NRC Group ASA

presentation for the second quarter of 2021-2025 for NRC Group. In normal order, it is possible to ask questions after this presentation. My feeling for the second quarter is that I think we deliver a stable, strong second quarter and it is in line with our expectations and my expectations. I think the hard work with reorganizing, restructuring and restarting the company now successively gives effect. If I look at the result per country, I can gladly note that all three countries are now contributing to the result. If we start here in Norway, we see a clean EBIT margin of 4.8%, which is a strong improvement from the previous year when we had declines in the second quarter. If I move to Sweden, it is the same thing there. We have a clean EBIT margin of 2.8%, which is also a powerful improvement compared to previous years, when we had a downturn. If I look at the results, it is actually the best second quarter we have delivered since the company was founded in Sweden. If we move to Finland, we also see a powerful improvement of our clean EBIT margin of 4.9%. The order entry in the second quarter has been on a stable, strong level, but a little unbalanced. We have a strong order entry in Finland and Sweden and a somewhat weaker order entry here in Norway. I will return to that. I will take some projects that stand out in the second quarter, starting with Finland. It shows that we are still a very strong and competitive actor in the Finnish business, with the profit of MA3, which is a large maintenance contract. If I move to Sweden, where we have focused on restarting our civil operations, where we focus on energy, defense and the water sector, we have a big profit from our new customer E.ON with an energy project that is valued at just over 600 million SEK per quarter. The maintenance contract in Finland is also just over 600 million SEK. If I look at the market, it is still at a very strong level, as I previously reported. I don't see any change there, really. If I look at all three countries, the demand for critical infrastructure is still high. However, with a little timing effect. I had hoped that some projects would come out a little earlier, especially the first half of this year, which is now a little later. But in general, the demand for critical infrastructure is still strong. Vi fortsätter att effektivisera bolaget och jag ser att de effektiviseringsprogram som nu rullar successivt har effekt, vilket bidrar till det här stabila resultatet i andra kvartalet. Trøndelmeråkerbanan här i Norge, som vi har pratat ganska länge om nu, är gladligen på väg att avslutas och jag tycker det har varit en bra hög aktivitet. Jag förväntar mig att det här projektet är till stor del avslutat i det tredje kvartalet. Vi har precis påbörjat att reducera vår organisation, reducera vår maskin, så vi är på en avslutsfas. Jag och vi är fortfarande fulla av självförtroende att vi ska leverera det vi tidigare har lovat för det innevarande år 2025, en clean ebit marginal på mer än 2, dock till en något reducerad omsättning. And that is mainly due to the fact that we currently have a timing effect where our light rail business is about to end, or the production part is about to end in some projects. And we are in the design phase in, among other things, Helsinki and Turku, which I expect will start in the second quarter next year. However, together with increased activity in Tampere as well, so that the turnover will take off over the next few years. If we look at the group level, we see a weak eye turnover. I think that 60 million SEK in the isolated quarter 2 corresponds to a good, strong quarter. The comparison figure will be significantly improved, given that we had large declines during the second quarter last year, and the margin is 3.4. The order entry is good. Kassaflödesmässigt så rör vi oss i rätt riktning. Det kommer Oskar komma tillbaka mer om men det är bra att notera att vi rör oss i rätt riktning och vi har en backlog på en stabil nivå på 9 miljarder. Om vi omsätter det till staplar så ser vi här då att Both the backlog of 9 billion is at a solid level, and what I am looking for is how it is for execution, where we have a good level for the current year and an increasing trend for 2026 and forward towards the end of our strategy period in 2028. The safety and health situation in the company is good, which I look forward to. If I start with the work injury frequency, where we measure one million working hours, which generates one day of sick leave, then we see a declining trend, which in this case is good. And we have seen it for several years, where we have gone from a frequency of six and we are down to 3.1, which stands strong in the benchmark for our competing companies. Det gäller även sjukfrånvaron, där vi har en nivå som är på par- mot föregående år 3,7. Jag är väldigt glad att notera att vi är så här långt förskonade- från allvarliga olyckor, och vill tacka mina kollegor- för ett väldigt väl och fokuserat arbete i det här segmentet. Med det sagt så lämnar jag över till dig, Oskar.

Varsågod. Tack, Anders. And good morning everyone. We have a second quarter behind us, which is in the big and whole completely in line with our own expectations. And we think that it brings us a good step further, the guiding that we have for this year is to deliver an EBIT of over 2.0%. In terms of revenue, we have delivered 1.8 billion, slightly above last year. The driving force is Norway up and Sweden up in activity. Finland down and back to that. In terms of profitability, we have an okay quarter. 60 million in EBIT or operating results. It is 3.4% margin, as Anders mentioned. The good thing is that all markets deliver positively, as you heard in the beginning. So it is very positive. It is now time for us to start looking in the direction of 2026. We are starting to look more and more at that. In 2026, we have said that we will deliver an EBIT over 3%. There are three drivers specifically in that direction. They are to ensure that we continue to contribute to the increase in our order reserves. is to carry out good project implementations, that is, to increase our project efficiency. Then it is to land, we call it the improvement projects, we have a fairly broad portfolio of improvement projects, and it is to land and realize the effects of it afterwards. A lot of good work is done in NRC by our colleagues. If we move to Norway, Norway has had a very high activity in the first six months. In the first quarter, we posted a turnover of NOK 500 million. In the second quarter, it is up to NOK 546 million. The single largest driver of the turnover, if we look at it project-wise, is ETM. And as you know, ETM contributes with zero profitability. In light of that, I would say that the profitability of 26 million, or 4.8%, is solid. Also in comparison with last year's profitability per adjusted level of minus 46. For Norway, I would especially like to mention Gunnar Knudsen, who delivers very well. We are very proud of Gunnar Knudsen. It is also the case that the improvement work under Ingevild's leadership will, over time, lift the profitability in the remaining portfolio. Note, of course, that it will take some time. In terms of orders, it is a weak quarter. In terms of numbers, we have received an order intake of 190 million. Compared to the production, or what has gone out of the order reserve, it is 35%. With that, the order reserve has reduced to 1.6 billion. They work very well and actively with this. We also see clear signs in the market, both for rail and civil, that tender activity or market activity is increasing. Let's go to Sweden. Sweden has a turnover per quarter of 619 million kroner. That makes Sweden an all-time high. A 12-month turnover of 2.2 billion kroner. Last year, Sweden had a changeover project in Piteå, in the north of Sweden, that was contributing. This year, we also have a changeover project in the far south. I'll get back to the relevance of that in a moment. In terms of profitability, Sweden has an EBIT of 17 million, or 2.8%. In comparison with last year, Sweden had minus 60%. 12-month profitability for Sweden, as you can see in the graph in the middle, is 44 million, or 2% of the mentioned revenue of 2.2 billion, on a 12-month basis. In terms of orders, Sweden has had a very solid first half year and a very solid second quarter. An order intake of 963 million corresponds to 1.6 times the produced turnover. And with that, we have lifted an already good order reserve up to an all-time high level of 3.8 billion. Let's look at Finland. Finland has a turnover in the quarter of 606 million. And it is actually below Sweden, but in the meantime. There are some simultaneous effects that have struck Finland. Partly, we had MA4 last year, the fourth operating area in Finland. We no longer have that. We have won MA3 in the quarter that was, but that is the first start of next year. Within Rail, we have a little lower activity in the meantime. Anders was involved in the so-called TITS effect on light rail. It is quite central. The light rail projects that we have in production, Crown Bridges, they are called the TAMP, so there the turnover goes down. Tampere 3, which is in the beginning, has not yet reached a high production rate. And as mentioned, these two projects we have in the design phase, it is only a very minimal turnover now. But we expect it to come to an implementation phase in both Turkey and Helsinki next year. So the order base in this way, and the change in Lightrail, predicts growth next year. If we look at the profitability in Finland, it is clear that 30 million and 4.9%, we are proud of that. It is good to deliver such a margin at such a reduced turnover level, and that is largely thanks to the improvement program they have run and taken down the cost base so much. So of course the whole break-even level of what you need to have in Finland has moved down. If we look at the 12-month salary level in Finland, it is at 57 million, or 2.2%. In terms of orders, it has been a quarter on average. 598 million in order revenue corresponds to approximately the produced turnover. It is not surprising that the order reserve remains at the same level, 3.6 million kroner. Let's look at the cash flows. On the left, you can see the working capital. The working capital increases with a moderate 19 million kroner per quarter. And I would say that's good. It's not normal for a CFO to be happy about an increase in working capital, but it's good to see in the light that we especially have had two working capital demanding projects in the quarter. ETM is familiar with this, and the mentioned track changing project in Sweden has also required some working capital in this project. As far as ETM is concerned, it is very happy to be able to say that the top of labour capital is now behind us, and ETM will generate some liquidity in the future. If we look at operational cash flow, it is at 83 million, driven of course by profitability and moderated by the mentioned labour capital increase. If we look at the development in cash, we generate 9 million in the quarter. The cash holdings go from plus 114 to plus 123 million. Operational cash flow pulls this up. Financial cash flow pulls it down to 78 million. It consists of leasing payments of a little over 40, interest payments of a little over 20, and a down payment of Pantelånet, which I will get back to, of 15 million. In addition to these 123 million, we have a rolling credit facility of 400 million. So the liquidity situation for NRC is satisfactory. If we look at the yield side, the net income yield has gone somewhat down to 822 million. And it consists of three components. A euro loan at the bottom of 150 million. An obligation of 400 million. and a leasing yield at the bottom of 400 million, netted with the position. I have mentioned this before. Some companies post their Net Interest Debriefing Debt without a leasing yield. Our leasing yield is a large part of it, so I think it is good to mention that those who are counting on this should be aware that it is 400 million or close to that. When it comes to default times, there is no change. We pay our Pantelån running once a quarter, and that runs out in 2027. The obligation also falls in its entirety in 2027. So we have a good time and flexibility to handle that. When it comes to our leverage ratio, or the relationship between yield and profitability, we promised last quarter that we would go down to a normalized level from and with Q2, and we have done so with 3.0. Further development will be that it will move down a little marginally in Q3, and a little more down in Q4, and we will get some happy seasonal effects. Let us finally look at loan conditions. We have very solid headrooms when it comes to our loan conditions. PT is measured at four conditions when it comes to the bank. As you can see from the top four lines, we have very good measurement achievements on those four. What I am particularly pleased with is that we last year received an assessment of the measurement of two loan conditions, leverage ratio and interest rate ratio, where if we had already measured from Q2, we are within, but the measurement is first taken up again per Q4. So that is solid. When it comes to the obligation side, you can see below that we also meet the requirements with good buffer. Also there, the interest rate requirement increases somewhat. It increases from 2 in the next quarter, and further up to 2.5 in the quarter after that. But we already meet these new requirements with the data on Q2. And then I think we can note that what I said during the Q&A last time still applies. There is no risk of any break in the loan conditions for NIC Group. With that in mind, I will return to Anders who will sum up the first half.

In summary, I think that we deliver a strong and stable second quarter. I am looking forward to the hard work of reorganizing, restructuring and restarting the company successively. Resultatmässigt så innefattar det då att vi levererar 60 miljoner kring ebitda i det andra kvartalet med en svagt ökad omsättning. Jag tycker vi har haft en stabil orderingång generellt på gruppnivå under det andra kvartalet, dock lite olikt balanserat med en stark orderingång i Sverige och Finland och en något svagare orderingång här i Norge, vilket till stor del beror på att vi har en timing-effekt, det jag hade förväntat mig. att några större RAID-projekt skulle ha kommit tidigare i det första halvåret som nu ligger för anbudsräkning i det andra halvåret. Jag tycker att jag kan med stort självförtroende kvarstå vid att vi guidar för en clean ebit-marginal för det innevarande år på mer än två. Tittar vi på What we do is that it's been about a year since we launched our new strategy and I think we follow that strategy and I think we see successive effects of improvement. I would like to mention specifically that in our new civil business, where we focus on the energy, water and defence sector, it is good to note that we are competitive with the new win in Sweden. We are an important actor in this sector and I expect a good continued progress in all three countries. In terms of the market, there is no change. I think there is a very high and strong demand for critical infrastructure in all three countries. However, there is also a little timing effect here. We now see that our tender pipeline is perhaps a little more advanced in time, but still at a strong level. The company's efficiency continues at a very high level, and I see that these efficiency programs are a contributing factor to the success of our better results. We have come a little further in Finland, where we started the program a little earlier. The program here in Norway is just about to start, so I expect a successful, continuous improvement. Tröndelmeråkerbanan, shortened ETM, which we have talked about for a long time, is now on its way to be completed. It is good to note that we are now establishing our personnel, establishing our machine fleet, so that we can focus on other important projects. I expect a fully completed project in the third quarter. Det kvarstår också att vi kommer att ta juridiska åtgärder mot vår kundbane NOR när projektet är färdigställt. Men vi finns här och finns naturligtvis tillgängliga för dialog fortlöpande om så skulle önskas. Vi vill ju lösa det här också. Ja, med det sagt så skulle jag gå över till vår guidning som jag har nämnt under min inledning och summering. and really no change. We are full of confidence that we will deliver a clean EBIT margin in the coming year 2025 at more than 2%. We see a margin of more than 3% in the coming year 2026 and we remain to guide for a margin of more than 5% clean EBIT at the end of our strategy period 2028. And then I think we are ready to open up for questions, Oskar.

We can start here. Norway, what are the expectations for new contracts in the next half of the year and in 2026?

We have a very high trade activity and a strong tender pipeline, so I expect that we will maintain our hit rate and will secure new contracts in Norway during the second half of the year and at the beginning of the next year.

And then there are questions around Civil regarding the investment that was launched on Captain Market's Day last year. How do you feel about the plans?

I think it's good. We have carefully followed our strategic direction. We have been careful to ensure that we have the right competence, both in supply and production. And we are most ready to be in Sweden, where we have gathered power on this supply to the energy sector. This project is about electricity. And it is proof that we are competitive and see synergizing affairs with our core business rail.

I have a follow-up question. Finland on the civil side, we have been there for a while. What is happening there?

The same thing there. We have a high supply activity. We have lost something, but remarkable. Most of the projects are under some form of negotiation. We have so far mostly focused mostly on solar and wind power. So we continue to negotiate, but it is a little longer lead times than these perhaps traditional rail projects. But it is reasonable to assume that we will get a meeting here during the second half of this year. The defence sector is a little further back. Right now it is the energy sector we are looking at. Follow the defence sector very closely. But perhaps we expect that most of the offers may come first during the coming year.

There are some questions. We can leave it to someone here.

A question about cash flow. You said there were two labor-capital demanding projects.

Yes.

The road change is in season, so it is released in the third quarter. Yes. The second one is on the market. There is actually a protection here from the entire market. I see there is over 7 billion in production for next year. Is it a real down adjustment? I see the tent pipeline in the back of the bag is down. Is it an activity down or is it a delay that you are actually talking about?

Vi guidar fortfarande för mer än 7 miljarder i omsättning nästkommande år. Vi har fortfarande ett mål på att nå mer än 10 miljarder i slutfasen av strategiperioden 2028. Just i innevarande år är det en timing-effekt där vi är i avslut på vissa produktionsfaser i Finland. Vi har designfaser i två stora projekt som kommer att komma igång under det andra kvartalet nästkommande år. So I see that we are not changing our guidance, but it is more than seven next year, more than ten. And the same thing when it comes to our tender pipeline. In the current strategy period, it is a strong market, but in the next nine months we can see a small timing effect. It's a bit more ready for the defence sector than I had expected. The same goes for some of the big rail projects that I thought would come earlier, but they're still in the national transport plans, so it's not a change, but a small reduction. So the answer to the question, we continue to guide for more than 10, we continue to guide for more than 7, but with a small timing effect that affects the current year 2025.

So more reduction than a real decline?

The last question from me is about cash flow. There are 4 million, I think it is, AGM and Haga in certain companies, and I think there is a specificity in the notes that it may go towards a conflict there. What should we think about that, and what is Burr's case scenario on the NRC's side in relation to cash flow?

That is a difficult question, Bengt. AGN Haga is a working association where we are 20% partners, and we have two of the two majority winners, which is a Turkish and Italian company. This is quite far back in time. It is true that we have financed up to 4 million in our hands. Everything has been done pro-rata, so the large owners contribute with their pro-rata shares. But there is a conflict there with the Swedish Transportation Agency. And it is nearing a time when that conflict must go through a proper process, so to speak. So it is difficult to say what what a type of world case is in relation to this. It's in the books and so on, so we now expect, we don't expect any major declines, we expect also that the capital that we now have, we have capitalized it up to handle it in the phase where we are now going to negotiate with them, so not a very big decline, but an uncertainty, and we don't have completely 100 percent.

I can follow up on the follow-up question. The timing effect in relation to the markers, is it mainly on the construction site or on the railway markers?

It is a bit unbalanced. It is perhaps about rail here, especially in Norway, where we see a timing effect when some projects are a bit missed, but not that far, but rather that we thought the first half year and it will come now during the second half year. On the rail side, I do not see the same shooting in Sweden and Finland. However, in the defense sector, the shooting applies to all three countries, where we might have expected that we would get a larger project for supply calculation in the coming years, and that applies to all three. Maintenance is not a change.

Can you tell me in detail about the capital binding on one site?

No, we can't just go in and share projects. Other than that, we have said that we have a significant amount of money. Now I mentioned that the labor-capital bond has reached its peak. It is now behind us, so it is an important milestone for us, because there has always been more ahead of us, and we are getting a cash release now, partly until Christmas, partly until next summer. There is a big decline from a project that is finished until you get the final decision. And then, as I said, there is a big pot at the end of the discussion, either legally or illegally. Significant progress, that's what we can see.

One more question. What are your expectations for the end of the project?

How sure are you of the end of the project in the coming year? I'm 100% sure that we will end the project in the coming year. There is no doubt about that. I'm always open to continuing a good dialogue with Banen and Or. I know that Ingvild in Norway works very hard with that. Men det vi har i våra prognoser är att det eventuellt kan gå till en rättslig process som ligger några år fram i tiden. Vi har gjort väldigt balanserade antagningar kring detta. Det gäller även AGN, Haga, Bengt. Vi har gjort balanserade antaganden och väldigt noggrant värderat risker och möjligheter. Det ligger in i vår guide.

We have another question. It's about Norway. You were quite specific about the cost savings in Finland.

What are the details about the program in Norway? The program has just started here during the latter part of the second quarter and I have very high expectations. And to mention a figure, I expect about a savings of 40 million SEK in two years.

Then we have the last question. Say over 2% in guiding for the coming year. What can we expect?

We are not guiding for a range, but I am standing here and promise that we will deliver a net margin, a clean net margin of more than 2. Let us return to the ten shares after the second, but now it is more than 2. There are still two quarters left, but it is more than 2. Inga frågor från? Då tror jag vi är beredda att tacka för denna presentation och önskar alla en fortsatt trevlig dag. Stort tack.