NRC Group ASA

Welcome to the presentation for the third quarter of 2024. After this presentation, you will be able to ask questions. Summing up, for the third quarter, we have a result in line with our expectations. We have a given guest result of 40, which should be compared to 80. But we are still affected by the negative reviews that were made during the second quarter. This means that we still have a result that does not contribute to any result. But I also think that we see a remarkable increase in our turnover. We see a marginal increase in our order input. We see a marginal increase in our order stock. So in summary, a result that is in line with expectations. A big event in the third quarter is that we have strengthened our financial platform. We have made a successful emission. I would like to welcome new long-term owners to the company. We have followed up the emission with the reparation emission here in the beginning of the fourth quarter. We have also re-executed our banks and obligations. As new capital, together with re-executed conditions, I think we have a strong economic platform to be able to carry out our long-term strategy and also take care of our challenges on our big projects here in Norway. We still see a very strong market related to building and upgrading critical infrastructure in all three countries, Norway, Sweden and Finland. I will say something. From a very high level, Norway is strengthening its budget for the next coming year, related to the railway. In our big projects, we have the Trøndemeeråkerbanan, and the ETM, a project we share with the Swedish business sector, on the challenge of Banenor, the income with all the documentation we want, which strengthens our cost requirements. Banenor is currently looking at this documentation, and it is reasonable to assume that we will take new steps with a new round of thought here in the beginning of 2025, hopefully already in January. Due to the strong market in all three countries, we have continued to have a very strong pipeline. A strong pipeline is the prerequisite for us to be able to grow this company for free. I will return to that. It is an important phase of the offer we are in now. We are counting most of our contracts during the fourth and first quarter. And it has started so well so far. We have secured two significant contracts in our Finnish business sector. We have a design phase in Tampere, which has now gone into a production phase, which we have summed up to around 900 million. We have also secured a design phase in Helsinki, and it is reasonable to assume that this design phase will go into a production phase, like Tampere in the beginning of 2026. Also valued at 900 million. Due to the -out-subscriptions that were carried out during the second quarter, at 160 million, we continue to guide, unfortunately, for a negative result in 2024, but within the same range. We have a range of... a result of minus 60 and minus 100, so there is no change in that guidance. I would also like to emphasize that we also guide for an EBITDA adjusted margin of more than two for the next year, 2025. And our long-term goals for 2028 are also remaining, where we will reach a turnover of more than 10 billion and an EBITDA margin of more than five. Due to the strong market, you can see here our tender pipeline, which is not at a record level, but at a very strong level. Again, we note that we have ten-year transport plans in all three countries, which shows that there is a great interest in building and upgrading critical infrastructure, and specifically related to tracks, related infrastructure, so the platform for the company to take care of this strong market is still very good. And we also see a budget increase here in Norway, related to the next year, 2025, specifically related to the railway, so it is also very good. As I mentioned, we have an increase, but marginally, but an increase in our order intake. We also have an increase, it is also marginally, but an increase in our order stock. I note that during the previous year, during quarter four and quarter one, we had a very good order intake, but with a strong tender pipeline, with very intensive order work, it is reasonable to assume that we will keep, hopefully, to increase our hit rate to be able to fill up work in this fourth quarter and during quarter one. It has started very well here in quarter four. Again, we have secured two significant contracts in Finland, and we have secured one contract here in Norway, the station is valued at 180 million, so the order season has started very well, but it is an important season, and we also see on the stacks for the ordered or worked order stock that we need to fill up a project, but it is ongoing. The work of sustainability, with emphasis on security and sickly products, is always very, very important. I note gladly that we, in our accident statistics, where we measure one day of sickly products per one million working hours, have a declining trend. We note 5.1, which should be compared to 5.6 in the previous year, which then signals that we are less hurt in the company, which is good to note. We also see on our sickly products, it is marginal numbers, but also there we see a declining trend. We are a little less sick in the company, 3.7, which should be compared to 3.8. But the most important thing is that we have been so far in 2024, we have been spared from serious accidents. We have also been spared from serious accidents this previous year, so in the meantime, I think this is good. With that, I will leave the introduction to you, Oskar. Here you go.

Thank you. Thank you, Anders. As Anders was saying, the third quarter was a quarter that was completely in line with the expectations we had when we were here a few months ago and reported the second quarter. So that's on the line. If I have to draw something, it must be in terms of turnover, 2.1 billion against 1.8 for the previous year. That is a good increase, I think that's good. The activity is a prerequisite for us to turn our profitability. If I want to draw up a project, it is a track change project in Sweden, in Piteå, where they have delivered a very large volume in a very good way through summer and autumn months. So it's a very good job and the NRC is very good at track changes. On the profitability side, I would like to draw up that the profitability is at 40 million, I will come back to that. It is very positive that all three of our markets deliver a plus. So it is clear that marginally, we see that it is on the careful side. We can draw up two things there. First of all, we are still characterized by some dead turnover. And dead turnover, we define it as projects that either give negatively, but then we have taken all costs upfront, so that means we produce at zero or projects that exceed zero. It's a bit of a boring term. It gives us a little down to the bottom, but still on some boring projects in this way, so a fantastic job is delivered in a project like this. It is an example of that. Where a large team is now producing a very good quality facility. The other effects of profitability is that we are more conservative today. We have, among other things, a model that we talked about earlier, another model for us to bring profitability through the projects. This means that we start a little more carefully and take more profitability out of each. And of course, during a process of that, you are doing a lot of profitability in front of you. The order reserve was Anders in on, so it is a weak increase from last time, also order intake. And cash flow I came back to. Anders, you were also in on this, which I have done on the financial strength through the quarter. It is important. We collected 200 million kroner in the third quarter. We followed up with 50 million kroner in the fourth quarter. So that is in itself, it strengthens us in a fundamental way. We have also, as you were saying, re-evaluated loan conditions on both the bank and the bond side. So if we get out of that, we have got a good, solid financial platform that supports our strategy in the period until 2028. So that is very, very positive. So I would also say, and my experience as a relatively new member of the board, is that we are working well with the management. We are working to centralize several important processes today, which is what I have been impressed by what you have done earlier. And these are processes such as within Tenders, within project control, within forecasting, within liquidity management, within digitization, so that you can name several areas. That will give results over time. We are also working a lot with risk management, risk evaluation, and especially I, as a new member, have been involved in and spent a lot of time in understanding which risk exposures we have. And I will be related to that in the next slides. So we are on the quarterly total, we have a turnover of 2.1 million euros, the highest in the higher, against 1.8 million in the lower. We have an EBITD of 88, and we have an EBITD of 40, the comparison with 80 in the lower. So we have just a small comment on this with operating expenses. We see that they have increased by 3 million kroner, and one should be very careful to draw a conclusion that the rate at which all operating expenses have increased. It can be said that 260 million of that is related to high project activity. So it is material expenses and costs to the EU on projects. If we look at the LTM side, the last 12 months, we see that we have a turnover right below 7 million kroner, and we have an LTM EBITD margin, that is for the last 12 months, at minus 1%. If we are allowed to correct these 160 million that we had in the previous quarter, we would have been at plus 1.3%. Still not a very high number, I mentioned these two effects on the previous slide, and it is clear that year after year has been characterized by many changes in addition. So I would like to draw one more thing that says here, share of loss from associated companies at minus 18. Some of the risk work has now come to the conclusion that we have reduced risk exposure against a company called AGN Haga. It is a company that we have had since 2017. We have been working with two partners, NRC owns 20%, our two partners V-Build from Italy and Gulermak from Turkey own 40%. The company was again in a restructuring phase that was concluded earlier this year. In connection with that, a deal was made with suppliers, where the owners were in and made guarantees. We have now financed the company so that we have come out of this guarantee position and made up the debt, so it is risk-reducing for us. And that is what is behind this loss of 18 million. Let's go over and look at the countries. As usual, start from the west and go east and look at Norway. Norway had a turnover in the quarter, we see on the bottom left, of 569 million and a result of 13 million. The order in the quarter was 282 million, that is to say about 50% of what we produced or a so-called built car of 0.5. We see on the built car over the last 12 months, it is not there, but if we had calculated it over the last 12 months, it is at 1.2. That is to say that we have received 20% more than what we have produced. So that is positive. The ETM project, Anders was involved in it, many people were wondering about it. Just a little recap for those who are not completely in on it. The electrification project we have in Trøndelag, the foreman of the north, it started out at 760 million, then grew in cost to 1.6 billion and we have not been agreed on the amount of all the changes. Ergo concluded on that in Q2 and carried out the project assessment down to minus 125 million. In the third quarter we have maintained it. Throughout the third quarter, we have also worked very actively with documentation of these requirements and we have sent over a complete summary that we believe is satisfactory. There is good and constructive dialogue now with customers at several levels. And as we said initially, we expect that the measurement will start over the new year and maybe already in the course of January. It is upside down and it is downside linked to measurement results. We continue to look at Sweden. Sweden had a turnover of 700 million, 701 million in the quarter, strongly up from last year. The mentioned change project is the biggest driver of that. In terms of revenue, a little more on the careful side, with 10 million crowns. If we look at the LTM numbers, Sweden has a 12-month turnover of 2.1 million. And that is a very good number. It is actually a bit funny, because it means that Sweden has become bigger than Norway for the first time. And internal stabbing, we think that is funny. In terms of results, the margin here at minus .1% in the last 12 months is not good. If we correct again for these so-called descriptions that we had in the second quarter, we are at plus 1.5%. The conclusion on the basis of that is that the development in Sweden, except for the bump in the road, which is a big bump, is that it is a positive development in Sweden. They expect me to continue. The reason for that is from the order reserve. They have an order reserve that supports that it will go well. And it is also positive that we have a leader who is in time. We had a new manager, director Thomas Johansson, started in the quarter. We move on to Finland. Finland had a pretty good quarter. 840 million in turnover and an EBIT of 31 million kroner. If we look at the top left of the LTM, it is clear that 2024 will not be a good year for Finland. They have a 2.8 billion in turnover now per Q3, the last 12 months. And they have a profit margin of 1.6%. I dare to assume that .6% represents a starting point. From now on Finland will also rise. And I am based on two reasons. One is that we are running a restructuring project in Finland that is running very well. The effect is that we have managed to reduce the number of employees by up to 10%. So it is an important capacity reduction that we are doing. At the same time, we are implementing a new division structure that will be very effective and good. The other main reason is the order base, which is now, especially with what happened in Tampere, positive. So Finland has reached the bottom, and we will also deliver better in the future. Over to the power supply and labor capital. What you see very clearly on the two left curves is that labor capital and the company are very volatile over time and have been too volatile. But in its nature, it is very fluctuating. And as most people know, labor capital drives the cash flow. And what we see in Q3 is that we have gone from a labor capital of minus 49 in Q2, middle graph, up to 36 billion. This increase has happened in Norway and Sweden. So of course it has a very happy focus. Finland delivers very well in the labor capital area at a high level, very steady and good. If we look to the right at the change in cash, we had a positive cash sales of 120 million when we entered the quarter, and we go out of it with a positive cash of 8. The capital from the operational cash flow at minus 48, that is pulling down. The labor capital effect is the biggest one. And then the financial flow at minus 73, it pulls down, it consists of, just for information, we have 14 million, so we have a down payment on a salary loan in the quarter. We have about 40 million in leasing payments. And we have roughly 19 million, as it is now, in pension payments. Another thing from the gray and the plush can be, where is the MSE's break-even level cash-wise? Under different conditions, you can count on it to be an EBIT around 50 to 60 million. There we balance cash-wise. And then we have a down payment on a salary loan with 14 million in the quarter. So if we add 56 million, where are we then, called the cash flow break-even, including that we are paying it down, we are at around 110 million. The last comment to this area is that the labor capital increase we have now seen, it has been expected. I was very clear about it during the quarter, that the cash position at 120 million was quite strongly optimized. And it is also the case that our labor capital is fluctuating, it is very volatile, and especially intra-monthly as well. That is, internally in the month, it is clear that we are the lowest or worst labor capital, the highest labor capital we have in the middle of the month. Because of that, we have a credit facility of 400 million kroner to take up these fluctuations. In the quarter report, we write at the same time that we will not use it until it is full, so we have some new covenants on it, which means that we have some degree of minimum liquidity that we should have. But we have a very good cash flow prognosis and we have a very good cash flow position, and what I said initially, as I call the financial strength, it is there. So this is fine. The cash from the emission, that is, the 200 million emission that we then carried out in Q3, will be paid in the first week in October. And the new test from the repair emission, that was paid in for two days ago, on Monday this week. So it is not included in the numbers. If we look at the credit side, we see to the left that we have a net interest rate in the area right in the area below. And it consists of the mentioned PANTA loan of 190, it is an euro loan, so it swings a little with the exchange rate. It consists of an obligation or bond of 400 million kroner, and it consists of leasing debt of 415 million. In the middle graph, we see how the stock structure is on the debt, on the PANTA loan, as I mentioned. It is quarterly the down payment of that, and it is then paid down in October 2017. And the responsibility also with the obligation, it also falls in Q4, in 2027, if I say in 2017, I call it 2027. So that also means that here also, I think this is quite comfortable. But of course there is a type of refinancing on the debt side a little ahead of us, but we will take that into account in good time before that, so there we have good control. The right side shows how the debt ratio is measured as net and debt in relation to EBITDA. And of course, when the break, when the counter goes up and the net goes down, it gets a pretty bad result. And that was in Q2, then we saw that our debt ratio increased by five, and in Q3 it increased further. So this can be said to be a bit of a slow matter, we measure this with a 12-month running number, which means that what we got in our books today in Q2, it will be there even in Q1. And when we report Q2 next time, the numbers will be at a completely different and normalized level again. And when we are measured from the bank on this next time, we are out in Q4 2025. So we have very good time, and we are very comfortable with the bank and the hedge, and actually the whole financial strength of ours. With that, we give the floor back to Anders to summarize the quarter.

Summarized from my introduction and Oskars presentation, I repeat that I think that in Q3, we have a result that is in line with expectations. We are still affected by the downscales that were carried out during Q2, but we note a significant increase in turnover. We have again a marginal increase in order input, a marginal increase in order stock, and if we take away these isolated downscales from Q2, we have a underlying result on the rolling 12, which signifies that we have a free company with all the conditions to grow In numbers, we have a marginal downscale in Q1 on 1.9, which should be compared with 4.3, and the result of the downscales, we have 40 that should be compared with 80, but again, heavily affected by the downscales that are carried out. We have strengthened our economic platform, it is an important condition for us to be able to carry out our strategy and have the strength to handle the challenges we have had here on the big project, the Trondheim E-race, which we have talked about, and I also want to welcome again new long-term owners of the company. I will take a few axes from our three business areas, Norway, Sweden, Finland, starting here in Norway. We have secured an important contract, a stable station, for 180 million, which is good. We have significantly strengthened our management group with new professional employees. I look forward to our new Norwegian boss starting his employment, which will take place here in January, and we are in a very intensive delivery phase, in parallel with other companies. And we have worked very hard and intensively to get all the documentation for Banenor in the Trondheim E-race that strengthens, in our opinion, our requirements. It is reasonable to assume that after this period that they need to look at the documentation, we expect the company to take off again in the beginning of the next year, hopefully already in January. It was Norway. If I look at Sweden, we have had a very high processing during the quarter and during the year on an important project, and as Oskar mentioned, in Piteå. And it shows that the Swedish business sector can now handle large, complex projects with a good result. We also note, isolated in the quarter, that we have a result improvement from 1.1 to 1.4 given that the Jässin margin, so the underlying is healthy in Sweden and the Swedish business sector is on the right track. If we look at Finland, we have talked for a while here that we have made or are doing a through-through of the Finnish business sector and streamlining. We are done with that now. The through-through is done. We start in the beginning of 2025 with a reduced organization with 10 percent, an effective organization, a new organizational structure. So there are all the conditions that we should break the trend in Finland and from now on grow together. We have also, as I have mentioned, in the beginning of this harvest season, in quarter four, secured two significant contracts. One in Tampere is valued at 900 million and a design phase that we estimate will be a production phase in the beginning of 2026 also valued at 900 million. So that is high and good activity in the company. If we look at the market, there is no tendency that the market is still very strong. It is a very strong interest in all three countries to build and upgrade critical infrastructure, especially related to trace-related infrastructure. And from these very strong levels we note that Norway is strengthening its budget for the coming year, again related to the railway. The platform in the company is very good. We are building critical infrastructure and the market for critical infrastructure is very strong. And the market situation generates that we have a very strong trending pipeline, which is also a prerequisite for us to grow the company profitably. It is an important phase we are in now. During the winter half of the year we secure our big contracts so we are counting on a lot of projects right now in all three countries. And compared to previous years, we had a very good order in total in quarter four and quarter one. And I expect that we will be able to maintain or hopefully improve the hit rate. And then we have strengthened our financial platform. It feels very good. We now have reimbursed bank and obligations together with new capital in the company. So we have all the conditions and we will succeed in the future. Looking forward, we will unfortunately continue to guide that there will be a negative result for this year due to the downsides we did again in quarter two. But it is exactly at the same level as we have communicated earlier. We are at a range this year aimed at the uncertainty in the trending railway which is between minus 0.9 to minus 1.5 percent and the -Gastel-marginal for the current year 2024. But it is important to emphasize that we are also at a long-term goal. If I start with 2025, we will guide for a turnover of over 7 billion and an EBITDA-marginal of more than two. And in line with our new strategy, we are matching the company with our long-term goal to reach more than 10 billion in turnover and more than 5 percent EBITDA-marginal by 2028. Now we open up for questions.

I think it's a bit complicated. It's for Oskar, back into the business capital. Is it possible to get a comment on how much of the increase comes from the ETM?

Yes, it is. There is little in this quarter. We agreed on a smaller agreement in July, which meant that we had settled for some of the business capital that we had in the ETM. But it is written, just as we said earlier, that ETM will continue to bind significantly increased business capital month after month from now until we have the solution in place with the customer.

And then there was a question about dead revenue, which you were talking about. Are there any projects in the portfolio that you see potential for? Bigger reductions益 2025?

Potential, it's a difficult question. It's naive to say that you're done with the reduction, because you always want to, in a big relationship with many projects, so there will always be something to write down. At the same time, the whole method we now have makes it difficult to keep the reduction in a completely different way. So, in concrete terms, no, not something I expect. Of course, we have a range of options for someone.

In addition, we have a different model of results in line with the strategy. We are much more cautious when we bring the results especially in the beginning of new projects, to know that they are well-timed and the organization and customer relations work. It should also be a security that we can handle.

I'll take one more question before we end. Anders, what is the biggest risk to achieve or not achieve 7 billion in revenue in 2025?

I see it positively. The most important thing is that we secure new contracts in the company that we can achieve a decrease in revenue. It's hard competition, but we are a strong actor, so I expect that we will secure new contracts. But to make money, we need new contracts. Absolutely. Then we need an organization that can handle these contracts. I see that we work with a strong business area in Sweden. We have done a streamlining process and we are well prepared to start 2025 and forward with a more cost-effective organization and a completely new organization structure. So all the conditions are there for us to handle this fine market in a good way and earn more money and build the company for

free. Okay. I think we'll stop here. Is there anyone who has questions? No.

If we can start with the production in the quarter, with Sweden, is there much pastoral material in that number?

I'm sorry, Piteå. With comments on that, there is not a lot of material in such a project. So there is something right. I have no detailed information. We will

take the old backlog for execution. In the coming quarter, it was down 4%. Three months ago, it was down 17%. Production has been very high. It sounds like that's what's happened here. There has actually been a lot of production on many projects and there has been a lot of order.

I think your analysis is correct. We have had a very high processing in the quarter and especially during this part after the summer. But as always,

it is an important

phase now. We mostly follow our order log here under Q4 and Q1. We also see that in comparison to previous years. What we have shown is that the projects that are in the order log for the processing of 2024 will not be able to affect. But it is important to be able to affect the processing of 2025 and 20... or forward towards 2026 and 2027. But it has started to want to add. We have some contracts that we have told about.

If we go a little further into Finland, it will decrease by up to 10%. We have seen a little speed. It is like the whole-year effect, maybe 50 million on lower growth. Is that the number you know again? And when can it be expected to have full effect? Is it late next year?

If I start by emphasizing what is being carried out, then you can go into the numbers. The listening is carried out. We have a much more cost-effective organization in Finland. And it is fully ready from Q1 next year. So the effect will be in the second half of 2025. But exactly the numbers, what the effectiveness is, you can go into it, Oskar. But again, it is an effective organization and we have a new organization structure that is aimed at the market area.

We did not guide on simple segments. If we had done that, we might have had to go out with both positive and negative profit warnings. So I put my head out here in the city and really mean that this called LT-MAG in Finland, it is now at the bottom. Finland will deliver better in the future. I have argued that this is the result of the restructuring program. And as Anders said, we get the effect on the employee side already from Q1 to a large extent. And completely also after Q1, it is 100% in. So it is quite unbearable and a significant effect. That is what he says himself. With such a large amount of money, there are many millions of crowns in this.

Two questions, if I may. At ETM, it looks like all have been moved up to 1.6 billion, I think it was 1.5 billion on Q2 in production value. Does that make any profit in relation to the time?

We are still with the project forecast that we have previously announced. We have not made any changes to it here in Q3. It is still at minus 125. But again, where we discuss the challenges we need to solve, it is old cost increases. And it is true that when we summarize now, the end result of the project is rather at 1.6 or 1.5, so we see that it is getting bigger. But the production that is now re-established, until it is finished in the later part of next year, we feel we are back with that. The changes and challenges are related to what has happened. And there we have then needed to strengthen documentation on the wishes of our customers. We have also done that in a very good way. The generous documentation we have sent in to Baninor that ensures our view of the demands we wish.

I will just add something to that. The risks have not increased from what we said in Q2. So that means that when the costs have increased a bit, then the demands have increased a bit, and very naturally and very well documented. But still upside down and still downside, connected to what we have in the books.

The last question is from Agent Haga on the NRC. Is all the risks now low? Or can there be a new up-capitalization of the company that will affect the current situation in the NRC in 2025?

No, there is still a discussion that is going on with our customer traffic department. It is not resolved. But our ambition is that what has been done now is final for the capital shot in our part of this company. But the project that is not finished like that, but the answer to your question is that we will do it before such a ploy at all, and come in with additional capital shots.

Do you have to be there because it is a mortgage guarantee? Or can you choose not to be there and then it is a share or zero? Everything is possible.

We are the company that is and works in the Swedish business sector. The other actors in the consortium are from Europe. So we are very eager right now to ensure that we will do our part to have a good relationship with the customers and suppliers in Sweden.

I think it is very positive that those who are in the majority sector, the Italians and the Turks, took part in the absolute prorata with their shares, which were much larger than us. I think that is positive.

No more questions here either. Thank you

very much for today's presentation. And good bye and good bye. Thank you very much.