Thank you. Welcome to our Q1 2021 conference call, and thank you for listening in. First of all, I need to ask you to read page two carefully. Then after that, let's move on to page number three. Here you see the presenters for today. My name is Michael Larsen, and I'm the Group CEO of NTG Nordic Transport Group. Together with me today, I have Christian D. Jakobsen, our Group CFO. If we move on to the next page. Here you see the topics that we intend to go through on the call today, including Q1 highlights, financial overview, and the full-year outlook. By the end of the presentation, the line will be open to questions from the audience. Let's move on to page number five.
These are the main highlights for the first quarter, and I'm proud to say that the 1st quarter represents the best quarter in the history of NTG. Revenue increased by double-digit figures driven by favorable Air & Ocean freight rates and activity development and effects of recent acquisitions. The operating margin almost doubled in the quarter, driven by the successful reorganization in Germany towards the end of last year. Restructuring initiatives in multiple geographies in 2020 across both divisions, which among others, resulted in a very strong rebound in profitability in the Air & Ocean division. The end of Q1 also marked the three-month anniversary of the new customs regime in the U.K., and while the transition caused significant delays and noise in trade flows and volumes dropped in the beginning of the year, we experienced a recovery in the volumes towards the end of Q1.
Although we had to make multiple adjustments to our setup in the very beginning, we managed to quickly increase efficiency and turn our focus towards capturing new customers from other players struggling to adapt to the new circumstances. In Q1, we also continued to maintain momentum on the integration of our recent acquisition, and we remained on track to finalize the integration of Ebrex in the second quarter of this year. When it comes to the more recent acquisitions, but small acquisitions, the integration of Saga Trans and TB International GmbH were completed by the end of the quarter, and the integration of Cargorange is also progressing according to plan. Finally, we updated our full-year outlook on 3rd of May 2021 to a revenue of DKK 5.9 billion-DKK 6.3 billion and adjusted EBIT of DKK 360 million-DKK 400 million.
With these words, I will now hand you over to Christian, who will take you through the financial results. Christian?
Thank you, Michael. The positive development we experienced in Q4 2020 continued into the first quarter of 2021, and performance in both divisions exceeded our expectations. On page six, you see the main financial highlights where net revenue in Q1 reached DKK 1.5 billion, up 17.6% versus Q1 last year. The organic growth made a strong rebound to 11.4%, especially driven by the Air & Ocean division, while the acquisition completed in 2020 and Q1 2021 contributed 7.3%. As you see, we have added a new component to the growth decomposition as we now report separately on FX effects that were negative 1.1% for the quarter, which was mainly due to the Polish zloty. I will come back to the underlying drivers shortly when we go through each division.
Adjusted EBIT increased 125% to DKK 101 million in Q1 2021 as reorganizations and restructurings triggered a record high operating margin of 6.6% for the quarter compared to 3.4% last year. If we move to page seven, you see the summary of key financial performance indicators, which illustrates that the extraordinary capacity situation in the Air & Ocean markets and early signs of capacity shortages in combination with increasing fuel prices in the road markets had a negative effect on gross margins in Q1 2021 compared to recent previous quarters. The extensive reorganization and restructuring initiatives completed in 2020 resulted in increasing efficiencies in both divisions that ultimately drove operating margins to new highs. The development was particularly distinct in the Air & Ocean division, where the operating margin increased 5.6 percentage points compared to Q1 2020.
If we go to the next page, we double-click on the Road & Logistics division. The division generated a net revenue of DKK 1.2 billion in Q1 2021, which was 10% above the same period last year. The growth was primarily driven by the acquisition of Ebrex, TB International, Saga Trans and Cargorange that contributed with 9%. Growth in existing businesses of 1.9%. The organic growth was mainly driven by the Nordic, Dutch, and English entities, while growth in the Polish and Finnish entities experienced a slowdown as the automotive markets were affected by semiconductor shortages and causing bottlenecks in the wake of Brexit. In Germany, reduced the activity on some challenged services. Total growth for the period was 10.4%, including the FX effects of - 0.5%.
Adjusted EBIT increased 75% to DKK 81 million, corresponding to an operating margin of 6.9% versus 4.4% in Q1 2020, driven by a general gross margin improvement across entities compared to Q1 last year, and the increasing conversion ratio resulting from the successful corporate adaptations and restructurings, predominantly in Germany. If we flip to page nine, you see the Air & Ocean division. The division realized a net revenue of DKK 363 million for the quarter, 49% above the same period last year. The rebound in organic growth was primarily driven by higher freight rates on both Air & Ocean transportation and increasing activity in mainly the Nordics, Netherlands, and Germany, together representing a growth of 53.2% in existing businesses.
A startup in the U.S. contributed positively to the total growth of 1.5%, while the close down of activities in Germany, Croatia, Romania, and Turkey had a negative impact of -1.4%. Total growth for the period was 49.4%, including a negative impact of FX effects of 3.9%, mainly from US dollars and Russian ruble. Gross profit increased 20% for the quarter, while scarcity of, and challenges in procuring capacity drove the gross margins lower. Adjusted EBIT increased from approximately zero in the first quarter last year to DKK 20 million in the first quarter of 2021, corresponding to a margin of 5.5%. The development was driven by increasing profitability in Germany and Denmark, which more than outweighed the effects of increasing time spent per shipment due to prevailing capacity shortages.
Based on the strong performance of the division in the first quarter of 2021, we remain committed to the strategy of prioritizing a limited number of core markets and increasing focus on sales and streamline operating procedures. If we flip to page 10, we highlight all our key figures. On the left, you see that the net working capital increased to -DKK 146 million, which is still better than last year. This is mainly due to the growth in the Air & Ocean division and timing of European Easter holiday. The development in net working capital almost offset the strong financial performance for the quarter, the adjusted free cash flow came to DKK 4 million, as illustrated in the middle, which was below previous periods.
To the right, you see net interest-bearing debt, excluding IFRS 16, that increased to -DKK 151 million due to the development in the adjusted free cash flow and the impact of acquisitions of business activities. On top of our net cash position, we further strengthened our access to liquidity by entering into an agreement for a new committed credit facility up to DKK 500 million, replacing the former committed facility of DKK 150 million. If we flip to page 11, you see the full year outlook for 2021, which we announced on the 3rd of May 2021. We maintain this guidance, and for the full year 2021, we expect net revenue in the range of DKK 5.9 billion-DKK 6.3 billion and an adjusted EBIT in the range of DKK 360 million-DKK 400 million.
The guidance includes the expected effects of reassessment of the previous impaired lease agreement, estimated at DKK 20 million, subject to final negotiations with customers and final configurations, and the expected effects of the acquisition of the 75% of the shares in the AGL Transport, which is expected to close in the first half of 2021. On the right side of the slide, you see the assumptions underlying our guidance. I'll not go through each of them, but merely emphasize that the guidance is still subject to a significantly larger degree of uncertainty than usual. That was all what we have planned for now. Now we'll go to the Q&A.
As a reminder, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you find your question has already been answered, you can remove yourself from the queue by pressing the hash key. Again, that's star one to ask a question. Our first question for today is from Michael Rasmussen from Danske Bank. Please go ahead.
Yeah, thank you so much. My first question will be a little bit on the impact that you've seen from the semiconductor shortages. I believe you mentioned Poland and Finland. Can you comment a little bit about how that has developed into the second quarter? When did this issue start during the first quarter? Should one expect this to be a little bit like a catch-up effect? When we are out of this problem, then you will kind of be able to compensate for that, or net/net, should this be a negative for the full year? That's my first question. My second question is more just a bit of insight into how you think about acquisitions. Obviously, we've seen you doing a number of relatively small acquisitions in the Road Division.
When are you seeing that you're ready to take on maybe, first of all, a little bit larger acquisitions, but also acquisitions in the Air & Ocean division. Those are my two first questions. Thank you.
Thank you. On the semiconductor, I think we had the first real effect in March, and we also seen it here in Q2. We are not able to tell you whether there will be a catch-up effect or not. Something could, but on the other hand, we don't know when that catch-up effect will come, if there will come one, because as we hear, there are still challenges on the semiconductor market. We'll not be able to tell you whether it will come and when it will come. On the acquisitions, we fully agree that we have made some, what we think is very nice add-on acquisitions in the Road division, and we are working also looking for bigger acquisition, both in the Air and Ocean and in the Road divisions.
As you know, we have a big pipeline, and we're working on that every day to come closer to acquisitions which will bring value to us. Yeah, we are ready, and then we just have to wait that the right acquisitions will land.
That sounds good. When you look at this very hot both Ocean and Air markets, what are you seeing in terms of getting the capacity? Because I think that this has changed slightly in both directions in the past. We obviously know that the ocean carriers are now more eager to get people using the online booking platforms. It also seems like Maersk is talking about smaller freight forwarders getting an increasing share of their revenues with the larger freight forwarders maybe struggling a little bit on using that because they would rather use their bargaining power. How do you see this market? Is this something which you've seen as a positive or as a negative for (guys like you)?
As for us, I think as you also know, last year, we had challenges adapting to the new situation. We have been very happy with how we have adapted in the Q1 and also we were happy about it in Q4. We had closed some challenges coming into Q4, as we discussed earlier. In particular, in Q1, we have been very good in adapting to the situation. We see that we get the capacity, and we are also servicing customers which we couldn't service before. Maybe you're right, I don't know whether the biggest challenge is getting the space involved. They have to answer that. We see that we have the possibility to get some services that we couldn't get before.
That's also what we see here in the start of Q2, but we also expect that that will come back to a more normalized situation during the year.
Great. Just my final question on the Air & Ocean division. You reach already now a 5.5% EBIT margin. Is this something extraordinary, or is this kind of the new level going forward on a 21% gross margin you can achieve a 5.5% operating margin and then once the operating, or sorry, the gross margin maybe improves, maybe also there is a bit of upside to the EBIT margin or are you satisfied with pretty satisfied with the 5% levels?
I think we can say we're very satisfied with the performance in the Air & Ocean division for the first quarter. Coming from zero last year to reaching 5.5% , we think that's really strong. We don't know whether we can maintain this level. We will do everything we can, we had a lot of tailwind in Q1, yeah, we don't know how the wind will be in the coming quarters.
Sounds very good. I'll step back into the queue here.
Thank you. Our next question is from Mikkel Emil Jensen from Nordea. Please go ahead.
Thank you. Maybe I can pick up where Michael Larsen left off. Air & Ocean division. I'm just wondering if you could elaborate a little bit on what you have done there, because it's a pretty big improvement in EBIT margin compared to the fourth quarter, I'm just wondering if it's all the strong markets, or are you seeing more cost savings coming through? A little more detail would be appreciated.
I think we have already said that we closed a couple of challenging companies, and the last thing we did was in Q4 where we closed them. I also think that we said that Q4 was a little bit more better in the underlying business than what we saw. To be honest, we have a lot of tailwind. We have really landed some good projects, and that's where it is. We're also very positive about the starting in Q2. As I said, we had a lot of tailwind, and maybe we don't expect that much tailwind in the coming quarters, but we will keep striving and fighting for the high margins and the high activity. We also see some challenges when it comes back to the normal situation.
Okay. Understood. Also staying on the Air & Ocean division, I'm just wondering how big an impact you've seen from the Suez Canal logjam. I imagine there wasn't much impact in Q1, but how has it affected April or Q2?
I don't think we have a big impact. We had some impact, but I don't think it will affect us a lot. Fortunately, they solved it pretty fast, and I haven't heard of any customers who are claiming us for money or something like this. I think most understand that, yeah, this was an unfortunate situation, and at least we couldn't do anything about it. We don't see a big effect, at least I haven't heard of that at the moment.
Okay. I think, Christian, you said you have a new credit facility of DKK 500 million, and that it replaces a DKK 150 million facility. It's a pretty big increase, obviously. I'm just wondering why you bother to do that at this point, given that you have a pretty large cash pile.
You have to do this when the times are good. You have to prepare yourself and get that on board. It's not like we are expecting to spend it tomorrow, but we are ready for also bigger acquisitions and more acquisitions. As you know, we have made five within the last couple of months. Maybe if some in the future will be a little bit bigger, then we need a little bit more firepower. We think that was the right time to do it when we also had the time to do it.
Okay, that makes sense. Finally, just a housekeeping question for our modeling. The DKK 20 million impairment reversal, I'm just wondering which line that will affect in Q2, which line in the P&L.
That will be under depreciations.
Okay, great.
Yeah.
Excellent. Thank you. That's all for me.
Thank you. As a reminder, it's star one if you wish to ask a question. There are no further questions that are coming through.
Okay. We will say thank you and have a nice day.