Welcome to HAV Group ASA's First Quarter Financial Results Presentation. My name is Gunnar Larsen. I'm the CEO of HAV Group, and together with me, I have Marius Koksvik, which is the Vice President for Business Development in the Group. Today, I'm going to tell a little bit about the highlights of the quarter. I'm going to tell you about the HAV Group in general and the subsidiaries and their market opportunities. Marius will come in and present the financials in more details, and I will give a market outlook for the group and for the subsidiaries at the end. We're also open for questions and answers. We already got a lot of good questions from our stakeholders, so we will take a session with questions and answers at the end of the presentation.
Q1 has been another exciting quarter for HAV Group. We had a revenue of NOK 199 million with an EBIT of NOK 8 million. Cash from operations was NOK 21 million, and our total cash balance is at the end of the quarter NOK 373 million. Some of the key developments in Q3 is that Norwegian Electric Systems signed their so far largest contract, approx NOK 100 million, for a totally electric ferry for Scandlines to be built at the Cemre Shipyard in Turkey. We also established our new company in Turkey, operating in the Turkish market and taking care of the important shipbuilding market in Turkey.
In addition to the ferry installation for Scandlines, Norwegian Electric Systems also signed the order for the land-based onshore ferry charging system. Norwegian Greentech also had a very important milestone in Q1, where they finally got the U.S. Coast Guard approval for the Ballast Water Treatment Systems, which will be opening even more markets for their good products. In addition, we also had some good events after the Q1. HAV Group together with HAV Hydrogen received preliminary approval for our Hydrogen-Based Energy Systems for ships, also a very important milestone. HAV Design also got the order for a design and equipment package for an SOV for the offshore wind market for Ørsted to be built at Cemre in Turkey, also a large contract for HAV Design.
We also secured the last remaining shares for Norwegian Greentech, so we now own also Norwegian Greentech 100%. HAV Group, as I said earlier, is a young company. We were established in February 2021, but we are based on the experience from four companies with several years of experience in the maritime shipbuilding market. We are an international provider of sustainable marine and maritime technologies. Our vision is a sustainable future at sea, and that is very much in line with the old activity that all these companies also have been doing up till we organized these companies in the new group. We will consider ourselves to be specialized and experts in guiding the marine and maritime industry towards the zero emission. The four companies within the group is HAV Design.
HAV Design is a global leader within their segments within energy efficient and competitive ship design with zero emission ambitions. Norwegian Greentech is the water cleaning expert in the company, and their main product today is Ballast Water Treatment Systems for small and medium-sized vessels. Norwegian Electric Systems is a world-leading total supplier of low and zero emission propulsion and control systems, and they can deliver to a wide range of vessels for the global maritime market. HAV Hydrogen is the youngest company in the group, and were established based on a large research and development project funded by Innovation Norway and the Research Council of Norway. With that technology, we are now commercializing Hydrogen Energy Systems for vessels.
How we are creating value within this group is that we are coordinating the strategy of the companies in order to extract synergies. We actively take part in the strategic developments. We are stimulating intercompany business within R&D and business development. We are extracting synergies through economies of scale, standardization and standard processes and systems. We also have an ambition for growth, both organically and through cooperation with strategic partners. Mergers and acquisitions and other growth potentials either organically or inorganically. The management team of HAV Group consists of group HAV Group management in addition to each of the managing directors for each of the companies. Together we represent very many years of experience within the maritime industry from different companies.
Also, we have a very experienced Board of Directors also with expertise from financials, from industries, from tech business. In addition also, we have representatives from the employees in the Board of Directors. We go on to the subsidiaries. Tell a little bit more about the subsidiaries, their results in the quarter, and also what their opportunities are for the future. HAV Design, we say they deliver simulation-based ship design. They have used years in research and development, in knowledge and technology and tools in order to design the optimal vessels with good digital tools to the best according to the requirements of the owners, and also documenting the performance of the vessels before they are going into the operation.
That will enable the shipowner also to calculate his OpEx and CapEx before he's building the vessel or taking the decision to invest, so that he has the best grounds for making a good financial investment decision. In the quarter, they had operating income of NOK 21 million with an EBIT of NOK 0.3 million. The main reason for the low income and EBIT in this period is the low capacity utilization of the company. Even though the potential for the products is very good, we still see a little backlash from the COVID period. Also, the lead times from when we are taking an order for a design until the income for the deliveries are coming is long.
We see that the orders that we are taking now will give results at a later period of the year. They are positioned for further growth. That is based on their experience, their references, their customer base within segments that have potential for growth, and using that to also enter into new potential markets. At the time being, the most potential markets that we are in are the offshore wind power production market, where we also got our latest order, and we see a huge demand for new vessels supporting this market.
In addition, also, HAV Design has great experience within fully electric car and passenger ferries, where the market in Norway has been extremely good for a couple of years. We see that now also that international markets are looking at the same in order to reduce emissions and save energy. Norwegian Greentech is the experts within Ballast Water Treatment Systems and also other Water Treatment Systems. They are experiencing now a very good growth and also very good profitability. That is based on a good product in a good market. Since the IMO Convention for installing Ballast Water Treatment Systems on most vessels worldwide went into force in 2019, Norwegian Greentech has had a steady growth.
We see also that growth will be continuing for the three to four years ahead. After that, it will be a more continuous demand for Ballast Water Treatment Systems for new buildings. We also see that when we are delivering more and more installations of Ballast Water Treatment Systems, also the aftermarket and the retrofits or the aftermarket and service market and the income from that will continuously grow depending on the number of vessels, on the number of installations, and also the age of the installations. The operating income for this company was NOK 82 million in the second quarter with an EBIT of NOK 8 million. In addition to Ballast Water Treatment Systems, they also have a good potential within land-based aquaculture.
We see that the prognosis for growth within this market is very big. We are already delivering to the aquaculture on vessels for water treatment. We have started delivering and developing products also for the land-based fish farming. This is one of the potentials and areas of growth and development for Norwegian Greentech when the Ballast Water Treatment end market is steadying out. Norwegian Electric Systems is the company delivering Energy Design and Smart Control. They deliver fully electric propulsion systems. They deliver smart control systems, and they deliver navigation and communication system for the bridge. We say that they are the preferred supplier of product and systems from bridge to propeller.
This company is also, as the same as for HAV Design, a little bit affected by a slow order intake during the COVID period, and long lead times from order to delivery and income. That is also reflected in the EBIT of the company for this quarter. Operating income of NOK 95.5 million and with an EBIT of approximately NOK 1 million. What we see is that the main drivers for the market for Norwegian Electric Systems is still there. Energy optimization and emission reduction and zero-emission is still very much sought after. Electrification and Smart Control will be one of the key factors for realizing the potential for reducing energy and also for reducing emissions.
Norwegian Electric Systems can deliver the technology for most type of vessels around the world, and our strategy there is, as we have done in Turkey, to strengthen our efforts and our presence internationally in strategic markets and going step by step in utilizing international market possibilities. HAV Hydrogen has also now entered into the next phase where the focus is very much on finalizing the technical solutions, finalizing the new products, and commercializing the products. The approval, the preliminary approval of the Hydrogen Energy System in the FreeCO2ast project, is a very important milestone.
The work behind that process is huge, and has been going on for a long time, but that has at the same time given us a lot of knowledge and made us able to develop new technology. The two major technology developments or finalizations that we have now is to continue working on projects where we integrate the complete Hydrogen Energy Systems in ships, and together with that, we are also developing more modularized systems that can be easily fitted, for instance, to retrofit of vessels. Also, we have made a huge investments in the organization and competence of the organization. You will see more power in the market and also in the development within the company onwards.
HAV Hydrogen has been and will still also take advantage of being a part of a larger group where they can utilize the resources within other companies that are related, which have related technology and knowledge to what they are doing in HAV Hydrogen. They have now achieved very high degree of knowledge about how to reduce risk, how to design, how to assist the customers in implementing Hydrogen Energy Systems. This advisory role will also make it attractive to customers to utilize HAV Hydrogen when they're going for new projects. There is several actors, of course, working within hydrogen in the different parts of the value chain from production to bunkering to transport, and onboard the vessel.
For complete systems onboard the vessel, HAV Hydrogen is in the very front of having the technology in order to advise their customers on what is the right solutions to choose. With that, I give the word to Marius Koksvik, who will run you through the financials, and then I will talk about further outlooks afterwards. Marius.
Thank you. Good night. Hello. My name is Marius Koksvik, and I work with Business Development in HAV Group. I'll take you through the highlights of the financials.
Okay, if we start with the key figures here, we had an operating income of NOK 200 million in Q1 2022. The EBIT was NOK 8 million, and this translates to an EBIT margin of 4%. Compared to last year's Q1, revenues were lower due to less trading, and also the EBIT margin was lower due to lower capacity utilization. It's also worth mentioning that last year's Q1 was driven by large revenues to Havila Kystruten. If we take a look at the balance sheet, there are only minor changes from Q4. The most notable change is the decrease in booked equity of NOK 50 million. This is due to the purchase of our own shares in the share repurchase program. If we have a look at the cash flow statement, we had a positive operating cash flow of NOK 21 million in Q1.
In total, there was a decrease of NOK 2 million in cash holdings after investments and financing. The order backlog, it increased in Q1. It increased from NOK 382 million- NOK 418 million. The notable contract, as Gunnar mentioned, after Q1 are HAV Design's NOK 200 million contract with ESVAGT. Okay. Now, Gunnar will take you through the market outlook.
For those who has followed the presentation, you will see that this is very much the same that we have done previously, and that is actually what the general market outlook is also. The same fundamentals for Maritime CleanTech that has been there for many years and since the start of HAV Group also is still there. Even though we see the there is special times now, of course, with the Ukraine crisis and rising energy prices and energy demand, higher energy demand, the necessity to reduce emissions and save energy and save the environment is still there.
We are an established group of companies with leading offers, and we are very well-positioned to take to utilize the requirement for new technology that is needed in order to save energy and to reduce emissions. We have profitable operations and a very robust balance sheet enabling us both to stimulate organic growth and look at opportunities in companies that can add something to our group and with complementary technology and knowledge that where we can also see further possibilities for synergies between our existing companies and new companies. Short-term, the market and company performance is characterized by somewhat of general uncertainty, especially with regards now to the Ukraine crisis.
We see that some of the decisions from our clients is a little bit postponed, whether they want to build a new ship or take an investment decision. For the supply, there can be at least some delays in supplies. We see a rise in prices. The general underlying fundamentals are still there. The requirement for clean energy and for low emissions is still fully in line with the technology that we are delivering. We see also that there is some good speed in the new building market of vessels. We see an increase in investment in the traditional offshore oil industry also.
Also there, the focus is to reduce the environmental footprint when they are operating in this market. All in all, short-term, there is some bumps in the road, it might be, but the underlying fundamentals are there. We maintain our outlook for 2025, where we expect NOK 1.3 million in turnover with a good profit margin. On the road towards that, we will experience fluctuations also, normal fluctuations, because we are in a project-driven market in many of our companies, where the revenues can go up and down from quarter to quarter.
That ends the presentation and takes us maybe to the most exciting part, where you have been able to ask questions, and we will answer them to the best of our abilities, both with regards to what we can answer, taking market considerations and what is possible for us to answer. Marius, you have an overview of the questions, so-
Yes. Here, I thought maybe I could start out with a question that came in that asked us how much of our cash holdings are prepayments. We actually have a line item in the report that says this, advance payment from customers. For Q1 2022, this is NOK 205 million. As you said, you can find that in the report. All right. Yeah, also I can take a question on working capital. We were also asked how large a share of our cash holdings should be considered working capital. As Gunnar has mentioned, we have a project-driven business, and we have attractive funding of most of our projects. Our projects are either cash neutral or cash positive for the most part.
Occasionally this will lead us to have large cash balances. Though we do not have a stated working capital target, we see that over time we wish to have a positive net working capital. Though we see this might fluctuate from period to period. Okay. Gunnar, do you want to take,
Yeah, you just ask the question, and I'll try to answer the.
Yeah. Okay, yep. We have a question here about the EBIT margin, especially for NES, which is lower in Q1.
Mm.
Can we elaborate on why NES is experiencing lower capacity utilization?
It is as I explained a little bit earlier also, NES has long lead times for new orders. For instance, the new order they got for Scandlines, the lead time until they deliver the major deliveries is more than one year. That means also that the income will come at a later stage. That means also that if the work that we are doing now was ordered at least one year and even before that there was a drought in the market also because of the COVID situation. We have a bigger capacity in NES and in some of the other companies also than we are utilizing today, meaning that the overhead cost compared to our capacity and utilization is higher.
It's at the same time very important for us to continue to develop products, retain important knowledge within the company and competence. That is the major reason for the dip in the EBIT that we are seeing now.
Yeah. Okay. We have a question here about visibility. Are we doing anything specific to increase our visibility in the market? Also, I interpret this as towards investors.
Yes, we are. We have developed a communication strategy also, together with some advisors. Our main target with our communication is two things. Maybe the first priority is to communicate so that we attract customers and we generate leads, which then again generate orders, generate profit, generate turnover. We also have, of course, a focus to give the market and the investors as good information about what is happening in the company as possible. We employed more resources also within the company in order to be able to do this. I hope that you have already experienced better communication from our side. We are, of course, taking input from you also on how to improve.
We hope that you will see that we will constantly be better also informing the market in general.
Okay, speaking about the market, we have a question here that asks us, we've been on Euronext Growth for a year or so and more. What can we say about the value creation since inception and the share price development? How are we working to secure return on investment for our shareholders?
We are working long term. As we have said earlier also, we have an ambition for profitable growth. We have an ambition to continuously be profitable and deliver results. That is, I think, the major contribution for us in order to also give value back to the shareholders by increasing the share price. We see that the market or the business that we have been in with green technology took a severe hit in general after we were introduced in March 2021.
If you compare to maybe other peers in that market, I think still we have had a good development. There will be, of course, periodic fluctuations, but we have to focus on long-term strategies and on making good results for all our interests or all our stakeholders long term. That is the strategy and that is what we also hope will reflect on the investor value of the company onwards.
Absolutely. Okay, we have another question here about Norwegian Greentech. The topic was mentioned briefly earlier. How is the aftermarket for NGT going to affect their business model? What kind of margins should we expect? Are customers bound to use Norwegian Greentech after they have delivered their products and new sales?
The aftermarket, the potential for the aftermarket is growing with a number of installations out on the vessels and also the age of installations. We see now that the number of installations sold and delivered each year is growing quite rapidly. That will, of course, reflect also on the revenues from the aftermarket. In general, the margin also from the aftermarket in order to have the sufficient service level to the ship owners and the clients, then also the margins there are normally better. We have our own special developed Ballast Water Treatment Systems with a specific certification. You cannot just take all kinds of parts and put them together and get it and use the same certification.
There is a certain, let's say, dependency on using Norwegian Greentech also in order to have the same quality and also retain the certification. The aftermarket for Greentech will be looking very promising onwards.
Yes. Okay, we have a question about HAV hydrogen, if they get a contract, are there also big synergies for, other companies such as Design and, NES?
That is a good question and I appreciate that question being asked because that is a good way of showing the synergies and the complementarity in the group. In a complete Hydrogen Energy System, you also need Smart Control and you need energy management. Norwegian Electric Systems is a natural partner and a collaborator with HAV Hydrogen in the total system deliveries. In addition, also for HAV Hydrogen to give the best advice on what kind of systems and optimize the systems and also how to integrate the systems in a vessel, the knowledge from HAV Design is very valuable. The customer can also, of course, choose how he want what extent of service he wants from HAV Hydrogen.
When it comes to HAV Group, you get a very wide range of knowledge and technology that is, I think, wider than most of potential competitors can offer for the same systems.
Yeah. All right, good. We have another question about the share. When are we gonna start paying dividends?
What we have said earlier also that we aim to have a good policy for paying dividends and creating value to our shareholders. What we have also said earlier is that we are constantly evaluating how to give the best value to the shareholders, either paying dividend or investing in new profitable business areas. As I said earlier, we are working with different cases. There is potential transactions or partners in the market that we are looking at.
At the time being, we feel that it will be most valuable for our stakeholders that we retain the power to do, for instance, investments in companies that can complement the rest of the group and give more growth that we are able to do in a short time, at least organically. Dividend is in the front of our perspective also, but at the time being, we feel that it's a better investment for the stakeholders that we are looking at other type of business opportunities.
Yeah. There's a question about the difference in the HAV Hydrogen Systems now. What has changed with the preliminary approval that we received?
I am not quite sure if I understand the question, but the preliminary approval, to try to explain that, is that compared to a approval in principle, which is a more general approval for a component or a system, we have got actually close to a final approval of a complete system installed on a vessel. That means that it is much shorter time and less work and less things that has to be done when we get a physical or a project in order to get the installation actually approved on board the vessel. We are utilizing that knowledge and experience that we have got in order to develop also, as I said, more modular systems.
For the modular systems, we will also have the possibility to seek approval more like a type approval or approval in principle for different modules. We can put those modules again into a system and make the complete approval. I'm not quite sure if that answered the question, but the preliminary approval is at least a very big milestone, and it's a very good proof that we are in the forefront of being able to implement these type of systems on board the vessels.
Good. Also, there's a question here about any updates on transactions on M&A after our, for example, after our 100% share purchase of Norwegian Greentech, which was already a subsidiary. Do we have anything more to share on transactions?
No. We can of course not share anything until they are public. We are constantly looking for new possibilities. We also have possibilities that we are looking at today. We see that there is many companies in different businesses that can be complementary and can add value to our group. We cannot say more on that than we are working. I think since you started in the group, you have been quite heavily loaded with this type of work.
Yeah, I can.
There's a lot of promising things.
Yeah, I can, yeah, add that we're working in a structured manner with potential transactions. Okay, what seems to be the last question here, it's about our listing status. Currently, we're listed on Euronext Growth. Do we have any plans on moving up to the proper Oslo Stock Exchange, to the main list?
We are evaluating that, of course. For the time being, we think that maybe the critical mass, the size of the company, also doesn't necessarily have an advantage for the time being to go to the main list. Of course, if we are growing at the pace that we are expecting, that will be something that we will be considering, and we will take that decision when we feel it's right to eventually go to the main list. We think that for the time being, it's a good place to be on Euronext Growth.
We see that the interest for the company is good there and we also see that is still a good tool for us for financing the growth that we are planning in the short term.
Yeah.
Mm.
Absolutely. Okay, well, I think that concludes the Q&A session here.
Yes. I thank everybody for following our presentation. You have, of course, possibilities as you are utilizing also the whole year to contact me or Marius or Pål, the CFO of the company, and ask questions by mail, and we try to answer as best as possible on that also. We hope that you continue to follow our company and that you will have good experience also from presentation to presentation. Thank you again for attending and looking forward to talking to you again at the next occasion.
All right. Thank you.