourth quarter 2018 results:
Acquisition of VR Track Oy
On 7 January 2019, NRC Group completed the acquisition of VR Track Oy to create the largest specialised rail infrastructure group in the Nordic region, with strong capabilities across the entire railway value chain and leading positions in the attractive Norwegian, Swedish and Finnish markets. Proforma* 2018 revenue for the combined group was NOK 6,472 million. EBITDA adjusted for M&A costs was NOK 475 million, including expenses and loss related to business being reorganised in Sweden in Q4.
The two businesses are complementary, and the combination is expected to create several synergies, including an improved position to capitalize on the trend towards maintenance projects in both Norway and Sweden with use of VR Track's extensive experience from such contracts in Finland and Sweden. The enlarged NRC Group will be able to leverage its unique capabilities across borders to create new project opportunities and offer larger turnkey projects to a wider customer group.
Following completion of the transaction, VR Group holds approximately 18% of the shares issued in NRC Group. VR Group is owned by the Finnish state.
*Acquired companies incorporated based on management accounts with estimated IFRS adjustments on financial lease
Continued revenue growth
Fourth quarter reported revenue was NOK 971 million, compared to NOK 674 million in the same period in 2017, a 44% increase.
As a consequence of the VR Track acquisition, the group resolved to reorganise its Swedish operations, including termination of approximately 90 employees. The related expenses and losses in companies being reorganised negatively affect the group’s EBITDA in Sweden, amounting to approximately NOK 60 million in fourth quarter 2018. Performance in Sweden also reflected the slow market activity leading to a higher cost base and lower margins for the Swedish operation. EBITDA excluding M&A costs was NOK -7 million, compared to NOK 72 million in the fourth quarter of 2017. M&A activities remained high through the end of the year related to the acquisition of VR Track. Incurred M&A costs for the quarter was NOK 14 million.
Full year 2018 revenue was NOK 3,176 million, an increase of 34% from 2017. Full year revenue-growth reflected continued market expansion in Norway with strong project execution and continued delivery on the consolidation strategy, partly offset by lower activity for track renewals and a slow market in the second half of 2018 in Sweden. EBITDA excluding M&A costs was NOK 132 million. The reduction in EBITDA includes significant non-recurring costs related to the restructuring in Sweden including such expenses and losses in SBB.
NRC Group conducted a thorough review of the Swedish operations in the fourth quarter to optimise the organisation and group strategies, realising synergies and improving operational execution. A new country management team was established, with Lars Öhman appointed as new managing director from early 2019. He was previously head of VR Track in Sweden.
The market in Sweden was weaker than expected in 2018, with an estimated decline in investments of 12% compared to 2017. The market also reflected some degree of uncertainty as the national budget was not approved until 19 December pending formation of a new government after the September election.
The Norwegian operation continued with strong growth and improved profitability.
The order intake was NOK 850 million in the fourth quarter where announced contracts amounted to NOK 498 million and unannounced order intake was NOK 352 million. The order backlog for own production amounted to NOK 2,748 million at the end of December. The orderbook including VR Track, as from 7 January, is 6,145 million excluding orderbook from JVs. Approximately 57% of the backlog is estimated for production in 2019. NRC Group’s interest in the order backlog in joint ventures/ associated companies amounted to NOK 600 million at year-end.
Order intake included a NOK 360 million contract for rehabilitation of Storgata in the city of Oslo, the second large tramway contract awarded in Oslo in 2018 under the ongoing NOK 4.1 billion programme to upgrade tram infrastructure and purchase new trams. NRC Group won both contracts with a combined value of NOK 762 million. Additionally, NRC Group won a NOK 92 million contract for ground and construction work at Herøya, Norway, for Yara ASA, and a NOK 46 million contract for construction work at the Oslo harbour front.
Tendering activity remains high in Norway with continued focus on larger turnkey projects covering several special competencies. This is in line with the group’s strategic positioning in recent years. In 2018, NRC Group built substantial in-house competence and capacity to provide a full range of environmental services which strengthened the group’s competitive position.
The Norwegian national budget proposal confirmed political support for strengthening the railway sector with a record NOK 26.4 billion allocated to 2019, an increase of 12% from 2018. Proposed spending on investment, maintenance and renewal lag behind average levels outlined in the 2018-29 National Transport Plan (NTP) for a second consecutive year and the maintenance backlog is increasing. These factors indicate continued growth in railway infrastructure investments and activity.
Overall market activity in Sweden has been slow, and the number of contracts awarded to the market in the fourth quarter was lower than expected. The tendering activity has catched up in January 2019. The Swedish national budget was approved in December and shows SEK 11.4 billion in new investments, an increase of 26% from 2018, and maintenance investments of SEK 9.3 billion, an increase of 6% from the year before.
The market in Finland is also firm and investments are expected to increase in 2019 compared to 2018 with light rail systems likely to represent the highest growth rate. Overall growth for the Finnish market is forecasted at 8% annually for the 2018-2022 period.
There is broad political support across all the Nordic countries for developing rail-based systems to provide environmentally friendly and effective transport systems. Railway, metro and light-rail solutions offer sustainable solutions for moving people and goods and absorb effects of population growth and urbanisation. NRC Group holds a leading position in a growing Nordic market. Key focus areas for 2019 will be the successful integration of VR Track, synergy capture and continued profitable growth.
It is NRC Group’s ambition over time to distribute a dividend of minimum 30% of the profit for the year, subject to a satisfactory underlying financial performance. Based on the 2018 results, the significant growth and the acquisition of VR Track, the Board of Directors will not propose dividend for 2018. Normalised dividend distribution is expected from fiscal year 2019.
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The fourth quarter 2018 result report and result presentation can be found attached and will be made available on the company's homepage: www.nrcgroup.com.
For further information, please contact Dag Fladby, Chief Financial Officer, NRC Group ASA on tel: +47 90 89 19 35.
About NRC Group
NRC Group is the largest rail infrastructure entrepreneur in the Nordic region, with strong presence in Norway, Sweden and Finland. The company is a turnkey supplier of all rail related services, in addition to providing services to any transport related infrastructure such as roads, harbours, bridges and tunnels. The services include design, groundwork, trackwork, safety, electro, telecom and signalling systems, and environmental services such as decommissioning and reclamation.
NRC Group has experienced significant growth since its inception in 2011 and is today the leading entrepreneur within rail infrastructure in the Nordics. The company has regional offices throughout Norway, Sweden and Finland and is headquartered at Lysaker, nearby Oslo, In Norway. The group has a revenue of approximately NOK 6 billion and approximately 2,450 employees. NRC Group is listed on the Oslo Stock Exchange under ticker “NRC”. The company’s chief executive officer is Øivind Horpestad.
For further information, visit www.nrcgroup.com.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.