Good morning, everyone, and welcome to the ABL Group Q3 results. My name is Reuben Segal, I'm the Group CEO, and I'm joined this morning by Stuart Jackson, our Group CFO. Today, we're gonna take you through the Q3 overall results. I'm gonna give you a short overview of the highlights of the quarter.
Stuart will give you more details on the actual numbers and some of the information behind the numbers, and then I will round up with an operational update and an outlook on how we see the rest of 2023 and going into 2024. For people online, please note, if you have any questions during the presentation, please put them into the chat room, and we will answer them at the end of this presentation. As always, we draw your attention to the disclaimer.
Please feel free to read this in your own convenience. So we're gonna jump into the Q3 results. It's an honor and a privilege to be here this morning to give these results. These are the best results in the history of ABL Group. We reported a revenue of just over $70 million for the quarter.
This is an increase of 60% year-on-year. Apart from the acquisition of AGR, which is the main driver behind the increase, increase in revenue, we also had a very strong organic growth of over 11%. If you look at the breakdown of this growth, this predominantly comes from OWC, which we reported an annual growth of just under 40%. So a very, very good performance in the Q3 top-line revenue. This translated also into an excellent EBIT for the quarter.
We reported an EBIT of $6.8 million, which is an increase of 70% year-on-year. This is predominantly driven by the acquisition of AGR, but in addition to that, it is also a 25% over a 25% increase over Q2. This is not only due to the strong performance of ABL sector, which is predominantly oil and gas, and also the acquisition of AGR, but every single division of ABL Group grew from Q2 to Q3. That's OWC, Longitude, ABL, and AGR. There is an improvement across the board, and Stuart will go into more details of this as we go forward.
Not only was it a very strong performance, which equated to 9.7% EBIT margin, but this is an increase of 9% from 9% over Q3 2022, and an increase from 8% pro forma, if you include AGR into the equation. So a very, very strong bottom line performance as well as a top line. For people that have been following ABL Group over the years, you will also know this is the first time in the company's history that Q3 has outperformed Q2, so an excellent quarter all round. In terms of our net cash position, we closed the quarter just shy of $15 million, which is an increase over Q2.
This was predominantly through good cash flows from operations of $3 million, which was offset by $3.4 million due to the acquisition of Delta Wind Partners, DWP, and our other loan repayments and financing responsibilities during the quarter. As I mentioned, Delta Wind Partners was also closed. It is our second acquisition of the year, and in future, you will see DWP as part of the OWC figures going forward. Finally, I'm very happy to announce that the board has approved a semi-annual dividend of NOK 0.35 , and this dividend will be paid in November of this year.
So all in all, it was an excellent quarter and excellent financial performance for the organization, and I would like to take this opportunity to thank our colleagues and our staff for the very, very hard work they put in during the quarter to produce these results. I'm now gonna pass you across to Stuart, and he will take you through more details of these results. Stuart?
Thank you, Reuben. Before I jump into the financial statements, just a quick review in terms of the segments and therefore what's driving our results. So this is across ABL, AGR, OWC, and Longitude. From a revenue perspective in Q3, there's not a material change from where we were in Q2 in terms of the split across those businesses.
There are changes, as Reuben has highlighted, at the adjusted EBIT margin level, with all of the segments showing improvement. So we still have very strong performance from ABL and Longitude, which are up 2%, two percentage points compared to Q2. So we're repeating the type of strong performance we saw in Q2. We have an improvement in OWC. You'll recall that what we're doing is driving growth in OWC, as you've seen in terms of the revenue growth.
That comes at a bit of expense in terms of margin. We'll be seeing a 2% increase in the margin at OWC in the last quarter. And then AGR, which is a very different type of business, so we shouldn't expect the same type of margins. This has had an improvement from 3%-4.3% in Q3, so a step forward in the AGR business.
That is after adjusting for some integration costs that we had in Australia. From that operating performance, we've had 7.9% going out of the business in terms of our corporate costs, compared to 8.2% in the second quarter , and that drives our EBITDA margin, EBIT margin of 9.7% over the quarter.
In terms of the more detailed analysis, Reuben's already mentioned that we've seen an improvement both at a revenue and an EBIT level, and an EBIT margin level across the business, and this just provides the detail in that respect. You see from a revenue perspective, obviously, AGR coming into the business, for a full quarter, but also OWC, from a growth perspective, showing a 39% growth year-over-year, which is very similar to the level of growth that we had in quarter two, although we wouldn't expect that growth to continue on a permanent basis. In terms of our EBIT margin, we're at $5.5 million across the group before making adjustments to the EBIT, which are predominantly around our integration costs, our share-based compensation, et cetera.
That drives our $6.8 million of EBIT margin for the group, which derives the 9.7% of EBIT margin percentage that we have across the group. Looking in a little more detail in terms of the income statement, key features here, you'll see that, while we're increasing 60% on our revenue, we're 67% on the costs, so a higher level of costs. That's simply because of the difference we have in terms of the type of business that AGR is. It's a lower margin business, and therefore, it carries more costs for the revenue that comes in. From a depreciation amortization perspective, we reflect in here $0.2 million is a charge we have on AGR integration costs.
This is where we've been pushing the integration and bringing the Add Energy, the AGR, and the ABL businesses into one office, and therefore, terminated other leases. We've had a positive impact in terms of FX movements during the period, but this is on unrealized valuation of instruments which are denominated non-functional currencies and not a cash impact.
Overall, as I said, $6.8 million in terms of EBIT and a 9.7% EBIT margins, so increase year-on-year and an increase over the second quarter. Turning then to the cash flow and after adjustment for our non-cash items and highlight the working capital changes that we have. So, an increase in the working capital over the period, simply explained by an increase in the day sales outstanding in OWC.
We had a very large contract, which was a very good payer, which completed, and we replaced that with another very large pay contract, but with a slower payer. And we're just seeing that effect while I go through the working capital line at present. In terms of cash flow from operations, as Reuben mentioned, we generated $3.1 million.
And in terms of utilization of that cash, investing activities of $1.7 million, which is predominantly the $1.1 million in cash that was paid to acquire Delta Wind Partners. And then from a financing activity, our regular debt service and lease service payments, together with $800,000 of debt repayments during the period.
After revaluation of our cash for FX movements, we're ending the period at $25.9 million in terms of our cash position, which if you then deduct our borrowings of $11 million, gets us to $14.9 million of net cash sitting on the balance sheet at the end of the third quarter. From a working capital perspective, you see a continued reduction in the graph here in terms of our working capital ratio.
Just to remind you, this is looking back over the last six months of revenue relative to the working capital position we have at the end of the period. The change here, as we highlighted in Q2, is we now have six months of AGR revenue coming in, so as expected, we've dropped just below the 50% level, going forward.
I mentioned before, from an EBIT perspective, AGR is a different type of business. It's also a different type of business in terms of it's less capital intensive. So when you start to look at our return on capital employed, which we provide in the details of the release, you'll see that we're increasing our return on capital employed, and actually, the end of the third quarter, we have one of the highest levels we've had in the company in terms of return on capital employed. From a debt perspective, we have the maturity of the term loan coming up at the end of the year, and we're well advanced in terms of discussions with HSBC for a replacement facility, which will be put in place in the coming weeks.
And finally, in terms of position for the end of the quarter, as Reuben mentioned, we are making a dividend payment of NOK 0.35 per share, which will be paid on or about the November 20th. This will be treated for tax purposes as a repayment of paid in capital. In terms of total returns to shareholders during the year, in 2023, therefore, that takes the payments up to NOK 0.7 per share, a total payment of NOK 8 million. Slightly different, higher payment than the first half, simply because of FX translation from NOK to US dollar. And with that, I'll hand back to Reuben to take us through the business outlook and business activities.
Great. Thank you, Stuart. Good. So I will just round up the presentation and give you a little bit of operational update. We talk about our headcounts, and we've talked about the very strong growth, particularly across the OWC sector over the last 12 months. Our headcounts now sits at just under 1,600 full-time equivalent employees, which is a quarterly increase of 1% and 3% in terms of permanent employees.
So this continues to show the growth that we're having. This, of course, is predominantly driven by OWC, but as Stuart has highlighted and I mentioned earlier, it is across all sectors of the organization that we continue to see this staff development. If you see the graph at the bottom as well, this just shows that both ABL and OWC are growing at a good pace, and Longitude also.
So even now with AGR coming into the equation, we've now integrated Add Energy into both AGR and ABL. We are seeing strong, organic growth across all divisions of the organization. As Stuart also mentioned, although we've been growing OWC at 40% annually, we expect to see a little bit of a cool down of that growth going forward, but still growth nevertheless. And how does that translate into where the revenues are based?
Overall, around about 2/3 of the revenues, pro forma $267 million, are in our Oil and Gas divisions. That is across Longitude, AGR, and also, ABL. 21% of the revenues continue to come through our renewables division. And maritime, we don't talk so much about maritime, but is performing very, very well. Very strong business, excellent margins, and continued growth across the organization....
In terms of the split, I think, as Stuart showed you the slide just before, but in simplified terms, just under half the revenue is generated within ABL, which is showing very strong margins. AGR, just under one-third, and we continue to grow AGR, both top line and bottom line, and the balance made up through OWC and Longitude.
But how do we see things going forward, and how does that translate into our business? So of course, we've seen a very, very strong uptick in the renewables industry over the last few years. However, with some of the inflationary costs going on, interest rates across the globe, we are seeing a slight impact on what we would see in 2024.
Some of the projects which were signed back in 2020 and 2021, are today being impacted by these additional costs. We are seeing some projects being postponed. We are seeing some projects being pushed to the right. But overall, the outlook is strong. Overall, the outlook is positive going forward. In fact, if you see going forward in Europe alone, the number of auctions that we expect to come online in 2024 is some of the highest the industry has ever seen. OWC, in particular, operates in that sector. They operate at the pre-pre-auction. We assist our clients with auctions. We assist them with permitting. So looking forward, it looks very positive.
If you look at the ABL sector of the business, where we do the marine warranty, it is about installation, and those are the projects we see going on today, which may have a slight bump in the road in 2024. But putting all that to one side, and with what you see across the globe, whether or not being in China, to Korea, all the way through to Europe, the outlook for renewables across the globe is positive.
The long-term future of renewables is very positive, which where OWC and ABL predominantly are playing. In terms of the oil and gas side, we are seeing some excellent growth continuing across the globe. E&P spending, you've seen this graph last time, it continues to be strong, but in particular, on the rig count, we are seeing more and more rigs going under contract.
In particular, jack-ups are showing an eight-year high of utilization and rigs under contract. ABL being a market leader in the oil and gas sector for rig moving and other related oil and gas consultancy activities, it is a great position for us to be. And just shows that going into the end of 2023 and into 2024, and what we hear as well about the oil and gas industry, ABL is in an excellent position to continue taking more market share.
So in summary, Q3 of 2023 was the best quarter in the company's history. It has showed some of the strongest growth the company has ever seen. It is some of the highest margin—sorry, some of the highest EBIT we have ever seen. Performance across each of the four segments of the business continues to grow, both top line and bottom line.
We're seeing very robust markets going forward. We're seeing a robust long-term future for renewables. We're seeing a very robust oil and gas resurgence during 2023 and going into 2024. Our maritime sector is extremely stable, and we continue to be a market leader, not only in maritime, but across all three parts of the business.
Going forward, our capital efficiency continues to improve quarter after quarter. We mentioned, Stuart mentioned about our return on capital. One of the reasons for the acquisition of AGR is to improve this return on capital. We are now at an all-time high of 21%, and we will continue to monitor this going forward and present this in the back of the appendix of the presentation.
We also mentioned we are happy to announce the semi-annual dividend of NOK 0.35, which will be paid out in the next few weeks. So a good return to our investors as well, which is important for the organization. And finally, and not least, we continue to look for acquisition opportunities.
If the right company is out there, we will always look at that opportunity. I think if you look at the last three or four years with the acquisitions of BTS and with LOC, Add Energy even, which I'm very happy to report, continues to grow from strength to strength, quarter to quarter, and now with AGR.
We have a good track record of finding the right acquisition, bringing them on board, and growing ABL Group, and we will continue to do that across all parts of the company if the right opportunity comes along, and I will use the word "if." We will only do what's right for the organization. So on that note, I once again would like to thank everyone within ABL Group for an excellent quarter. Keep up the good work, and let's take that into 2024. So on that note, we will close the presentation, and if anyone has any questions, we are happy to take them.
We have received some questions online, and it's still possible to submit questions. First one is from Lukas Daul at Arctic Securities: "How do you think the offshore wind slowdown in 2024 is affecting your activity levels relative to 2023?
So 2023, and even prior to 2023, we've had very, very strong growth in headcount. We saw an opportunity to grow our headcount. We saw an opportunity to get in now while we have a chance to be able to embed our position for future years. What I don't expect is for us to see 40% annual growth next year.
That would be too strong, I believe, but we will still see growth going forward. As I mentioned, if you look at the area where OWC focuses, they focus on pre-Before we install anything, when people want to do the audit to get permitting and the auction rounds, we see OWC at a very, very early stage, and we expect 2024 to be a record year, particularly across Europe. So the position is still very strong for OWC. We expect to see growth for OWC, and the long-term future is very good. But only thing I would caution is I do not expect to see the 40% growth over 2024. A calmer, more controlled growth during next year.
Good. This next question is from Olav Rian, and I guess it's for you, Stuart. The company's net cash, what can you say about dividend going forward?
Well, I think, you should probably look at what we have in terms of the last comment here, that, you know, we do have still, an ambition to grow the company and grow the company through acquisition. But at the same time, we have maintained dividend payments and increased dividend payments. I don't have a forecast in terms of where that will go to for 2024, but I expect we will still maintain the history we've had, of making sure when we have cash available, we return that to shareholders. Balancing that with the opportunity we will have around acquisitions.
We have another question from Lukas Daul . "Regarding consolidation, what parts of the value chain would you like to strengthen or grow going forward?
I have to say, we have opportunity across all four divisions of the company. AGR is the newest part of the organization in a new field of business, particularly on the consulting side, which was different than when we first started ABL Group. But we are looking for opportunities in renewables. Right now, with this potential blip in the road, what we may see are renewable companies at a more realistic price. So we will look at them. Right now in oil and gas, there are opportunities out there, and of course, the margins within oil and gas are excellent. So if there's a chance for us to strengthen our oil and gas division or our engineering division through Longitude, we will take that opportunity.
So even in maritime, if the right opportunity comes along within maritime, we will look at that too. So I wouldn't say we're particularly focused on one of the four divisions, but if the right opportunity comes along, whether or not it be in oil and gas or renewables or even maritime, we will look at all of them. And right now, with this, with all businesses being the way they are, long-term potential growth for renewables, certainly the short-term outlook and midterm outlook of oil and gas, there's no reason for us not to look across all divisions.
We have an anonymous question here. "How will slowdown in revenue growth in OWC affect the margins?
So one thing we've stated is by having this very strong growth, it affected the margin. By bringing on so much headcount during the course of the year, what you cannot expect is for people to join, they become highly utilized on day one. So it'll actually have a positive effect. The plan is that we have a more structured growth plan, less recruitment, and what we use then is to the excess utilization that we have in the system, we can now start to push that utilization and actually increase the margins. So by having less growth in the headcount, we get, hopefully, a higher growth in the utilization and a higher growth in the margin. That is the intent. So it's a balancing act between growth of utilization versus growth of headcount.
This year, we've decided to take the route of grow headcount. Next year, we've decided to take the route of more controlled growth and grow the utilization, which ultimately should fall down to the bottom line.
The final question for now is from Olav Rian: "What can you say about margin going forward more generally? Can we increase, expect increased margins for the group, or are we at to the steady state margin now?
What can I say? I mean, Q3 is the highest we've ever had versus Q2, and in past history, Q2 has been the highest. I think the margins that we're seeing across the oil and gas divisions today are very strong. ABL and Longitude, in particular, are very strong. It's not to say we couldn't grow them more, but they are very strong. If you look at what's going on within Add Energy, we're starting to get Add Energy up into double-digit figures as well now. We have recently acquired AGR, and our intent is to grow AGR's margin. Will AGR ever get to the same as ABL? It is unlikely. It is a different model. It's a different structural business than ABL.
But what we would like to do is continue to grow the margin of OWC and grow the margin of AGR, which combined will increase the overall margin of ABL Group. So I don't think it's about necessarily growing one or the other. It's about working with all of them to grow the margin of ABL Group. And there is still room to do that, as we talked about, within both renewables and also within AGR. And you are seeing that quarter-on-quarter at the moment.
I think operations will also... Yeah, they always drive the margin, but also we have the corporate costs.
Yeah.
We're seeing a quarterly reduction on those quarterly costs, and we'll be continuing that focus as we go into 2024. So it has less of an impact on the operations, but it's a focus for the company as well.
We have received one more question from Lukas Daul at Arctic Securities: "How do you think the offshore wind industry will adapt going forward?
If you follow what every country on Earth is saying, and COP28 is taking place as well, all countries are wanting to invest in renewables. All countries are wanting to grow that part of the energy sector. With the energy transition going forward, the long term, I don't think has changed in any way, shape, or form.
The adaptation is the reality of cost. As the years have gone by and inflation has gone up and interest rates have gone up, there is a higher cost. But that is the same. If you look at traditional oil and gas sectors over the last X number of years, you get these humps and troughs and cycles, and I don't think the renewables one is any different. What they're going to do now is understand that these costs are there, and ultimately someone will pay.
Whether or not that's the government or come down to consumers, that will happen. Yet the intent by all governments and by all sectors is to continue to grow renewables. It is continue to grow offshore wind, onshore wind, solar, battery storage, and so on. So the long term is, is still the same. I don't think there's any change for the long term. It's just a realization that the costs are increasing and someone has to pay.
And of course, from our own perspective, we want to increase our rates, we want to increase our salaries, we want to increase what we do across our own business, and there's, there is a cost to that. So I think the reality is, it's just an industry correction that needs to take place, and that correction will take place during 2024, and I'm sure back end of 2024 and 2025 onwards, we'll continue to see that growth that people are talking about. Just short term, in my opinion, anyway, so.
We have no further questions online.
Great. So thank you very much for your attention. And if anyone has any questions going forward, please feel free to drop us a note. Otherwise, we look forward, for myself and Stuart, to give you our Q4 results in two or three months' time. So thank you everyone for tuning in today.