NRC Group ASA – Q1 2022 results

Today, 11 May 2022, NRC Group has released its financial results for the first quarter 2022.

The company will host a physical presentation at 09.00 AM (CET) at House of Oslo, Ruseløkkveien 34, Oslo. The presentation will be held by CEO Henning Olsen and CFO Ole Anton Gulsvik.

The presentation will be broadcast as a webcast on the following link:

https://channel.royalcast.com/landingpage/hegnarmedia/20220511_5/

The presentation will be followed by a live Q&A session. Investors, analysts and journalists are welcome to participate at House of Oslo or follow the presentation digitally, where questions can be submitted during the event.

Below you will find highlights and a summary from the report.

REVENUE

• NOK 1.2 billion (NOK 1.1 billion)
• Growth YoY* 7%

OPERATING PROFIT

• EBITA** NOK -37 million (NOK -59 million)
• EBITA** margin -3.2% (-5.2%)

ORDERS

• Order intake of NOK 0.9 billion (NOK 0.9 billion)
• Order backlog of NOK 7.3 billion (NOK 6.0 billion)

LIQUIDITY

• Operating cash flow of NOK 69 million (NOK 17 million)
• Cash position of NOK 593 million (NOK 551 million)

* In local currency

**Before other income and expenses (M&A expenses)

Improved results and strong cash flow

First quarter revenue was NOK 1,176 million compared to NOK 1,129 million for the same period of 2021. The revenue increased with 4% in the quarter. Adjusted for currency effects the growth was 7%, mainly due to strong growth in Norway and Sweden, partly offset by lower volumes in Finland.

The Group’s results, measured in EBITA*, improved to NOK -37 million in the low-season first quarter, compared to NOK -59 million for the same quarter last year. The result included gain from sale of fixed assets totalling NOK 19 million, compared to NOK 14 million in the same quarter last year. The Group’s financial performance continued its positive trend as EBITA* margin improved to -3.2% from -5.2% in the same quarter last year, mainly due to improved profitability in Norway and Sweden.

The order intake in the quarter was NOK 874 million. The book-to-bill ratio was 0.7 in the quarter and at 1.3 over the last 12 months. The cash flow from operations in the quarter continued strong with NOK 69 million compared to NOK 17 million in the same quarter last year.

Finland had a revenue of NOK 389 million compared to NOK 446 million in the first quarter of 2021. Adjusted for currency effects the organic growth was -10%. The reduction was due to lower volumes in Light rail division, partly offset by higher volumes in Rail construction. The EBITA was NOK -9 million compared to NOK 2 million in the same period of 2021, leading to an EBITA* margin of -2.2% for the quarter, down from 0.4% last year. The reduction compared to last year is related to the mentioned volume reduction.

Revenue from the Swedish operation amounted to NOK 289 million for the quarter compared to NOK 259 million in the same period of 2021. Adjusted for currency, the organic growth in the quarter was 19%, with growth in rail construction as several projects won in 2021 have commenced. The EBITA* for the quarter increased to NOK -22 million compared to -35 million for the same quarter last year, mainly due to improved project margins and increased volume.

Revenue in Norway was NOK 499 million compared to NOK 423 million in the first quarter of 2021. The organic growth was 18% in the quarter, mainly driven by the Environment and Rail divisions. EBITA* was NOK 4 million compared to NOK -17 million in the same period of 2021, which leads to an EBITA* margin of 0.8% in first quarter, up from -4.0% for the same quarter last year. The increased profitability is explained by improved results in the Environment division where the measures implemented during 2021 have yielded results.

Group operating profit (EBIT) for the low season first quarter was NOK -47 million, an improvement from NOK -77 million last year.

Net financial items amounted to NOK -14 million for the quarter, compared to NOK -18 million for the same period last year. This included a reduction in net interest expenses from NOK 16 million to NOK 14 million due to ordinary debt instalments in the period.

The order intake in the first quarter was NOK 874 million, split on announced contracts of NOK 238 million and unannounced contracts of NOK 636 million. The order backlog amounted to NOK 7,331 million at the end of March, a decrease of NOK 470 million from last quarter, including a currency adjustment of NOK -169 million. The order backlog for 2022 amounted to NOK 3,486 million at the end of March, an increase of 19% compared to the same quarter in 2021.

In Norway, new orders included an appointed contract by Sporveien AS of NOK 47 million for rehabilitation and upgrading of tram platforms in Oslo, scheduled for completion in January 2023. New orders in Norway also included a contract for rehabilitation and upgrading of the railway infrastructure between Etterstad and Lillestrøm, appointed by Bane NOR. The contract is valued at approximately NOK 51 million and commenced in March 2022. The project is scheduled for completion in March 2023. NRC Group Sweden was appointed to a contract for civil and construction works between Dyvelsten and Forshaga, appointed by the Swedish Transport Administration. The contract is valued at approximately SEK 71 million, and the work commenced in March 2022 and is scheduled for completion in May 2024. New orders in Sweden also included a contract for rehabilitation and upgrading of Säters railway station, appointed by the Swedish Transport Administration. The contract is valued at approximately SEK 78 million and is scheduled for completion in May 2023.

The Group has identified an addressable tender pipeline of approximately NOK 18 billion for the next nine months. This compares to a NOK 20 billion tender pipeline three months ago and NOK 22 billion at the same time in 2021.

The tender pipeline in Finland is approximately NOK 1.2 billion, a decrease of approximately NOK 0.4 billion compared to the tender pipeline three months ago mainly due to awarded tenders in maintenance. The tender pipeline is approximately NOK 2.7 billion lower than the same period last year, both related to maintenance tenders which have been awarded during 2021 and reduced tender pipeline in rail construction.

The tender pipeline in Norway is approximately NOK 6.2 billion, a decrease of NOK 2.7 billion compared to the tender pipeline three months ago. The decrease is in rail construction. The tender pipeline has decreased approximately NOK 3.0 billion compared with the same time last year. The decrease is mainly related to Rail construction where three large tenders have been awarded in the first quarter of 2022.

In Sweden, the tender pipeline is approximately NOK 10.2 billion, an increase of NOK 1.6 billion compared to the tender pipeline three months ago. The increase is explained by a NOK 2.4 billion increase in maintenance, mitigated by decreased tender pipeline volumes in rail and civil construction. The tender pipeline is NOK 1.0 billion above the same period last year, which is mainly related to increased level of tenders in maintenance.

ECONOMIC IMPACTS OF THE WAR IN UKRAINE

A global pandemic has been followed by a war in Ukraine and the long-term impact globally, for both companies, societies, and people, is characterised by uncertainty.

The economic impact is felt worldwide and risks becoming increasingly severe and long-lasting. The invasion has led to volatility in the financial market and uncertainty in the global economic outlook. With the invasion, already rising commodity prices have increased sharply. Due to the situation the outlook is more uncertain both related to material prices, supply chain risks, and government spending on infrastructure.

The company has analysed the direct sensitivity from increasing material and fuel prices. The findings conclude that NRC Group’s business in the short term is well protected against increasing material prices. In addition to frequently used index regulations, the customer predominantly takes the risk on sector specific materials within rail infrastructure. The Group monitors the development, including both direct and indirect effects, and is actively evaluating opportunities to limit risk in the project portfolio.

NRC Group has limited direct supplies from Ukraine, and alternative sources have been identified.

DIVIDEND

NRC Group expects to create value for its shareholders by combining increased share value in a long-term perspective and distribution of dividends. The company aims to have a dividend policy comparable with peer Groups in the industry and to give its shareholders a competitive return on invested capital relative to the underlying risks. The Board of Directors at NRC Group has introduced a dividend policy whereby, subject to a satisfactory underlying financial performance, it is NRC Group’s ambition over time to distribute as dividend a minimum of 30% of the profit for the year. The target level will be subject to adjustment depending on possible other uses of funds. The Annual General Meeting (AGM) resolves the annual dividend, based on the proposal by the Board of Directors. On 5 May, the AGM resolved there will be no dividend paid for 2021.

OUTLOOK

NRC Group is strongly positioned in a growing market with a substantial tender pipeline. Proposed national budgets and updated proposals of the National Transportation Plans with substantial long-term investments, confirm a positive market outlook. However, due to the invasion of Ukraine and the volatile global market, government investments in infrastructure may be adjusted.

NRC Group continues its focus on measures to improve profitability. For 2022, we expect a continued positive operational and financial development with moderate to strong revenue growth and moderate increase in EBITA* margin compared to 2021.

The first quarter 2022 result report and result presentation can be found attached and will be available on the company’s homepage: www.nrcgroup.com.

This information is considered to be inside information pursuant to the EU Market Abuse Regulation, and is subject to the disclosure requirements pursuant to Section 5-12 of the Norwegian Securities Trading Act.

This stock exchange announcement was published by Cecilie Blaauw Cock, Marketing & Communication at NRC Group ASA, on 11 May 2022.