NRC Group - Third quarter 2018 result report and presentation
Creating the largest Nordic rail infrastructure player
Today, 6 November 2018, NRC Group has released its financial results for the third quarter of 2018.
The company will present the results at 12.00 AM (CET) at Hotel Continental, Stortingsgaten 24/26, Oslo. The presentation will be held by CEO Øivind Horpestad and CFO Dag Fladby.
Below you will find a summary and highlights from the report.
Acquisition of VR Track OY – Creating the largest Nordic rail infrastructure group:
- An even stronger platform to capture future growth initiatives including maintenance-, design- and environmental services
- Creating value for NRC Group investors - strong cash flow generation and significant growth prospects
Key figures Q3 2018
- Revenues of NOK 851 million
- EBITDA of NOK 72 million excluding M&A cost
- EBITDA of NOK -18 million in SBB due to changes in cost estimates in projects
- Strong order backlog
Key events:
- Sustainability requirements create new business opportunities within environmental services
- Acquisitions of Gunnar Knutsen AS and NSS Holding AS
- Subsequent awarded NOK 360 million Storgata tramway contract in Oslo
- Extraordinary General Meeting approved to increase the share capital in connection with the acquisition of VR Track Oy
- Rolf Jansson and Eva Nygren elected as new Board members with effect from early January 2019
Comments on third quarter 2018 results:
Third-quarter revenue was NOK 851 million, compared to NOK 776 million in the same period in 2017, a 10% increase.
EBITDA excluding M&A costs was NOK 72 million, compared to NOK 113 million in third quarter 2017. The M&A activities in the quarter was high, including the process of acquiring VR Track. Incurred M&A costs for the quarter amounted to NOK 14 million. The EBITDA margin was 8.4% (14.8%) excluding costs related to M&A activities.
The performance in SBB in Sweden was disappointing this quarter, impacting our profitability negatively. The company, which was acquired in July 2017, has over a period of time not performed as planned. To improve the financial performance, the managing director was replaced at the end of August. The management has subsequently taken several actions, including a close review of the cost estimates and the remaining production of the project portfolio. Based on the review several cost estimates have been changed, leading to an EBITDA of NOK -18 million for SBB in third quarter. The remaining projects in SBB are completed or close to be finalized. The accumulated EBITDA for SBB as per third quarter is NOK -30 million. The remaining part of intangible assets related to customer relations in SBB were impaired and written down with NOK 6 million to zero in the third quarter. A contingent part, SEK 30 million, of the purchase price has been repaid during the third quarter.
The remaining operation in Sweden has performed satisfactory even though the revenues and the profit were substantially lower than the same quarter last year. Last year the Swedish operation had a track removal project with very high production (approximately NOK 200 million) in the third quarter. In 2018, there are no such projects in the portfolio, as there has been only one out in the marked. Next year there will be tenders out in the market for five track removal projects.
Furthermore, the weakening of SEK versus NOK of about 6% for the quarter, has negatively affected the consolidated profit in Norwegian kroner compared with last year.
The Norwegian operation has continued the strong growth with a 65% revenue increase versus the same quarter last year. At the same time the EBITDA margin has increased from 7.3% in third quarter 2017, to 10.7% in third quarter 2018. The production has performed well, and several new experienced employees have been recruited.
Based on the positive performance in Norway and the acquisitions made during the third quarter, the group have capitalised the remaining part of the previously non-capitalised deferred tax assets of NOK 15 million, leaving a net tax income of NOK 6 million for the quarter.
The order intake was NOK 853 million in the quarter where announced contracts amounted to NOK 295 million and unannounced order intake was NOK 558 million. In addition, the order backlog from acquired businesses during the quarter was NOK 175 million. The order backlog for own production amounted to NOK 2,802 million at the end of September. Approximately 30% of the backlog is estimated for production in 2018. Our interest in the order backlog in joint ventures/ associated companies amounted to NOK 551 million.
Order intake included a NOK 110 million contract for rehabilitation of Sørumsand station on the Kongsvinger line in Norway involving rail services such as track, signal/telecom, electro, groundwork and environment. New orders also included a SEK 77 million multi-disciplinary contract to rebuild the rail terminal at Ystad, Sweden.
Subsequent to the quarter, at 5 October, NRC Group was appointed a NOK 360 million contract for rehabilitation of Storgata in the city of Oslo. This was the second large tramway contract awarded in Oslo this year under an ongoing NOK 4.1 billion programme to upgrade tram infrastructure and purchase of new trams. NRC Group has won both contracts with a combined value of NOK 762 million.
Tendering activity remains high in Norway with increased focus on larger turnkey projects covering several special competencies in line with the strategic positioning executed by the group over the past few years
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 12.4% from 2018. However, proposed spending on investment, maintenance and renewal is lower than the average levels outlined in the 2018-29 National Transport Plan (NTP) for a second consecutive year. The maintenance backlog has also been adjusted upwards. These are factors that indicate continued growth in railway infrastructure investments and activity in coming years.
Bane NOR announced it will create a 100% owned railway operation and maintenance unit with about 1,000 employees, operative from the first half of 2019. The move is a preparation for the upcoming privatization of long-term operations and maintenance contracts in Norway. Additional details on the process is expected in December. NRC Group is uniquely positioned for this expansion of the Norwegian market with its full-service capabilities and ability to leverage a leading maintenance position in Sweden and Finland after the VR Track acquisition.
The Swedish Government approved the National Transport Plan in June, confirming a 20% increase in investments to develop new railway infrastructure and a 47% growth in maintenance and renewal spending for the new plan period compared to the previous NTP. The 2019 Swedish budget proposal has not yet been made public following the general elections in September. The overall tendering activity in Sweden is high.
The environment and sustainable operations have had high priority in NRC Group since inception. The company closed the acquisition of NSS Holding AS, including the 100% ownership in Norsk Saneringsservice AS and 70% in Miljøvakta AS during the quarter, adding leading decommissioning and remediation expertise and capacity in Norway. NRC Group also closed the acquisition of Gunnar Knutsen AS, one of Norway's leading companies within transportation of loose materials for the building and construction industry.
Having in-house competence and capacity to provide a full range of services, from planning and project management to the actual physical work of decommissioning, remediation and waste logistics, strengthens NRC Group’s competitive position.
The third 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 a leading contractor within railway infrastructure in Norway and Sweden. The company is a supplier of all track-related infrastructure services, including groundworks, specialized track work, safety, electro, telecom- and signalling systems, and environmental services. The company works within rail, metro, tram segments and close related infrastructure. NRC Group has experienced significant growth since its inception in 2011 and has a vision of becoming the leading Nordic entrepreneur within railway infrastructure.
For more information: www.nrcgroup.com
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.