NCC Group plc

Good morning and welcome to this presentation of the fourth quarter and the full year of 2024 for the NCC Group. I'm Thomas Karlsson, the CEO, and with me here I have our CFO, Susanne Litander. But let's start with a short glance of the key figures.

In the fourth quarter, NCC's net sales was 20.3 billion SEK and 61.6 billion for the full year, higher than last year. Operating profit was 844 million in the quarter and 2 billion for the full year, a clear improvement versus 2023. Orders received in a quarter was 13.4 billion SEK, which resulted in the annual orders received reaching 54.7 billion. The order backlog at the end of the year was 50.7 billion.

Good morning. Welcome back. And this is the way that I think about the fourth quarter and the full year of 2024. It was a strong quarter. It was a strong year. We have an all time high earnings for three business areas and we have an exceptionally strong cash flow. All of that we will talk about in some more detail in a short while. We are reaching the target of EPS 16 sec. And for the business areas, we have a strong performance in industry throughout the year. Infrastructure on a stable level and meeting a strong demand in the market. We have record high earnings in property development in the fourth quarter. We have improved profit in building Nordics and actually an all time high for building Nordics as well, while building Sweden is weaker after an adjustment of the risk profile for finalized projects. And as a consequence of that, the board proposed a dividend to the AGM of nine SEC, which is an increase from eight and then an extra dividend of two SEC per share. That's the summary of the quarter. And overall, I'm super happy about the quarter and the year. For the year, we have stable orders received. And well worth noting here is that we maintain a very disciplined approach to tenders. But we also see a higher proportion of early involvement tenders. projects and particularly for infrastructure higher than we've seen before and they are slightly different in nature than others than earlier projects with a lower risk profile but also being order registered a little bit later than what we've been used to We have a robust order backlog of almost 51 billion. And here's some examples of projects that we have won during the year. We will refurbish the metro station in Majorstuen in Oslo. We are continuing with the second phase of the upgrade and extension of the Hagalund train depot in Sweden, just close to our office here in Solna. And then we have won yet another refurbishment project in Denmark at a value of approximately 1.3 billion, that on orders received. Net sales up, of course, impacted by the sales of and the profit recognition of three properties in property development. But also without that, we have a very healthy net sales in the quarter and the full year. EBIT is up in the quarter and as well year to date and ending at 844 million in the quarter. Now, if we look at the bridge from earnings in the fourth quarter 2023 to earnings in the fourth quarter 2024, there's a number of things that stand out. Property development, of course, industry and building Nordics driving improvement. But let's start with the negative deviation from last year. So we've talked about that. Building Sweden in the fourth quarter declined due to provisions. Now we have new management in the business area and I've asked them to take a look at the risk profile of projects that were started before the inflation 2022 and what that means with our claims for additional projects. compensation for the extraordinary price increases. And as a consequence of that, we have made a provision of approximately 250 million SEK. There's a number of important things here. First of all, it has no direct impact on cash flows. it has no material impact on the on the order backlog and it gives us a better risk profile going forward so this is an adjustment of many many projects that are mainly finalized and just to make sure that we have the correct risk profile giving us better conditions going forward. We expect gradual improvements in the underlying earnings expected for Building Sweden. Now to the increasing units, building Nordics, strong performance again in the fourth quarter, where Denmark continues to develop strongly on a strong market, but also Finland develops extremely well in a really weak market and where we have taken a lot of measures and lots of activities to improve our operational discipline in Finland. And I'm really happy with what the Finnish team are doing. And in Norway, we have good progress in the turnaround that we're doing. That's a relatively small business. So the most important here is the development in Finland and continued good earnings in Finland. Lowers received versus 2023, but that's a variation on the theme, and the theme is good. Order safety good in 2024. It was even better in 2023. Industry, again, a quarter with record high earnings, improving in the quarter, 92 millions, to an extent because of favorable weather conditions in November, but also due to better discipline with pricing, better discipline with cost, and overall better operational discipline. So we are increasing volumes, improving margins, and and increasing the earnings in the business areas. We're really happy about that for industry. And then we have property development, fantastic Q4. We have profit recognition from three transactions, two that we both sold and handed over in the quarter and one that was previously sold, but we met the threshold for letting to hand it over. So we profit recognition from three transactions. So we have transaction volumes in the quarter around four billion. And then we also sold the project that will be profit recognized later on in the years to come. Now, we had a fantastic fourth quarter, but we still see that the market for commercial property transactions remains very cautious. We really don't know if this was something that happens because we had good objects to sell or if it's a sign of something on the market. And we will see during the coming year. And then if we look at the same bridge for the full year, it's fundamentally the same explanations. The numbers are a little bit different, but we increased from 1.8 billion to a little bit more than 2 billion in the year. I'm really happy about that. And that means that we meet the EPS target for the second consecutive year, 16.1 again. So I'm really happy about that. Our financial targets, we met the earnings per share target. We have a net cash position, so we are far below the threshold for debt of lower than 2.5 times EBITDA. And then the dividend policy states that we should distribute roughly 60% of profit after tax. The board suggests to the AGM that we should increase the dividend to nine from eight. And then in addition to that, two SEC in extraordinary dividend. And that's 68% of the profit of the tax. That's the financial numbers. Let's talk a little bit about health and safety and the market. We had a positive development of the accident, the lost time injury frequency in the business. We ended the year on 3.3, which is on a really low level. But we have a target for 2026 of 2.0. That's not a given that we will get there. It's very ambitious, but we have a clear understanding on the path to get there. And then the market outlook, we have continued the same positive market outlook that we've had for some time. Good market demand in many segments like infrastructure, not only traditional infrastructure like railway and roads, but also energy generation, energy distribution, water treatment, water distribution. but also strong demand from the industry for public buildings for anything with related to um to hospitals prisons police stations but also the defense sector a more cautious market for residential and commercial offices but in general a positive market outlook and then uh In addition to what I normally say at this stage, the board decided yesterday to do a strategic review of NCC industry. Various options to be evaluated and the background is the following. The business model for industry is fundamentally different from the business model from the contracting business. where industry has a lot of capital employed for fixed assets, delivering products and services from fixed positions, that is stone and asphalt and paving services, and delivering standardized products and services. as opposed to the contracting business that is a capital light, where the projects move all the time and are in different stages and where the prime delivery is a service. We have very little internal businesses. So we see a limited number of synergies. However, we see some doubling of costs for developing of support systems and such things. So we want to do a thorough review on how to position industry for an even better development going forward. The outcome of this could range from anything that we in the end will sell the business area to that we conclude that this is the best possible combination. We will get back to that when we have some more news. And with that, I hand over to Susanne to walk you through the numbers in some more detail.