Welcome to NRC Group's quarter one presentation. After we've been through the presentation, we will host a Q&A session. For those of you who are participating on the stream, you can write questions in the chat. Quarter one is always low season for NRC Group, and the seasonality is impacting our figures. Overall, we have delivered a solid first quarter with a 10% revenue growth and operating results in line with last year. We have delivered a EBIT adj. of NOK -48 million versus NOK -41 million same period last year, and the difference is mainly related to less gains on sale of machinery in Finland. We have had a solid order intake in the quarter of NOK 1.3 billion, giving a book-to-bill ratio for the quarter of one. Operating cash flow ended up at NOK -48 million, which is down from last year.
The main reason for this is that several bigger projects are closer to the end of the life cycle, and we have had favorable payment terms in the starting phase of these projects. At the same time, we do not have started any bigger projects this quarter with similar favorable payment terms. We end the quarter with a very strong order backlog of NOK 8.2 billion, and the wins we have seen this quarter have given us significantly better visibility when it comes to 2023 revenues. We have also seen a very active tender market for the past couple of months, and we expect that to continue in the time to come.
We see several projects out in the market that suits our competence and capacity well, and we believe we are in a strong position to continue to grow a solid order backlog going forward. As you know, we have done a strategic review of our civil construction activities in Karlstad in this quarter, and we have concluded to discontinue the business. As you remember from quarter four, this is a business of limited size. It has delivered significant negative profitability for NRC Group the last years, and we see limited operational synergies with the rest of our business. In that relation, we have taken a one-off cost of SEK 35 million to cover the close down cost of this business. Our health and safety KPIs.
Looking at them, we can see that our lost time injury frequency rate for the past 12 months has increased somewhat compared to the former 12 months. On the other hand, we see that our total recordable injury frequency is somewhat down. However, both numbers are too high, and we need to continue our systematic work to improve in these areas as well. Looking at Q1 isolated, we have had five lost time incidents, four related to winter conditions, and none of our incidents have led to serious injuries. Looking at the total recordable injury frequency rate in Q1, it ended up at 9.5, which is actually all-time low for NRC Group. We see a positive trend in this area, and we hope to be able to continue this positive trend going forward.
Sickness absence rate ended up at 4.3 for the quarter, and given the seasonality of sickness absence, we are satisfied with that figure, and we believe it indicates a motivated and healthy organization. Ole, you will go through more details on our financial figures.
Thank you, Henning. Looking at the P&L for the first quarter. Financially, we had a mixed picture. We showed good sales growth, while our operational result was somewhat behind last year. We delivered a revenue of NOK 1.3 billion, which is up 10% compared to the same quarter last year. This was driven by strong growth in Finland and Sweden. On a like-for-like currency, the growth rate is 7%. You may have noticed, is that we have changed the profitability KPI from EBITA, excluding M&A expenses, to EBIT adj.. The main reason for this is that EBIT adj. is a much more known KPI than EBITA. The two most important differences between the two KPIs are the following. In EBIT adj., we include the cost or amortization cost related to investment in IT and software.
Secondly, in EBIT adj., we exclude items outside ordinary course of business, such as operational profits from businesses to be winded down, restructuring costs, or gains or losses arising from divestments. As you can see, our EBIT adj. came in at -NOK 48 million, which is down NOK 7 million compared to the same quarter last year. Note that in Q1 2022, we had NOK 19 million in positive gain from sale of machinery, and this was only NOK 4 million in Q1 2023. If you look at the adjusting items line, we have a net gain of NOK 1 million. During Q1, we took a restructuring cost of NOK 6 million related to the change of management in Sweden, and we also have a one-time wind-down cost related to the discontinuing of the civil business Sweden in total NOK 35 million.
On the positive side, we have NOK 40 million in gain from sale of the Gravco business, and the net sum of this is NOK 1 million. The sum is that our net profit came in at minus NOK 43 million, which is a somewhat improvement from the same quarter last year. Looking at the longer-term development measured here as rolling 12-month performance. We have had a steady improvement in sales over the last year. Our profit and margins are slightly down from peak levels mid-2022, but significantly up from where we were in 2021. Despite that our margin is coming slightly down over the last few quarter, we expect to continue the positive financial development as according to our guidance.
However, the improvement compared to 2022 will come in the second half, and the reason for this is that we had a pretty good first half in 2022. Order intake came in at NOK 1.3 billion, which gave a book-to-bill ratio of 1.0, as you can see in the graph to the left. Our total order backlog is now strong at NOK 8.2 billion, which is up 12% compared to where we were at the same time last year. You can also see that we have increased our backlog with NOK 400 million during the quarter. However, as our book-to-bill ratio is 1.0, this means that this improvement is related to the weakening of the Norwegian kroners compared to the euros and the Swedish krona.
If we go into more details on the backlog for delivery in 2023, you have to look at the graph to the right. During Q1, we have seen significant improvement in our short-term backlog. When we stood here and presented the fourth quarter, we showed a short-term backlog that was 9% behind where we were one year ago. Now we're showing you a short-term backlog that is 7% ahead of where we were at the same time last year. The reason for this improvement is a combination of good orders coming in in Q1, which is for delivery in 2023, as well as the favorable currency. Despite that our short-term order backlog now is 7% higher than it was one year ago, we still forecast a slight decrease in revenues in 2023 compared to 2022.
The reason for this is that in 2022, we had several projects that unexpectedly grew significantly in size. We do not expect this to happen to the same degree in 2023. Moving to our balance sheet. Our total balance is now NOK 5.1 billion, which is somewhat down from NOK 5.2 billion at the end of the year. Our net interest-bearing debt is NOK 1.0 billion, which you can see in the graph to the right. This is an increase in debt of NOK 160 million. The increase compared to fourth quarter is NOK 55 million. Out of this NOK 55 million, NOK 35 million is currency. Our net interest-bearing debt, excluding leases, is only NOK 484 million, as mentioned under the graph. Our equity ratio stands strong at 46%.
Moving to our cash flow. Our cash flow from operation came in at negative NOK -48 million. As you can see in the graph in the middle, that our net working capital has gradually increased over the last few quarters, which is why the operational cash flow is not good in the first quarter. This is due to a combination of higher activity as well as unfavorable portfolio mix. The working capital will fluctuate from quarter to quarter. Lately we have had several bigger project that come into a late phase, which typically ties up working capital. We do have a lot of focus on reducing the working capital. Now that we move into high production period during the summer, we normally tie up more working capital, which we get back in the winter.
If we move to the graph to the right, you can see we have a positive gain from cash from investment activities at NOK 86 million. The reason for this is that we received the net cash from the sale of the Gravco business of NOK 97 million. The cash flow from finance activities, it came in at minus NOK 101 million, which is the normal level, and this include interest payments, debt installments, as well as lease payments. In the end, we ended the quarter with NOK 395 million in cash. Moving to our financial position, we have a EUR bank loan consisting of NOK 279 million and a bond loan of NOK 600 million.
The bank loan amortization profile is like NOK 14 million per quarter, and it falls due in third quarter of 2024. The bond loan falls due in full in third quarter 2024. On the liquidity side, we have the mentioned NOK 395 million, and we have a NOK 200 million undrawn credit facility, in total NOK 600 million in available liquidity. When it comes to the covenant, we have a target. Sorry. When it comes to the leverage ratio, we have a target of being below 2.5x EBITDA, and we have come down to this threshold over the last year. In Q1, it increased to 3.2x due to a combination of somewhat higher working capital, as well as slightly weaker EBITDA in the quarter compared to last year.
With this, back to you, Henning.
Thank you, Ole. We will start our operational review in Norway, where we continue to see improved performance. Looking at the figures, we have delivered our EBIT adj. of NOK 9 million in the quarter compared to NOK 4 million same quarter last year. The improved results are driven by strong results in our civil construction portfolio in Norway, partly offset by weaker results in environment. Our demolition and recycling company, NRC Kept, are experiencing tougher markets and lower activity levels, and that has impacted the result in the quarter in a negative way. We are adjusting our resources to meet unexpected lower activity in this segment going forward. Looking at the revenue side, Norway delivers a 2% organic revenue growth in the quarter if you take out figures from Gravco last year.
In quarter one 2022, Gravco delivered NOK 20 million of revenue and NOK 3 million of operating results. We have had a okay order intake in Norway for the quarter. We need to win more work in Norway to support continuing the growth we have seen over the past year. We do see a very active tender market, both within civil construction and rail construction, that will support this ambition. Looking at the tender pipeline, you can see that it has grown by NOK 500 million since last quarter. We have several projects in the pipeline now suiting our competence and capacity very well. This supports our ambition to continue the growth in the Norwegian market. Our strategy remains the same. We will target bigger projects to continue the profitable organic growth we have seen for the past couple of years in Norway.
As mentioned in the start of the presentation, we have done a strategic review of our civil construction activities in the Karlstad area in Sweden and concluded that we are closing down the business. In this quarter, we have also established a new organizational model in Sweden, where Niklas Sundell will go in as COO of Sweden. We will also go more into details of these two important actions in the next coming slides. Looking at the operations in Sweden, we see that the strong revenue growth we saw in 2022 is continuing into fitst quarter with an organic growth of 12%. This mainly comes from increased volumes in rail construction. Looking at the operating result, it is in line with last year, and we see only minor changes in segment profitability.
We have seen a strong order intake in Sweden in quarter one. We have more or less secured our order book for 2023, meaning that we can focus on projects giving revenue and profitability for 2024 and onwards. As said, we have taken a decision to discontinue our civil construction activities in the Karlstad region in Sweden. The reason for this is that the activities has contributed with significantly negative results for NRC Group over the past years. The operations we do in this area, it's mainly smaller and mid-sized ground construction contracts, typically related to housing development, industrial clients and municipalities in the region. The market within those areas will be tougher in the future, it will not be easier to be profitable in this area going forward.
When we also look at our position with fairly limited size, NOK 364 million in revenues for the past 12 months, we see that to generate any meaningful profitability from this segment, we would have to at least double the size. With the tougher market condition and the historic performance, this would be a high-risk strategy going forward. The demanding short- to- medium market has, of course, also impacted our efforts to sell this business. Discontinuing the civil construction activities in Karlstad is one important action to reach our goal of returning to profitability in Sweden as soon as possible. Discontinuing the civil operation is also important for us in order to focus all of our management attention towards rail maintenance and rail construction, where we have the biggest potential for value creation in NRC Sweden.
These are the areas where we have the highest competence and capacity. It's the areas with good market outlook, and it is areas that are synergistic when it comes to the everyday operation. We have established a new operational model, organizational model in Sweden from 1st of May, where we have appointed Niklas Sundell to CEO role of the Swedish business. He will have the P&L responsibility for our operations in Sweden, and he will also be a part of our group management team in NRC Group. Niklas has been head of maintenance in Sweden for the past four years. We are very satisfied with the work that has been done in that organization to develop our maintenance business in Sweden.
We have seen an improved profitability, and we have a good market position where we have renewed all our existing contracts and have a strong long-term order backlog in that segment. We believe Niklas has the right capabilities and the right profile to further develop our Swedish business. This is an important step for us to establish this new model to reach profitability in Sweden. In the quarter, we have of course, continued our actions to improve profitability, continued to focus on operational execution in our projects, project control, contractual handling towards the client. We have raised our tender margins in all of these segments. We have managed to maintain our hit rate even though we tender at higher margins. We have also done cost reductions, especially on headquarter level in Sweden that will help us being more competitive in the future.
Having discontinued the civil operations, the tender pipeline is now focused towards rail construction and rail maintenance. We have seen a very strong development in the tender pipeline, mainly driven by several bigger maintenance projects being out for tender during the next nine months. We also have a very active tender market in rail construction. We can be selective in which tenders we want to engage in. I said, our order book for 2023 is strong. Our focus is to win good projects, bringing revenue and profitability in 2024 and onwards. In Finland, the quarter has been characterized by growth and solid order intake. We delivered a revenue growth of 8% in local currency. This is mainly related to increased activity in rail construction.
We deliver a EBIT adj. of -27 versus -11 last year, and the main difference comes from less gains on sales of machinery, as you can see in the slide, where we had NOK 3 million this quarter versus NOK 17 million last year. However, we also had one write down of a project in rail construction, which will also impact the profitability in this segment in 2023. We do expect somewhat lower profitability here, but compared to a very strong year in 2022. This will be compensated by improved profitability in our maintenance business in Finland in 2023. The order intake has been strong with NOK 476 million, but we still need to win more projects in Finland for 2023 to have optimal resource utilization, especially in rail construction.
The tender pipeline is strong, has continued to grow in quarter one for NOK 500 million more than in quarter four last year. If you compare it to one year ago, it's up by NOK 5 billion. A lot of tendering going on also in the Finnish market on the rail construction side. The pipeline in rail maintenance is more modest this year, and this is due to the tender cycle of FTIA. As you saw, we won one contract in maintenance in Finland last week, a fourteen million euro contract covering maintenance area nine. This has been our own contract, so it will not yield growth as such, but important to maintain our market position and also profitability in the Finnish maintenance business.
To sum up, Q1 for NRC Group, the strong growth we saw in NRC Group has continued in the first quarter , and revenue grew by 7% organically in local currency. We delivered a EBIT adj. of NOK 48 million, somewhat lower than last year and mainly driven by less gains on machinery sales in Finland versus same period last year. We have a very strong order backlog. The wins we have seen in first quarter has significantly increased the visibility when it comes to revenues for 2023. With the very active tender markets with projects suiting our competence and capacity well, we believe to be in a good position to continue to grow a solid order backlog going forward. In the start of the quarter, we divested our shares in Gravco, and that resulted in a net gain of NOK 40 million for quarter one.
Looking at the operation, we are delivering operational results in line with last year. We see an improvement of profitability in Norway that has been offset by somewhat weaker margins in Finland this quarter, while in Sweden, we have seen stable operational performance in the quarter. We have done two important actions in Sweden this quarter. We have chosen to discontinue the business related to civil construction in Karlstad and taken a one-off cost related to that closedown of SEK 35 million. We have also established a new organizational model in Sweden, where Niklas Sundell takes the responsibility for our Swedish business. I think this is the correct model to make sure that we achieve our targets in Sweden and regain profitability as soon as possible. Going to the outlook for 2023, we expect the continued positive operational and financial development to continue.
As Ole said, we are expecting a slight decrease in revenue, while we expect moderate increase in EBIT adj. margins. Now we will open up for questions.
Right. Let me see here. Let's start with the restructuring cost in Sweden. Will the cash effect be later? Let's see here. Yeah. Sweden, higher tender margins you're talking about. Can you say a little bit about the magnitude? Is there a change in the competitive situation? We know that that has been a tough competitive market for a number of years since you're saying that the hit rate is stable. Finally is on Finland, the write-down in the project, what is the remaining revenue? What kind of project is it? Is it a new client, a new type of project, or something that you have done before? Yeah.
Should we start with?
35.
Yeah.
The cash effect will come gradually as we phase out the phase down or complete the projects. It will come in over a period of 12 months, you can say.
The civil business will be out of the books early next year or?
Yeah. Well, yeah. We might have some small deliveries that needs to be come in next summer. More or less everything will be done the next six to nine months. It's also important that the cash effect in itself doesn't have to be negative, because we have tied up working capital in this business. This is the P&L effect, which we take now, and the cash effect is more neutral.
You have the question related to margins, tender margins, and the competitive situation. We have raised the tender margins. We will not go more into detail of the magnitude of it. When it comes to the competitive situation, it's correct what you are saying that even with higher margins, we have maintained our hit rate in Sweden. What we have seen for the past, I would say 12-18 months, is a gradual normalization of the competition in the Swedish market. When we win or lose projects in Sweden, we see smaller price differences between the players competing, and that is a sign of a more healthy market in Sweden. I think it's several reasons for that.
One is, of course, that there has been a continued high outflow of projects from Trafikverket over a couple of years now. I think capacity-wise, most players have their handful with what they are producing today. I think also that more players than NRC have seen the profitability they have realized in history and have had to adjust their tender strategies. The more healthy competition in Sweden than what we have seen for the past years. You have one question related to the write-down of one project in Finland. I think the remaining revenues are around NOK 100 million. It's a traditional project for us. It's a renewal of a rail yard we are doing and have done several times before. There are several reasons for why we have had this write-down.
First of all, it was won in 2020, so the full effect of all material prices and costs increase have hit this. We have had to do some takeovers of subcontractors that have not managed to handle these price increases. We have also experienced a more complex rail technical work than what we saw on the tender stage. That has impacted the profitability negatively. Several effects impacting it. Around NOK 100 million left in revenue in that project for 2023. Lene?
We have many questions, but we can follow up later. How big was the writedown of the project in Finland?
We will not go into the figures of the project.
Going back to Sweden, any risk of further impairments related to the Swedish civil operations?
Not as we see today. We have taken the restructuring cost we mean is necessary to close down that business.
Is the lower order intake in Norway due to lower win ratio or due to less contracts in the market?
I would say that the first couple of month this year was fairly slow. That was no surprise for us because when we see the tender plan from the clients, we can see approximately when they plan to launch their projects, even though they are not sort of following that plan to 100%. It has been lower activity in the first couple of month of the year. We have a very active tender market for the past couple of month, and that is expected to continue throughout 2023. There's lots of opportunities in Norway, and I'm not concerned about the order intake in Norway as such in quarter one.
Any question here, from here? I have a couple of more, maybe we should let the audience here ask some questions. No? Can you elaborate a bit on the inflation adjustments in the contracts?
Inflation adjustments. Yes. Most long-term contracts have different indexation mechanisms in them. Typically, the contract revenues are indexed towards different construction cost indexes. It varies from country to country exactly how they do it, but typically the effect is expected to be that our revenues and our cost in the project increases approximately with the same amounts. Then you will have projects where this has a negative net effect, and some projects will have a positive net effect. Our expectation is that the total sum of this will be more or less neutral for us.
Some speculation here. Have you considered to merge with another company?
We have not considered to merge with another company. I don't think the valuation of NRC Group as of today makes it a good deal for our investors to merge with another company as of now.
What's the impact of the writedown on the EBIT margin, Ole, of the Finland overall?
We don't go into details about that, but it is obviously a significant amount in that writedown, which is in the P&L numbers in Finland.
In the EBIT numbers.
Yes.
So, so-
The Finnish writedown, yeah.
We have had two effects impacting lower profitability in Finland. Less gains on sales of machinery. I think it was NOK 17 million last year and NOK 3 million this year. We have had this writedown of one project, which means that we also have had other effects impacting profitability in a positive way.
The trend in Finland is pretty consistent downwards when it comes to the EBIT level. I think the last five quarters has gone from NOK 198 million to NOK 130 million.
Yeah.
It's a pretty consistent trend. How, or how do you foresee that going forward?
We have a, as mentioned by Henning several times, is that we have had quite a lot of sale of machinery between Q1 2021 to Q1 2022, which has impacted this last 12-month rolling forecast. I mean, if you Now it's maybe exceptionally low lately, but if you take that out, it's more or less flat, the profitability in Finland over the last couple of years.
Okay. Isn't a sale of machinery kind of a ongoing part of the operation?
It's-
You buy some and then you sell some.
It's a recurring business. It's normal part of our operation, but it fluctuates a little bit. Some years it's really good, and some years are rather low, and it depends on the book value of the assets you sell, and also, you know, the market interest in these assets.
Still, it's I think the 12-month rolling first quarter 2022 was NOK 198 million.
Mm-hmm.
Now it's NOK 130 million.
Mm.
It's NOK 70 million in difference.
Mm-hmm.
It can't be just machinery sales.
It is.
It is? That's the magnitude?
For that year.
That-
It was an exceptional year on the book value that side. It is obviously a little bit the age of the assets.
How do you foresee that going forward? I mean, it makes quite a difference in how you can expect the EBIT going forward?
If you see the average for NRC Group over several years, I think the normal range in this figure is sales gains of between NOK 20 million and NOK 30 million . The last four quarters have been, I would say, record low. This is about. You know, these are specialized machines and especially the machines we have in Finland, which has a different track than we have in the rest of Europe. There's not an enormous amount of buyers. This is a bit dependent on when we have market interest for these machines, and that is hard to predict. It's been low the past 12 months. We had a period the former 12 months before that, which was really high.
It's a recurring item, but it's volatile, and it's difficult to predict exactly when we have a buyer that is interested in these machines.
Mm-hmm. The NOK 20 million-NOK 30 million is for the whole group.
Yeah.
It's not just Finland.
Most of this comes from Finland historically.
Right. I assume that you know, why do you have old machinery or not ready for sale. It should be possible to-
We have old machines, ready.
Where you're going in terms of sales.
I think that based on what Henning is saying, you should just forecast that the normalized level is between NOK 20 million to NOK 30 million per year, and then it will be very volatile compared to that.
We have machines for sale out in the market, all the time, but this is dependent on when will there be buyers out there interested in these specialized machines. They are very specialized, you know, there's a limited amount of buyers. It's a bit dependent on what kind of projects are executed around in Eastern Europe as well, where they have the same track width and when we see interest. We have a machinery fleet that we know we can sell, but we also need a buyer to do a transaction.
No further questions from here.
Good. Thank you for coming here in House of Oslo, and thank you for the ones participating on the stream. Have a nice day to you.