Good, I guess we are rolling, I expect. So good afternoon, everyone, and welcome to this presentation by MT Højgaard, which is presented today by CFO Rasmus Untidt. Rasmus has been CFO for the past year or so, but has been with MT Højgaard for the past nine to 10 years, so he's very knowledgeable with the company. And Rasmus has been instrumental in some of the major restructuring efforts that we have witnessed this year, and which is creating a whole new path for MT Højgaard going forward. So with these introductory remarks, I will leave the word to you, Rasmus.
Thank you, Peter. Thank you. Hello. Thank you for joining the presentation. My name is, as Peter said, Rasmus Untidt, and I'm the CFO of MT Højgaard Holding. I'll kick off today's presentation with a high-level introduction to our investment case and an overview of the strategic transformations we are going through to emerge as an industry-leading player in the Danish construction industry. I'll then highlight our core focus areas and provide a snapshot of current trading before taking any questions. Let's flip to slide two. Profitable growth in challenging markets. So why is a Danish construction company an interesting investment case in the tough markets we all face, with inflationary pressure, high interest rate, and increased uncertainty?
Well, MT Højgaard Holding has been around for more than 100 years, and we are on track to deliver the fifth year in a row of growth and improved profitability in our Danish core business. We have successfully navigated COVID-19 and mitigated the impact of our industry of severe macroeconomic shock in the wake of the pandemic and the war in Ukraine. We've delivered a solid performance while spending considerable resources on building a new, leaner, and more focused group. These efforts have included several divestments and restructuring of our core business in Denmark. We have already seen good results from the restructuring efforts, and we have taken important steps this year to further sharpen our group profile.
Our key competencies and core focus areas are now well-defined, and we have established a unique position of strength in carefully selected parts of the Danish market, which are less sensitive to macroeconomic volatility. We are continuing this path to drive stable performance and reduce risk exposure even further. The strategic target is clear for us, and we are making progress every day towards becoming a pure-play construction and civil works company with a leading position in the Danish market. We see interesting perspective and growth opportunities for our business units and a strong outlook for MT Højgaard Holding in the years ahead, and we are pleased to report that we have built a solid foundation for pursuing these opportunities through stepwise improvements of our cash flow and balance sheet. Please turn to slide three. So MT Højgaard Holding today.
Our history dates back to 1918 and includes a number of landmark construction infrastructure projects in Denmark and abroad. Today, our group is compromised, comprised of around 2,500 employees and three business units focusing on the Danish market. MT Højgaard Danmark is our largest business unit, covering construction projects, civil works, and infrastructure. Our other large business unit is Enemærke & Petersen, covering construction projects and holding a very strong position within refurbishments and a solid foothold in building services. The third unit is MT Højgaard Property Development, which is focused on developing, specifying, and realizing sustainable commercial and residential projects. This is our Danish core business, which we have grown profitably for five years in a row, and is expected to reach in the range of DKK 9.5 billion-DKK 10 billion this year.
The operating profit before special items has improved step by step, and we are aiming for a level of DKK 400 million this year, corresponding to a margin of approx 4%. It's key for us to emphasize that we want to continue to grow the business, but we are focusing more on profitability improvements than over top line. We want to maintain the momentum and build on the progress we have made in recent years, and I'll highlight four focus areas that are central to realizing this ambition. I'll get back to these points shortly. Let's proceed with slide four, please. So strategic transformation. The blueprint of our group today is a result of a series of strategic decisions, divestments, and restructuring activities in recent years, and we are not done yet.
Looking back a few years, we have streamlined the group through divestment of business unit within technical installation and leasing of equipment, and most recently, we sold off the modular building company, Scandi Byg, and the company Seth with activities in Portugal and Africa. These divestments are made to streamline our business and ensure that we are spending our management and financial resources in areas where we have a competitive advantage and prospect of further profitable growth. After the divestment of Seth, we are in the process of divesting the remainder of our international business in Greenland and the Faroe Islands to further reduce complexity and risk. This means the international business is now classified as discontinued operations, enabling us to focus entirely on the profitable Danish activities. Let's take a look at the Danish core business on the next slide. Slide five, please. So the Danish core business....
The Danish core business has generated growth and lifted earnings for five years now, and we have improved cash flow, return on invested capital, and other financial ratios during the last year. A fair share of the progress has been made on the back of a strong turnaround effort in our business unit, MT Højgaard Danmark, supported by a stable and high level of performance in the two other business units. This has been the case during COVID-19 and the current slightly depressed economic cycle in the Danish construction industry. We have a broad foundation with 210 current construction and civil works projects. The geographic distribution is good, and we have a great mix of small, mid-sized, larger, and a few major projects. Adding to that, we have more than 2,000 service assignments contributing to the stability of our total portfolio.
We are proud to say that we are the market leader with a multi-year strategic construction partnership with large customers, and we have a strong position in other collaborative projects, refurbishment, infrastructure, sustainability, and construction works in general. The Danish core business is well-positioned today with a high order backlog, a promising project pipeline, skilled leaders and employees, as well as a strong exposure towards the most attractive parts of the market in terms of growth perspectives. Over the last year and a half, we have spent a lot of resources on strategic restructuring. We sold the company Scandi Byg and are now parting with the business unit, MT Højgaard International. This restructuring has taken its toll on the group results, but we have now reached the core of our business.
We are now able to focus entirely on developing our core business, which still holds potential for improvements, and new strategic initiatives will contribute to the strengthening of MT Højgaard Holding and our abilities of continuing delivering profitable growth. Please turn to slide six. On the next couple of slides, I would like to highlight some of the most important strategic focus areas and how they impact our approach to the market and the prospects for future profitable growth. One key focus area and stronghold for us is strategic partnerships and integrated cooperation projects. We're the leader in this area in Denmark, with years of experience for multi-year strategic partnerships with several large council housing organization and public developers. Under these agreements, we cooperate closely with developers and other advisors in a portfolio of projects.
In addition to the fully fledged partnerships, we have entered into large-scale framework contracts, dialogue-based and phased tenders, and we see, and we see an increasing number of projects with early involvement as well. 35% of group revenue was generated from partnerships and other cooperation projects in the first nine months of 2023, and we have won new tenders in municipalities, bringing the number of strategic partnerships agreements to eight. These types of collaborations ensure a higher level of robustness and contribute with increased stability and visibility. It is simply a great way to ensure efficient construction processes delivered on time, on budget, on scope, and it reduces the risk of conflicts. We have actually never been involved in a dispute in a partnership or cooperation project.
Another key focus area is the civil works and infrastructure part of our business in MT Højgaard Danmark, which provides diversification of our portfolio to build greater resilience and stability in challenging markets. We want to expand further in this area after solid growth in recent years. This was most recently illustrated by the 25% growth rate delivered in the first nine months of the year, and subsequent signing of one of the largest waterworks contracts in Denmark, the landmark expansion of the Port of Rønne on the island of Bornholm. During the third quarter, we were pleased to book new orders for the Danish Road Directorate and utilities company, DIN Forsyning Varme . We continue to see solid demand driven by the green transition, energy projects, infrastructure, and waterworks. On this note, please jump to slide seven, please.
The next focus area I will point out is our building service activities. We have put greater emphasis on this area due to its relatively recession-proof nature and stable contribution to revenue and earnings across economic cycles. We have expanded Enemærke & Petersen's capabilities and footprint within building services with the addition of the company Raunstrup, and MT Højgaard Danmark is taking on more service assignments today as well. The area is gaining traction as planned, with more than 2,000 service assignments across the group. Another area that has been gaining traction recently is sustainable construction and refurbishment. We have seen... We have been a front runner in this space for years and are now seeing increasing demand for know-how about recycling, waste reduction, materials, and flexible construction, among other things.
The number of sustainability-certified projects has increased steadily for years and reached 38 in 2022. Today, sustainability is a key topic in conversation with developers. Tomorrow, it will be completely integrated as a natural part of all projects. With this perspective of the four key focus areas, please turn to slide eight, please. So current trading... I'll not spend too much time on the details of our results for the first 9 months, but simply provide a brief snapshot here. Please note that these reported figures are significantly impacted by the international business, which has since been reclassified as discontinued operation. Group revenue grew 23% to DKK 7.5 billion, based on strong development in the two main units in Denmark.
We saw a decrease in operating profit to DKK 95 million, solely caused by a sizable operating loss of DKK 185 million in the international business, which has since been subject to a significant value adjustment, put up for sale and excluded from the accounts. Disregarding the impact from the international, which we are phasing out, profits grew. Looking at the continuing core business, it is key to note that MTH Danmark delivered 36% growth and largely doubled its operating profit to DKK 178 million in the period. Enemærke & Petersen grew revenue by 12% and earnings by 8% to DKK 180 million. The property development unit lifted revenue slightly and reported a positive result.
It is worth noting that this unit typically delivers value and earnings in Q4, which is unfortunately also expected to be the case this year. Overall, the Danish core business delivered strong performance, with high growth and a significant improvement of earnings on the back of higher revenue, better margins and lower capacity cost. Let's jump to slide nine, please. Cash flow and balance sheet. Even with the negative impact of the international business, we improved several financial ratios. We reduced the group's net working capital by DKK 489 million because we are improving our ability to collect cash and phase our projects to quickly receive payments for our work. In the Danish core business, we reduced working capital by DKK 506 million.
We also improved cash flow from operations from DKK 18 million- DKK 426 million Danish krone, and the Danish core business actually outperformed this with an increase of DKK 557 million. Return on invested capital declined by 0.8 percentage points to 17.6% because of the loss in the international business. But for the core Danish business, we delivered a 29 percentage point improvement on ROIC. Finally, we reduced the group's net interest-bearing debt by more than DKK 500 million- DKK 221 million Danish krone. This improvement was driven mainly by an increase in cash in hand. This high-level overview of cash flow and balance sheet improvements underlines that we are making significant progress and creating greater financial headroom. The figures for the Danish core business show the great potential once the international business has been phased out.
Turn to slide 10, please. So, strong and increasing order book. Looking ahead, we see a really strong order book, which grew by 16%-16% year-on-year to DKK 14.3 billion at the end of September. The order book is comprised of firm unconditional orders. In addition to this, we have orders with roughly DKK 400 million, which have been awarded but not yet contracted, and we also have future activities with an estimated value of DKK 5.2 billion within the construction partnerships mentioned before. Finally, the joint venture category contributes with a value of DKK 1.1 billion. When we add up the numbers and unconditional orders with the other categories just mentioned, our potential order portfolio exceeds DKK 21 billion.
This forms a very solid foundation for our activities in the coming two to three years, enabling us to plan and optimize our resource allocation. We are less vulnerable to fluctuations in the market, and we have a good outset for continued stable, profitable growth. Please go to slide 11, please. So the share. Before I end this presentation, I just wanted to share a few points about MT Højgaard Holding share. We are listed on Nasdaq Copenhagen and have roughly 2,800 shareholders and a market cap of around DKK 900 million . In addition to ABG, the share is followed by independent equity analyst at SEB and Danske Bank. Our major shareholders include various entities and private individuals associated with the two original owner companies. In addition, several Danish institutional investors are represented in our ownership, along with retail investors. Free float is around 43%.
We are focused on creating value for our shareholders based on the restructuring efforts outlined today and through continued improvements of the core business. We are confident that these initiatives and a continued strong performance in Denmark will unveil in the value of our group and enable us to distribute excess capital to our owners in the coming years. It's our main priority to resume dividend payment as soon as possible. With these words, I look forward to taking any questions or any follow-up questions after this session, so please feel free to reach out now. Please turn to slide 12.
Thank you, Rasmus, and maybe I should kick off with a few. I mean, there are... We could focus on the short term, or we could focus on the long term.
... short term is, I guess, is a bit outside of your control, as you have, the external factors going on. So, let's start sort of with the long term. Clearly, I just want to know, you have, disposed or on the process of disposing some, you know, legacy businesses, which are, you know, have had - I guess, have some kind of emotional, value impact/etc., for the group. On the other hand, I guess there are also a couple of your very strong divisions, which may also have seen, the other divisions as sort of a drag to the overall group performance. So my question is: How has this been perceived, internally, and how do you see this impacting sort of the motivation and the whole operations of your core Danish divisions?
Because I think this could have a potential impact for the way that you will perform once the whole macroeconomic situation turns around.
Yeah. Thank you, Peter. It has been a very, very... It's been a long journey using IFRS and setting the international business up for sale and selling Seth and also Scandi Byg. You have to understand that Seth is a company we have owned since 1933, but we had to look at it from a strategic value and an economic value, and it was simply not providing either strategic or financially. Therefore, we had to put it up for sale. We were not the best owner. So what we have been doing is we have taken a lot of legacy entities, which have been with the company for years, and put them up for sale. It's been tough, but we had to do it.
The good thing is that the money we will get or the focus will now be solely on the Danish business. So in that sense, it actually brings us together as a group. So we are very pleased with it, that it's been received very positively, because it's not that fun having a loss in a unit of DKK 185 million, as we have seen in the international business, because that money will actually limit the growth in the Danish business. So overall, it's been perceived very well.
During your presentation that you said, actually said, you are not finished yet. Did you sort of refer to the fact that you have not completely sold off the international operations, or should-
Mm
... we see that as you have appetite for some more? And if you do, what could that be?
Yes. We are. We have put up, according to discontinued operations, for in Greenland and the Faroe Islands, and we are in the process of selling it. We are not buying any more international companies. That's. We are now focusing on the Danish core business, but we are looking into our value chain. How can we strengthen it? We are looking into the green transition in Denmark. We are very focused on the infrastructure part in Denmark, which we see as a very, very solid area, and it balances us very well out towards our construction part. So we are looking in, but I can't say what we are looking at, but I can tell you that we are looking. I don't think we are going to make a big bang.
We are going to do it increment and put in value into the existing business. And perhaps we could end up looking in the group and see could something be carved out and be put in a separate division. Everything at the moment is in play, but we have a plan, and I would love in a later stage to tell you a little bit more when it's more solid and I can communicate it.
Thank you. It's not a secret that you had sort of a troubled past.
Yes.
Have you gotten any feedback from some of your clients, potential clients, that have not used you, but may be looking forward to interact you with the future, or any sort of feedback from the client side of what you have been doing here, and whether it has their view on you has sort of turned into more positive and, let's say, looked at you as a more not reliable, but potentially more attractive partner? So I know there were different—the individual companies are running as they should, but nevertheless-
Yeah
... there is a perception at the group level. Just to get some feedback on that.
One of the, some of the feedback I got was, "Finally! Finally, you realized that you weren't the ideal owner of the international companies." And they said, "You have had so much heart, and it's nice that you also use your brain now and actually go in and, and, and create value where you really can create value." Because when you look at it, the Danish market, there are so many possibilities in the Danish market. We still have possibilities to grow in the Danish market. We, we see a lot of opportunities in the Danish market, so why should we go abroad and focus on, on, on those areas?
So a lot of positive, but also people said that it's legacy, it's your culture, it's part of your tradition that you're selling, for instance, the Seth business, but also the business in Greenland, which has been with the company for many, many years. So, but overall, a positive feedback, because they see us now as less risk. The business is more, it's easier to comprehend the business. What are we and what are we not? So in that sense, it's been good.
So looking at the, say, more near-term conditions, your order intake in Q3 was slightly weaker than or weaker than-
Yeah
-we had anticipated, and you made a specific comment that you've seen some orders being phased from Q3 to Q4, and also into 2024. So just your view or your comments at this point in time on sort of how you look, view things, and also if there are any particular... I mean, we know there are particular features in the Danish market. For instance, there is a big pharmaceutical company which is spending a lot of money. You've had some orders from those before. You've mentioned the whole energy transition, renovation, et cetera, which is also having a high activity in Denmark.
In addition to your very strong order book, how do you see the prospects for 2024, and any risk to the order book or order intake at this point in time? Just trying to get the whole-
Uh, uh-
Picture of 2024.
Yeah, we had a decrease in our order intake in the third quarter, but compared to last year, we were at approximately DKK 7.9 billion year to date, and last year we were DKK 7.8 billion, so we are still at a high level. Since we have such a strong order book, we are very careful when we go in and see where we should spend our money and our time and our resources. So that's actually a reflection of that. And we have seen a growth. We have been growing and growing and growing, and sometimes it's good just to take a breather, and also there's a lot of really interesting projects in the pipeline, and we would like to be able to go in and bid on them or cooperate on that.
We are in such a good situation that we have a order coverage for the next 12 months of approximately 82% for the group, and that's... It's very, very nice. This means that we can be selective, and we are. You mentioned the big D- there's a big pharmaceutical company. Yes, of course, we are looking into that, the green transition, the energy transition, everything, we're looking into it. But in terms of the infrastructure, we are not ready now to go in and do the really, really big, big, big projects. We're taking it step by step, increment we are building on from project to project, so it's actually- so it's stabilized, and we can control it, because we don't, with our history, want to go into a situation where we have...
We have a direction now, and this means that now we are working with the speed, and we are taking it nice and calm, but we have the direction. We know where we are going. We want a strong construction, and we want a strong civil works division, because those two balanced will create a good company. Then we have the PD, product development, which is, in this market, a little bit challenged, but it still, it makes good synergies to the other two business lines: construction, refurbishments, and civil works. I hope that was the answer.
Yes, you sound pretty confident on the prospects for-
Yes
... on for next year. And I guess one of the other uncertainties is sort of the whole sale process. I know it's, it's very early days. You just announced the process was, but... And we spoke about this not that long ago, after your Q3-
Yeah
... but any developments on that and any sort of timelines that you can share at this point in time, et cetera?
I have been giving out my number, and people have been calling me. Without I gave them my number, and that's a positive sign. We have put it up for sale, and according to IFRS 5, we have an obligation to sell it within 12 months, and we are working hard on it. That's all I can say right now in respect of anything, yeah, any process, so... But we are working hard on it.
Good, Rasmus. The time has actually come to a stop, or at least, 30 minutes have gone.
Mm.
But nevertheless, you gave a good impression that MT Højgaard, as we see it today, is a completely different company than it was just 12 months ago-
Yeah
... and with much better financial strength, flexibility, and you've shown a good path forward. So, all in all, it does bode well for the company and-
Yeah
... I guess also the share, which you alluded to-
Yeah
As soon as some of these results, sort of-
Yeah
Get more clarity in the numbers.
Yeah.
Thank you very much for being with us.
Thank you so much .
Thank you, Rasmus.
Thank you, and good day. Bye-bye.