Norva24 Group AB (Publ)

Good morning and welcome to the presentation of the fourth quarterly report of Norrva24. My name is Henrik Norrbom and I'm the CEO. With me on stage I have our CFO Stein Ynderstad. Before we start jumping into our Q4 report, I would like to take the opportunity to share information about our capital markets day coming up in Stockholm on the 19th of March. Here we will present our updated strategy, financial targets and the evolution of Norva24 for 2025 to 2030. We will kick the day off with a site visit leaving central Stockholm at nine in the morning. We will be back in central Stockholm for lunch at 12 and the capital market day will start at 1300. We, of course, hope to see you there in person, but we will also live stream the event. Warm welcome. Please sign up. Given the upcoming capital market day, I will not spend time presenting the Norva24 case today, which most of you already know so well. Okay, now on to the group numbers and the highlights. We continue the growth journey where we see solid development in core business and in addition, a strong cash flow. Given the negative impact from the underperforming entity Jutze Haus Technik in Germany, we will comment on the overall numbers, but also on the performance excluding Jutze, given the fact that we are winding down the non-core projects, the non-core project business that has had such a negative impact on our 2024 performance. A lot of CEOs always want to exclude things, but in this case, I see it as important to show that we have a healthy and strong core UIM business in Germany. We talked about this unit in Q2 and Q3 report, but we will be more transparent in the disclosures today. More on Jyotsu and Germany later. We are satisfied with the quarter with a growth of 15.5% in the total operating revenues and the currency adjusted organic growth is 6.2%. The adjusted margin for the group was down 1.3% from last year's Q4, which is related to our problem unit in Germany, Jutzi. Adjusting for this, Norva24 has both solid organic growth and margin improvement for the quarter and the full year. Looking at the operational highlights, all our markets have experienced revenue growth achieved through a combination of increased utilization, higher prices and new customer agreements. There are margin improvements in all the Scandinavian markets and also in Germany when exclude Jytsi. Norway is up from a poor quarter last year at 7.9% margin up to 9.6% this year with an organic growth of 7.8%. This is still not where we would like to see the Norwegian operation. We have taken action to secure improved operations in Norway. Sweden with a solid uplift to a margin of 14.1% with strong organic growth of 8.5% on the back of a solid Q4 last year. Denmark continued the positive development, total growth of 49% and with margin improvements. Currency adjusted organic growth in Denmark was 1.7%. Germany, despite the challenging market conditions, the German operations have had a currency adjusted organic growth of 3.5% in the quarter, but with a margin reduction of 320 basis points. Excluding for Jytsi, the margin is up by 370 basis points. In Q4, our operating activities generated a strong cash flow of 298, up 92 million from last year's Q4 of 206 million NOK. Overall, we are satisfied with our core businesses in Q4. Before we go through the segments, I want to present Norva24 group numbers adjusted for Jyotsu. Excluding Jyotsi gives a more balanced view of the underlying performance and shows that we are on the right path. Overall growth was 21.5% and the currency adjusted organic growth was 11.3% for the quarter. This performance is strong and underpins that our core business is resilient and acyclical. I also want to stress that despite the impact Jyotsi and the non-UIM business has had on our 2024 result, it is a limited part of our operations. Non-core operations was less than 10% of German operations in 2024 and expected to be less than 5% in 2025. and significantly less for 2026 as we are discontinuing non-core operations in Jyutsu. The adjusted numbers also show we are on the path of margin improvement and we achieved 130 basis points uplift for the quarter when adjusting for Jyutsu. Now let's go through the segments. Starting with Norway, most Norwegian entities have revenue growth, but on the back of a quite slow quarter last year, which was impacted by bad weather conditions, resulting in an organic growth of 7.8%. The EBITDA margin increased by 170 basis points this quarter from last year, with a total margin of 9.6%. Even though we see an improvement, we had expected more from Norway. To our disappointment, we were not successful in the appeal to the court regarding the acquisition of Vitek. We are continuing to build our position in Bergen and are comfortable that we are the preferred partner to our customers in the greater Bergen region. As we informed in January, our head of Norway, Tore Hansen, is stepping down after six years in the role. We would like to thank Tore for his strong contribution during these years. We are in the middle of a recruitment process for his successor. Germany achieving 8.6% total growth and an adjusted EBITDA margin of 10.9% and a margin reduction of 320 basis points over the quarter. As mentioned earlier in the presentation, the margin development is affected by low activity in Jutsy and I will in the next slides present Germany without this company to illustrate that the rest of the entities in Germany are performing strong. Okay, next slide. Germany, excluding Jyotsi, achieved total growth of 25% and an adjusted beta margin of 14.4% in the quarter, a margin improvement of 370 basis points. The same exercise for the full year gives total growth of 18%, with an adjusted EBITDA margin of 13.1% and an uplift with 50 basis points for the full year. This underpins that our core business is performing well in Germany with both growth and margin improvements. We managed to improve our margin in some important units and we will show this on company by company level on the next slide. But before that, one more topic about Germany. We are in the phase of going live with our well-needed business platform in the first entity of Germany. The first part of the business platform, a field services management system, was launched in Q4 and is delivering as expected. And the second part, which is the ERP, will be live in the summer. Then a broader launch through the rest of the German entities will start. This will support operations in a good way and enabling better utilization of equipment and personnel. It will also help scale the business in a better way. As promised, here is a transparent overview of the German entity's full year. We see from this slide that all operations are delivering double-digit EBITDA margins. The exception here is Jyotsi this year with their non-core UAM business that destroys the picture. Including German group overhead, the margin adjusted for Jyotsi was 13.1%, up with 50 basis points. Before closing the German chapter, I want also to be transparent with our improvement plan for Jutsy. We exit the previous management summer of 2024. Since then, German CEO and CFO has been on the location on a daily basis. We have a new manager in place from 1 January 2025. We are winding down our non-core, non-UIM project business. The non-core projects will be finalized during 2025. We have rigorous follow-ups and have limited the financial risk of the one large remaining project. The revenue reversal from Q3 deemed to be sufficient as we implemented a new control regime, except expected to be concluded during first half of 2025. 2025 is our transformation year, transformation of this company, but we are not expecting any significant restructuring cost. We are now building on our core and healthy UIM business in Jutsy and we expect to get back to profitability during 2025. Homework is done and we have turned every stone and there are no major non-UIM projects in the German operation or other parts of Norwa24 for that sake. Okay, next slide is Sweden. Sweden continues to perform well with strong currency adjusted organic growth of 8.5% and the impact of acquisitions leading to a strong growth in total operating revenue at 18.8%. The margin improved organic with 70 basis points and in total 130 basis points for the quarter. Full year the margin has improved by 310 basis points and the majority of the margin up list is organic. The Swedish operations and management are really starting to function as a team and we see a strong broad-based improvement in Sweden. Looking forward to seeing the continued development in 2025. Okay, Denmark. The Danish operations have improved a lot during 2024. This continued in the fourth quarter. The organic margin improvement is 170 basis points, while Nordic Power Group, who has their peak season in the summer, has a negative impact on the margin of 130 basis points. This does not worry me, as this is following the seasonality we know from them. Denmark had a revenue growth of 49% in the quarter and 51% full year. Nordic Power Group contributed a lot to this growth despite only being consolidated from the 21st of May. The organic growth in the Danish operation was 1.7% in the quarter and 4.1% for the full year. Full year margin improvement for Norwa24 Denmark was 390 basis points. The impact of Nordic Power Group for the full year is significant with 295 basis points contributing to the margin uplift. And there is also a good organic margin improvement of 95 basis points in the Danish operation. We continue to grow and we have added close to 500 million NOC of revenues from Q4 2023 and more than 1.1 billion NOC from Q4 2022. Also, regarding profitability, we see growth. Our EBITDA is up to 384 million NOC on a 12-month rolling basis, up from 279 two years ago. Adjusting for Jytsi, we reached 400 million NOK, up from 309 million NOK. Okay, I hand over to Stein to go through the financials.

Thank you, Henrik. Before we go to the financial section, I would like to touch on the M&A activity. When we met in May, we were very pleased with the activity and the conversion we had achieved in the start of the year. Since then, we've kept our cool and pushed some deals into the future, as we've seen the financial performance of some of these targets drop. This was related to Germany in particular. We have not been able to complete the VTEC transaction, and we do not expect this to change in any way. So far this year, we've signed a smaller deal and we will be closing that in the coming days. It will be a good add-on to the Zimmerbeutel operations in the rural area. Looking at the funnel, we have worked on expanding our shortlist and have grown the list with new targets. We currently have 10 targets in the advanced discussion phase and as stated earlier, we are in no hurry and it is very important for us to be prudent in these acquisitions and secure the right capital allocation. We have increased our capacity with the head of M&A Nordics to strengthen the Nordics, but also to free up capacity for our head of M&A who is located in Germany and who will spend most of his time on this market. We do expect that M&A activity will pick up in the coming months and in relation to The Jyotsi situation, we have adjusted our M&A approach to secure that we do not run into such issues as we did in Jyotsi in the future. It's important to note that we have done more than 50 acquisitions and a very small proportion of these have had a negative impact on the group. Now let's move on to the financials. As Henrik mentioned, we're satisfied with the revenue growth and the growth in the quarter, with a revenue growth of 15.5% in the quarter and 15.2% for the year. Last quarter, we did a revenue adjustment related to the potential reversal of previously recognized revenues of 3 million related to Yuzi. And based on the information we have today, it appears that that provision or that reversal is sufficient. And following that adjustment during Q4, we have rolled back a small proportion, about 10% of that reversal in Q4. related to a project that we have concluded and that was sufficient for that project, actually a little bit more than sufficient, but the benefit of that is an XO in the quarter. Looking at the cost development, this is quite aligned with our growth in revenues. The other operating expenses increased a lot, around 30 million, and this is primarily related to M&A costs in various forms, but VTech is a major reason for this increase. Operational service expenses and personnel costs, which you should see jointly, have increased together in line with our revenues. The same goes for vehicle operating expenses, which are up by 15% in the quarter, so following our revenue development. The same goes for our depreciation, which is at the same level compared to revenues as last year's fourth quarter. Year-to-date, we've seen a small increase of 25 basis points in relation to revenues on the depreciation. For the quarter, the adjusted EBITDA is 8.2%, and that's a margin reduction of 130 basis points. Year-to-date, the margin is 10.6 percentage points, which is down 40% on last year. Excluding Jutzi in Germany, the group margin would have been 9.3, which is 130 basis points higher for the quarter. And year-to-date, the margin would have been 11.5, which is 80 basis points up from last year. Our net financial costs were 5 million in Q4 versus 36.6 million last year. The reduction here is coming from recognized earn-out gains of 14.2 million, mainly due to the reversal of an earn-out accrual in a German acquisition. And we also have a currency gain of 10.7 million. And the interest cost is up by 6.1 million from 22 million to 28.1 million for the quarter. And this gives us an earnings before tax for the quarter of 56.5 million. And that is up from 23.4 million last year. The tax rate was at a lower level this quarter compared to the year-to-date numbers, and this is mainly due to the year-end calculations that we've done. The tax rate going forward is expected to be at around 25%. Okay, let's look at the balance sheet. we continue to show a strong balance sheet. Our net debt of 1.6 billion at the end of the year represents a net interest-bearing debt over adjusted EBITDA of 2.1 times. Goodwill of 2.260 billion at the end of the year shows an increase due to the latest acquisition. We also do this, we do impairment tests on a regular basis and these show ample headroom for all cash generating units, meaning all markets. The lease liability of 1 billion and 39 million is related to the right of use assets, which refer to financial leasing of vehicles and property rentals. And the non-current loan of 9-11 million is primarily the bank loan. Our investment in the quarter was 134 million, and our investment in machinery and equipment should be around 8-9% of revenues in the long run. But we are currently seeing a higher level, driven primarily by three factors. We are up due to a lower level of deliveries due to the war in Ukraine in 2021 and 2022. The second reason is that we are winning new contracts where we need to increase our capacity. And we also for a third reason is that we're seeing stricter requirement for carbon neutral vehicles, meaning electric vehicles or for larger vehicles, gas fueled equipment, which has also led to new investment. You could also say that we have grown significantly more than the market, and we're having a growth this year of 8.8% organic, and that also requires more capacity. Going back to the gas vehicles that we are acquiring, some of these are replacing equipment that has not sort of reached the end of life. And these vehicles were able to relocate to more rural areas and they can have a sort of a useful life going forward as well. But still, it does mean that we have a temporary higher level of investment, and we are also expecting to see that in the prices and revenues going forward, that the equipment that we're investing in is slightly more expensive than it used to be. Okay, let's move on to the debt structure of the group. So as our headline says here, about 65% of our debt is related to IFRS 16. So most of our debt is IFRS leases and rental agreements. These leases amounted to 1 billion and 40 million in Q4. a slight increase from 1 billion and 16 million at Q3. Our total net investing-bearing debt was 1.55 at the end of the year, slightly down from last year. And as I said, about 65% of these are capitalized EFRS leases. Leasing payments for the next 12 months amount to 268 million, which is very close to what it was last year, 267 million. Depreciation of the lease assets is included in the P&L under depreciation. Net debt excluding leases was only 511 million at the end of the year compared to 581 million in the last quarter. The multi-currency revolving loan facility has been increased from 1.1 billion to 1.85 billion, and it has also been prolonged two years compared to the 2021 facility. The agreement was signed in Q4. Of the NOC 1.85 billion credit facility, 868 million was utilized at the end of the year. So there is close to 1 billion available. Then moving on to the cash, in Q4, our operating activity generated 298 million of operating cash flow, and that is up from 206 million last year, so 48% up. For the full year, this number was 661 million, which is up 28% from 516 million last year, and a cash conversion of 90.8%. up from 80.9 last year. We've started initiatives to reduce our working capital in Germany and Denmark particularly, and we see some positive impacts from this in Denmark, particularly in Denmark. And the overall net working capital is down from 5.9% of annual revenues last year to 4.6% this year. Although it is encouraging to see the improvement in net working capital compared to the previous quarter and year, we have yet to reach our target net working capital levels. Yes, and at the end, just to recap the financial results, it's a good growth in total operating revenues of 15.1%. 15.5%, sorry. The adjusted EBITDA margin uplift in the quarter and full year when we adjust for Jyotsi. We see a strong cash flow and we have a strong balance sheet that enables M&A. And there is still room to continue the growth journey. And the multi-currency revolving credit facility has been increased from 1.1 to 1.85 billion NOK. Now handing over to you, Henrik.

Okay, thank you, Stein. Summarizing the year, we see very solid organic revenue growth for full year with Sweden and Germany at 10%, Norway at 8% and Denmark at 4%. Resulting in currency adjusted organic growth for the group of close to 9% for the full year. And three of four markets also achieved margin increases and Sweden quite significant increase. Key takeaways from this presentation. Financial wise, we come from a quarter with strong total growth, 16%, and adjusting for Jyotsi, a growth of 21.5%. And currency adjusted organic growth of 11.3%. Reported adjusted EBITDA is flat for the quarter. Adjusted for Jyotsi, it's up by 40%. Strong operational cash flow, up 44% in Q4 and up 28% full year. And strong cash conversion of 90% full year. Other takeaways, we are uniquely positioned in an attractive growth market and show resilience in a tough economical climate. And we are prepared and ready to continue the profitable growth journey. Before we open up for Q&As, I want to repeat that we have a Capital Market Day on the 19th of March in Stockholm to present the updated strategy and evolution of Norma24, our strategy for 2025 to 2030. Sign up, warm welcome. Now we open up for Q&As.