Today, 17 February 2021, NRC Group has released its financial results for the fourth quarter of 2020.
The presentation is available on the following webcast link:
A Q&A session will be held at 10.00 AM (CET), and investors, analysts and journalists are welcome to participate.
Participants dial-in numbers:
NO: +47 2350 0296
SE: +46 (0)8 5065 3942
FI: +358 (0)9 7479 0404
DK: +45 3515 8121
UK/ International: +44 (0)330 336 9411
US: +1 929 477 0324
Below you will find highlights and a summary from the report.
- NOK 1.58 billion (NOK 1.66 billion)
- NOK -10 million (NOK -47 million)
- Order intake of NOK 1.4 billion (NOK 1.9 billion)
- Order backlog of NOK 6.5 billion (NOK 7.1 billion)
- Cash flow from continuing operations of NOK 110 million (NOK 63 million)
- Cash position of NOK 610 million (NOK 154 million)
KEY FIGURES 2020
- Revenue of NOK 6.45 billion (NOK 6.19 billion)
- EBITA* of NOK 50 million (NOK 55 million)
- Cash flow from continuing operations of NOK 312 million (NOK -37 million)
* Before other income and expenses (M&A expenses)
Comments on fourth quarter 2020 results
Fourth quarter revenue was NOK 1,578 million compared to NOK 1,663 million reported for the same period of 2019. The revenue growth was -5% in the quarter. Group EBITA* was NOK -10 million compared to NOK -47 million for the same period last year. The EBITA* margin was -0.7% in fourth quarter.
Full-year 2020 revenue was NOK 6,449 million, an increase of 4% from 2019, due to currency effects. Group EBITA* was NOK 50 million, compared with NOK 55 million in 2019. EBITA* margin was 0.8% in 2020, in line with the announcement of estimated financial results from 21 January 2021.
Revenue in Norway was NOK 442 million compared to NOK 583 million in the fourth quarter of 2019. The organic growth was -24% in the quarter and is mainly explained by lower revenue in the civil construction, due to low order intake during the year, and lower revenue in the demolition- and recycling business. EBITA* was NOK -43 million, compared to NOK 8 million in the same period of 2019, leading to an EBITA margin of -9.7% this quarter. The weak result is mainly due to low profitability in the demolition- and recycling business, including a significant write-down in one project related to a disputed change order, as well as low activity in civil construction. The result in the demolition- and recycling business is partly compensated by an income of NOK 12 million due to an adjustment of the earn-out compensation, reported in other income and expenses and not included in EBITA*.
Revenue from the Swedish operation amounted to NOK 396 million for the quarter compared to NOK 370 million in the same period of 2019. The organic growth in the quarter was -4% in local currency. EBITA* was of NOK -22 million compared to NOK -83 million in the same quarter in 2019. The EBITA* margin in the fourth quarter was -5.5%, mainly explained by low activity level in combination with a project mix with low average profitability.
Finland had revenue of NOK 740 million compared to NOK 713 million in the fourth quarter of 2019. The organic growth was -3% in the quarter in local currency. The EBITA* was NOK 62 million compared to NOK 29 million in the same period of 2019. EBITA* margin was 8.4% the quarter, an increase from 4.1% last year, mainly explained by improved margins in the light rail projects.
Group operating profit (EBIT) for the quarter was NOK -16 million compared to NOK -95 million last year. EBIT for the fourth quarter of 2020 includes an income in M&A expenses (other income and expenses) of NOK 9 million, related to the NSS earn-out settlement net of other M&A expenses. Net financial items amounted to NOK -20 million for the quarter, compared to NOK -20 million for the same period last year. The Group has a 20% interest in a joint venture sharing risks and rewards of two larger projects with Astaldi and Gülermak in connection with the Station Haga in Gothenburg. The projects are complex with substantial risk, hence net income from the associated company has been reported at zero.
The order backlog amounted to NOK 6,475 million at 31 December. Fourth-quarter order intake was NOK 1,392 million, split on announced contracts of NOK 754 million and unannounced order intake of NOK 639 million.
In Norway, new orders included an appointed contract by Bane NOR of NOK 220 million, for rehabilitation and upgrading of Nittedal station. The work commenced in December 2020 and is scheduled for completion in August 2022. Skanska appointed NRC Group Norway a contract of NOK 90 million, for transportation and disposal of masses for the new metro station at Fornebu, where the work will commence in January 2021 and is scheduled for completion in December 2023. Skanska also appointed NRC Group a contract of NOK 65 million for demolition and remediation works at Fornebu. The work commenced in November 2020 and is scheduled for completion in June 2021. New orders in Finland included an extension of the ongoing Tampere Tramway alliance contract where NRC Finland’s share of the extension is approximately EUR 16 million. The work commenced in November 2020 and is scheduled for completion in December 2023. In Sweden, new orders included a SEK 160 million contract of signal renewal on Nässjö station and Gamlarp station appointed by the Swedish Transport Administration (STA). The work will commence in March 2021 and is scheduled for completion in September 2025. STA also appointed NRC Group Sweden to a contract of SEK 35 million for rehabilitation of the catenary system on the railway connection between Åstorp and Ängelholm. The work will commence in December 2020 and the project is scheduled for completion in September 2021.
The Group has identified an addressable tender pipeline of approximately NOK 21 billion for the next nine months. This compares to a NOK 16 billion tender pipeline three months ago and NOK 16 billion at the same time in 2020. The tender pipeline in Finland is approximately NOK 5.2 billion, an increase of approximately NOK 2.5 billion compared to the tender pipeline three months ago. In Sweden, the tender pipeline is approximately NOK 9.9 billion, an increase of NOK 2.8 billion since last quarter. The strong growth is mainly explained by increase in tenders for maintenance contracts where several tenders are up for renewal the next nine months. The tender pipeline in Norway is approximately NOK 6.1 billion and at same level as last quarter.
The Norwegian parliament has decided a total budget for 2021 of NOK 26.5 billion allocated to railway, up close to 20% from the revised budget for 2020. This includes an increase of NOK 4.6 billion to rail investment projects and a NOK 500 million increase to maintenance and renewal spending. The increase in investment projects is mainly targeted towards InterCity projects already awarded. The maintenance backlog is expected to increase further to NOK 23 billion at the end of 2021, as renewal and maintenance spending of NOK 3.5 billion yearly are required to offset actual wear on existing infrastructure. These factors indicate continued growth in railway infrastructure investments and activity in Norway.
The Swedish national budget for rail investments and maintenance spending in 2021 is SEK 30.4 billion, with a SEK 2.9 billion increase allocated to investment projects. Most of the increase is targeted to already on-going projects. The Government has also decided a yearly increase in maintenance spending of SEK 500 million to keep up with the maintenance backlog.
The Central Government in Finland has decided a national budget for railway at EUR 0.92 billion. Funding allocated to rail investments and maintenance spending are at the same level in 2021 as it was for 2020. Two years of a high investment level indicates a strong outlook, confirmed by the increase in tender pipeline. Light rail investments are expected to be at same level in 2021 as in 2020, mainly related to on-going projects. NRC Group is involved in all larger light rail projects in Finland.
In February 2020, NRC Group presented its strategy update to position NRC Group as a Nordic leader in sustainable infrastructure. NRC Group has established a clear strategic roadmap with the ambition of NOK 10 billion in revenues and 7% EBITA margin in 2024. This implies a return to the 2016-2017 average margins, with the main uplift to come from internal improvements.
Several measures have been implemented to restore profitability and to create the foundation for continued organic growth. Improvement programs in 2020 yielded satisfactory results. Rail Norway has improved the tendering processes, strengthened the organisation and project execution, as well as reduced overhead costs. The financial performance has improved significantly. Sweden has improved the tendering processes, strengthened the organisation including the project management, and reduced costs in line with targeted level. Focus on core processes in tendering and project execution will continue in 2021.
In the demolition- and recycling business in Norway additional measures are being implemented to restore the profitability back to normal levels. In Finland, measures to increase flexibility in the cost base implemented in fourth quarter 2020 are expected to have effect from the second quarter of 2021.
Update on Covid-19
NRC Group continues a sharp focus on adopting guidelines and policies to prevent and handle COVID-19 outbreaks. The Group monitors the development of the pandemic and its potential impact on the industry and on business continuity. The main risks are related to potential operational impact if outbreaks intensify and restrictions are resumed. Operations also depend on that customers, predominantly the public transport agencies and the municipalities in Norway, Sweden and Finland, continue to announce and award tenders as scheduled to enable efficient planning and execution of projects during 2021. Governmental restrictions and recommendations were intensified in all three countries as the numbers of affected has increased in fourth quarter and continued into first quarter in 2021. The Norwegian Government imposed stricter rules 27 January on foreign nationals seeking entry to Norway which will impact production over time. Only those non-Norwegian citizens who are residents of Norway are permitted to enter the country. Operations in Sweden are not affected due to zero number of foreign workers and Finland still has open borders to foreign nationals seeking entry, with a few exceptions.
NRC Group’s main priority is to keep employees safe while maintaining operations. The Group communicates regularly and transparently to equip teams for virtual working and safe project execution. The Group complies with restrictions and guidelines from relevant authorities and follows up with immediate actions when relevant and needed.
Parts of NRC Group’s activities are related to maintenance and upgrades of existing railway infrastructure. These operations are defined as critical to the society, and the company will prioritise these activities in case of situations where certain resources become scarce. NRC Group is well positioned to ensure business continuity.
The Covid-19 pandemic has had limited operational impact for NRC Group to date. Still the long-term impact for the societies and people is characterised by uncertainty due to increase in infection rates and further intensified restrictions.
In January 2021, NRC Group revised the EBITA margin target for 2021 to 1.75% - 2.5%, explained by expected lower profitability in the demolition- and recycling business, low order book in the Civil operation in Norway as well as continued fierce competition in Sweden with low order intake.
NRC Group maintains strong focus on implementation of improvement measures to restore profitability. The company is strong positioned in a growing market with a substantial tender pipeline.
The fourth quarter 2020 result report and result presentation can be found attached and will be available on the company’s homepage: www.nrcgroup.com.
For further information, please contact Dag Fladby, Chief Financial Officer, NRC Group ASA on tel: +47 90 89 19 35.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.