Welcome to the second half year 2022 presentation. My name is Henrik Badin. I'm the CEO. Today I'm also joined with by Erik Magnussen, the CFO. We're starting off with this picture. It's actually the large reactor that we have under construction in Fredrikstad, Norway. You see, one of our team members inspecting the valves inside, and you can get sort of a grip out of the size of this new reactor that will, we truly believe, will be a game changer for us going forward. Just jumping straight to key takeaways from last year. We have a sharp increase in revenues. Growth in all segments, and with land-based growing nearly 3x. The full year revenues is reported at NOK 783 million. We're reporting in Norwegian kroners, NOK 783 million.
That's a 72% increase year-over-year. Profits improved significantly. EBITA more than doubled to NOK 92.2 million before non-recurring for the full year. That's 11.8%. We're doing our best year ever in cruise, and we continue with strong margins in projects, and we have really a rebound in aftersales. In land-based, we have healthy profits, which also reflects costs related to scale-ups. I will provide more insight into that in coming slides. Order backlog remains high at nearly NOK 1.2 billion. Adding the options, we're at NOK 2 billion. That provides, for us, very good visibility for revenues and cash flow going forward.
We do see a strong demand for Vow solutions across several industry verticals. Our technology for biocarbon production, and now recovered carbon black in the tire industry, is identified as candidates for rapid scale-ups. Moving on to, you know, how we have developed the latest 4 years. I will say that we have performed well through the pandemic. Coming out of the pandemic last year, we have a sharp growth. We're coming, you know, from an EBITA level in the 40s up to more than NOK 92 million. We have a very strong development coming out of the pan-pandemic. Looking at the numbers on the half-year basis, you see we report our numbers within 3 segments. We have the cruise projects, we have aftersales, and we have land-based. You see how that develops. I will highlight 3 effects.
You see on one side a very strong performance in cruise and the way we develop that business to the all-time high activity. In the second half, That has sort of an impact of the contract we entered into in June last year, the US-based contract that is recognized at lower revenue in the last part of the second half. While we have full force in our engineering activity to develop our scale-ups going forward, that sort of the result is the margin development from the first and the second, to the second. Looking at the second half, all business areas are profitable. Looking at the share of revenues in the second half, 31% is land-based at, you know, 10.7% margin, and that comes back to the previous slide.
We are doing extensively development on new projects, and we are now planning for the scale-ups. With the low revenue in the fourth quarter, the EBITA comes a bit down. Again, we do that because we have said earlier, we're building for growth and we have good prospects going forward. It's 50%. Cruise project is 50% of our total revenues in the second half at 19.1%. I will explain a bit about the EBITA margin in that segment in the coming slides. Aftersales, 19% of the revenues. Historically, that has been one third of our business, it's coming back as all ships are mostly back in operations, and that's a 13.6% margin.
As revenue grows, the EBITDA margin comes up within that sector. Okay, let's look at the land-based specifically. For the full year, revenues of NOK 304 million, that's a 39% share of the total revenues. Looking at how we have developed for the full year, 12.4% EBITDA and 10.7% for the second half. 441 is the backlog, and that's around 37% of the total backlog is now from land-based. We last year have delivered sort of an extensive part of the technology to the first factory at Follum for Vow Green Metals, supporting them in their, you know, rapid, their plan for rapid expansion. We have been doing engineering for the U.S.-based project.
The construction start is still pending permit. We have very strong and good signals from U.S. that the permit will be granted shortly in the beginning of the second quarter. We expect to have a very large activity on that project this year. The strategic partnership with ETEL, I will share some more light about both that opportunity, but also more on the Vow Green Metals later. That is something that we, you know, have been developing in the second half of last year. We're building pipeline by developing projects both in Europe and in U.S., actually driven by the macros around the EU Green Deal, the REPowerEU, higher intention in Europe, and also the Inflation Reduction Act in the U.S. plays an important part. We see that in communication with our clients.
The pictures you see on the right is the construction again of the large reactor. One plan is to deliver that reactor to the increase of capacity at Follum, but we also are in discussion with other possible takers of that first reactor, and we have plans to build more. The small picture there is actually the Biogreen reactors that has been produced and delivered to Follum. Moving on to the cruise part of our business, NOK 359 million for the total year. It's 46% of the revenue. For the full year, we have a 21.4% EBITDA coming a bit down to 19.1%, and I will say that that's sort of an inflation effect that slightly brings down the EBITDA margin within that segment.
Backlog, with confirmed contracts well into 2026, options into 2028, provides a very good visibility for us for future revenues and cash flows. We are in dialogue with several shipyards for new builds. We also have been focusing on not only delivering waste management and wastewater purification as an offering to the cruise industry, but also waste-to-energy onboard ships because the industry has the target to decarbonize their operations, and waste and biomass onboard ships can be used to produce energy that replaces hydrocarbons. What's good to see is also that in the first half of this year, a ship will be commissioned with our first waste-to-energy pyrolysis system, the MAP, and will enter service during the year.
We are progressing, we are moving forward, and we see a lot of interest around this new technology that will increase our technology portfolio in the cruise industry. Looking at aftersales, 15% of our revenues in 2022, NOK 120 million. For the full year, 11.7% EBITDA, increasing to 13.6%, of course, it will continue increase as we are booking more orders. It's high activity. Recurring revenue is expected to increase as installed base continues to grow. It means that our addressable market within aftersales is increasing. We have had several commissionings and several ships have entered service, both in the 2 years of pandemic, but also we see now we have a very high activity during the first half with commissioning activities.
Just to explain that commissioning is sort of our handover of the systems already installed before the ship enters service, before it's handed over to the ship owner. We have another 35 plus Scanship, you know, ships that will enter service. It's more than 35 Scanship systems. It's actually ships with equipped with our technologies. We have multiple systems on board, and those will be delivered in the coming years. On top of that, we have the options. Just to explain the activity level now in the next months is, you know, very high. Normally, historically, we have had sort of four, three, four large commissionings at shipyards. Now, in six months before the summer, we have 10 large commissionings.
We actually have four, additional four on smaller, you know, smaller vessels with of course a smaller supply, but it's, you know, all-time high. When those are entering service, they will generate revenue in after sales. It's looking very good. We will then move on to, you know, looking at income statement, in a balance sheet and cash flow. We issued our full report this morning. Our CFO, Erik Magnussen, will walk us through some of the details on those, and I will be back to talk about sort of market outlook and way forward. Okay.
Thank you, Henrik. As Henrik said, he will be back. There's more details on the income statement in the full report, of course. Just some key figures here. The drivers for the increase in revenue and EBITDA is the segments that we just showed and explained. Just on the depreciation, amortization, that is increasing from last year, mainly due to the inclusion of C.H. Evensen, which has kind of a production facility and then some fixed assets. In the net financial items in 2021, there is a special item that's the fair value gain from the demerger of the Vow Green Metals AS operation. You can see the details of that also in the annual report.
Also the net financial items in each year will have in the financial items, a share of net profit from the associate company, Vow Green Metals, and also some internal gains effect on that. That you can also see more details on in the full income statement. On the balance sheet, I think that our total balance sheet increases both from the inclusion of C.H. Evensen and from the high activity level and the increase in revenue and working capital from that. You know, see we're doubling revenue from 2021. We are investing in intangible assets and also fixed assets for future growth. Part of the increase there also in intangible assets is due to the C.H. Evensen coming in with the acquisition purchase.
The increase in contracts in progress and also the receivable is reflecting the high activity level, and that will. The net contracts in progress is a value of NOK 198 million, and that with the accounts receivable will convert into cash to a large part in the first half 2023. We have with the credit facility, we have available in addition at the year-end 2022, we have NOK 68 million in addition to the NOK 42 million level in cash. In total, NOK 111 million. I'll give you some more comments on the cash flow on the next slide. The equity ratio is 37%.
Included in that, you will see in the report that the purchase of own shares, accounting-wise, is deducted directly from that accounting value of equity. If adjust for that, the equity ratio is 39%, which is kind of a, I think a solid position for the group to have. We do have negative cash flow from operations in the second half year of 2022, but that will change in the first half year 2023. Following, there's 2 major payment streams. It's the payment from the accounts receivable and from the net contracts in progress. That will, after investments and payment of interest costs, that will convert into a significant net cash inflow in the first half year 2022.
Just to understand our structure, we can have singular customer payments coming in between NOK 20 million-NOK 40 million. If you have two or three of these coming in next month compared to the month you're standing in, it will have a significant effect on the cash flow you're showing exactly in that reporting period. It's not so that our customers are not particularly concerned about whether we close 30 June or 31st December. You have to look at these balance sheet values we'll convert into cash, and all the EBITDA will be cash. Just to give you insight into those kind of large customer payments, they are coming in bulks, and they are coming at the level NOK 20 million, NOK 30 million, NOK 40 million each payments.
I think that just on the value of our balance sheet at NOK 1.4 million is reflecting the growth in the group and the value that we are creating. That's kind of a possibility. There's also that we are including C.H. Evensen, which is showing up to be as a very good acquisition that we did. I think I hand back to you, Henrik. I promise that you will be back.
Yeah, I'm back. Never leave you. Thank you, Erik. Let's look at the market and outlook and our current focus areas. We talked about these current focus areas last time, and we have divided those into 4 areas. One is the focus towards the metallurgic industry space, where we have technology to produce biocarbon that replaces fossil-reducing agents, meaning that we're helping that industry to become carbon neutral, lowering their emissions. We continue in cruise, and extending our technology portfolio and not only helping them to reduce discharge overboard, eliminate that, but also to play a role in decarbonizing that part of the business. We have our area where we call sort of the clean energy transition, and carbon sequestration, where we are producing renewable energy.
We are working on waste valorization, producing biochar for carbon sequestration and other interesting things that are, you know, driven by the need to go fossil-free. The last, circular economy, where we are looking at plastic recycling and recycling of polymers with a special attention on end-of-life tires. While technology is relevant across a wide range of applications, if you look at projects, initiatives, and clients we're working on within these four areas at the moment, we continue to support Vow Green Metals, but we're also working with other clients. One is an undisclosed client we announced last year that has an ambition to go 5x larger than the first Follum stage plant with 50,000 tons of biocarbon a year. We continue to develop a project with that client. We are introducing MAP.
MAP will be started up in the first half of this year in cruise. We are working on larger capacities to cruise using the ETIA Biogreen technology. Clean energy transition, and carbon sequestration. We have earlier announced working with GRTgaz to produce renewable gas as a replacement for, you know, natural gas in the grid. We work with Circular Carbon to produce renewable gas that replaces natural gas in Hamburg. We are these days also working, starting up the NSR plant in Sweden, a plant that was the client, the waste management company was getting funds to have a new business model at that site to convert green waste into biochar as a climate mitigation effort. We are working with concepts around finding an end of waste solution for sewage sludge.
That is relevant for the, for the biogas infrastructure and the need to scale up the capacity of biogas in Europe. We have talked about the initiatives under REPowerEU, where EU has the ambition to increase the biogas production, you know, more than 10x up to 350 TWh a year. We are definitely relevant in many applications around clean energy transition, and carbon sequestration.
The last, circular economy, where we have earlier announced that we're working with Repsol and lately when we had delivered sort of a test plant to their R&D center in Spain, in Madrid, and we're working on this Horizon 2020 project, the plastic to oils, and now the ETEL Itochu within end-of-life tires, where I will provide more details into. Just looking at sort of the two, as I said in the introduction, we have two potential scale-ups that we're working on. Scaling means that we could multiply Vow in the coming years. One is the biocarbon scale-up, and the reason why we de-merged out Vow Green Metals, why they now are developing a pipeline of prospects. We're working together with them.
Last time when we gave you some insight into their scale-up plan, they talked about 470,000 tons of biocarbon annually towards the metallurgic industry. They had their presentation to the market last week on Friday, where they gave more insight even to a larger capacity target of around 600,000 tons a year. Let me sort of remind you that the first plant that we have delivered technology to this last year, and that was sort of a large part of our growth, was only for 10,000 tons a year. This represents a, sort of a huge opportunity for us to grow our business as a technology. Importance of getting on early production at Follum.
We made an investment decision earlier to build a plant and as Cecilie announced in her presentation last week, Vow Green Metals, they had the ambition to take over the plant that we have under construction at Follum ourselves, and that we will have operational this summer. That means that Vow Green Metals can start qualifying biocarbon together with their clients, and they can start having revenue in Vow Green Metals already this year. This plant will also be very important for Vow, because it will also be a demonstration plant for our clients. Here you see the picture of the steel construction that will sort of where we will assemble our pyrolysis system based on a multi-step biogreen setup.
I would say that this setup represents sort of somewhere between 20% and 25% of the total capacity of the factories, you know, the phase one factory that Vow Green Metals will be building in parallel. This is good news, and I think it's well appreciated in the market that we see that we are, you know, moving faster forward on the biocarbon opportunity. The other example of a scale-up for us is the recovery, the end-of-life tires. It's all about producing carbon black from end-of-life tires, a recovered carbon black. The pictures on the right side is an agreement we entered into in December. You see representatives from ETEL, Jack, and on the right side, Mark Murfitts.
Mark Murfitts we have been working with for several years. When we acquired ETIA back in 2019, they had already then delivered the first test site at one of their facilities in U.K. Since that time, we have been running that plant together with Murfitts Industries, producing recovered carbon black to verify and qualify that product for the tire manufacturers. We're actually, you know, aiming for a very high quality recovered carbon black. We have had a lot of interest from the tire industries. Mark, you know, has been sort of, he's a somebody within the end-of-life tire industry, and I will speak more about sort of the rationality of why we are working with them.
You see the pictures on the left side is the test site in U.K. at, at Murfitts in Lakenheath. It's a huge attention around getting the circular economy working within the tire industry. The tire manufacturers are really pushing forward to recover carbon black instead of using or extracting hydrocarbons for that purpose. Today, tires are landfilled or burned. We want to recover it to have sort of a sustainable way to produce tires in the future. The carbon, the end-of-life tire market is huge.
That MAP there is on an annual basis, 33 million tons a year. 10% of that is in Europe and at the convention during last year, Michelin and Bridgestone have the ambition, the belief that by 2030 they will utilize in their factories 1 million tons of recovered carbon black. That means that to reach that amount, you would need to process all the end-of-life tires in Europe. Why is this partnership... Sorry. Why is this partnership so unique? Why is this partnership so good for us? Itochu. They are producing rubber, natural rubber for the tire manufacturers. They are trading that, delivering that to the big tire manufacturers. Itochu is actually one of the 3rd largest suppliers to the production of new tires in the world.
Some years back, Itochu acquired ETEL, established ETEL in Europe. That's a tire wholesaler, and they also own Stapletons and Kwik Fit in the UK and in the Netherlands. Stapletons and Kwik Fit in UK it has 2/3 of that market. That means that they are collecting, you know, they are selling and collecting 2/3 of all tires in UK. Murfitts, they acquired Murfitts 2 years ago, and that's the partner that we have been working for several years with Mark Murfitts and his team. What we are basically doing here, we're closing that gap, so we are sort of making this circularity with Vow technology to produce recovered carbon black and tire oils.
Recovered carbon black for Itochu to sell to the big tire manufacturers and tire oils that will be used in the petrochemical industry as a you know, recycled product to reduce the amount of petroleum products. This is why this is so good for us. You know, we are working together, being well-positioned for us to deliver technology to their ambition to build several factories in the coming years. We, when we announced the partnership in December, we already said that there are three factories under planning, but we're also working with more. Let's summarize. Cruise is steaming ahead. We actually did our best year ever in Cruise. We are very proud of that. Also it's driven by more activity on the after-sale side.
We truly believe there will be more business also in the, in the short run because we are in negotiations with shipyards for new builds. Land-based, we were very busy parts of the last year with delivering equipment to Follum and Vow Green Metals. We also been, and as our margins reflects, you know, we have been building the team and we're doing extensive engineering for these two scale-ups, but also developing other new projects. We do see with what we're working on that this will have significant effect on revenue and profits already in 2023, this year. Order backlog, including options at NOK 2 billion. That provides also good visibility for us to plan. It provides good visibility for revenues and cash flow short term and well into 2025, 2026. Very important, we continue to develop and invest in technology.
We want to make sure that we are well-positioned in this green transition of energy in the coming years. That's why you see in latest years we are investing a lot to develop technology. The opening picture, you see this large-scale reactor is an example that we are really pushing the limits because we need to sort of make sure that we are very relevant working with the industries in the coming years. Biocarbon technology that we have developed for biocarbon production and recovered carbon black is identified as, you know, top candidates for rapid scale-up that potentially can multiply Vow in the coming years. Thank you so much. We will open up for some Q&As.
Yeah. Hi. Thank you, and thanks for the presentation. Thomas, SpareBank 1 Markets. I guess it's a bit covered already, but I have a couple of questions on the balance sheet. Should we interpret it that growth will be a bit slower in the first half of 2023 as you expect the reversal of working capital?
No, not that. What I The net cash inflow I referring to is the the net cash inflow from the backlog in the prison operations that we have from after sales of the accounts receivable and contracts in progress. The growth in land-based, that has an advanced payment structure, so that will be coming on top of that in a kind of a positive element for the first half year. What we're working on is this for instance, this large scale-up with ELT is a structure that we will be looking at that will not include kind of a financing element for us. When I refer to net cash inflow, it's excluding the ELT and the Murfitts and those big elements that we're working on for the first half year.
It's just converting what we have in the balance sheet to cash in the first half year.
Yeah, because in my head, I would just assume in the period from now or from the 31st of December until now, you also will build up kind of new contracts in progress and new receivables, et cetera.
Yeah. I think the net contract in progress has been increased with NOK 100 million from year-end 2021 to year-end 2022. That including the accounts receivable, that will convert to cash. It's kind of particularly high now, and then we see already that it's converting to cash in the first quarter. The growth will of course be, there will also be growth in project crews and land-based, but the land-based does have this advanced payment structure.
Okay, thank you. In terms of the margin on crews, you talked a bit about inflation, but I also saw that there was a doubling in the employee expenses there. Is there any explanation for that from first half to second half 2022?
Yeah, I think that, you know, the, it's just the, e-expenses within the business segment, then there's also some allocation keys in-allocating the, the OpEx base we do have. We are kind of building for more growth. Generally, you'll see that the OpEx base in the last half year will be higher than in the first half year. That has something to do with the summer period and the there's some months there without the salary payment given the, holiday pay structure in Norway. Generally, you will see that the OpEx in the second half year, if you go back and look, it's been generally higher than in the first half year. That's where the margins will be slightly lower in the second half year.
Mm-hmm. One last question, and I guess it's also in this slide. You will continue to develop and invest in technology, is still seeing that kind of the investments in are higher than your depreciation. Do you expect that to continue in 2023, 2024, or is this kind of were there any special one-offs this year?
I think that in. It's a good question, and you're right that if you look at the investment level of 117 for the year, and you have a depreciation of 32, so of course you're building for future growth, and you're building that base. I think the investment in the second half year was 56, and that includes the, at this point, the investments in the new ERP system, et cetera. We'll be at a somewhat lower level in 2022, we're looking at, because we have made significant investments in both 2021 and 2022.
This year, at this, what we're looking at now is, it will be somewhat lower in both first half year and second half year 2023 than the level we have seen in 2022.
Okay, thank you.
Cheers, guys, for that. Elliott from Nordea. Could you have a couple words on the competition of the biocarbon and the carbon black space? Just a couple of words on, you know, the competition there that you see.
When it comes to the biocarbon towards the metallurgy industry, we have interest from several clients. I would say the market is huge, you know. If you just look at the Norwegian market, I think it's, you know, there's a need to, and the ambition is to replace, you know, almost 50% of the consumption today. That's a million tons a year. We have volume now, while Vow Green Metals is, their ambition is to double the production at volume. That will take us to 20,000-25,000 tons a year. Currently, we have a lot of interest from. It's not sort of a market that is very crowded with competition. That's not what we see.
It's actually, I see that we are, to some extent, first movers. We have, of course, also supported others because we are, we are a technology provider. We have the. We are free to deliver our technology to several players that want to pursue sort of a business in producing biocarbon. When it comes to ELT, that's, there are more initiatives we definitely see. I think we found a good way to move forward, working with these partners because they control the entire value chain. They have a strong interest in, you know, taking a position to be a large supplier of recovered carbon black to the tire manufacturers.
They own most, you know, more than 65% of the tire, you know, the collection of end-of-life tires in UK, and a large share in the Netherlands, and they have ambitions to do more. I think if we would be operating there on our own, it would be another game. I think that with the partnership we have, we have a unique position to be part of a scale-up here.
Cheers. Kind of following on to Thomas's question on margins, the explanations are quite helpful, but just kind of digging into what you're seeing now in the first half of 2023, after the dip in H2, do you expect, you know, margin levels to kind of rebound quite quickly, back to, say, H1 2022 levels? Or are you seeing the potential effects are still kind of taking place for the first half of 2023?
I think that, within the margins we have, if you look at the cost we have in our project in Cruise, I think we have that sort of a very good visibility in that now. We don't foresee that it will continue to grow. When it comes to land-based, we are delivering technology on, I think in many cases, strong business cases, meaning that it's not that price sensitive. Again, you know, what you have to think about when we're a company that are growing. We are investing to grow. We're building capacity. Once we get the projects in, once we get the revenue, of course the margins comes up.
I, you know, if you look at last year with the huge investments we have done, we have revenues to support investments in technology to take the future positions and we are able to finance that ourselves.
Cheers.
We have a couple of questions from the audience online. Actually, they're both from Anders Rosenlund and concerns the cash flow and the balance sheet. You might have commented on this already, but in case you wanted to elaborate, the first question is on debt. Why has debt been increasing so much in the past year? I'll do the second question as right away, and that concerns the total net cash flow from operation he has calculated from 2016 to 2022 is NOK -24 million. He asks, "Why is this the case? And could you please give some explicit guidance on what you expect in terms of cash flow in 2023?" Net debt and cash flow in 2023.
Yeah. I think I'll... That's a good question. I'll take the last question first. I think that... Remind me about the first then. I think the, you know, if you look at, if I remember correctly, the revenue we had in 2016 was NOK 171 million, and now it's NOK 800 million, so it's four times higher. That demands some kind of working capital that is kind of, effect, and we have basically financed that through kind of our operations with some increase in debt over that period, and some equity. It's also so that in this period, the land base is not only investments, it also has a negative EBITDA quite significantly over some years. That is kind of also reducing the cash flow operations.
We have had, I think, one and a half or two years with negative cash flow EBITDA in the after sales business or close to zero. Those two kind of factors are helped by the cash flow and project profits within the project screws. All and it's kind of if you look from that summary he made, if you exclude the second half year 2022, the figure is a bit different. That's a good question. I think the combination of those factors are kind of giving that picture. It's important to remember that we have had negative EBITDA, and we're investing through OpEx also in land base, and we have had after sales been very down due to COVID.
The increase in debt last year is just, that we're drawing on the credit facilities we have to meet the increasing contracts in progress and the, and the working capital. Those are, in a way, part... The large part is the revolving credit facility we have recorded as a short-term debt, but it's actually a long-term because you draw it up and down, and it's kind of doesn't have any payment, repayment structure. You will have it for many years in a way, but it's accounting-wise as a short-term debt, but it's actually, in its nature, it's kind of long-term. That isn't... I'm kind of wearing off a bit, but that's the, to just to add on that.
Thank you. There's one more question from Anders Rosenlund. This concerns the order backlog, which he says is down 8% year-over-year and 15% in the second half last year. Could you comment on the development of securing sales? Is the customer attitude more muted, or is the drop just coincidental, reflecting inherent volatility in order intake?
To respond to that, we are working on several prospects with clients both in Europe and in United States. We see a keen interest. There are some timing effect on it, also these scale-ups. We are, I think we are in a good position to see that we will start booking larger contracts in the short run. It's, I would say it's a timing effect. We don't see less interest, rather the opposite. We see a huge interest in these things, and that's what we're trying to give some insights into here.
Thank you. I think that sums up the questions that we have received from the web. Back to you.
Thank you so much. Erik, do you have anything more to say?
No.
No?
Thank you for coming and visiting, looking at the web as well.
Yeah. Thank you so much for your attention. Have a good one.