NRC Group ASA

Welcome to this capital market day for NRC Group. We are several in the team who will talk today and the agenda looks like this. We will start with the first quarter, where I will shortly lead. Olle, our CFO, will go into more detail in the numbers. Then I will come back and take the first part of our new strategy Formula One. It will be about the transformation, what platform we have today and how we will look in 2028. After me comes our communication and sustainability chief, Lene, sitting there. Will run that session and will put the word to Harry, who is the head of the Finnish business area. In turn, he will let the word back to Olle, who will take more financial talks. I will try to round off the whole thing. There you have the agenda for this little busy hour. The first quarter, if we start there, I will take the big pencil draw. I apologize. I think we have had a good start on the year. What sticks out in the quarter, I think, is primarily the Swedish business area, which is starting to move in the right direction. We see other small movements, although they are positive. We see a big change in line with last year, weak improvement. We see a result of movement and a movement margin that is improved by a margin. We have a cash flow that I want to discuss a little. It is simply because we are here in Norway, have a larger track-related infrastructure project that we share with the Swedish business area. It is Trøndemeeråkerbanan. It is full production. We handle large deliveries, subcontractors, subentrepreneurs, which are cash flow's influence. The job from our perspective in the quarter, in this job, was a little more than 700 million jobs. We have determined this together with our customers as doubled at the moment. And we come in the near future to discuss this with our customers. There have been big changes from the contracted amounts. We have had a lot of supply orders, we have had change orders, change orders. And we will discuss them with our customers. It is a good conversation climate, but we need to discuss this because it drives a lot of cash flow right now. Ole will come back to that a little. Finally, we have had a good order in the quarter. I can not say that it is at record level, but it is close to the record level. And it naturally builds a strong order book. And the orders we take, except that we are competitive, are orders that are in line with the new strategy. Our staff is doing great. We see a good trend in our employee survey in line with previous years. And when we follow our working-duty frequency and sick supply, we have an improved statistics, which is good. Safety always comes first. And then I think we will fly in a little deeper in the numbers, Ole. Here you go.

Thank you, Anders.

So I will switch over to English for our international viewers. So financially, we had the first quarter more or less in line with the same quarter last year. And this is a seasonally weak quarter, as you can see in the graph to the left. For the first quarter, we had reported revenues of 1.3 billion and an operational result, EBIT adjusted, at minus 43 million. And this compares to the first quarter last year, which also came in at 1.3 billion in turnover, while then our EBIT adjusted was minus 48 million. We see continued positive development and improvement in our Swedish operations, while our Norwegian and Finnish operation is slightly behind the same quarter last year. We also initiated an operational restructuring of our demolition and recycling business, KEPT, in Norway, to structure that business in line with current market conditions. And we have taken a one-off, totalling 59 million in the quarter, and you can see that in adjusted items of minus 56. This breakdown includes a breakdown of assets. We have the discontinued parts of the business unit, and we have also reduced the number of police. And this business unit now is under strategic review. If we move to the different countries, starting with Norway. So the results in Norway are slightly below where we were at the same quarter last year. However, we did have an exceptionally strong order intake with a -to-build ratio of two and a half times sales. And right now we have a much better backlog in Norway than we had at the end of the year 2023, but winning new contracts both in our rail and our civil division remains a high priority. As Anders mentioned, we have had significant change orders in a joint Norwegian-Swedish rail project, where the outcome is still pending. The project is recognized at zero margin, and it also affects our cash flow negatively. Mediation with the customer is to commence now in Q2 for the resolution for these change orders. Moving to Sweden. In Sweden, the ongoing transformation has been highly successful, and we are back to deliver a positive result in Q1, which is seasonally a weak quarter. We have strong organic growth with above 50% of the growth in the remaining business, and we have a -to-build ratio of 1.8 times sales in Sweden. So we have a good backlog, and we're now building a backlog for 2025 and onwards. Operationally, both our maintenance business and our rail business is delivering acceptable results at the moment. In Finland, our activity is down 12% in local currency. We are not satisfied with the performance we have had in the operations in Finland, and this is driven by our rail division. We are working on one project, which is coming to an end in Q1, sorry in Q2 2024. And when this project is completed, we can free up resources for other more profitable projects. We have already initiated actions in Q4 last year and Q1 this year, and we expect this to yield results going forward. The tender pipeline in Finland is very strong and we also won another light rail contract in the first quarter, which is currently in the design phase. If this project is decided to go into construction phase, the value of this contract alone is over 1 billion and it's not included in the backlog. Despite this, winning a new large contract remains a high priority in all segments in Finland. Some comments on our working capital. Our working capital is highly volatile, as you can see in this graph to the left. First and foremost, we have seasonal volatility, where we basically build up working capital during the summer period, where the production is very high, and we build this down during the winter period, when the production is lower. But we also have working capital volatility intramond, where we build up working capital during the mid of the month and then build it down at the end of the month due to the payment pattern of our customers. And over the last year, we have had increasingly tied up working capital in this joint Norwegian-Swedish project, and this has escalated further in Q1 and the beginning of Q2. Except for that, we are very satisfied in the way we are managing our working capital, and we believe that we can continue to reduce this into negative territory over time to free up liquidity in the company. However, this project particularly has highlighted the importance to forecast the cash flow when we do tenders to avoid taking on projects where we take too much of the liquidity risk. Moving to the order intake and the backlog. As you can see, we had a good order intake at 2.6 billion, which is the -to-bill ratio of 2.0, isolated in the quarter, and measured over the last 12 months. As you can see in the graph to the left, this is at 1.0. And this gave the backlog of 8.2 billion, which is in line with the same quarter last year. I will come back with more details later on in the presentation related to our backlog and our pipeline. On the right-hand side, we have a new graph showing how this backlog of 8.2 billion is spread out over the years ahead. So for the current year or the remainder of the year, we have slightly lower backlog than we had at the same time last year. While we are building a very strong backlog now for 2025, as you can see in this graph. Yes, I will be back later with more details on numbers, but I will leave it to you, Anders Malm. Thank you, Ole.

As I said, a good start to the year. And then we move on to what will happen from now until 2028. And our recipe for success, formula one. What happens is that we will simply transform this company. We are now a track-related infrastructure company. And we see that the platform we have is mature and simply takes a bigger part of this strong market. And from now on, we are simply an ambitious infrastructure builder. We will use the platform we have, but we will look at new business areas. The starting point, you see here, and at the end you see here too. Then we simply start with the platform. I think we are a Nordic company. We are in Norway, Sweden, Finland. We will exploit that. We have run the company from now until now in three business areas. And we will use the synergies across the whole of Nordic countries. You can do a lot of things there and we see possibilities. We will use the knowledge we have from the track-related infrastructure. We are of course good at handling quite tough contracts. We are good at our concrete constructions. We are good at strong current. We are good at transporting current in relation to contact lines, etc. Of course, we have a good order process and a strong order book to start with. The goal is to aim for more than 10 billion in turnover, with a margin of more than 5 billion. A adjusted margin of more than 5 billion. If I say that the market is strong, I will go into how we see the market. We see, of course, many more than we see. There is still a population growth. There is urbanization. There are people who move from the forest to the large areas. We see some areas that are sticking out. For example, a lot is happening in northern Sweden. We follow Sweden and Finland's partnership in NATO. What business opportunities we can take from that decision. Many people in close quarters require a critical infrastructure. We have a safe water supply. We have already started this business in Norway. In the form of water cleaning, water supply, water transportation and water storage. We also look at the energy sector from three examples. We see that there is a lot of movement on the solar panel side in Finland. There are wind powers in Sweden and perhaps more water power in Norway. We look at all these three parts. Our adjusted market from previous years is from 60 billion to 82 billion. We see a possible growth in this market, which is adjusted to 28 to 35 percent. This is what it looks like today. I want to prove that we have a greater opportunity to grow the company for free. If we start with the platforms again, where we are obviously strong. I would say in the trade area, among other things, Finland is at the top of the market. From the whole track segment. We are incredibly strong in Sweden on track repair, track direction. We are also one of the strongest actors in Norway. That's what the track area looks like. If we look at the one we come back to, which is the most exciting in this strategy. Where we obviously see a great opportunity and take profitable deals. It is in the civil sector. We look at these three blocks. Energy, critical infrastructure and defense facilities. And it is just the beginning. We do a certain part here in Norway, where we are good at dams, wells. So it has started to move a bit in Norway. And we have not started the projects in Sweden and Finland. But we are in the introduction phase in those two countries. If we look at the defense side, we are leading actors in Finland and Sweden. Unfortunately, the market is not open here in Norway for the private sector. We have looked at other possibilities. And use our driving and defense skills. It is possible that we see that it will be possible to leave a bid on driving and defense. Of critical water, environment, defense facilities, etc. So we think we can take a larger part of the deals. And why are we looking at these three business areas? You can think that trace-related infrastructure in relation to solar panels can be a bit different. But we have done a very good analysis of where we are best so far. And where we are simply making our money. And what is clearly shown is that it is advanced concrete constructions. And it is mainly in the Perong environment, in Sweden. The infrastructure is in the form of support walls, perongs, dams here from Norway. The tougher the concrete constructions, the better we are. We have professional staff who have a license for this type of work. Regardless of whether it is above land or under water, classic lighting. And it turns out that it is about the environment that is in the energy sector. If we look at where it is often located, regardless of whether it is a solar panel park or a wind power park. Then maybe it is outside of the site. It requires a fairly high basic skills. So it is often quite advanced concrete constructions. The heavy constructions we are talking about, the wind power foundation, for example. And the solar panel or wind power or water dams should of course transport energy to a power station. And there our contact management skills will be introduced. We are good at strong current. The same applies to the water sector. It is the same thing. Regardless of whether it is a water dam or a water cleaning plant. Or if it is a water storage in some way, it is often about heavy advanced concrete constructions. Which we are good at from our perron environment. It is about professional staff who will understand quite tough contracts. And everything that is often the same thing. It is large mass movements, it is the foundation that can be applied to this environment. For example, if we take here in Oslo, the hospital in Aker. It is critical infrastructure. It is one of Europe's most advanced hospitals. What we do is foundation, mass movement, foundation. And it fits our business. It is a good example. And I think you are starting to see where I want to come. The same thing applies to the defense facilities. Now they may be a little late in the cycle. Sweden's membership in NATO now in the near future will of course not start any big projects in the near future. But we believe that it will start to move in the surrounding infrastructure. There is a lot of material and machines that will need to be transported. From a dense area out in the country into the port environment. Where it fits our track competence. It fits our contact management competence. And it fits our concrete competence. So defense facilities are an important part. And this is what I think you see in the new part of the strategy. Maintain the platform, track-related infrastructure. Lift in critical infrastructure in the form of energy, defense, critical water supply. And of course have the opportunity to drive and rebuild these facilities. The thought market you see also. I'll go a little more into that. We look from the platform, the track-related infrastructure. We see an address market of 28 to 31 billion. Which could be from today's platform a growth of about 7%. If we look at the middle of the three sectors, again energy, water and defense. We see an address market of 40 billion with a growth from today's platform of 6%. Per year. And the drift window, which we obviously do in Finland, which we do in Sweden. And which we look at in the form of energy, water and defense facilities. We see an address market of 12 billion with a growth of 5% oil. This part is also new. We have made a detailed analysis of our machine fleet. And the machine fleet we have in the company is distributed right now in three countries. It is often all in our projects. And we have a fairly advanced machine fleet. Most of it is track-related. We are working on track-related changes, track-related changes, slipper changes, etc. What we have done now is that we have determined the machine fleet. Should it be included in the new strategy? Does it need to be renovated? Repaired? Or should it be out in the strategy? Our division as a Demolitions machine fleet here in Norway. Does not fit the new strategy. We have such an analysis. We have created a machine company that will work in all three countries. Where we clearly see the possibility to take care of the machines. Earn more money on the machines. And have a better overview of how we supply our projects in all three countries. So that's new. And we will continue to look, change on specialized machines. For us it is good if there are long delivery times. They are specially ordered. They are simply difficult to get hold of at the spot market. It is that type of machines we are looking for in our companies. There are many things that lead to success. We have chosen to focus on three things. And we try to look from both customer projects and staff. And I start with excellence. And the projects I am talking about. If it is advanced track related infrastructure. If it is water supply, water cleaning or if it is defense facilities. Then it takes tough education. Enormous licenses. We will handle quite advanced constructions. Obviously we need when we sell this product. To create a trust among the customers that we can handle this. We can deliver this infrastructure in quality. We can take care of sensitive equipment. We can be safe-classed. We are safe-classed. We have the education and licenses required. So the project, we look at the other segment. We look at customers who have a greater need. And we believe that this is an attraction for good professionals. Who want to stay in the company. Who want to move to an advanced environment. There are many engineers who like this segment. We believe that it is possible to recruit. We will need it if we want to grow the company. We will need more professional staff. It will also be. We look at efficiency. And the hand on the heart. There is more in the company that we can do with the platform we have. We are good in many areas. But we can improve, especially on the project support. Harry will come back a little. But again. If we want to make money in this segment. It is necessary that we understand and drive the project effectively. Everything from time planning. Cost understanding. Supporting our suppliers, entrepreneurs. Purchase routines, calculation routines, etc. And culture. What we have focused a lot on is an energy culture. Where we draw new from our business areas. We see synergies. We use our system support platforms in a much better way. It is a common concern culture. We have chosen to focus on those three success factors. Our way. Comes here. I hope you recognize the green thread in the presentation. The green thread. Again, the segment we look at. And the advertised market. We see that the project is somewhere around 250. Up to 600 million. It is the most common. A common. Enlargement of these projects. There will of course be some projects that will be even bigger. But above all, we will use these projects as driving force. To vacuum the other market. If we are anchored in an area with a project that has been going on for several years. There is of course synergies. And look at the nearby infrastructure that suits us. One project in the center. And vacuuming the area to get synergistic business. Are we going to be good at this? If we are going to deliver a quality product. And have satisfied customers and satisfied employees. Then we have to prepare the company for this. And we are currently doing a comprehensive. We have started in certain segments. From which we have so far. A centralized approach process. We are done with it. How we take care of these large offers. How we draw synergies between our business areas. Norway, Sweden and Finland. With our carcule resources. We also have a centralized risk process. Which of course applies to the offer itself. And will be included during the entire project phase. Where we will give you some risk assessment of these projects. Which we are also done with. We will, which Ole will return to. Also has another model. For how we take the result in the project. Where we will simply be more careful. We have the first third of the project. Where we will have a careful result. When we see that we are trimming our organization. We have an understanding of how the project works. And we have created a customer relationship. We do this in succession. So prepare the company to win big. Naturally, it will be required that we carry out. It is a tough competition. Should we earn the money to reach our goals. Then we must be able to carry out the project in a good way. There it is untrimmed now. We are very, very, very good in certain business areas. Which we look at, analyze and understand. And we need to get better in certain areas. But everything is about how we understand our customers. How we communicate with our customers. How we manage our suppliers. How we manage our deliveries to the project. How we have control over our costs. And of course, it is about delivering sustainable infrastructure. With a good customer relationship. And an attractiveness that makes people want to stay. And work in this environment. We will recruit people into this environment. And then we come to the middle of the screen again. Then we see great opportunities to benefit from our three business areas. We are good at different things. If we see the synergies and lift this into a -over-culture. Then we have a lot to collect. Calculation system is often quite similar. Purchase routines are often quite similar. Cost management program etc. We can create a platform that is more cost effective. And there we look of course at excellence. We should not have everything. But what we should have should be in premium class. We will need many more competent employees. And above all, bosses who lead this process. And we want to keep the competent leaders, bosses and employees we have in the company. So leadership, leadership education will take a very big place. It is a hunt for the most employees. And we want the best. And it is required that we have routines in the company. Which takes care of making people want to be in the environment. Want to come to the environment. Have a safe environment and earn a job pleasure. And then our leaders are incredibly important. Finally, before I hand over to Lena. So we want of course that it should be a purpose. We build sustainable critical infrastructure. We create sustainable societies. We will of course do it with charity. And we will do it in such a way that people will stay and want to come to our company and enjoy it. And then I think it's time for you Lena to continue. Here you go.

Thank you. Yes. Switch over to English. Yes, we build infrastructure with a purpose. It's about what we provide to the market. But it's also how we do execution in the projects. As Anders mentioned in his presentation. The mega trends supporting our growth. And really driving us forward with urbanization, population growth and so on. And as you know, the national transportation plans have record high investments today. And will increase investments, especially in rail related infrastructure going forward until 2028. The addressable market for NSE Group as Anders mentioned is over 80 billion in 2028. Which says it's a lot to tender for going forward. So it's about choosing the right projects aligned with this strategy. What we have done and what we will continue to do is to convert sustainability credentials into contract winning projects. So we use our strong sustainability profile into contracts. And we also see that the customers, both on the governmental side and on the private side. They have an increasing demand on sustainable investments going forward. It's a bit different between the majority in the countries between Norway, Sweden and Finland. But we see an increasing demand, especially in tenders also. We see for soft criteria that there is a demand to describe both on the quality side. But also on what you will do on the sustainability side. And that's good for us. We have a unique position in our market. We have already reported on taxonomy figures for the past two years. We have been really proactive here to be in the forefront on new demands coming also from Europe. And as you can see here, we have for 2023, 72% of our activities in terms of revenue was aligned. Meaning that the taxonomy defines our activities as sustainable. This is a classification system that is really important also to help investors choose the right companies to invest in. But also of course to scale up sustainable investments with a net positive environmental impact going forward. And if you compare this with peers in our market, so other infrastructure companies, you can see that the average aligned revenue activities we are quite above the peers. And if you compare us with, I would say the really good green transitioners in the Nordics, you can also see we're not that far behind here either. So 72% aligned according to EU taxonomy is really good. So this is an excellent opportunity also for us to continue to strengthen our sustainable profile both externally and internally. This makes our employees proud as well. So this is important for employer branding also, that we have this strong sustainable profile. It's not just something we say, we act on it. Anders touched upon this also. We have of course a continuous focus to prevent injuries. We see that the last numbers here that we are on the positive side, we have reduced the number of injuries in Q1. We had zero serious injuries in 2023. And the sickness absence in the company is at a healthy level. And I think this is also really good numbers when it comes to, of course, we don't want to have any injuries, of course, but due also to the very challenging winter conditions we have. It's not acceptable to have any injuries, but it's a good trend. I would also like to mention also that we last year we established our first green finance framework. An external assessment was done, standard and poor, and we received the highest possible rating, dark green shading. And also, as you might know, that we successfully also completed a green bond issue of 400 million, with a four-year duration at three months neighbor plus margin of 4.4. And in Q1, we announced that the green bond was listed on Oslo Stock Exchange, the proceeds and the environmental impact of the green projects. So to sum up this chapter, short but very important chapter, we see an increased demand from our customers, both on the governmental side and on the client side, both when it comes to national transportation plans and also in tenders from the private sector on the ask for sustainable solutions. We use, of course, these sustainability credentials into winning contracts, obviously, and we also do it to recruit great people. As you will see today, we are not launching any new targets for ESG, and that's because we are just in the middle of completing the double materiality assessment. So when that is finalized, we will discuss ESG targets for the next four years and then revert to you with our ambitious targets when it comes to ESG. So we already offer great sustainable solutions to the market, and now it's about how we execute our project to reduce our footprint and handprint. So it's all about execution. Harry, do you want to take over and talk more about how we execute our projects?

Yes,

I know you are.

Hello everyone. So when we presented our previous strategy in 2020, NRC Group had been formed as a result of 14 acquisitions and the degree of integration at that time was very low. Business operations were mainly led by the organizations of acquired companies without unified processes and structure. So at that time, our strategy focused on integrating organizations and functions within the countries with the aim of creating strong country organizations with effective processes for business management and tendering and project execution. So now the strengthened platform is in place for delivering profitable growth. In addition to building country organizations and developing processes, we have successfully implemented turnaround measures in loss-making rail construction operations in Norway and Sweden. We have also divested loss-making civil construction operations in Sweden, and in addition, we have repositioned our Swedish maintenance operations by winning five new contracts with higher margins. Strategic review and improvement measures are underway in Norway for demolition and recycling business. In Finland, profitability of rail construction business weakened last year and as a result, improvement program has been initiated. When we look at margins of the project portfolio, we see that the margins of projects in upper 25 percentile and lower 25 percentile have increased, but the impact of few non-performing projects can still be seen. We have identified the root causes and established the strengthened Nordic project governance model in all countries. So the strengthened platform is in place to deliver profitable growth, and now we are ready to take the next step in the new strategy, implementing Nordic unified structures, processes and culture. Where we can utilize the best practices of different countries and further develop them, we centralize Nordic structure and processes like centralized tender process, efficient unified project execution, group final sale management policies, and margin recognition, which I will introduce in more detail later in the presentation. So the centralized tender process improves tender selection and tender review process and governance. The efficient project execution includes Nordic strengthened risk management process from project selection to completion. The margin recognition means that groups new final sale management policy with more conservative approach. It focuses on cost control, realistic valuation, risk mitigation and change order management. Let's deep dive a bit deeper and take a closer look at our unified tender process, which starts with project planning, where the project scope and quantities, work volumes are determinate. At this point, schedule, organization, resource plan are prepared, taking into account the division of the project into subcontracts, and potential or possible partners are selected. After this, we have necessary information for accurate cost calculation, at which stage subcontracts and materials are tendered, and in addition of production cost calculation, a cash flow forecast is prepared as well. After the cost calculation, risk assessment is held according to the Nordic risk management process to identify impact of risks on tender price and needed or necessary risk management measures. In the price offer preparation, in addition to production costs, the cost of capital based on a cash flow forecast and risk adjustment based on risk assessment are taken into account. The target margin is determinate, taking into account the overhead construction of the business in question to ensure the profitability of the project at EBIT level as well. Then before submitting the tender, risk reviews are held according to our Nordic unified project governance model. Risk reviews verify projects compliance with the strategy and approve projects at risk level and final target margin. When submitting an offer, we have invested especially in a good level of quality documentations to make sure that we are competitiveness in terms of soft values as well. So the quality is prepared in some cases in addition to price offer based on information obtained from project planning, risk assessment and customer requirements. In some cases, the offer submitting is followed by contract negotiations with the customers, especially with private customers, and if the final negotiation result differs from the original tender, it will be reviewed and approved again in the tender review process before the contract is signed. Then let's move on to the project execution process. When establishing a project, we first invest in collaboration, in integration with the customer and partners to ensure understanding of the customer's expectations and to create good collaboration. Alliance projects put a lot of effort into integration at the beginning, which creates good conditions for the success of the project. This is important also in other projects. Before starting the work, more detailed operational production plans are prepared. Typically, customers require approval of several plans before starting the work, wanting to ensure that customer's requirements and goals are met. In addition to those plans which are required by customer, we prepare also our internal plans to ensure that our goals are met as well, for example, in terms of final sale goals. The basis for cost control is a cost plan created from the cost calculation, so that the accumulation of the cost continuously can be monitored and compared to the plan. We have created regular routines for the project execution, for work planning and progress monitoring. Lean offers good tools for work planning, and from the point of view of cost control, important issues to be constantly monitored are, for example, the progress of the work compared to the schedule, realized quantities and work volumes, realized man hours, machine hours, subcontracts, materials, additional works and possible quality deviations, and of course realized costs. All of those are monitored against the plan. Without it, you cannot detect deviations, which are very important to notice in time. During the project execution, risks are assessed regularly, both for the risks identified in the tender phase and for possible new risks. And if deviations are detected, those operational plans are revised or separate plans are prepared to manage deviations and risks. This is a process which runs continuously throughout the project execution to ensure the success of the project. We have implemented a unified conservative margin recognition approach across all countries in medium-sized, large and complex projects. It means that at the beginning of the project, margin recognition is started with a slightly lower margin than estimated. At the beginning of the project, uncertainties and risks are at their highest, but they decrease as the project progresses when the margin can be gradually increased towards the estimate. This risk reserve for the project with a low completion rate reduces the result impact of individual project changes on monthly and quarterly results and that way makes reporting of the result more predictable. Thanks. Now, Ola will continue from this.

Yes, I will now take you through how we are going to deliver on our targets and how we are going to create value for our shareholders. Initially, I will start with some reflections on our financial achievements during the last strategy period from 2020 to 2024. As you can see, we have had moderate improvements in most financial KPIs. Our revenue is slightly up to 6.7 billion while our operational result or EBIT adjusted comes from breakeven level to around 2%. We also had some improvements in our networking capital coming from slightly positive to slightly negative and this is measured here at the end of each year. And lastly, our leverage ratio has come down to the target level at below 2.5 times EBITDA and this is also measured at the end of the year. We are now setting new targets with revenue above 10 billion and margin above 5% in 2020-2028. Over the last few years, we have taken a lot of action both structurally and operationally as Harry went through earlier and today we have a much better platform to continue the financial improvement than we had a few years back. If we look at the strategic priorities towards 2028, first and foremost, it is to improve the margin in the existing business as well as realize high margins in new markets. And we will not jeopardize or sacrifice margin over growth. However, profitable growth is a key part of our strategy and the reason for this is that we already have a unique position in a market that is strongly growing and we see that we have some competence that we can utilize in certain niches particularly within the civil industry. And lastly, we have to ensure that we have a robust financial platform to execute this strategy. And I will come back to details on this going forward. So if we begin with the current margin and the baseline we are building on. So in 2023 we reported an operation margin of 1.8%. In this graph we are now showing the underlying potential as we have adjusted out the three major items that impacted the result the most in 2023. First we have taken out what we call non-core business and businesses we are supposed to face out. Either we've done it in 2023 or we're doing it now in 2024 and this is the impact it had on our 2023 numbers. In addition to this, we also adjusted out the impact for the two largest negative projects. And as you can see the potential in our underlying performance is 4% as we see in this graph. So we already have a reasonably good platform in place and the actions we are now doing which Harry mentioned earlier will drive us up to the above 5% margin. This underlying improvement is supported by the impact from non-performing project or dead revenue which we see is coming down. So this graph here shows how much of our revenues was actually either a negative margin or zero margin. And the 2023 is the total turnover we had in 2023 which did not provide margin to the group either it was negative or zero. And as you can see it was 1.3 to 1.4 billion in turnover in 2023 which did not contribute to our results. And out of that 2023 numbers nearly 50% or more than 50% is represented by these two contracts which I mentioned earlier. And obviously these projects are going to be phased out and what we see now for 2024 based on Q1 result as well as the backlog we have remaining for the year is that we believe this non-performing project or dead revenue will come down below 500 million and will continue to be phased out as these two major projects is completed. Dead revenue will always be to some degree part of our business. This is part of the construction industry. However these two projects was beyond normalized levels so the actions we are now putting in place with Harry mentioned it will drive down the dead revenue going forward and we will have more profitable project in general. Another indication that we are improving our underlying performance is our net project adjustments. So in the construction industry you adjust your margin as you draw closer to the end of the project either you are performing better than expected or weaker than expected. And the net of this is called net project adjustment and a good project or a good company has more positive adjustments than negative adjustments. And so a good company then have positive adjustments in total as a net. And as you can see we have had a positive development both in Norway and Sweden over the last few years while we had some challenges in Finland in 2023 which we are now looking into and fixing. In addition to continue to improve the operational execution and operational platform we will focus our core business in slightly larger projects which will yield higher margin. And the reason for this is that we have the capability and capacity to execute projects from 200-300 million up all the way to 1.5 billion. And this is an area that we believe there are somewhat lower competition and the project risk is acceptable. Today over 80% of our tender pipeline value are projects which are above 300 million in value. And the concept here is that Anders said we will anchor our business in these core projects and vacuum for smaller projects in the surrounding area. And that means that we can utilize organization already in place and it will give us higher margin in total. If you look at the left hand side of this slide or this graph is that at the bottom end we see that there are several small players which can bid for small contracts and have the capability and capacity to do that. So there's increased competition there. While on the far right hand side we see that we also meet national and sometimes international civil players. And the reason for this is that in this huge contract there's a significant proportion of the scope which is civil work and not so much rail relevant work. And in such cases where we are on the very large contract we will try to focus to get a joint venture partner or partners which are strong on the civil side or it's a structured contract where we have partnership with our clients such as we have with alliance contracts and light rail contracts in Finland today where we've been very successful. As mentioned before we do believe we have a unique market position. The competitive landscape in the mid segments which we are talking about here is that we usually see three significant players in each geographical area as well as each rail technical area. And NRC Group is the only player which is strong position in all these geographical and rail technical areas. In addition to this we are going to leverage on our knowledge to expand into certain civil niches which have a high barriers of entry and this include power construction as well as water side construction such as water reservoirs and harbours as Anders mentioned earlier. And the reason for this is that we believe these niches actually yield higher margin than some of our bread and butter business. When we look in our product portfolio today the projects we have which have a huge scope of power or electricity and the project we have which we have water side construction we have much higher margin than we have in our standard rail business and this is because it is more difficult and this is a niche market where we have a unique competence. So by utilizing the competence we actually already have in place we believe this in total will drive margin for the group in some. So if I summarize basically our path for continued profitability improvement or the path from .8% to above 5% margin first and foremost it is to strengthen the execution platform already in place with the action already taking structurally and operationally and the new processes that Harry mentioned earlier and this will drive the majority of this improvement. The second is that we will go into slightly larger project and rather vacuum for small projects around which will also support margins as a total. And lastly we will have strong growth in certain niches within the civil industry where we already have competence and capacity which will yield higher margin in total than a group and in some this will drive a margin above 5% in 2028. Moving then to the growth leg of our strategy as highlighted earlier we see growth in all our markets both geographically as well as sub segments. We estimate in Norway and Sweden that the market will grow from around 20 or our Dresselmann market will grow from around 20 billion to around 25 billion while in Finland we expect it to grow from around 20 to up to 30 billion and this is obviously driven by a significant increase in investments in green power. We can already see this in our tender pipeline so on the left hand side you can see how many tenders we are working on the next nine months and the value of the tenders the next nine months. So either it's tenders we are preparing to bid or in the bidding phase or it's tenders that we already bid for but has not been decided if we win or we don't win and the value of this tender pipeline is not going to be the same so right now it's up to above 30 million 30 billion and it came from around 20 billion a few years back and we already see now sign in our order intake which had two quarters in a row with significant better performance than we had the last year and in addition to this we also won two light rail contracts one in Q4 last year and one in Q1 this year which currently is in a design phase and it takes about a year and a year and a half before the customer usually in municipality and the government decides if they want to go in the construction phase and we have no history that they don't go into the construction phase but the value of these contracts is each over 1 billion for NRC Group alone so there is a huge upside potential in this if this goes into construction phase In total the order backlog came then in at 8.2 billion as mentioned earlier and we are close to all time high and in line with the same quarter last year So as a sum we now have a target to increase our revenue from 6.7 billion to above 10 billion This comes foremost from growth in the market so out of this growth which is approximately 10% per year we believe -7% will come from market growth in areas we already have a position and the last part of this will come from market share gains mostly from the niches within civil business which we talked about earlier To support our growth and to support our strategy we need to have a robust financial platform As you can see here that our net interest bearing depth has come down over the last few years and the same we can see on the leverage ratio which has met the target of being below 2.5 times EBITDA In the upcoming strategy period we do not change the leverage ratio target it will continue to be below 2.5 times EBITDA but we will re-evaluate this over the next 12-18

years

On the right hand side you can see that our maturity profile with both our term loan and our bond loan is good which matures both in 2027 Due to the significant volatility we see in our working capital we need to have a solid available liquidity position and currently we have 400 million in credit facility and the remaining is cash on the balance sheet and we draw on this credit facility during the summer period as well as in Jammant as explained earlier With increased volumes going forward it is also natural to also expand the available liquidity over time So to summarize our capital allocation criteria First and foremost we need to build sufficient capital to support our existing activities as well as our future growth ambitions We will do this by optimizing our working capital as talked about earlier and we will also establish a machine unit to monetize our machines better than we have done historically And lastly we have the ambition to pay our dividend over time Anders

Thanks Then I summarize and go back to Swedish To summarize our new strategy period I will start with the platform We start in this strategy period with a young company We have had both opportunities and challenges and I think we have worked very hard with the current strategy period to adjust the parts that need to be adjusted We will see if I will highlight a few things the Swedish business area that the election started the year strong We also come from a platform where we are a track-related infrastructure company and the strategy period is about moving the company's structure to an infrastructure company a specialized infrastructure company focused on sustainable critical infrastructure We have a target where we aim at a turnover of more than 10 billion with a margin that should be more than 5 I emphasize that, especially when Ole said that it is a profitable growth but profitability will always go before the turnover If we have a target, we need a market and we have identified an addressable market for our company which is divided into three business segments and we see a strong growth in this market and the three business areas that we are working on The first one is that we keep DNA in the company the track-related competence where we are in many areas market leader We keep our business activity where we are in two of our three countries and we look at opportunities to drift other facilities than tracks It is possible to drift, as I said defense facilities, port environment water environment, we look at that and we look at what is useful in this strategic period civil space, which we have divided into three blocks energy, critical water supply and defense facilities We look at the tough segment we have a customer category that puts very high requirements we put very high requirements on ourselves and we put very high requirements on the system support and the machine fleet and other equipment that requires this infrastructure so excellent is one word We talk a lot about effectiveness we need to be effective we need to understand our processes we need to have a project delivery that of course leads to profitable growth and we have focused on several areas we have a centralized supply process we have a centralized risk process and we have a new model that will bring about our profitability which is a careful result We have also talked about the area we are aiming at which is a little bigger which is often between 250 to a little over 500 and we have looked at the model which has been very successful for us a little bigger project in our three business areas and then we try to suck up the area with synergizing business Our three business areas are also supported by a machine company where we have lifted in our machines and work at a centralized level in all three countries We have talked about culture where we should benefit from what we can and what we are good at in all three countries we can do that in a better way and that has a great focus in this new strategy Finally there are many good things that have been said but finally I conclude that is where we leave it and should have a purpose We are building sustainable, safe infrastructure for a sustainable social environment It should be an attractive environment that people want to be and work in and it should be a profitable environment for our business With that said, I would like to finish and open up for questions Thank you very much from us

Thank you So there are some questions from the digital audience as well so if you want to ask questions from here we need you to use the microphone for them Yeah, we can start here so I can work more Start with Simon Thank

you and I have a long list Thank you Can I have an answer in Swedish? Is that ok? Can I ask you in Norwegian? Yes, please We can start with Q1 in an isolated way Just take that one first If you can comment on the order that was cancelled in the quarter that was flagged on Saturday and what was behind it Can you start with that one? I can just

say that both that we got the order and that it was cancelled that happened in the same quarter so none of that is in our order So can you comment on what happened?

It's just that our distribution was tried by another company and it was about a competence that was a very small part of this project that obviously was not to our advantage and the project went over to the entrepreneur who tried the process

So this was something that we had a subcontractor who was going to deliver and it wasn't us who was going to deliver that competence and there were some details in the offer and we didn't have the reference that we needed The subcontractor

was going to leave references in this small segment and some parts in it and obviously a failure with our subcontractor and that's why the process was like that It

wasn't us

And a little bit about the cash flow So in the quarter there are 85 million in assets sold when was that sold?

It's not sold this is related to the capital where we are going to sell a part of the assets so we have made a subscription of the assets So

that's something that comes in Q2 and you don't know that yet?

I can't comment on that

We work with the case The big part is how we have moved and identified machine flow It's demolition Machines aren't a priority in any situation

And the subscription and reorganization in the quarter which is a big one off Can you tell us what's included and what's done? I

mentioned it Muntlisdan, I can try to give more color What we see is that the market is weak and we haven't been good enough to adjust the company after today's market And after a big loss last year we see that we have too much footprint in relation to the market and the income we have So what we did was scale this back We sold below or we lowered one company so that took a little cost a special project In addition to that we lowered our assets We saw that our assets were too high if we were to sell them in the future So we took that risk And last but not least we have a lot of packages for employees and all this is taken in the quarter and then it's carried out through the quarter So more

remains are expected We

hope not We still have a good business with a couple of big projects that fit our profile better But we have a lot of small projects in the

background And Easter was the holiday in Norway Did the working capital and working capital affect the payments?

I'm not sure I'll come back to that We haven't discussed it internally so I don't think it will happen But I can come back to you if it was effective I'll

go to the Q&A Continue

when

you're on the field You're entering a new field We've heard about the strategy You don't mention M&A At the same time you expect market growth between 57% The target is .3% from the previous round Is it only market share gain? How do you see M&A needs and get capacity?

We don't have that as a priority part of the new strategy We think that the first phase after we're a young company is about company acquisition when the company is formed and has continued This strategy period is primarily about organic growth We're always open to what's available and will evaluate all possible business But primarily we focus on organic and profitable growth

We've written a point that Bolton Action is a non-profit The second point is about what drives the growth The main wave of growth is market share but we also see that they need to take market shares 60% of the annual growth of 10% comes from market share and the rest comes from market share within some niches

In the guide you see a slight increase It's the subject or the adjectives you use The slight decrease was 4% last year Is the same range to expect?

What we say is that with a slight it's -7% up We've delivered flat in the first quarter and a little lower backlog than last year We showed a slide and we think we can take that so we can show a weak growth this year

Can you just continue? 5% is a tough target and we see what the civil margin is in Finland with voting companies IIT and others We see in the NCC in Skanska in Sweden they're not close to 5% It's a big market for you How do you manage to reach 5% in the market when the competitors actually have it?

We think we're better competitors than we started so we've set a target It's a tough target We believe in them We've divided it into niches and markets Requiring customers Requiring competence We see that the market we're aiming at is an opportunity to get higher margins Requiring competence Strong power, advanced licences We'll pay for that We're not a low price company We're in a premium sector and there's a way to earn higher margins We've talked about the business model We've seen a bigger project in the centre but an opportunity to create a synergy business We see where we have a shortage and where we can adjust We've talked about our machine fleet how we can handle it between three countries instead of being in project in all three countries from a centralized model We look at our process and our risk model We believe in our target It's a tough target

We're trying to get potential We delivered ,8% margin last year on a huge dead revenue It says that when we get these processes in place there's a lot of potential in the business we have today We'll expand into areas we think have higher margins

What's on the dead revenue graph? You're at the top of What are we looking at? Is it the backlog or the revenue?

To show that it's 2023 it's revenue In 2024 it's Q1 revenue and Q2, Q3, Q4 is what's in our backlog It's expected

It's

expected There may be some smaller projects but it shows that this has been a significant impact on our 2023 numbers It will affect this year It's expected but not near as much Is

it the expected backlog? What's on 2025 is in the backlog today 2025

plus

How much is more occur? It's mostly

the same We rarely have so many projects that go so far

When is more occur?

We'll discuss that in the near future but there are several years left and there's a lot of work to be done We have important transactions but we have a strong customer one of our most important customers and we have a good tone of conversation We'll understand what has happened what has changed what's on the dead revenue graph because there's a lot to do I see a good and constructive transaction

Then the mic goes on

We can have other questions from here and then we can have a look at the digital Q&A as well Here

I'll try to speak in Norwegian if I can I'm in the ABG Just a basic discussion with you internally You talk about centralizing some processes risk and offer processes Is there a self-contradiction between a stronger centralization and growth? Are there limitations in that place of centralization?

We see it from the fact that we can do things more effectively It's too costly to have three different processes in three countries That's the setup we see We have different calculative tools different cost-effects different ways to handle these processes One is to be more effective and reduce costs We also see it from a competence supply Hardly advanced calculative engineers who look at critical water supply or infrastructure projects where we can't have three different setups but we will need some central people who take care of it and the same thing is our risk process For us it's a way to be more effective to benefit from what's in the three countries cost reduction and our competitiveness That's what we have seen in the processes

I would like to continue on what Simon said 5% is a very high goal in a Nordic context but if we take a step back if we say 2026 where are we satisfied in 2026? Where are you confident that 5% is enough?

We are guiding for the current year and it's a slight increase but we see this as a stable and profitable growth until 2028 We take small stable, careful profitable steps

Follow up with the guiding from last year We have seen the dead revenue for 2024 Two questions How have you treated the dead revenue in the guiding? What do you see as a risk adjusted outfall of the dead revenue given what you are going to do with the negotiations with Oman and Nordic?

We can comment on that case with the UN and the UN we can't comment on that it's not right but we have laid the ground that we should have some dead revenue that we have on the table that we should have around 500 million plus in our forecast So there is already a expectation there about further changes so that is part of our business and our backlog

I have to ask the 500 million in the guiding is it implicit zero margin or is it implicit loss on the 500?

It's implicit zero margin

We can take a question here it's a bit of a follow up to Bengt but in relation to the margin if we see gradual development or do we see some jumps

We should get away from these strong strikes we start on a stable platform and we should take careful, stable, and profitable steps until 2028 that's what the guiding looks like with more than 5 and more than 10 billion in the forecast

And then it's a bit in the same camp, but we can repeat in relation to competitors What do we do differently to achieve more than 5%

in 2028? I'll repeat We are looking at a premium segment a hard-nosed segment where we obviously have a small but well selected part of this big infrastructure cake We think that demanding customers There is a way to make more money and to do that we need to understand the risks That's why we have put a lot of time and effort into our risk process and we have this new model to be sure of our results We start carefully, we trim the project and the organization we mitigate in the middle of the project and we get the whole result in the end of the project

So this is another question but it's more to NRC Way is it prepared to win big? Do we have enough experience in this in relation to winning the big projects?

I absolutely answer that We have shown, especially in the last quarter we have reported that we have a strong order process that is in line with the market What we can do better is to centralize the processes to be more effective and reduce costs But our offer is far

from enough Are there any more questions? Simon, take a little comment and we'll go back to you

Just a little bit on how this new strategy has been built up Is it from top down or has it been built up in the organization? How wide is it? How has it been received internally? How has it been communicated?

We have done our homework really well We have started in the board with many many hours of analysis and discussion and we understand the company and understanding where we actually earn our money We have had meetings with our 100 top bosses to discuss and anchor how they see it in all three countries and we have only for the rest of the company presented the ranking from those who are under the top segment the 100 top bosses and how the rest of the year with road shows we go around and discuss in so many leading groups we can reach to discuss create questions and understand and implement the strategy It is the creation that comes from within the company

Estimates come down it is not like they just press on and leave

Just a little bit on the co-operation and effectiveness of IT systems and so on We have several supply systems IT critical elements A number we are used to can pull out and many companies are where we have the biggest administration costs for project profit How are you today and how do you see it coming?

It is no secret we can top trim this company even more We have many good things in the company but we have too many of them We have no wrong things but we do not need to have three sets of most So what should we have? What should be phased out? We have a lot of system support we can have one set up It will not work everywhere in all three countries but it is a bit too expensive We can we can make it more effective Trim it all It has been started It will take a while

It will work against the law We

have done the analysis what we will do from the central what we need to be different We need to be different because there are three countries and we need to be different but what can be centralized we have analyzed and it is started It takes time to implement

How much of that do you think the margin is out of the expected 5% margin compared to where you are in five years and compared to where you are today How much can it give on the ebit margin of internal victimization

We will reach this goal but we have to look at it I will repeat myself First is the project and the customer The first is how we implement our projects and the third is how we take care of a top trimmed company that takes care of our costs We have to do all three We have to choose the project and the customer We have to make it effective and deliver the project and we have to have processes that are cost effective

Thank you

Last question about the margin Is there any difference in the country Is it 5% flat everywhere

The margin is no different All three business areas Norway, Sweden, Finland we aim at the same margin over 5

% It is a little different but everyone is over 5% and there is a little different growth expectations in the country Everyone has good growth but it is a little different In

total it is the same but they come a little different from the business areas We are stronger in civilian business areas and stronger in business so it is a little different but at the top it is the

same Now we have the same question Are there more questions Let's take a double check No more questions Then we are ready

I thank you again for taking the time to come here and thank you for us for your attention and see you again Thank you