Good afternoon and welcome to Borgestad's Q4 presentation. With me today, I have Pål Larsen, CEO, and Bendik Andersen, Head of M&A and IR. Please use the Q&A function in the chat if you would like to ask any questions. With that, I'll hand it over to you, Pål.
Thank you, Jeppe. It's a pleasure to be here, and especially since we are reporting good figures and also introducing or reporting a proposal of dividend. 2024 was a transformational year for Borgestad. After several years of structured work across both business segments, the results have materialized, and we end the year with good momentum where we have a good, prosperous start into 2025. Borgestad Group as a whole reported a full year 2024 profit before tax of NOK 82.3 million, up from negative NOK 37.3 million in 2023. Our refractory business, Höganäs Borgestad , is increasing its EBIT margin up to 2% from 1.4% in the same quarter 2023. When we also take into consideration that this is the Q4, this is a solid performance given the seasonal slowdown in the end of the year.
Our shopping center, Agora Bytom, is also maintaining its positive momentum, posting an EBITDA of NOK 10.8 million in the Q4 2024, an improvement from NOK 8.9 million same quarter 2023. In light of these results, the board of directors will propose a dividend to the Annual General Assembly in May of NOK 0.8 per share. This is, of course, subject to approval of the General Assembly. This will be the first dividend distributed since 2011 for Borgestad also. So this is positive news. Overall, 2024 marks a turning point for Borgestad. We have built a better foundation for the future, and we are well positioned to continue delivering value creation for our shareholders.
Before going further into details, we will start with a brief introduction to Borgestad to those of you who are not that familiar with who we are and what we do. Borgestad is a company with a lot of history, primarily from shipping and industrials, dating back to the early 1900s. Over the years, we have now evolved into becoming an industrial investment company, currently invested in commercial real estate and the refractory industry. Our current main priority is to improve and maximize the value of existing holdings. But looking ahead, we aim to take positions in niche segments where we see that we can make a difference. We operate as active owners, meaning that we work closely with and support our holding companies to drive operational improvements.
A key part of our strategy is also to leverage the knowledge and expertise of our board of directors and to identify and capitalize on new opportunities. In addition to profitability, capital efficiency is always a priority, ensuring resources are deployed effectively. We take a data-driven approach, meaning that we measure everything we do. Additionally, M&A has been and will continue to serve as an important tool for us in strengthening the competitive position of our holding companies. Our current portfolio consists of two key assets: Agora Bytom, a fully owned shopping center, and the refractory supplier, Höganäs Borgestad , in which we hold a 69.7% stake. Agora Bytom is a modern shopping center located in the city center of Bytom in Poland. The center features 52,000 sq m of gross area and approximately 34,000 sq m of lettable area.
With almost 5 million annual visitors, Agora Bytom holds a leading position in its primary catchment area. For reference, especially for our Norwegian followers, Storo Storsenteret i Oslo is rather comparable to Agora Bytom, both in terms of area and annual visitors. Høen Andersen Borgestad is a manufacturer and supplier of high-quality refractory products and installation services, serving industries that rely on high-temperature processes such as steel, cement, pulp and paper, and alloy. With a strong presence in both Finland, Sweden, and Norway, Høen Andersen Borgestad is the market leader in the Nordic refractory market.
Yes, thank you. Going into Agora Bytom and a bit more details, Agora Bytom continued its positive trend with margin improvements driven by revenue growth and cost cutting. As a result, we are seeing that cost cutting measures implemented in the H1 of 2024 are giving effect at the end of the year, as communicated. It's resulting in an increased EBITDA for the Q4, and EBITDA increased from EUR 37.1 million for full year 2023 to EUR 41.3 million for full year 2024. We can expect further cost cutting measures implemented in 2024 are expected to have a positive impact also for coming 2025. As of 31 December , the debt stands at EUR 29.4 million, which is at a loan-to-value ratio of approximately 47%. This is estimated to be a sustainable level both for Agora Bytom and Borgestad.
Just to remind you, the debt has a due date on 31 December 2028, so we have still a long term there. As previously communicated, we do not see Borgestad as a long-term owner of Agora Bytom, and we will seek to divest our position when time is right. We are actively monitoring the transaction market in Poland and following other shopping centers in that area. The transaction market in Poland is showing signs of recovery after several years with a slow period. In that terms, it's worth mentioning that in the end of 2024, it was two transactions, major prime transactions completed in Poland. Those were completed in October and December 2024. It's marking probably the start of a reopening of the transaction market in Poland for shopping centers. Tenant turnover at Agora Bytom increased by 3.9% in the Q4 2024 compared to the same period 2023.
We have a slight decline in visitors, down from 5 to 4.9 million, but the basket per visitor is increasing, and that is positive for our tenant performance. From a macroeconomic perspective, which is crucial both for Agora Bytom's operation and the broader transaction market, Poland's reference interest rate remained unchanged year on year, while GDP grew by 2.7% year- on- year as of September 2024. Inflation eased at 4.7%, down from 6.2%, signaling improved economic stability. Meanwhile, consumer confidence in Poland is relatively stable with a slight decrease over the course of the year. Agora Bytom benefits from a diverse tenant base and a healthy weighted average under the expiry lease term of about four years, ensuring low contract duration risk and high visibility for the years ahead.
Lease expiration, as well as, are well spread over time, with the first due date for top ten tenants in Q4 2025. It's worth mentioning that two of the top tenants extended their leases in the Q4 2024, respectively 15 and 5 years. So we stand at a good base for the future. A weighted average unexpected lease term around four years is very good at shopping centers where the normal length is five years contract length.
Turning to Høen Andersen Borgestad, we saw a significant increase in EBIT margin during 2024, rising from 3.1% in 2023 to 7.5% in 2024. This improvement is all thanks to outstanding efforts and structured work in all subsidiaries in the group, and the fact that we have exited unprofitable projects, especially in the cremation segment. From Borgestad, we are impressed by the efforts made, and we look forward to keeping up the momentum in the quarters and years to come. Looking at Q4 and considering the general slowdown during winter season, performance remained solid in the quarter, confirming the positive development of the business. We will shortly provide you with an update on the previously announced sale leaseback transaction, but first, we'll have a look at the general seasonality of Høen Andersen Borgestad, and I would also say the Nordic refractory market as a whole.
While it's a stable and non-cyclical market year- over- year and also in the long run, it has somewhat seasonality, with lower activity in both Q4 and Q1, while demand generally peaks in Q3 when customers in several segments perform scheduled maintenance during the holiday season. To manage these fluctuations, Høen Andersen Borgestad relied partly on subcontractors and hired resources during peak season, ensuring flexibility and keeping operational costs under control. As a result of this seasonality, profitability is generally lower in Q1 and Q4 when utilization is the key focus. In Q4 2024, the group successfully increased revenue compared to previous years, which contributed to further improved profitability. Looking at the revenue and profitability development, we began seeing positive trends in 2023, which were further strengthened throughout 2024 across all three countries.
As we enter 2025, the group has a normal order backlog, providing a good foundation for continued progress. Knowing that many larger tender processes can span several years, including extensive product testing and qualifying, the group has a promising pipeline of opportunities for further growth also in 2026 and 2027. Going forward, further improvement across group cooperation will be a key driver in achieving our midterm EBIT target of 10%. While we have seen rapid profitability growth in the last two years, we do expect and see clear opportunities for further and continued improvements in the years to come, but we do not necessarily expect the improvements to continue at the same rate as we saw in 2024.
As previously announced, Høen Andersen Borgestad reached an agreement to sell two properties housing the majority of the group's refractory production facilities to Bjuv Municipality, with an option to lease them back for another five years. However, a complaint made by a local citizen has delayed the process, and the complaint is currently under review by the administrative court in Malmö. Based on the estimated processing time of 12 to 14 months, we do expect a decision soon. Due to these delays, the long stop date for the transaction was postponed from 31 December 2024, to the same date, 2025. Further information on the transaction itself will be announced as soon as we have a final decision made by the court. While awaiting the final decision, the group is actively planning for future production beyond the leaseback period of up to five years.
Given the significance of this transition, we are taking the necessary time to ensure the best possible production setup, making use of the leaseback period.
Going into financials, starting with the Borgestad Group as a whole and the P&L, revenue increased by 7.1% in the Q4 and by 2.5% for the full year 2024. Adjusted EBITDA, which excludes the positive effects from sale of our former headquarter in Skien, and arbitration court ruling in 2023, increased by NOK 58 million from 2023 to 2024. This growth was primarily driven by improvements in our refractory business. Looking at the net financials, net financials improved by NOK 20.8 million in 2024 compared to the previous year, largely due to the heavily decreased debt from 2023 or end of 2023. These factors all contributed to a stronger profit and loss statement for the group and a total financial situation. Looking at the balance sheet, the booked value of the investment property Agora Bytom increased due to weaker NOK against the EUR.
Working capital decreased to NOK 197 million from NOK 239.3 million as of December 2023, mainly due to lower trade receivables for more efficient invoicing processes. Total interest-bearing debt stood at NOK 447.9 million at the end of December 2024, with net interest-bearing debt at NOK 227.5 million. The property in Bjuv remains classified as held for sale, pending soon expecting court decision, as Bendik communicated. Looking at the cash flow, the net cash flow for 2024 was positive with NOK 67.8 million, reflecting the solid financial performance with cash flow from operating activities of NOK 146 million for the year. At year-end 2024, available liquidity stood at very solid NOK 276 million, including an undrawn credit facility of NOK 72.1 million, ensuring that we have a good liquidity situation going into 2025.
With that said, of course, that is also the reason why the board of directors will propose an ordinary dividend of NOK 0.8 per share for 2024 at the annual general meeting in May 2025. The dividend will be repaid as repayment of paid-in capital, and that, of course, is positive for private shareholders. If we look into the summary, Borgestad delivered strong financial results for both the Q4 2024 and the full year 2024, driven by record-high profits in Høen Andersen Borgestad and continued improvements in both revenue and cost efficiency in Agora Bytom. Cash flow remained solid with an operational cash flow of NOK 146 million, contributing to the cash position of NOK 220.5 million, a substantial reduction in net interest-bearing debt through the year.
Additionally, the sale leaseback transaction in Høen Andersen Borgestad, valued at NOK 145 million, is expected to be completed within 2025, and communication from the administrative court in Malmö is awaited soon. This will, of course, further decrease the net interest-bearing debt for the whole group. Looking ahead, Høen Andersen Borgestad will remain focused on operational improvements, with expectation of further gains in profitability, capital efficiency, and cash flow throughout 2025. For Agora Bytom, we are expected to increase slightly in the years ahead. The EBITDA is slightly going forward, with the impact of recent cost cutting implemented throughout 2024 will give a positive impact for the whole year 2025. At group level, Borgestad will continue to monitor the Polish shopping center transaction market and explore add-on acquisitions to further strengthen Høen Andersen Borgestad's position in the Nordic refractory market going forward. Thank you.
Okay, let us open up for questions. Just a friendly reminder that you can still use the Q&A function if you would like to ask questions. We have received a couple of questions here. The first one is related to Agora Bytom and the transaction market in Poland. Given the transaction market has been somewhat supportive in Q4, when could we expect a liquidity event and any valuation expectations?
To start with valuation expectations, we have presented an updated valuation in the Q4 report. I think that is saying everything about expectations. Coming to the liquidity event and a potential transaction, of course, the signs in the transaction market are positive, with two prime transactions concluded in the Q4. At the same time, these are prime shopping centers, probably among the most prime outside Warsaw in Poland. I think we need to review this as a sign, and the transaction market needs to further develop before we can enter with Agora Bytom.
Yeah. Moving on to Høen Andersen Borgestad. What will the possible U.S. tariff or trade war affect Borgestad?
It's a good question. I would say for the most part of the business, it's more or less unaffected. It's likely affected through material costs, but given that Høen Andersen Borgestad is quite large on the installation part of the business, we don't see that as a huge risk for the business. Also, given that we are locally focused on the Nordic market with solely Nordic competitors, which are all exposed to the same factors. So yeah.
Thank you. Next one is also related to Høen Andersen Borgestad. The EBIT margin has improved significantly in 2024 versus 2023. You mentioned in your Q3 presentation that the first percentage point was easier than the next or the H2 . What is your strategy to reach the midterm target of 10% or above in EBIT margin?
Of course, as you say, the first steps are always the easiest, but we have reviewed and analyzed specific possibilities to increase the EBIT margin further. Of course, we don't want to communicate what those measures and initiatives are, but we have a good plan, and we have a plan to partly try to increase the EBIT margin in 2025, but also 2026 and 2027. This is ongoing work and a never-ending story, actually.
Thank you. Last question. Given the dividend proposed for 2024, improved operations, and a solid balance sheet, how should we think about further distribution and also your capital allocation strategy going forward?
For Borgestad to propose, or for the board to propose a dividend, of course, the group companies need to perform. Høen Andersen Borgestad is performing well at the moment, and we expect them to increase further. We strongly believe with the debt level they have today and probably the sale leaseback transaction completed within 2025, we expect further dividend from Høen Andersen Borgestad up to Borgestad ASA, which will be distributed to our shareholders. For Agora Bytom, we have a facility agreement with Bank Pekao that is ring-fencing Agora Bytom. Additional cash in Agora Bytom will be used to repay debt because we don't have the possibility to pay dividend up to Borgestad ASA. In general, what we have communicated is that we will pay ordinary dividends when we have cash flow and results for that, and extraordinary dividends when it's a liquidity event or transaction.
Could we see any M&A going forward?
That's absolutely possible, obviously linked to what we already have to strengthen the position of our holding companies. But yeah, we'll see.
Thank you. And thank you for everyone who watched Borgestad's Q4 presentation.