NRC Group ASA

Welcome to the presentation of the NRC Group for the second quarter and the first half of the year, the year of operation 2024. Usually, after this presentation, there will be a possibility to ask questions. In terms of introduction, I will start with the market, as we have communicated in our new strategy. There are four business areas we are looking at. We are building, upgrading and rebuilding, track-related infrastructure, together with water, energy and the defense sector. We still see strong government support in our three Nordic countries, Norway, Sweden and Finland, who support this market. This means that we will continue to have a very strong supply pipeline that supports these four business areas. We have a somewhat lower order flow in the second quarter, which I refer to two parameters. One is natural season variation. We count our jobs, most of them during the third, fourth and first quarters. We also have in line with the new strategy, chosen and will be very selective in which projects we want to connect our organizations to. So we are selective and we have big jobs that require resources, especially here in Norway and Sweden, which is a lower order flow. I started my job in October. I have been working on a detailed analysis to get to know the organization and the business area. We have created a strategy during the first and second quarters, and we are now taking action, which we have done for a while now, where leadership is most prioritized. We have a new Norway boss, among other things, who started his job in January next year. We have a new boss in Sweden who starts his job next week, together with a new CFO, and we prioritize the leadership at the project and head office level. Along with this, it is our application process that has been highly prioritized. Which projects we choose that should be in line with the strategy and the company's profitable growth. Our risk process, Cross Nordics, we do in a similar way and evaluate in the same way, in all three countries. And the prognosis that we want to see is a more careful approach. We have also prioritized leadership programs in the company to bring out new talents. If I may mention a few, we have a top talent program that is rolling right now. We have a mentor program and we have a newly started trainee program. We are also looking at the IT side with a new IT boss, especially now, prioritized the financial support system. Financially, the calculation, cost control, and time control are prioritized. A few axis blocks of everything that goes on in the company. The financial part in the second quarter is of course challenging, given the downscoring we communicated in July, a downscoring of 160 million. I will come back to the five parts where this downscoring is based later, but it is affected. The board, together with the management, has decided that we will strengthen our position of equity in the near future. We will communicate down and to what extent later. We have engaged ABG and Danske Bank in this issue. With the downscoring in the second quarter, the company will be back in 2024. But I want to emphasize that there is no change, I am very convinced that we will deliver in line with the strategy we have communicated. The EBITDA-Gastrid margin is still 2028, there is no change in that parameter at all. The guidance for the coming year 2024 and the long-term goal, which I will come back to at the end of the presentation. Downscoring of 160 million is largely due to the Trøndemeeråkerbanan, which we operate here in Norway, 50% shared with the Swedish business area. What happened there? We communicated in the first quarter that we had expected a member to own the room in June, which it did. It shows that the complexity of the question we are discussing is greater. We have a project that is planned to be 760 million, which has passed 1.5 billion. The first round of action was needed to understand the complexity and discuss how we proceed, as we did not achieve any solution. That we did not get a result, together with the accounting rules that are in place, this is a time aspect, makes us choose to have a much more careful presentation in this project. This is a project that we have full control over. We have strongly strengthened the leadership in this project, on the project head side, the place head side. I feel comfortable with how we are running this project. We also have a strong team that will run this medium. The new prognosis minus 125 is, for me, a comfortable level. But there is an upside and an downside. In the same way, we have made a thorough analysis of the remaining projects. The situation in the company has resulted in four downgrades of 35 million. One project in Sweden, which is being introduced to a legal twist, is ongoing. But we have chosen to be careful. We also have three projects in Finland, worth 20 million. The most important thing is what we do in the future. I repeat the priority things. It is about our application process again. It is about our risk process. It is about our careful results presentation, together with a strong leadership, especially on the Trondheim Eurokibana, to ensure that we are able to deliver the remaining progress. On the safety side, we see a good trend. It should be zero, of course. We do not want any damage at all. But on the working-danger frequency, we measure one sick person from day to day, per one million hours of work. We see a decreasing frequency of 4.6, which is good, if we compare it with other companies in the same activity. We are on par with previous years, on our sick person from day to day, on 3.8, which I think is a reasonable acceptable level. We are incredibly happy that so far this year, and previous years, we have not had any serious damage in the company. Safety is always prioritized in everything we do, I would like to emphasize. After this introduction, I would like to hand over to our new CEO, Oskar.

Hello everyone. It is nice to be able to stand here, just a month after it started. It has been a learning period, absolutely. And certainly also intense. I will not go into the background any more. NSC is an exciting company. NSC is well positioned towards Nordic infrastructure. I am very happy to be involved and contribute to my role, and I am looking forward to delivering on this strategy, and the goals I have set out. In my role, the main value is the company management. For me, the core of company management is to have control of the company, control of the finances, to ensure real development, and not least to have good prediction precision. I have good knowledge of entrepreneurial business, finance and business development, which everyone will benefit from in this role. As Anders mentioned, our numbers are, of course, disappointing, and we are sorry about that for the second quarter. It is dominated by the 160 million, as you mentioned, Anders. On the other hand, we have had a quarter that has not been so good. It is a bit on the volume side, but it is also a bit on the shift in volume. The consequence of this is that we are strongly on our earlier EBIT guiding on slightly improved. The results for 2024 will be strongly negative. We will get back to that. But as Anders said, we are doing our job, the market is good, our tender activity is good, we are turning the development and we are delivering on the strategy. And that already from 2025. If we look closer at our numbers, we see that we had a turnover of 1.7 million in the quarter, and an EBIT adjusted to minus 88. The difference from last year's 1.8 and plus 65 is then in the big and whole, explained from these 160. If we look at our -months-old, on the left side of the slide, it is a turnover of 6.7 million, and an EBIT adjusted to minus 0.4%. Corrected for the 160 million, we would have been at 2%. It may seem a bit hard to correct all the time, but we are fully aware of that. At the same time, the situation is extremely close. It is important to see what the underlying profitability is in the store. If we look a bit further down the slide, on the right side, we see that we have big adjustments in this quarter. 653 million. 3 million of that is connected to CEPT. And we believe that we are done. There was more in the first quarter. And the whole 650 million is connected to a downgrade or so-called impairment of the goodwill. And a few words about that. Before we did this impairment, we had a goodwill in our books of 2.4 billion. IFRS claims that we will make a annual valuation of it. And it is normally done in connection with the annual revenue. At the same time, IFRS says, and specifically IAS 36, that if there are indications in place for a downgrade, we will make a new modulation of this. These indications can be weak results that previous model estimates have not reached. And also that the market cap is at a lower level than the book for the own capital. So we have done the modulation. Yesterday, we decided to control based on the new modulation and write down the goodwill with 250 million. Sorry, 650 million. 500 million of that is connected to Finland and 150 million is connected to Norway. This has no liquidity effect, but it eats some of its own capital. At the same time, it is our own capital, after this, at a solid 35%. So over to our country, and we move from west to east. We start with Norway. Norway had a turnover in the quarter of 494 million, 6% down from last year, which was at 524. We had an EBIT adjusted at minus 46. The adjustment elements for Norway were at 62.5 million. The reason for this is that the ETM project, which then had 125 million, was distributed to Norway and Sweden, so it is a joint project between Norwegian and Swedish companies. We adjust that and look at the EBIT adjusted LTM, which had not been at 0.3%, as you can see in the graph in the middle, but had been at 3.2%. We see on the order side that Norway had a great development, now has an order reserve of 2 billion kroner, as we see in the graph above. At the same time, we also see the black elements that represent what will be left over this year, that the weight is a bit more in the background than later. As Anders was saying, Norway has taken a lot of action, a lot on the board, it works very well with both hands, and the ETM project, as Anders said, is working on broad fronts. We have control over the project, and it is working on broad fronts. Let's move on to Sweden. Sweden had an turnover in the quarter of 438 million, which is organically 7% down from 552 in the quarter last year. We have adjusted for the Civil Works meeting that was sold during the last year. If we look at EBITDA Døstud, we are at a minus 60. The adjustment for Sweden is the same 62.5 million that has been raised in Norway for ETM, and on top of that, the 15 million on MOB, which we saw Anders referring to. Adjusted for that, EBITDA Døstud has been at not minus 60, but plus 17. If we look at 12 months' revenue, we are at 1.9 million, and minus 2.7%. If we do the same adjustment, we are not at minus 2.7, but we are at plus 1.4%. In the end, we believe that we can stand for the title at the top, so the transformation and restructuring in Sweden is on the check, which is completely independent. In terms of order, very good development, a total order reserve of 3.3 billion when we go out of the quarter. If we look at the change in Sweden, we have been under a lot of pressure. Anders was in on it, a new CEO started this week, a new CEO for all, started before the summer, very high-grade tender work also for Sweden, and we also have a restart of civil, a completely different type of civil activity than the one we sold in the previous year. Finally, we look at Finland. Finland had a turnover in the quarter of 823 million, which is up 13 to 14% depending on whether you work in the local market, the local is Euro or Norwegian crowns, but a good growth in the quarter. EBIT adjusted is at 32 million, the adjustment element there is also Anders, it is 20 million crowns on the three projects, so EBIT would have been corrected at 52, and EBIT LTM would have been at 2.9%. On the other hand, the picture is a little different than for Norway and Sweden, we see that there has been a weak development on the order reserve to 2.5 million, and that creates a little weaker speed now in the second half of the year, which we are not satisfied with. We work with improvements on a letter front, we work with improvements in maintenance areas, we work with improvements in rail, we work with cost reductions and adjustments, and of course we also light up market share offers. It can be mentioned that we are in the design phase for two light rail projects, they are large projects that if they come to the construction phase will do a lot with the order book, and we expect an explanation on the first project during the next few years. Let's look further at cash flow and capital. As we look to the left, we had an operational cash flow of 7 million crowns in the quarter. What dominates operational cash flow in the short term is always capital gains. That is a main priority for us and I have also worked extensively with the last ten years. If we look at capital, we see that through the quarter we have reduced from a situation of plus 55 to minus 49, which looks relatively good. But in that, it is 160 million crowns. Corrugated by that, we have an increase in capital of 56 million crowns in the quarter. The main reason for that is the ETM project. We are still binding capital in that project. Corrugated by ETM, that is a pretty good development. The second quarter is normally a quarter where we bind capital, so that means that on the average for the rest of our portfolio, we keep the capital in this quarter. If we look at the change in the cash position on the right, we start from 177 million in positive cash, divided by Q1. We mentioned adjustment of 7 million crowns in operational cash flow. The investment is increasing by 15 million crowns. This is positive because of the sale of assets in connection with the restructuring of the capital. We have a negative finance of 77. This is a good result for the return of loans, and leasing payments. Out of this, there will be a positive cash position of 120 million crowns at the end of the quarter. In addition to this, we have a credit facility of 400 million crowns. But, it is important to note that we use this facility to a large extent. The reason for this is the mentioned capital. It swings strongly. It swings between the quarters, some quarters are harder than others, and especially between the months. Through the months, the capital swings significantly. The second reason for using this facility is that the capital is at a low level, in order to normalize it. The third reason is that the ETM project continues to bind capital until we are finally at the target with the customer. This means that the credit facility will be used. Let's look at our financial situation in total at the end of the quarter. On the left, we have a net and loan position of 880 million crowns consisting of bank loans of 200 million, bonds, i.e. obligations, of 400 million, and a leasing loan of 400 million. The net is of these 120 million in accounts. If we look at the maturity or the repayment plan in the middle of the graph, we see that the bank loans, represented by black cells, are repaid in the course of even 2027, while the bond is to be repaid in Q4 or October 2027. Despite the fact that we have this ongoing repayment of bank loans, i.e. a long-term loan, we have the balance for Q2 classified as short-term. It is again a technical accounting thing because the waiver from the bank was not in place per date, 36. We will come back to that later, but it is a short-term thing. From Q3, bank loans are again classified as long-term. On the right, we see our loan rate, measured as net and loan in the course of EBITDA. It makes a jump up to 5.1 per quarter. Without the mentioned 160 million, it would have been at 2.7. Then it is okay to link some comments to Covenants, i.e. loan contracts from our loan insurance, because this creates a challenge. I can say that after Q2, we got a waiver from the bank. We were compliant with our covenants per medium in July. I will show you, for example, in Stocknaltis, which we sent on July 12. Last week, we came to an agreement with the bank about a new calculation method for ICR, or the interest cover covenant. It meant that we were no longer in compliance with Q2, but we immediately got a waiver from the bank, so that we are still compliant with Q2. I will show you in Stocknaltis, which we sent last week, August 21. Then we got a new waiver from the bank for the period Q3, 2024 to Q3, even Q3, 2025. The reason for this is that when we get these descriptions in our books, we will be able to get 12 months into the future. This is always measured with 12 months of re-use of the power. If it is severe, we have to get it repaired in 12 months, so we got that in place from the bank. Finally, it is worked out with our advisers to ensure that the conditions are met in accordance with the obligation. Finally, let's look at the other side. Isolated for the quarter, from the left graph, we had an order entry, order income, at 1.3 million, which means an built-in bill ratio, or a ratio with turnover of 0.8. If we look at the 12 month basis, it is at 1.0, which means we have got it as much as we have produced. The consequence of this, in the middle of the graph, we see that our order backlog is quite similar to the level we had 7.8 billion kroner. But we see on the right side that a little more of the order income will be delivered later than what was the case a year ago. There are some consequences for other half-year isolated, and for the guidance we will come back to. But, as Anders was saying, the activity on the market side is high, and our activity with tenders is high and good. What we have done, among other things, is that the 29 billion is completely normal. We have taken a real clean-up, so I am in the 29 billion, which is what we are working with now, and which has the data of the next nine months from 30.6. This level supports our further growth. The market is solid, it is both building and operating services for critical infrastructure. The new strategy that is laid opens up and addresses a larger market. For us now, this with quality and precision in the work of the tenders is extremely important. I give you a word back to you, Anders, for a summary of the way forward.

Summary I do not think, or do not need to repeat all the figures that Oskar has just presented, but the headline of the second quarter is that it is heavily affected by the down-scores we communicated in July. We are coming, and it is decided that we will strengthen our liquidity position and we have engaged with the ABG and the Danish Banking Question. And above all, there are two things that I would like to emphasize in this event. One is that we will be long-term to have time to be able to implement the message on the ETH, which needs to be done. Again, there are big blobs and important discussions, and we want to have financial strength to implement these discussions during the time it takes. And we have a new strategy that we are on our way to implement, and we have a good end goal in that strategy. It is the two headlines that we are strengthening the liquidity position. We have taken a lot of action, and many good things are happening in the company right now. I will repeat the biggest headlines, which is that we are strengthening the leadership if we start from Norway. Ingvild, our new Norwegian boss, started his job in January. We have naturally gathered strength in how we run the ETH, both project-wise and on a medium level with two strong teams. In Sweden, the new boss Thomas will start next week together with a new CFO. And the headline in Sweden is that I think that the whole turnaround and the transformation that is taking place in Sweden is successful. We are completely in line with the plan that we have communicated. The GTM that is shared with the Norwegian business area of 50% has a natural impact, but apart from that, many good things are happening in Sweden. In Finland, we are in the final phase of streamlining and making a total breakthrough in the organization. We need to become much more cost-effective. And I feel that we have done a good job. We will communicate in the later part of the year what this breakthrough has resulted in. But it is in the process. The strategy and the platform for the company is still very good and strong. It is a big question for our services. We have a good platform right now and it makes me go over to the market where we still see a strong, steady support in Sweden, Norway, Sweden and Finland to upgrade, build and rebuild critical infrastructure or critical sustainable infrastructure in our four business sectors. Streamlining infrastructure, water, energy and the defense sector. And it is among other things the partnership for Sweden and Finland in NATO is of course a business-driven one in this issue. As Oskar has also shown when we are in line with our new application process and choose the upcoming projects we see a very strong application pipeline. And nothing we do in the company should be at cost and we build with a sustainable shift. Then I will go over to the guidance and the re-signing. Again, the re-signing that is communicated here in the second quarter has a big impact on the year of 2020-2024. It will be a return. And we guide for the remaining year, again with the headline that our member must be allowed to take time on the ETM. Therefore we guide for a range this time and we guide for a return of 6.5 billion. And a reduced margin of minus 0.9 to 1.5. Numbered it will be minus 60 to minus 100. Is it a range for the remaining year of 2020-2024. The platform for our new strategy and goal remains. There is no change in that communication at all. And we are convinced that we will return to the beginning of the year. And continues 2025-2026 to 2028 with building an NSE Group for free. And we guide for the next coming year on a return of more than 7 billion. And a return margin of more than 2 billion. And then we expect a linear development. But start 2025 more than 2, more than 3, more than 4, more than 5. With the end goal 2028. And the end goal will be a return of more than 10 and a reduced margin of more than 5 with a linear from 2025. And with that said, Oskar, I think we open up for questions.

We can start here. Are there any questions here? We have a lot of questions from the digital audience. We will start with Oskar. You say that the ETM will start capital by the end of the year. Do you think it will start capital by 2025? 2025? The project

is expected to be complete by the summer of 2025. And we expect to see a little bit of a difference. If we don't reach a settlement or a contract with the customer before the completion of the project, it will start capital by June 2025 and some increase month by month.

Just follow up a bit around capital. Can you comment a bit on the capital in relation to the ETM and the water? It

is connected. As I said, it is a project that contributes a lot to the negative side of the capital. We start with a lot of capital. If we look at the total liquidity balance in the projects, it is a lot negative, far, far more negative than the result of minus 1.25. Which is also a positive side, because at a certain point, capital will also come in from the project.

Should we follow up with some questions? I have some more. We have received quite a few questions about the size of the emission. Some comments on that.

We don't comment on the time and size here today. It is a decision by the government. It is a decision taken. We will implement our strategy and manage ETM in the time it takes to get capital. We have engaged ABG and the Danish banking government.

Back to the strategy. The long-term goals. Who is the driver? The country, divisions? More than 2%? We

don't guide per country. We see a strong, sustainable growth in the 3 countries we are in, in Norway, Sweden and Finland. They are in different phases and have different opportunities and different challenges right now. All 3 countries will be developed in a sustainable way in line with the linear guidance we have communicated.

We have to follow up on the emission. When is the planned launch of the terms for the

emission? We don't communicate the time and size here today. We will return.

We will do the same. We can close the Q&A digital. Any questions?

If there are no more questions, we thank you from our side and on the other side. Thank you.