Welcome to MT Højgaard Holding's Q3 2025 presentation. This call will be recorded. In the first part of the call, all participants will remain muted. Afterwards, there will be a question and answer session, both in the teleconference and on the stream, where it will be possible to ask questions to the speakers. To ask the speakers a question, please press five star on your phone. I now hand it over to speakers CEO Rasmus Untidt and CFO Dennis Nørgaard. Please go ahead, Rasmus.
Thank you. Welcome to this presentation of MT Højgaard Holding Q3 report and full year outlook. We appreciate that you have taken time to listen in. My name is Rasmus Untidt, and I'm CEO. With me today is CFO Dennis Nørgaard. We'll give the presentation in English to consider our stakeholders, including our growing international shareholder base. While Dennis and I speak, you can submit questions in writing on the right side of your screens. We'll answer both online questions and questions from the participants in the conference call as soon as we have completed our presentation. Slide two, please. Let's start with some highlights from Q3, where we continue to follow the path we've set for 2025, with a clear focus on stability and building on the progress made in recent years. Q3 results were well-aligned with the full year outlook.
We maintained guidance with increased confidence after an additional strengthening of the order coverage for 2025. We also managed to expand the long-term order portfolio, but we still have some work ahead of us in terms of strengthening the short-term order portfolio for 2026 and 2027. The efforts to focus and simplify the group are on track. The integration of MT Højgaard Property Development in MT Højgaard Denmark has been completed. The step-by-step consolidation of Enemærke & Petersen's activities in Western Denmark is ongoing, and we still expect to divest the remaining activities in Greenland this year. This will conclude the winding up of the group's international activities. Finally, we repaid a subordinated loan in Q3. This loan was established in 2018 when financial resources were strained. Fortunately, we are in a different situation today.
The group's robust financial position allowed us to repay this loan and thereby reduce financial expenses going forward. With these highlights, I'll hand over to Dennis, who will further elaborate on Q3 results. Slide three, please.
Thank you, Rasmus. As you will appreciate from the columns to the right, civil engineering and infrastructure in Q3 cemented its position as the key growth driver for the group. Revenue from this business area was up 43%, while we did see some short-term fluctuations in the order intake. The perspectives in this business area are encouraging. There are many interesting projects lined up under the Danish government's Infrastructure Plan 2035. Tunnels, extensions of highways, new highways, additions to the metro systems, et cetera. These infrastructure projects form a solid basis for continued growth in the business area. In Q3, civil engineering and infrastructure accounted for 27% of group revenue, as shown in the columns to the left. 42% of Q3 revenue was related to new builds, while 29% was linked to refurbishment. These figures demonstrate an improved balance between the group's three major business areas.
Across business areas, revenue from construction partnerships and collaboration projects was up 6%, accounting for 32% of group revenue in Q3. We continue to put a lot of emphasis on both multi-year partnerships with large developers and projects with early involvement, where we continue to contribute, to develop, and design before construction starts. This approach increases visibility and helps us reduce risk and avoid conflicts. Let's take a closer look at our two business units' results in slide 4. MT Højgaard Denmark's revenue in Q3 decreased by 10% to DKK 1.4 billion. This reflects the current phasing of the order book, where large multi-year projects contribute modestly to the top line in the startup phase. Revenue from these multi-year projects will pick up as construction work start. MT Højgaard Denmark had a fairly strong trend in the execution of own projects.
Nevertheless, earnings were down on lower revenues and lower contributions from joint ventures. Joint ventures broke even after previously communicated write-downs. Still, an operating margin of 5.3% was satisfactory. The business unit's order book was DKK 6.3 billion in Q3. To this should be added a significant portfolio of won, but not yet contracted orders. Let's turn to our second business unit on slide five. Enemærke & Petersen's revenue in Q3 was DKK 999 million. More than half of this revenue was related to construction partnerships and various collaboration projects. The operating margin was 3.9%, a minor improvement over Q3 last year, but a significant step up from recent quarters where the margin was below 2% due to a handful of problematic projects. Improvements were driven by stable project execution and a reduced impact from the problematic projects for which progress was achieved and individual subagreements concluded.
The order intake increased on new contracts within subsidized housing and ByK & TRUST with the City of Copenhagen. From the quarterly update to the results year to date. Slide 6. In the first 9 months, the Group consolidated recent years' profit improvements. Revenue grew modestly by 2%, while earnings on ongoing projects were largely on the same level as last year. The EBIT result of DKK 309 million was adversely affected by 2 factors. First, the result of joint ventures declined following previously communicated write-downs. Second, we had minor non-recurring expenses for organizational changes, while last year saw positive one-offs from the settlement of older disputes, reversal of provisions, and profit from land sales. Net financials were an expense of DKK 21 million, mirroring lower interest expenses. Furthermore, last year's financial items included an adjustment of the obligation to buy NemByg.
At DKK 235 million, profit from continuing operations after tax was nearly on par with last year. The loss from discontinued operations was substantially reduced to DKK 39 million after tax, after we wound up most of the international activities. Thus, net profit ended at DKK 196 million, up from DKK 114 million last year. Return on equity was 25.6%. Moving to the cash flow. We're reporting an outflow from financing activities of DKK 370 million. This reflects the DKK 240 million repayment of the subordinated loan, which Rasmus mentioned earlier, as well as the dividend payout of DKK 50 million. Let's turn to slide 7, please. Cash flow from operations rose to an inflow of DKK 151 million, a much needed improvement from last year's outflow of DKK 216 million. The increase was driven by MT Højgaard Denmark and discontinued operations throughout the period, while Enemærke & Petersen started contributing in Q3.
Improvement in working capital in both business units remain a focus area. Return on invested capital was 45%, a decrease of 2.5 percentage points. Despite this small decrease, we still see this level as a reflection of efficient capital allocation. Finally, net interest-bearing debt improved to a deposit of DKK 335 million, a clear indication of the group's improved financial position. All in all, solid results. With these financial highlights, I'll hand back to Rasmus and the order situation. Slide eight, please.
Thank you, Dennis. The business units won final unconditional orders worth DKK 1.8 billion in Q3, up from DKK 1.7 billion last year. Moreover, the business units won orders worth DKK 1 billion, which will be recognized as soon as they're finally contracted. A landmark order was the extension of the M4 metro line in Copenhagen with 2 new stations. MT Højgaard Denmark will be the first Danish contractor to lead a metro construction project as design and build contract. Major wins for Enemærke & Petersen included the refurbishment of the social house area, Egeparken, in the city of Dragør. This order underlines Enemærke & Petersen's strong position in this segment, with around 40 active refurbishment projects for social housing organizations across Denmark. Enemærke & Petersen also won the new build of a social residential facility for the city of Copenhagen through the ByK & TRUST partnership. Slide 9.
End of Q3, our total order portfolio had grown to DKK 22.5 billion, an improvement of 16% over last year. DKK 11 billion were final unconditional orders, widely spread across segments, project sizes, and geographies. DKK 6.3 billion were awarded but not yet contracted orders, typically phase contracts. Examples are the metro stations, a global warehouse for UNICEF, facilities for the state-owned railway operator DSB, a psychiatric hospital for the Central Denmark Region, and other projects for blue-chip customers. On top of this came future assignments and partnerships with an estimated value of DKK 4.6 billion. These assignments are part of the partnership scope, but they haven't yet been contracted. Finally, we had orders in joint ventures worth DKK 0.6 billion. An order portfolio of DKK 22.5 billion allows us to plan long-term and optimize the use of own resources.
It also gives a solid buffer if demand and market conditions suddenly change, even though we don't see any signs of this. A growing share of the order portfolio relates to multi-year contracts where production is spread over long periods, 3, 4, 5 years, or even longer. While it's a privilege to secure a fair and growing share of long-term revenue and cash flow relatively early, both business units continue to focus on strengthening their short-term order coverage for 2026 and 2027. Slide 10, please. In the past two weeks, we have published a few new orders for Enemærke & Petersen, or E&P as we call it in everyday speech. E&P has been awarded the main refurbishment and renewal contract for 3B Folehaven, an area with close to 1,000 housing units in Valby, a suburb to Copenhagen.
With a tendered amount of more than DKK 1 billion, it's the second-largest refurbishment assignment for Enemærke & Petersen ever. A significant win. In addition, E&P secured two turnkey contracts for new builds from its ByK & TRUST partnership with the City of Copenhagen, both are residential facilities designed for people with special housing needs. The combined value of these contracts is DKK 320 million. To keep the record straight, the ByK & TRUST partnership also entered into a contract to complete the construction of a school in the Ørestad district. MT Højgaard Denmark also works to strengthen its order portfolio. We look forward to sharing additional progress by both business units. Now, let's turn to the outlook on slide 11, please. The full-year outlook is unchanged.
We still expect revenue to come out in the DKK 10 billion-DKK 10.5 billion range, while the operating profit still is projected between DKK 400 million and DKK 450 million. Earnings on ongoing projects within civil engineering and infrastructure, new builds, refurbishment, and other areas are expected at largely the same level as last year. On the other hand, non-recurring income is expected to be significantly lower than last year, when profit from land sales amounted to DKK 56 million. In September, contracts were signed for 98% of the year's expected revenue from construction and civil works projects. We entered 2025 with a 77% order coverage, and we have continuously increased the order coverage during the year. 98% coverage further reinforces our full-year expectation. Lower financial expenses and reduced losses from discontinued operations have been driving the improvements of the net result in the first nine months.
We expect these factors to make a difference in Q4 as well. However, please bear in mind that Q4 last year included non-recurring income of more than DKK 40 million from land sales. We're up against tough comparisons, as we don't expect any significant one-offs in Q4 this year. To sum it all up, 2025 will be a year where we consolidate the progress of recent years, stabilize earnings from ongoing operations, and implement measures to simplify and consolidate the group. Slide 11. Let's end the presentation with this photo from the topping out ceremony for the new headquarters for the Danish Defence Intelligence Service, which took place in Q3. It is the largest public-private partnership project in Denmark ever, with the pension fund PensionDanmark as contractor, while MT Højgaard Denmark is responsible for construction and property management.
The domicile is expected to be completed in the summer of 2027. We will now enter the Q&A session. Operator, please go ahead.
Thank you. If you do wish to ask a question to the speakers, please press five star on your phone or use the Q&A on the screen. If you wish to remove from the queue, you can press five star again. Our first question comes from the line of Christian Tornøe from SEB. Please go ahead. Your line will now be unmuted.
Thank you, and hello, Rasmus and Dennis. A couple of questions from my side. If we start with the Enemærke & Petersen, I was obviously quite pleased, and I'm sure you agree with this too, to see the EBIT margin improvement in Q3. Maybe just to understand whether this is a, you can say, clean margin or whether there's any sort of one-off. I would assume you have a healthy part of the revenue in Q3, which delivers a solid margin, and then you have these problematic projects, which you have talked about before, which still dilutes although to a lower degree. Just verifying whether there are any other elements which drive the margin improvement in Q3.
Hi, Christian. The short answer is basically no. What you see in Q3 from Enemærke & Petersen is, you can say, a result of neither negative or positive events in the quarter. It's pure business driven and obviously as also mentioned in previous communications. We also see a, you can say, a period in the coming months, and quarters as well, where we will see that these problematic projects will have a less proportion of the total portfolio within Enemærke & Petersen, which will also improve, you can say, margins.
Great. Along the same line, you also highlight in the report that you have concluded some individual sub-agreements on these problematic projects. I don't know to what extent you can elaborate, but maybe help us understand whether there is any optionality to phase out these problematic projects faster than the contract duration otherwise would suggest.
It's Rasmus here. No, the duration won't change of the projects. That's not the agreements we have made. However, we have made certain smaller agreements in the projects where we had disputes. We can't elaborate on what it is because it's ongoing projects. We have been working on the challenges of each project for definitely a year now, and we have been able to make deals or some conclusions on some of the outstanding issues where we had a dispute. We are moving according to the plan.
That makes sense. Thanks for clarifying that. If I can move to MT Højgaard Denmark, I'm just curious, the UNICEF contract, should we still expect that to turn firm here in the fourth quarter, or can you just update us on that project specifically?
We are waiting. We hope so, but we are not 100% certain. It depends on a meeting in one of the Danish ministries, a budget meeting. We await that meeting to conclude. We are also waiting.
Fair enough. To your discontinued operations, just an update on the divestment process for Scandi Byg, and whether you still hope to see that divested here in the fourth quarter?
The short answer is yes. We'll put some flavor on it, so we have a good progress in terms of the divestment of Scandi Byg. Yes, we still expect it to be divested this year.
Sounds good. A question on your capital structure. As you show, you have a decent level of excess cash. If I just look at your dividend policy, given that your solvency ratio now is just below 25%, your dividend policy would suggest a payout ratio of 25%-30%. Although your cash balance should have room for substantially more than that. Any flavor on what to expect on the dividend front? Should we just see these 25%-30% payout ratios as the most realistic outcome?
Thank you. Dennis and I, as the management, we will come with the suggestions to our board, and the board will make that decision. We are looking at the guidelines, and then it's up to the board. It's nice, I have to say, to see that we have some financial headroom, and that's a positive thing. We can't elaborate more on what will happen because we don't know.
Fair enough. My last question here, you highlight that you have a new strategy in the making, and I obviously know you're not going to give me all the details for that now. I'm just curious whether you can share your consideration of including any financial targets to this strategy. I'm obviously not asking for the targets, but whether we should expect targets or not.
Again, a good question. I hate to be not answering, but yes and no. We are in the process of figuring out how we best can communicate our strategy. Of course, we have some numbers, but we are currently looking into how we can communicate what would make sense for the market and make sense for us. Yeah. I'm sorry, but we're in the process with the board and we have to respect that, so I can't put any more flavor on that, unfortunately.
Fair enough. The plan is to present the strategy in February, I assume.
Yes. It is.
Great. Well, excellent. That was all for me. Thank you.
Thanks. Thank you.
There will be a brief pause while new questions are being registered. As no one else has signed up for questions in this call, I'll now hand it back to the speakers for any written questions.
Yeah. We do have some. First question is DKK -19 million from discontinued operations in Q3. Can you comment on this loss? Does it relate to sale of assets? To start from the latter, no, it does not relate to sale of assets. We have sold off some assets during the year, but none of this, I recall, it has been with any loss. We have made some write-downs in previous periods, so if we have sold differently than book value, it may have been a very small gain. The DKK 19 million you see in Q3 is a mixture of several areas. We are winding down in Greenland, but we do also have some historical discontinued operations in Denmark which has impacted slightly in Q3. Yeah. The next question we have received here it says, "Can you comment on loss in joint ventures?
Should one expect it to turn positive in 2026? What we communicated previously was that we have made some write-downs in the large projects we have. What you can see in Q3 is that although it's a minor loss, that minor loss is not related to the last project. I would say if the project should turn positive in 2026, it would require that we make some positive adjustments on the projects. Everything else being equal as it is right now, it would be close to zero in 2026, depending on discussions with the counterparts on the specific projects. The last question we received here on the writedown is, after repaying the subordinated loan, all else equal, what is the underlying current yearly net financial cost? That is a very tricky question for us, because obviously we don't have that much mortgage now.
The expense itself would be small, but we do see sometimes that we have some financial income related to dunning letters, et cetera, which sometimes could be substantial amounts. Net financial items is not something I would be reluctant to comment on. The financial expenses, yes, expected to go down. I don't have the numbers right now, and we don't provide guidance on it, but expect it to go down given the fact that we've now paid down the subordinated loan. I guess that was the last question we received.
Yeah. Okay.
We will just say thank you so much for participating in this call, and we look forward to meeting you all again for the Q4. Have a good day. Thank you.