Netel Holding AB

My name is Jeanette Reuterskjell and I'm president and CEO of Netel. With me today I have Fredrik Helenius, our CFO. In the last quarter of the year, net sales grew 1.5%, driven by good development in power in Norway, as well as telecom in Sweden and Germany. When it comes to profitability in the quarter, power had a strong ending of the year with improved profitability and an EBITDA margin of 11.6%. However, we saw a decrease in the quarter in infraservices and telecom, which impacted the overall profitability. And Fredrik will later go into details of that. Even though the underlying market trends are strong, our performance can, of course, fluctuate between the quarters because we are a product-driven business where the timing of the project's completions affects our short-term development. The order backlog continued to develop favourably and we see a growth of 600 million SEK in the last quarter. A strong development reflecting the underlying market trends we have in our segments and our strong market position within them. As you know, we announced a few weeks ago that we had made the decision to sell our operations in Finland. All numbers in these presentations refer to continuing operations unless other is stated. Fredrik will later go into details of the effects in numbers and reporting. As part of our efforts to build a more sustainable and stronger Natel, we have conducted a comprehensive review and decided to divest our loss-making operations in Finland. During 2024, we have seen some improvements through several margin-enhancing measures, but considering our group's strategic plan, and the historically negative development we had in Finland, which we have aimed to address for several years, we believe that this decision creates greater opportunities to create and generate value for Nutell in both short and long term. We are working to complete the sale in 2025. And until then, we will continue to operate and develop the business as usual together with our team in Finland. By divesting the Finnish operations, we can focus on infraservices, power and telecom in the larger markets we have in Sweden and Norway, as well as the growth markets we have in Germany and the UK, where Netel is assessed to have greater opportunities to create value and reach our financial targets on the mid-dare. 2024 has been a transformative year for us. We have developed a clear growth strategy and taken significant initiatives to build a stronger and more profitable Natel. A year ago, I introduced our new organizational structure where we now primarily operate and manage by function. This shift has improved our ability to allocate resources more effective and better meet customer needs across our Infraservices, Power and Telecom divisions. It has also strengthened our capacity to identify business opportunities with both new and existing customers. One of these key initiatives is, of course, the preparations for selling our finished operations. At the same time, we have launched several efforts to enhance internal efficiency across all of our processes. This includes working smarter, improving follow ups and allocating resources more effectively. A crucial part of this transformation is increasing digitalization and implementing new group-wide digital tools. One of the most important of these is our business system, which will soon be fully deployed across the entire group. This system will be instrumental in enabling quick analysis, providing a clear overview of our progress and ensuring efficient resource utilization. We have a strong market position in Sweden and Norway, where we see significant opportunities for growth, both with our existing customers and by expanding our customer base. A larger business with an extended geographical presence also increases our ability to create synergies. During this year, we have, for example, won new and bigger contracts with Telenor, UGG, Telia, Elvia and Vattenfall. Another milestone we are proud of is the validation of our climate targets by the Science-Based Targets Initiative in December last year. This validation allows us to continue strengthening our collaborations with customers and business partners as we work together to create a more sustainable and emission-free society. Within Infraservices, besides water and sewage product, we also deliver products within civils. For example, this project where we build a pedestrian and bicycle path undertaken by our company Moberg on behalf of the Swedish Transport Administration. It is a construction of three and a half kilometers pedestrian and bicycle paths and started in 2024 and will be completed in autumn 2025. And within power, our power company in Norway, Nettjänster, has signed a new framework agreement with Norway's leading energy company, Elvia. The agreement covers the design and installation of new control systems for Elvia's substations to a value of 320 million. We deliver complete protection and control systems to existing and new substations and has a total responsibility for everything from planning and material procurement to assembly testing and commissioning. The agreement runs for four years with an option for additional two plus two years. This is a large and important agreement for Nettell. It provides increased volumes and extended geographical coverage, and we are proud of the in-depth cooperation we have with Elvia. We have just started in this new contract and expect to see increasing revenue during this year. This is an important step to our growth expectations we have in power in Norway. In Telekom, our German team have won another contract with UGG for rollout of fiber networks. This contract covers the rollout of fiber to over 7,000 households in Moldenstause near Leipzig, worth 50 million euro. The new product will start immediately and the rollout should be completed in 2026. In June this year, we announced another contract with UGD to roll out fiber to 5,000 households in Lagoon Gessnit, north of Leipzig, worth 10 million euro. We are very proud of UGD's extended trust. Germany is a fast-growing fiber market, and UGD is an important player with the goal to improving people's quality of life to fiber networks. UGG is a German company. It's headquartered in a Bavarian town in Eastmaning. It was founded in 2020 as a joint venture between Allianz and Telefonica Group. So, let's move on to our financial performance. Fredrik, welcome.

Thank you, Annette, and good morning, everyone. starting with the full year 24 we delivered 3.1 percent growth almost all organically and reached 3.3 billion in total sales we saw growth across all three divisions with infra services in the lead almost nine percent growth in infra services and in particular that was during the first half year which was on the stronger side Margin-wise, we reported an adjusted EBITDA of 5.2%, down from 5.7% last year, as we saw lower volumes within telecom from UK and Germany, and due to infrastructure usage, which came down in the year-on-year comparison. However, we closed 24 in line with the provided indication in January, and with an all-time high or the backlog of 4 billion for continuing operations. Now, before digging into the Q4 performance, we'll walk you through the status of the process regarding Finland and the outcome of the Finnish operations, given that we, from this report and onwards, will report those operations as discontinued. As previously said, we have decided to, let's see if we can get the correct slide. Like that, we have decided to initiate the process of divesting the Finnish operations and we expect to confirm closing during 2025. Whilst we of course focus on our continuing operations, the process with regards to Finland has started and we are evaluating our alternatives to move forward. As of today, we do not have any details on a specific timeline or the evaluation, but as said, we expect to close the divestment during this year. Our discontinued operations have not performed in line with our expectations, and we believe that, as Conette said, both Nutella and the Finnish operations will have better opportunities by finding a new structure. Finland is from now on considered discontinued and reported separately in all of our statements. Finland's performance in 24 reported in line with the indication that we provided, with 241 million in sales and a net profit after tax of minus 105 million. As the decision was made, we evaluated and stress tested relevant positions, contracts and projects, the organization in Finland and the outcome and loss for 24 includes what we believe to be necessary updated assumptions regarding the business to enable a successful divestment process. This means that the fourth quarter and the full year 24 includes additional costs with regards to the organization, the projects, other business related activities, and also estimated costs for the transaction and ongoing process with regards to selling the operations. The divestment process has, however, not implied any adjustments to other intangibles or goodwill for the group. This is our position as of today. And as said, the financial outcome includes our estimates for the coming process as well. We will, of course, get back to you once we have additional details on the process. Now, the following slides will refer to the continuing operations, just as the report did that we published earlier today. And looking at the financial performance for the continuing operations, the fourth and last quarter, we grew by 1.5%, driven by good development in power in Norway and from new growing sales within telecom in Germany and Sweden. This provided important answers for us, for both divisions, power and telecom, as we continued with growth in Germany and as we turned back to growth for the Norwegian power business. All in all, we delivered 957 million in the quarter compared to 943 million last year and almost 3.3 billion for the full year, as we said. During the last few months, we have had the pleasure to release contracts with, for instance, LVI Norway and UGG in Germany. And together with other added contracts and orders in our existing agreements, we grew the order backlog to an all-time high level of just about 4 billion for the continuing operations. The underlying demand is promising with the need for electrification, digitalization, improved infrastructure. And we believe that we have a good position with the existing water backlog. And together with additional volumes, we can enable the stepwise improvements towards our financial targets on midterm. In terms of profitability, we recorded an adjusted EBITDA of 57 million with a margin of 6% in the quarter, slightly below the 6.9% last year. The profitability was driven by strong performance from Power and Sweden with a series of finalized projects and good margins, especially regarding substations that we saw. We did not fully manage to reach last year's margin in total as we saw lower margins from telecom and a few projects with profitability and a continued competitive market within infra services. This holds for the full year 24 as well, where we recorded 169 million in adjusted EBITDA with a margin of 5.2 compared to the 5.7 last year. We continue to believe in our process as we now enter 2025 with a strong order backlog and continuous measures for further growth and improved profitability. Turning to cash flow, in the fourth quarter we saw that we once again achieved the best quarter for the year in line with the so often referred to seasonality where we are able to close projects and finalize our invoicing towards the end of the year. We reported 7 to 1 million as the operating cash flow for the group during the quarter. Telecom and Norway contributed on the positive side, as did Power and especially Sweden, where we had a good run closing profitable projects. The cash flow in the last quarter was affected by fewer projects being finalized. And for the year in comparison, we note that 23 was very strong and benefited from the release of cash previously tied up as working capital. For the full year 24, we delivered 115 million in operating cash flow, below last year due to low profitability levels, but also certain one-off effects, as for example, the 70 million positive effect from a legal dispute in 23. Looking at 24 standalone, we closed the year with around 10% net working capital in relation to sales, which we believe is within expected levels for our business. And we achieved improvements within projects and increased the cash flow awareness across the group. And with these levels, we believe that we are on track to reach our potential going forward as well. Closing 24 also meant that we paid the remaining earnouts. And in total, we recorded an outflow of 124 million from earnouts during the year. Effectively, we remain above our capital structure target on net leverage, being around 2.8 times in comparison to the target of 2.5. But we continue to have a solid liquidity and will continuously focus on cash flow activities to gain advantages and improve our financial position. If we take a look at the performance across our divisions, Infraservices delivered sales of 238 million in the quarter, just below last year for the full year. Infraservices contributed to the growth for the full year volume with 844 million in sales, up with almost 9%. As previously mentioned, the profitability within Infraservices was negatively impacted by some less profitable projects in the quarter. And as we still notice relatively higher competition within our markets, we recorded an EBITDA of 14 million or 5.9% compared to 11.7 last year. For the full year 24, we delivered a 6.4 margin, below last year where we saw very good performances across the entire division and year, and a very strong Q4. We believe that we have good opportunities for Infraservices as well as our other divisions, and we continue to evaluate our new orders on the basis of our mid-term financial targets. Within Power, we produced sales of 317 million in a quarter with a growth of 3.2%. Norway increased the production within both our Power Service contracts as well as from from projects and stations and added to the division's growth in total. Sweden, on the other hand, managed to finalize projects with better margins, which resulted in an EBITDA of 37 million in the quarter and a margin of 11.6%. With a strong delivery here in Q4, we closed the year at just above 1 billion in sales and with improved profitability to 7.6%. Power remains as a very interesting market with key drivers being digitalization trends and the need to increase access and capacity across our power systems. And we are happy to recognize the growth from Norway in the quarter as we have released recently one contract with important customers and previously within the industry sector as a new strategic initiative. Q4 marked the end to two profitable years for the division with good performances and we are looking to add additional volumes going forward to the order backlog and try to utilize on the momentum in the underlying markets. Telecom delivered 402 million sales in the quarter and continued with growth despite the lower yearly volumes from our growth markets. While UK remained on the low side, Germany continued with the growth for the second quarter in a row and added important volumes to the division, partially from the new contracts as we previously mentioned with UGG. Sweden closed the year with good progress, especially within mobile networks, as the swap of certain equipment was to be finalized before year end. And for the full year 24, telecom showed growth and remained slightly above 1.4 billion. The EBITDA of 0.5% or 2 million in the quarter was negatively impacted by lower volumes in UK. We are not satisfied with the 14 million or 1% margin for the full year 24. And as previously stated, our focus on increased margin remains. However, as we now see new volumes and the growth in Germany, we are implementing new tools for efficiency within our biggest service contracts in Norway and have interesting opportunities in Sweden. We share the view of the true importance to increase the profitability and expect a stepwise improvement going forward. Telecom is our biggest division today with almost 45% of sales and we aim to leverage on our order backlog today and new contracts in order to increase our profitability going forward. Finally, 2024 implied a lot of activities as previously described by Conett where we have been working with actions for a new organization. both in terms of structure and personnel, actions to increase efficiency. We have seen new customers and increased geographical presence. Again, this resulted in overall organic growth of 3% and adjusted a bit of 5.2 and a cash flow from operations of 115 million. Now, leaving 24 and having our eyes on 25, we entered the year with a solid order backlog of 4 billion. out of which more than half refers to 25, and we entered 25 with continuous measures for further growth. Improved profitability is key, but we further know that we have the ability to generate healthy cash flows, and with our earn-ups paid, we can continue and increase our focus on the balance sheet, monitoring our net leverage position, evaluate necessary debt levels for our business. We need to continue to improve our financial stability and with market rates continuing to improve, we can gain advantages and together with better projects and profitability levels, reach our financial targets in mid-term. We certainly have a lot to do and look forward to 2025. And with that, I believe that we are ready for some final remarks from your side, Conette.

Yes, thank you Fredrik for this in-deep presentation. I will finalize today with a presentation with some concluding remarks on our growth strategy and how we build a stronger Natel forward. We have a clear strategy and plan for how we will grow and improve our profitability step by step. As we said earlier, we operate in markets that are driven by strong megatrends. We have a strong position in these markets and we are therefore very well positioned to continue growing and creating value. Our strategy to succeed in this is divided into three areas, growth, operational excellency and our talents. We see clear opportunities to grow with our existing customers in all geographic areas, as we have proven under 2024. We have long standing relationships with many of our customers, and we now know that we managed to exceed their expectations. We therefore have the competitiveness to be able to grow existing customers by winning contracts that can encompass both larger geographical areas and new areas of responsibility. We have also identified opportunity to enter new customer segments, not least in power, where we have begun to approach the industrial sector in 2024. This opens up new existing opportunities that we are approaching step by step. With our customer base of large, well-established, both listed and publicly owned companies, we know that sustainability is an important competitive advantage. More and more of our customers and also suppliers want to work even closer so that together we can contribute to a more sustainable society. Our activities in the area of sustainability are therefore an important and competitive advantage and also a step in building a stronger Natel forward. The second area is operational excellency. We have already covered in the presentation and we are pleased with the progress we have made in 2024. The activities to improve operational excellency aim to both strengthen our offering to customers and improve internal efficiency. These initiatives often go hand in hand. For example, a more effective risk management in our products not only benefits our own profitability, but also means that the customer can benefit from us delivering with good quality in time and within budget. Last, but for us most important, we must secure that we have the best talents in the industry. There is a competition for talent and we are working focused to build our employee brand with the goal of keep and develop our employees and attract new talents. These strategic initiatives lay the foundation for a stronger and more sustainable Natel. We are confident that we have a clear, well-developed plan that we will continue to deliver on. And with this, we open up for questions. And as you know, you can either call in to us or mail questions through the webcast.