NRC Group ASA

Good morning and welcome to this presentation for the second quarter and the first half of the year 2026 for NRC Group. As usual, after this presentation, there is the opportunity to ask questions. We are just halfway into our strategy period until 2028. The goal so far has been to create a stable, profitable, sustainable group. and I think we are moving in the right direction. And then I look mainly at three key figures. I look at the margin improvement on the rolling 12, where we have a steady positive trend. I of course look at the margin in the quarter and the corresponding cash flow. If we look at the isolated quarter, we reach a result of 61 million, with a margin of 3.6%. Unfortunately, we have been forced to take a one-off cost in Sweden of 71 million from a legal dispute that was filed in 2018. It is no secret that we would have liked to have succeeded in that dispute, but now it is as it is and we have taken the cost and we move on. I think the underlying improvement in profitability is in all three business areas, Norway, Sweden and Finland. And we reach a margin of about 20% in our new business area machine. Special operation with KEPT and Gunnar Knutsen is in line with the plan. In our strategy period, we are very selective in what we include in our portfolio. We want to have projects that suit our company, suit our organization and lead to our long-term profitability goals of reaching more than 5%. It is tough competition and there is obviously cheap turnover to buy. We are not going that way, we are prioritizing long-term profitability. As I mentioned, it is very positive that the cash flow is rising. We have doubled the cash flow in the quarter to 180 million. And it is at the same time the same thing. We have had this under focus for a long time and therefore it is delightful that we see that we get the effect of this hard work. Vår synpunkt är att vi har lämnat över ett kvalitativt projekt i ett hjem till vår kund Bane Nord och efterlevt de krav som är ställda och vi har således skickat slutnotan. Slutnotan kommunicerar vi här idag och den är på 566 miljoner. Vi kommer att påbörja en förhandling om det här slutkravet under det tredje kvartalet. Men som vi har kommunicerat tidigare, om vi inte når framgång så kan inte vi fortsätta vara bank till Banenor utan då kommer vi söka rättslig instans för att lösa den här knuten. Den strategiska översynen av Gunnar Knutsen pågår enligt plan. Resultatet av den här översynen kommer vi tillbaka till under det tredje eller fjärde kvartalet. Jag tycker fortsatt på den överliggande nivån att vi har en solid, stark marknad för kritisk infrastruktur. However, we see a delay, especially here in Norway, where we had expected a larger supply of larger rail jobs from Banenor. We have in fact only had two larger jobs to fire here during the first half year. Therefore, we will control our strategy in Norway. where we look more at the civil side, especially in water and concrete-intensive projects, like the parking lot that we won here during the first half of the year. A very important part during the second quarter and for NRC Group is to ensure the second wave of light-trade projects in Finland, and it is therefore a joy that we won both projects. We won both Helsinki and Turku. and we hope for a quick start in these projects. We do not have any improvement in these two new contracts in the second quarter. I will conclude the summary with what I started with. I think that the key figures we are looking at indicate that we are moving in the right direction towards our long-term goal of reaching more than 10% and more than 5%. If we look at the isolated figures, I will again raise the margin in the quarter, which is 3.6%, compared to 3.4% in the previous year, and the corresponding cash flow, which is 180 million, which is more than doubled in the previous year. We have an order entry that is in line with the previous year, and a stable order entry and a backlog. Jag hade förväntat mig avslut på några projekt här i det andra kvartalet som vi fortfarande håller på att förhandla om. Jag hoppas att vi har framgång och kan komma med några positiva nyheter i det här tredje kvartalet. Men det är vissa saker som fortfarande inte är avgjorda. If I look at the backlog, what is in the backlog is only the first part that is contracted. If we look at what the entire second wave of light rail in Finland looks like, you can see that for execution in 2027 and forward that we have a considerable improvement there than before. And it's the same thing in the backlog. We don't have the entire light rail project in the backlog. Som jag förväntat mig, eller som jag har kommunicerat tidigare, så önskar vi en boktogbild på mer än ett. Men då tycker jag ändå att vi har en stabil orderingång på två miljarder och då är det fortfarande saker som vi håller på att förhandla om som jag hoppas att vi når framgång i här under det tredje och fjärde kvartalet. The security situation in the company is not good. We see an increased frequency of short-term injuries. Therefore, we go back to our routines and look at what we can do better to ensure the absolute best working environment for our organization. We have a zero goal, so we make a change. The sick situation in the company is on a stable level compared to Benchmark. Gledjande nog så er vi förskånade från allvarliga olyckor sedan lite drygt två år tillbaka. Det är väldigt viktigt. Med den här inledningen så lämnar jag över till Åsgeir.

Fint. Tack Anders. Väl overstått sommer till det rade. Vi tänker att Kuto är ett solidt kvartal. Vi føler att i kvartalet så leverer vi på de allra fleste KPI'er. It is also cool that from the inside of the company I and my colleagues observe that the quality in NSE is increasing. We are a learning organization. It is also nice to see that improvement work bears fruit. And today we are a much stronger corporation than we were before. In terms of profitability, Anders was in on it. In the quarter EBIT at 61 million, or 3.6%, against 60 million and 3.4% last year. Again, we have to mention this one-time effect, 71 million kroner, we will of course get back to them. It is, as I said, 71 million kroner. It is okay not to start doing everything for so-called creative calculations, that does not mean that we pace at 132 million kroner. It doesn't mean that, but it definitely shows what we have talked about earlier, which is that we have robust accounting practices in the company. And even to absorb this in the course of the quarter, we feel that we are a witness to that. If we look at the turnover, it is 1,704 against 1,763 in the previous year. Let's look at Norway. Norway had a turnover of 368 million kroner compared to 379 million kroner last year. The EBITDA is at 39 million kroner compared to 5 million kroner last year. Norway's second quarter has been characterized by a lot of good business, good project conclusions, and we have provided a positive project adjustment on the ETM. As far as the ETM is concerned, it has been a nice last phase, especially three things. The correction of what is called the punch-fail, which is always done after large projects, has gone very well. We have had good change work at the end, and for ETM there have been changes all the way from the first day to the last day. And last but not least, we have delivered this claim, or our final statement, which Anders was in on, for 566 million kroner. And we are now starting a process with Banen Nord, which Anders was in on, and we will see where this leads us. In the books, it is as it has been before, the books are, as it should be, reasonably balanced according to our view. This means that yes, there is upside potential, and there is downside potential. When it comes to liquidity, the main thing is that liquidity is only positive to the right. So at a time of upheaval, we are provided with essential liquidity. The order in Norway is 97 million, which is not something we are trying to hide, because it is a weak number. It is against 652 last year, and with that we have an order reserve of 900 million. That is the weakest point in the report, and we have pulled it forward several times over time. There is a full focus on this. Anders was talking about what I call the turning point. It becomes too binary, too risky to focus on the strong weighting towards rail that has been done. Now there are things that indicate that there will be more projects, but still we have to turn more towards civil in Norway. We have implemented Pwned Position, which was the name of the improvement project in Norway. It has been a tough process for the organization, and of course for everyone who has been involved in this. The postage base has been significantly reduced, and now matches the so-called income line. It is also happy to say that we have a new managing director in place this quarter, Tor Oskar Rydheim, who contributes to a good lift in the organization. And if you look at where he comes from, you also understand this with the so-called civil direction. He has very good experience from the so-called civil entrepreneur business. Let's look at Sweden. Sweden has a turnover in the quarter of 415 million towards 605 last year. Why such a big change? Well, there are three things that drive this. There is the currency change. This is the one-time effect of 71 million kroner, just to be clear, it was an income correction, not a cost correction, so it hit 71 on both the top line and the bottom line. And then there are a few short-term projects that have slipped a little in time. This means that yes, there will be a loss of turnover in 2026, but not a loss of turnover in total for MSC. Ebit, as you can see, we deliver minus 56, against plus 9 last year, as I said, 71 million kroner, which is hitting there, and Anders was in on it, this is a return, this is a legal failure from a operating contract with OPAV in 2018. It is clear that I and Anders are responsible for what we had in the books. Based on our so-called external legal advice, we thought it was a good space for us to have it in the books in the way we had. And then there was another failure. So it was an surprising failure for us. But again, I think it's great that we managed to absorb it in the quarter. And we correct for it when we look at Sweden. Correcting minus 56 for 71, we are at plus 15. And then Sweden is at a... Åsgeir Nord, Lene Engebretsen, Marianne Ulland Kellmer, Tor Oskar Rydheim Finland has a turnover in the quarter of 7.47 against 5.94, and we are happy to say that. We have predicted for a long time that there will be a growth. We were a little uncertain about the timing. We have probably predicted it for two and a half years this year than the first, so it came in a little stronger than expected for us. There is also a value effect there that is decreasing, so that means that the growth in Finland is very good. EBIT is not any worse.

It is at 54 million, 7.3%, against 2.6% last year.

Finland has a strong operational quarter. Looking at the order intake, we are also proud of that. 1.4 billion against 0.4 billion last year. That is driven by the two large light rail contracts Anders was talking about. And with that, NIC Group has secured what we call the second wave of light rail projects. We now have three projects in production in front of us. We have Tampere, we have Turku, and we have Helsinki. These are the last two projects we won. There is no replacement for the last two projects in the last quarter. So if you look to the top right, you see that the annual reserve is a total of 4 billion. Finland has actually surpassed Sweden, that's a while ago. So we have included this engraved field at the top. And the engraved field, as Anders mentioned, is not contractual agreements, but they are agreements that will come if the projects continue, which we of course expect. And given that, given that this happens, the three mentioned projects will give high activity even in 2032. And maybe a top in 2030. Good choice for Finland. Let's look at Special Ops. If we look to the left, Gunnar Knudsen, we see a turnover of 83 million and an EBIT of 6 million. If we draw a line on the last quarters from last year's exit, we see a downward trend. And that is correct. 2026 is a change year for GK. GK finished producing on a very large contract. It has been a dominant contract for GK for several years in January. We would also like to point out that in spite of being in a change year, GK is able to make money. New leaders are in place at GK. There is a full focus on building revenue and big contracts for the future, so this is going to scale well in the future. As Anders mentioned, the strategic review is still ongoing. If we direct our attention to the right of the slide and look at NSE CEPT, we see a revenue of 58 million, a bit up from 52 in last year. We see an EBIT at what we call a careful zero. If we look back at the last two years, we see that the EBITDA has improved over time. It has been a consistent improvement. What you don't see here is the history of KEPT from a long time ago, and it is clear that we have restructured KEPT. We did a big restructuring in the first quarter of 2024, and we have made significant improvements over the last two years. KEPT is a healthy and healthy business that is now developing in a positive way. Maskin, glad to report a turnover of 163. Once you know a turnover of 163, you understand that the result is also quite good. So it's a good turnover from last year, and of course from the first quarter, as you can see to the left. EBITDA was 36 million, or 22%, against 24 million and 18% last year. The reason why it is so top-line focused here is that machines earn money when the activity is high. Machines are the cost-driven area for us. There is a high fixed cost base. When the machines are there, there is poor profitability. When the machines are there, there is good profitability. We should also note that there has been a machine sale in the second quarter. 1.1 million euros, 12 million is what it says in the cash flow overview. There is nothing special about that. All machine sales have been consistent in the past. And in the future, it will be isolated in this area of the machine, i.e. pulled out of the business areas. Last but not least, we have a new MD in place for the machine. We are very happy about that. The focus so far has been very internal. From next year, we will focus more on the external market. Let's start by looking at cash flows. On the left we see a reduction in working capital down to 148 million kroner per quarter, which is very good. At the same time, we see that the working capital is volatile, and that is the name of the game. If you are invested in entrepreneurs, you know that the working capital is swinging. I still have a claim that we are good at working capital, And this is important, but you have to see that this is over time. The trend of working capital over time is extremely important, because it is a very important factor for what we call the quality of income.

So this is a full focus for us.

The graph in the middle shows our operational cash flow in the quarter, Anders was in on it, 180 million kroner, while the graph to the right shows the development in the cash flow. The change in the second quarter is 105 million kroner, which is from minus 27 kroner per 31.3 kroner to a positive salary of plus 78 kroner per Q2. Operational cash flow is 180 kroner, and the financial cash flow is minus 71 kroner. The components are that we have 17 million in interest rates, 40 in leasing costs, and 14 million in amortization of a term loan from the bank. Our liquidity situation is good, in addition to the so-called book money, we have a 400 million draw facility. And as I have mentioned many times before, we have also invested a lot of capital in ETM. Let's look at the financial position and yield profiles. We have a net income yield of 781 million, as you can see from the graph on the left. The reduction is 123 million. This swings again with the working capital. The sum of it, you see that we have a bank yield, I just need to see the numbers, 90 million in bank yield, we have 400 million in obligation yield, and around 370 million in leasing yield, netted with this positive bank yield. To sum up, I have done this maybe a couple of times earlier, this is not a message specifically to the analysts, for this I can do, but for the others who are dealing with valuation practices, Please note that we, as a part of Netto Rentebærne Gjeld, include Leasing Gjeld. And if you work with EWI EBIT multiples, I think you should go a round or two on that, if you want to be on the bridge from EWI to EK. I midten ser vi forfallsstrukturen på gjeldstrukturen vår. Ingen endringer med den. Det som selvsagt stikker seg ut her er den grønne søglen her på 400 millioner. Bondet vårt forfaller 25. oktober 2027. Av den grunn har vi selvsagt jobbet med refinansiering.

Vi har startet refinansieringsprosessen nå.

We have set a goal that we will be ready by the end of Q1, or rather before the end of Q1, and the goal is that we will have a reasonable and good capital structure for NRC Group. And it will be a capital structure that undermines the fact that we will be an exchange company. We will become an exchange company, we are not there yet, but the direction is clear. If we look to the right, we see our yield, and it is at a comfortable 1.8, well, a little optimized. But it is a comfortable level, and there is a good distance up to the Covenant level, as you can see from the dotted line. Apropos Covenant, the last slide, we see that we have a very solid buffer on all parameters. We have four parameters that we have mainly been faced with. It is the four top ones that you see, a very solid buffer, and the same applies to the obligation. Thank you, Åsgeir.

Summarizing, if I start with the most important result of the quarter, we reach a result of 61 million SEK with a margin of 3.6 million SEK. And then we have to repeat again that we have been forced to raise an initial cost of 71 million SEK from this lawsuit from 2018. We have a turnover that is in line with previous years and I think we have a healthy, stable order entry of 2 billion SEK. I want to emphasize that there are still things that we are still negotiating, which I hope will come in positively during the third quarter. The backlog is at 8.9 billion, and as both Oskar and I have been talking about, we only have the first small contracted part in the second wave of light rail in Finland. and we have talked about that if we shade in the entire contract, it is worth much more for execution here, especially from 2027 and forward. It is very exciting that the hard work with generating cash flow gives results and we have a cash flow in the result of 180 million. Our point of view, once again, is that we have fulfilled what we have promised. We have submitted a qualitative project and met the requirements set by our customer Banenor. Therefore, we have submitted the final invoice of 566 million SEK. We will now negotiate it during the third quarter. I have hoped for a good, constructive dialogue, but we have also been clear that we cannot continue to be a bank for Banenor. If we do not move forward here, we will seek legal assistance to ensure that what we think is right. The underlying business is improving in both Norway, Sweden and Finland. This time, I would like to emphasize Finland with a strong margin of 7.3, which is a remarkable improvement, and above all this nice order of the second wave, Light Rail. But I also think that our newly launched machine segment has a margin of a little over 21% and it is also a joy that we are developing in the right direction. We have so far had internal business in focus, but from 2027 onwards we will also bring in the external opportunity and that business. The strategic oversight of Gunnar Knutsen is ongoing according to the plan and we will come back with the outcome of what this resulted in today in the third and fourth quarter. The key figures I, together with the team, look at above all the marginal improvement over the last twelve months. We have the cash flow and we have isolated the quarter's results. and how the margins are improving in our business areas, I think we are moving in the right direction. The goal has been to create a profitable, stable, sustainable corporation, and I think we are there, and we are moving towards the long-term goal. And therefore we repeat the guidance we have said before. We have a guidance of about SEK 7.5 billion for the current year and a profit margin of 3 for 2026. We have emphasized that the currency is an effect that is blowing against us right now, but we will see how it develops. I have also been clear that in the first half of the year we have no improvement in the newly adopted light trade segment in Finland. and I hope that it is as usual that we are somewhat similar in the first half of the year and we tend to start a high business during the second half of the year. The long-term goal remains so that we will be a corporation that earns more than 10 billion and has a profitability margin of more than 5 when we reach 2028. And then I think Oskar and I are ready and ready to answer questions if so wished.

We can start from here. First, maybe, just to get started. A question about the ETM requirement. 566, the expectations around the negotiations for the budget.

Yes, we are not leaving a requirement that we consider to be wrong, but we have left a requirement on this project that we think is right and correct, and we expect that we will be paid for it, of course.

This follow-up is expected to be fully paid for the requirement.

Vi har varit öppna med att vi är vilja att förhandla, men jag vill inte förbegå den förhandlingen utan vi påbörjar det här i kvartalet. Låt oss se vad vår kund har att säga och vi är lyssnande. Vi har sträckt fram handen och hoppas att vi kan vara vilja att nå en konstruktiv lösning. Men jag kommer tillbaka, men vi kan inte hålla på i all evighet. Om vi inte ser att vi når framåt så kommer vi söka juridisk avgörelse på det här.

There is a lot of interest for Bande Nord, but it's a bit the same question, so we can take some other questions from here.

I can start. Margin in Norway looks very violent, because of VTM, and I understand that you don't want to quantify how new it is. Can you try to give us a little explanation for that? Thank you for watching!

I think Norway is isolated. We have devoted a lot of energy to cost-efficientifying Norway, and I think we have been successful in that. We now have a cost situation that reflects the competitiveness we want to have. We have also been honest and said that we are not satisfied with the order entry in Norway. It has partly to do with the fact that we have devoted ourselves a lot to organizational change, but also that there has been a very thin supply with what we have prioritized. We have waited for a larger supply of raid jobs in Norway, and that has not been fulfilled, so now we are controlling it. And I think that I answer that the underlying margin is improved in Norway, but we take more facts.

Yes, that is correct. We had 5 million in the same quarter last year. If you adjust for ETM, you are relatively better than that, especially if you look at the margin.

Finland. Two questions. Are there any project conclusions in the quarter? Or should we look at this as a clean margin? That's one question. The other is, are there any profitability differences in the product mix? If you get a wave of lightweight rail production, is there any structural other profitability on that type of work than, for example, what you produce a lot on now? Can I take the first and you take the second?

Yes, I think it's about time. I'll take the first. The question is, is there a lot of one-offs on the project side in Finland? No, but on such a large portfolio, there are project conclusions. And it's been a good quarter when it comes to the conclusions. But it's also good because it's still conservative in the books. It's a bit difficult to say. It's been a good quarter, in conclusion. If it's repeatable, maybe not, but there are some elements to it. But again, as I said, very good operational operation throughout the quarter, and that's what we're on.

On the other hand, we are very selective. We see what we are making money on in Finland and we will continue to stay in that segment. The base or DNA in Finland will be the light rail segment. We are happy that we have secured the entire second wave. We are also working with Datacenter, Vinkraft, which also suits us very well. And of course we are looking at traditional radios, but they should be very machine-intensive. So the machine-intensive radios we are looking at, if we take this mix, I think it will be the basis in the Finnish business until 2028. And we see that it answers well. We have good margins in Finland.

And then it gets a little bit like this with Lightradius SL. Lightshell has elements of cost plus in it, and that is quite interesting, but there is still room for relatively good magic, so in terms of risk-reward, it is an attractive segment to be in. Of course, the competition is increasing, there are several, so it is tougher now than it was three, four, five years ago, but there is no negative mix, because the risk is lower.

Is it true that you work with a normal price and if you deliver to a lower cost than the normal price, you get some bonuses?

Exactly. We are in agreement with the direct cost and if we match the direct cost in cooperation with the customer, there is a bonus model that we hope will be successful and has been successful in many cases.

In addition, there is another bonus model called soft criteria, such as customer complaints, injuries, traffic disruptions with more, and that can also give a good statement.

Since it is zero?

No, actually not. It is called a bonus-malus model, but we have never been in the malus area.

It has never happened, and we plan to continue with it.

I can follow up with GK, or Strategic Review of GK. The question is, if the conclusion is a sale, will it primarily be used for down payment or refinancing? I don't want to go over what this strategic oversight results in.

A sale is a possible outcome of a strategic oversight. Vi tycker att vi har i så fall något som är väldigt positivt och får återkomma till vad det innebär i så fall. Men det är bara en del i översynen, och jag ber om återkomma.

Ja, uansett, det är klart att kapitalstruktur och det har blivit tillfört en väsentlig pengebulle på om det skulle ende där. Så det är klart att det spiller ju rätt in i en refinansiering av kapitalstruktur, området får man säga det sånn. Så det är en link där.

Vi förväntar oss att vara avklarade på den här sidan året.

Absolut. Det kan, men det är lite offensivt, men naturligtvis finns det en möjlighet att vi kan vara klara under det tredje kvartalet. Men jag säger att vi ska vara avklarade med det här under det här året, 2026.

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