NCC Group plc

Good morning, everybody, and welcome to this presentation of the first quarter 2025 for the NCC Group. I'm Thomas Karlsson, the CEO of the company, and with me here today, I have Susanne Litander, our CFO. And first, some key figures for the group. But the way to think about the quarter is this, it's the stable performance, seasonally slow as always and good overall demand. Sales and EBIT very stable, good orders received, high orders received in Building Sweden. In industry, we have a very clear pronounced seasonality, but we have a strong demand in the industry business. Infrastructure solid with good demand and continued profit development in building Nordics. Property development has not recognized any sales of properties this quarter, and we will point that out to guide you through the presentation going forward. Orders received, book-to-bill won on a rolling 12 basis and won almost one billion higher than last year. So good orders received for the group. Solid order backlog. However, and I think this is important because it's very pronounced this quarter, The strengthening Swedish krona has a negative impact on the overall order backlog. In reality, this doesn't matter because it's order backlog in local currency that will be generate revenues in local currencies with cost in local currencies. But when we translate it to Swedish krona, it has an effect of quite significant effect in the quarter and has had that both positive and negative earlier quarters as well. In the quarter, we received a number of large projects. Here are three projects from different business areas, all 600 million SEK, reinforcement European route, E10 in Sweden, expansion of district heating in Copenhagen, and a new school and sports facility in Stockholm, in the Stockholm area. Net sales are seasonally slow, as every year, in line with 2024. Now, the way we recognize revenue in the group, we do percentage of completion for most of the business, but for property development, we do a completed project property revenue recognition. So we've highlighted the proportion of revenue each quarter that belongs to property development. And when we do that, you can see that it's very stable over the first quarter of the last couple of years. EBIT, seasonally low, again, as always. We have a certain impact of earnings recognitions from property development. So, to make it easier for you, we've made this slide highlighting the contracting and industry earnings quarter by quarter, and you can clearly see the seasonal pattern in earnings for the contracting in an industry business where we have the percentage of completion profit recognition. Our financial targets, we reiterate the 16 SEC earnings per share target, short and medium term. We are at 15.63. The difference from the full year is the absence of the sold property that we did last year, first quarter. We have a very low net debt compared to our target. And as we reported in the report for the full year in the fourth quarter, the board suggests a dividend increase to nine SEC. and an extraordinary dividend of two to be distributed 4.5 in the spring and 4.5 in the autumn, and the extraordinary to be distributed together with the first tranche of the dividend. Sustainability target, some news. We actually reached our 2030 target of 60% CO2 reduction, scope one, two, already last year. So we have a new target for CO2 reductions going to 75% reduction by 2030. And then we have, we reiterate the target of scope three of 50%. health and safety. We have a target to reduce all types of accidents, but with an increased focus on eliminating serious accidents and fatal accidents. We have met the CO2 reduction target quite well, and we now have a revised target of 1.3 kilo per sec. Target for Scope 3, we are progressing quite well for ready-mix concrete, asphalt and steel reinforcement. Steel actually already reaching the target. Not so much for transportation services. The increase in emissions from transportation is driven by the removal of the emission reduction obligation in Sweden, totally. And for health and safety, we are developing well towards our goal of 2.0 2026. We are now at 2.8. That's actually the lowest accent frequency rate that we've recorded since we started measuring in a very systematic way. and finally before i hand over to susan we have a continued positive market outlook good market demand and positive outlook for key contracting segments that's for example water treatment of all sorts water distribution energy generation, energy distribution, but also healthcare, schools, security buildings. Particularly strong demand for infrastructure of all sorts and public buildings. Solid demand for asphalt and stone, and we see that several of the administrations in the Nordic region are communicating that they will have an increased effort of maintenance of the road systems. commercial property and residential markets remain slow. And with that, I hand over to Susanne.

Thank you. And this is the short update for our four contracting units. We have solid infrastructure performance and the demand situation is good. Building Nordics continue to improve and develop positively when it comes to profits. We have very strong orders received in Building Sweden. And in Green Industry Transformation, we've signed a new long-term cooperation contract with LKAB regarding their sorting plant. We have a solid order backlog as Thomas just said and the book to build in the quarter was 1.3. Both building units have a backlog well above 12 months of sales. Infrastructure a bit below 12 months sales but that's pretty much very normal variation in their business. Sales and earnings are on par with last year. And infrastructure shows increased sales, net sales. Earnings and margin are on the same level as previous year. Building Nordics increase in both net sales, earnings, and margin, and all three countries contribute with earnings improvements. Building Sweden slightly lowers sales, but in spite of that, they keep their margin level and earnings on the same level. The summary of industry is that seasonally slow quarter means that there are always a negative quarter the first quarter. The good order intake was very good. And as Thomas mentioned, we see increased funding for road maintenance that can drive additional demand for asphalt. When it comes to volumes, the first quarter was very normal. Insignificant volumes for asphalt, as usual. Slight increase when it comes to stone material. The earnings, the EBIT level for industry was pretty much exact the same as last year in the first quarter. Capital employed improved, however, down with almost 400 million. That's due to lower property, plant and equipment and also lower short-term liabilities. The return on the capital employment was 14.2% and well above the target of 12%. The summary for property development is that we have no projects profit recognized in the quarter. We have started one new project in Finland, Clean Tech. All in all, we have nine projects in the portfolio and the letting in the quarter was high. And as we've mentioned before, last year we had a recognition in earnings of one property in Göteborg, Albatross. This year we have 10 million in earnings, which is a positive result thanks to the fact that we have property management of our completed projects that we have still. The capital employed is down 1.8 billion, thanks to the divestment of the properties towards the end of last year. And the return is 7.1%. Letting in the quarter was high, primarily driven or mainly driven by the start of the Cleantech project in Finland, which is 95% let already at start. We have a completion ratio of 60% and a letting ratio of 79%. And this is the whole portfolio and you can clearly see the timeline where we have the expected timing of the profit recognition of the three ongoing projects. All in all nine properties, six are completed and unsold down to the right in the corner and the three ongoing that are sold to the left. In segment other end elimination, the earnings level is pretty much on the same level as last year. The first item there and the third when it comes to group cost and pension and accounting adjustments. is pretty much in line with last year the difference here and the negative difference is from elimination of internal gains and this row here is where we eliminate the profits for in property development during the building phase so it's the the the profit for the building unit And since we haven't so divested any properties this quarter, it's negative compared to last year when we did divest a property. And that's when we reverse that provision or the elimination and get a positive effect. So that explains the difference. So in our income statement the segments contribute with negative minus or minus 170 million. Our financial net is 5 million lower than last year and that's due to our much lower net debt, corporate net debt. Our calculated tax rate is 22% and earnings per share is 1.39 in the quarter and 15.63 on rolling 12. Cash flow is seasonally low and the cash flow from operating activities significantly down from last year. And that's explained completely by the fact that we did divest a property or we profit recognized the property in the first quarter of last year, which we didn't do this year. We also have low investing activities and that's explained by lower capex in machinery, basically all of it in industry. And that is more of a timing issue. And our corporate net debt is much lower. It is 377 million compared with 2.5 billion last year. And our target, as we know, is to be below 2.5 times when it comes to net debt to EBITDA. And we are at 0.14, as Thomas already pointed out. And with that, I will hand it back to you. Thank you very much.

Thank you. And before I talk about the regular stuff that I talk about at this point, I will introduce a little piece of news. We've had some discussions about capital allocation since we have a really strong balance sheet, which means that we are now ready to announce that we are ready to do selective M&A for the NCC Group. We are financially strong, we have a strong balance sheet. We have been working for several years now on a scalable operational model for the group. We have a robust organization. And we will be targeting companies in contracting. that would complement our current operations. We are primarily looking for companies above a certain size, i.e. organizations that are used to work in a larger structure with common working methods, systems and processes. However, we anticipate that this will take a little bit of time because finding the right acquisition target takes some time. There are many stars that needs to be aligned to do it right. But we want to be clear on this is where we see that we're heading. And with that, I want to remind everybody that we have an AGM coming up on May 7th, and that will take place at Hotel at Six in the center of Stockholm. And before we open up for questions, in summary, a solid quarter with seasonal patterns, good orders received, strong demand in contracting and industry, operational and financial readiness for M&A, and a very positive development in health and safety. And with that, operator, I open up for questions.