Welcome to the second quarter presentation for NRC Group. After the presentation, we will host a Q&A session, and for those of you who participates online, you can write your questions in the chat. Second quarter has been a good quarter for NRC Group, with strong financial and operational performance. We continue to see a high activity level, and we have delivered a strong second quarter result of NOK 65 million. The strong second quarter result confirms the positive trend in the company. Going back to 2020, we had an EBIT in second quarter of NOK 20 million, increasing to NOK 32 million in 2021, and then delivering NOK 60 million last year, which was also a very strong second quarter result. We start to see the results of the actions we have initiated in Sweden for the last six months.
We see that the profitability in Norway is continuing to increase, and we have now crossed a 4% EBIT margin, measured in the last 12 months in Norway. We continue to see solid profitability in Finland, although somewhat down from last year. With somewhat lower revenues, improved results, our EBIT-adjusted margin has increased to 3.6% for the quarter. When it comes to operating cash flow, we have delivered a really strong operating cash flow from second quarter with NOK 107 million. Quarter two is normally a quarter where we deliver significantly negative cash flow due to the seasonality of our business.
We have delivered an order intake of NOK 1.6 billion in the quarter, and we have a very strong order backlog of NOK 8 billion, and we see several interesting tenders coming up, giving us good opportunities to grow our order backlog going forward. When it comes to health and safety, we are not satisfied with our results. We delivered zero serious injuries in the quarter and in the first half of 2023, but we have too many injuries in total in the company. And this is driven by two categories of injuries. The first one related to the use of handheld tools and heavy equipment, causing crushing and cutting injuries in hands and legs. We need to be more aware of the use of the right equipment for the right task and do a proper risk assessment before initiating the work.
The second category is related to the fact that we walk a lot in rough terrains besides the railways, causing tripping and subsequent injuries connected to knees and ankles. We need to raise awareness related to both of these categories of injuries in order to improve our results on these KPIs going forward. The positive trend in sickness absence is continuing, with a sickness absence of 3.8% for the quarter, well in line and better results than our industry peers. The EU taxonomy highlights NRC Group's unique position when it comes to building sustainable infrastructure by delivering maintenance and construction services for railways. In the first half of the year, more than 90% of our revenues were eligible according to the taxonomy, and 68% was aligned according to the taxonomy.
And I think you will struggle to find construction companies getting close to us on these KPIs. We believe that tighter regulations from the European Union will further highlight and create a bigger interest, both from equity and debt investors, when it comes to investing in NRC due to our unique sustainable position. And in the video you will see now, you will get some more insight into how unique NRC Group is when it comes to building sustainable infrastructure.
First, it's great to be here on top of the construction site, but learned a lot about a lot of the new and emerging technologies.
[Foreign language] .
We talked about how the cement here that is in use is of low carbon intensity, great progress and innovation on that. The biofueling of the trucks and using that, which also has low emissions. Lots of reuse and recycling of the materials, I think you said up to 99%. So it's really great to see a construction site come together with so much forward thinking around environmental sustainability, but also, as we say, to demonstrate that you can be environmentally sound, but also economic and, you know, budget conscious, financially conscious, as you do the project.
[Foreign language] .
... In NRC Group, we are extremely proud that the head of UN Global Compact chooses to visit our NRC Group project to learn more about how we can transform the construction industry and deliver projects in a more sustainable way. As Arild mentioned, we need help from our clients to incentivize sustainable behavior in the construction industry. And to give one example, NRC Group has invested and converted half of our truck fleet to be fueled on biogas, which you saw on the video. This has reduced our CO2 footprint by more than 5,000 tons of CO2 per year, and it would not have been possible without the right incentives in the contracts from the municipality of Oslo. They have been on the forefront on this topic, and they have been an important driver for developing sustainable construction, also in NRC Group.
Now, Ole will take us through the details of the financial situation.
Thank you, Henning. Looking at the PNL for the second quarter, financially, we had a good quarter. All of our revenues is somewhat down compared to last year. Our profitability is improving. Revenues came in at NOK 1.8 billion, which is down 6% compared to the same quarter last year. On a like-for-like currency, the reduction is 13% due to lower volumes in Finland and Norway. Our operational results, measured here as EBIT adjusted, improved with NOK 5 million and came in at NOK 65 million in the quarter, and this gave an EBIT margin of 3.6%. Net financial items came in at -NOK 17 million, which is more or less unchanged from last year, and this is because we have hedged the NIBOR on our bond loan at 1.83%.
As a sum, this gave a net profit of NOK 37 million in the quarter, which is an improvement from NOK 32 million in Q2 last year. The earnings per share was 0.5 NOK in the quarter. Looking at the longer term development, measured here as rolling 12-month performance. The pro forma figures presented in this graph excludes the Gravco business, which we sold in Q1, 2023, and also excludes the civil business in Karlstad, as which we decided to discontinue in Q2, 2023. As you can see, we have shown a steady improvement in sales and profits over the last few years, and our margin is running around 2.5% on that rolling 12-month performance.
Order intake in the quarter was NOK 1.6 billion, and this gave a book-to-bill ratio of 0.9, as you can see in the graph to the left, and the majority of the order intake in the quarter came from Finland. Our total order backlog now stands at NOK 8.0 billion, which is down 4% compared to where we were at the same quarter last year. If we drill down in the order backlog, which is for delivery in the second half of 2023, you have to look to the graph to the right.
As you can see here, we now have NOK 2.9 billion for delivery in the second half of the year, which is 8% higher than we were at the same time in 2022, and we've seen a gradual improvement in our order backlog over the last few quarters. However, even though we have delivered flat sales in the first half of the year compared to first half of 2022, and the fact that we have an order backlog for the second half of the year, which is 8% higher than last year, we still believe we will have a slight reduction in sales in 2023 compared to 2022.
The reason for this is that in 2022, we had several large projects that unexpectedly grew significantly in size, and we do not expect this to happen to the same degree in 2023. Moving to our balance sheet. Our total balance stands at NOK 5.5 billion, which is slightly down from NOK 5.6 billion in the same quarter last year. Our net interest-bearing debt is slightly down to NOK 968 million in Q2, as you can see in the graph to the right. This is down from above NOK 1 billion, both in Q1 this year and Q2 2022. The net interest-bearing debt, excluding operational and financial leases, now stands at only NOK 445 million. The equity ratio is firm at 44%. Some comments on the cash flow.
Cash flow from operations in second quarter was positive with NOK 107 million, a result we are very satisfied with. Q2 is normally a working capital-intensive quarter, but despite this, we managed to keep the operational cash flow on a high level. And as you can see on the graph to the left, the operational cash flow in Q2 has significantly improved compared to Q2 last year and Q2 in 2021. Some other comments to the cash flow, to the graph to the right. As you can see, the cash flow from investment activities, or CapEx, was only -9 in the quarter. And the cash flow from finance activities was -78, which leaves a cash position at the end of the quarter of 427.
A very good improvement from Q1 in light of the seasonality. Moving to our financial position, we now have a euro bank loan of NOK 273 million and a bond loan of NOK 600 million. The maturity profile of the bank loan, you can see in the graph in the middle, we have an installment of NOK 14 million per quarter, and the bank falls due in Q3 2024. While the bond loan falls due in full in Q3 2024. On the liquidity side, we have the mentioned NOK 427 million in cash, and we have a NOK 200 million undrawn credit facility, so we have more than NOK 600 million in available liquidity, currently.
To the right, you can see that we have a leverage ratio target to be below 2.5x EBITDA, and we come down to this threshold over the last few years. In Q2, the leverage ratio was 2.8x EBITDA, a level we are very satisfied with in light of we are in the middle of a high production period. Yesterday, we published our first green financing framework, and we are among the very few companies that received a dark green shading from S&P Global Ratings. This is part of our commitment to provide sustainable transport solution. The framework can be used for future green financing, products and will help us drive down the cost of capital. We expect to renew the long-term debt financing well before the maturity in 2024.
Before I hand it over to Henning for some operational updates on each country, we would like to show you a video of a project that will typically fit very well into a green financing product.
[Foreign language] .
[Foreign language] .
[Foreign language] .
Electrification of [Foreign language] is one of the bigger projects in NRC's portfolio, and it shows key elements of our strategy in practice. As Odd Magne told on the video, most of our real technical disciplines are involved in the project. But I guess for most of you looking at this, you can also see that it's very important to have extensive civil construction competence, even though you do railway projects. It's a big project, and NRC Group's size allows us to have a strong competitive edge when it comes to bigger projects. [Foreign language] could not have been won or executed with one country alone. This is a joint project with a joint project management team and execution team from Sweden and Norway. And as important is that this bigger project is the fuel we need to grow our revenues and profitability in the future.
It's the best arena to train and develop our employees, to get them to faster being able to take on more responsibility, and then generating the necessary long-term growth and profitability for the company. And I think it also clearly shows NRC Group's unique position when it comes to delivery, delivering sustainable infrastructure in a sustainable way. So let's take a closer look on the key highlights for the quarter in our three different countries, and we will start in Norway, where we continue to see a strong positive trend in profitability. As mentioned, we have now crossed the 4% hurdle on the EBIT adjusted margins measured by the last twelve months. Looking back two years, as you can see on the top left here, two years ago, we had a rolling profit in Norway of -NOK 42 million, while in second quarter this year delivered NOK 90 million.
So the turnaround that has been executed by the Norwegian management team have been very successful, and they have done a great job executing this process. Revenues in Norway is down NOK 164 million versus same quarter last year. It's driven by reduced activity in civil construction and environment. The improved results are driven by strong performance of civil construction, but partly compensated by somewhat weaker results within our demolition and recycling business. And as communicated in first quarter, we are heading into a tougher market in this segment, and we are continuously adjusting our capacity to mitigate that. The order intake in second quarter and in the first half of the year in Norway has been weaker than what we want, and this is, of course, a big priority going forward to win new projects, to generate the necessary profitable growth.
However, we do have a very attractive pipeline when it comes to rail construction. We see several big and good opportunities coming up for us in the next nine months, so we are comfortable with the situation and believe we have good prospects going forward. In Sweden, we are gaining momentum from the actions we initiated during the first half of the year. This being change of management, significantly cutting overhead costs, increasing our tender prices, and also the decision, of course, to discontinue the civil activities in the Karlstad area in Sweden. And related to the latest topic, in August, we signed an agreement with the management of the Karlstad unit, where they do a management buyout and take over the responsibility of our remaining projects in civil construction. This is positive in many ways.
The employees will be able to continue their work in the new company, and for NRC Group, it significantly reduces our operational risk related to ramping down these activities. Accounting-wise, it will have limited effects on our numbers. In Sweden, we are delivering improved profitability in the quarter, delivering an EBIT adjusted of NOK 10 million. And this is driven by improved results in maintenance, but also, of course, the lack of losses in civil construction. The order intake for the quarter has been modest, but we have a very strong, both short and long-term order backlog in Sweden. We need to win some more projects in rail construction for the high season next year. But, as you will see later in the presentation, we have a solid tender pipeline and lots of opportunities in this area as well.
When we announced the decision to discontinue our activities in civil construction in Karlstad, we were asked to present pro forma figures for the remaining activities in Sweden. And as you can see in the middle and to the right of this picture, our profitability in rail maintenance and rail construction have improved significantly during the last two years, with a rolling 12-month result of -NOK 78 million in quarter two 2021 to having break-even for the last quarter in Sweden. And when we have discontinued our civil construction activities in the Karlstad area, we can focus our full management attention on continuing to develop our core business, where we also have the best prospects when it comes to market growth and profitability potential. And that's why we believe that the positive trend you see here will continue going forward.
As mentioned, the tender pipeline in rail construction is very strong. We can be selective in which tenders we engage in. We have seen a significant reduction in the rail maintenance pipeline in quarter two. This is mainly driven by two big contracts, maintenance contracts for the Swedish metro system that were due to tender in quarter two. Due to very unfavorable contract conditions, we chose not to deliver a tender. And as you remember, we won four new maintenance contracts last year, and these are long-term contracts, so we have more or less secured our activity level in maintenance for the next five to seven years. Of course, we want to grow, and we want to grow profitable in this business, but we can be more selective when it comes to where to go tough and where to stay away.
When contract conditions are so unbalanced, as we saw with the metro system maintenance contracts, it's better to say, "No, thanks." In Finland, in second quarter, we saw a small nominal growth in revenues, but measured in local currency, we saw a decline in activity level. And this is driven by lower activity in rail construction and light rail, where we have several bigger projects getting closer to the end of the life cycle. One example being the Jokeri Light Rail project, the biggest project in NRC Group's history, with more than NOK 2.5 billion in revenues, where we handed over this project to the client last Friday. And I want to say a big thanks to the project team in Finland, delivering another successful light rail project for our client, delivered one year in, one year before schedule and also with significant lower costs.
Looking at profitability, it's down NOK 8 million compared to last year. It's driven by lower margins in rail construction, and as we communicated in first quarter, we did a writedown of a bigger rail construction project in Finland, which will impact profitability in this segment for the rest of this year. But we have also initiated some growth initiatives in Finland related to civil construction, where we are targeting projects close to the railways and close to the railway competence we have. These have incurred some costs before we are able to reach the necessary scale of the project portfolio, and this is also impacting the results in Finland this quarter. We are happy to see a strong order intake in Finland in quarter four, with the biggest win being the Turku railway yard, a contract of EUR 35 million with several options which can increase it.
The tender pipeline remains strong in Finland in rail construction. We are also entering a new phase of light rail tendering, where we expect 3-4 new light rail projects to be tendered within the next 12 months. In the medium to long term, we also see good prospects in Finland when it comes to the rollout of ERTMS. In maintenance, we are in a slow period of the tender cycle, so we expect limited activity here for the next 9 months. To sum up quarter two, it's been a strong quarter for NRC Group, both when it comes to operational and financial performance. Revenue is down 6% in the quarter, which corresponds well with our guiding, saying that we will have a slight decrease in revenue in 2023.
We deliver improved profitability, and our guidance continues to be a moderate increase in EBIT adjusted margins for the year. Our order backlog remains high. We have an attractive tender pipeline, which we believe to support our medium- to long-term growth ambitions. Looking at the countries, the positive trend in Norway continues. We are starting to see the results from our actions in Sweden, and we also see improved results in Sweden in the quarter. We are still delivering solid profitability in Finland, although it's a bit lower than last year. This is my final quarterly presentation for NRC Group, and as announced, Anders Gustafsson will take over as CEO of NRC Group, 1st of October this year. And I'm sure Anders, with his extensive construction industry background, will continue the systematic work to improve profitability in NRC Group and strengthen our market position.
We have worked hard for the last four years to build a robust organization in NRC Group, and we have strengthened our key commercial processes. We have started to see results, but I believe that the profitability will continue to show the effects of this in the time to come. During the past three years, we have experienced some quite extraordinary events. We had a pandemic with remote working and significant disruptions in our value chains back in 2020. We have seen a sharp increase in raw material prices for the past year due to the war in Ukraine, and I think you also have seen how a full stop in the housing market in the Nordics have impacted many of our construction peers. But I think all these three events shows the resilience of NRC Group's business model and the resilience of NRC Group markets.
The demand for our services have continued to increase, and we have seen limited effects on the results in NRC Group from all of these three events. So the combination of a resilient business model and our unique position when it comes to delivering sustainable infrastructure, paints a bright picture for NRC Group going forward. Thank you for participating, and we will now start the Q&A session.
Yeah, we start here from the digital chat here. So one question related to the green finance. So any comparable companies in relation to the rating we got, the dark green rating?
... From the top of my head, at least listed companies, I know Scatec and TOMRA has it, but it's not many listed companies that has the dark green shading.
I think also the presentation today with the videos we have shown shows our unique position when it comes to building sustainable infrastructure. One thing is, of course, the effects, when it comes to being a, an attractive investment, but also the recruiting power we have. Attracting new talents in the market by being on the forefront in this topic is, of course, equally important as the financial effects of it.
More. Should we do one more here? What do you expect in terms of revenue development in second half in Finland, given the completion of the large project?
We do not guide on revenue development per country, but our guidance for the year across all our markets is a slight decrease in revenues compared to 2022.
And since then, the revenues in first half of this year is flat compared to 2022. Means that we are indicating that it will be slightly down for the full group in the second half of the year.
Mm.
We have some questions. The change in the tender pipeline from the first quarter-
Mm.
How much is related to, let's say, contracts actually being handed over to those who won the contracts? And the second question would be, in the third quarter here, has Hans had an impact on your operations? And, out of curiosity, can you specify what was so unfavorable in the maintenance contracts?
Okay, let's start with the first one, with the tender pipeline. The tender pipeline is going up and down, and bigger projects have a significant impact, of course, when they enter the pipeline or goes out of the pipeline. All the project that goes out of the top pipeline is won by some of our competitors, and I think that is the importance of why we show this tender pipeline, that even though we don't win all the project, it tells something about the activity level. And when our competitors win, they have less capacity to compete for new projects, and it puts us in a better position to compete for the rest of the projects available in the coming period. So, especially the Swedish maintenance contracts, it was two for the Swedish metro station.
It was also one for [Foreign language], where we didn't win, that we came in second. So that is the biggest sort of biggest projects that has been moved out of the pipeline. Related to Hans, it has limited impact on our operations. We have received some requests to assist [Foreign language] , but this is marginal in the big picture for NRC Group. And then your last question was related to...?
The unfavorable-
Yeah
... contract terms of contract. Can you specify what kind of thing that were so unfavorable?
Basically, they put all quantity risk on the supplier and giving us little opportunities to impact these quantities. So it's very difficult to estimate how many resources you need, and you basically take all the risk. So there was a contract with a lot of downside risk and very limited opportunities, in our view.
More questions?
Yeah. We can have one question from here again. Any cost reduction initiatives planned, going forward in the second half?
We are working continuously, of course, to trim our cost base. During first half of the year, we did significant cost cuts on the overhead side in Sweden that will continue to yield results in the period to come. Besides that, we are not initiating any bigger programs. We are working every day to have efficient cost level in the organization.
So, so just add that, so the majority of the actions in Sweden has been completed, but the benefit of that takes, like, up to 12 months to phase in. But we have had already some benefits in Q2.
Can you say anything about the competitive situation, especially in the civil market? Has that changed or is it the same as before?
I would say it's more or less the same as before. It's a lot of projects out in the market, and if you read market reports from our competitors as well, you will see that they paint a quite bright picture when it comes to volumes in the infrastructure market on the civil side, ex railways. As you know, on the railway side, we expect very good markets in all three countries for the coming years.
That was it.
Thank you for attending, and thank you for all questions. Have a nice day.