Multiconsult ASA

OSE:MULTI

Earnings Call Transcript 2022-Q1

[Grethe Bergly, executive]

Good morning, and welcome to this presentation of the results for the first quarter 2022 for Multiconsult. My name is Grethe Bergly. And with me today, I have our CFO, Hans-Jorgen Wibstad, who will take you through some of the more details regarding the figures. The KPIs for this quarter are all strong, and we see an improvement on all these major KPIs that we follow. The EBITDA is at NOK 169.2 million, reflecting a margin of 14.9%. We also see an improvement when it comes to the billing ratio and an increased operational revenue. It's a strong quarter, and it's an all-time high results for Multiconsult for 1 quarter. We have a solid growth of 16.2%, driven partly by more calendar days, but also that we are more employees than we were in the first quarter 2021. We have had a strong intake in the quarter, and we're making an adjustment to the business area where we are now putting Energy & Industry as one business area. And the rationale for this is that we see the changes in the clients with respect to the deliveries we have in this business area. We have seen over the last year really how the competence that we have is of major importance for us to support our clients in the activities they need to implement with respect to the green shift. We have strengthened our market position in the Western Norway through the acquisition of Smidt & Ingebrigtsen, and we are on track with respect to the strategic ambitions that we released in November 2021. Looking at market and sales. The largest sales in the first quarter was Ocean Space Center. This is a research facility in Trondheim in Norway. We have the Fornebubanen, which is an extension of the tube in Oslo, major infrastructure project. We also won the continuation of the Sotra project. This is the largest ongoing infrastructure project ever in Norway. We have also Mosvangen, which is in the Building & Property business area, and we have been awarded a large bridge contract. As you can see, we had a positive development of the order intake. Sales are close to all-time high, and we leave this quarter with a very strong and diversified backlog, and the outlook is good in all the business areas that we operate in. Looking at ongoing projects is, to a large extent, some of the ones that we have also been awarded in the quarter. But to remind you, that we're also involved with Gaustad, it's a major hospital development in Oslo, and the water supply infrastructure also in Oslo, and we are involved with a large electrification project at Melkoya up in the north of Norway. As you can see, order backlog is stable. We are seeing and expecting an increased investment in the Energy & Industry market. We would, however, also like to mention that there are some more uncertainty with respect to the macroeconomic environment that we see around us in Norway and in Europe, and also with the COVID situation in China. We are doing a major change with respect to business areas and this is to strengthen and coordinate our work in the market of renewables. We're seeing now that our client base is changing. Our clients are changing from industry to renewable and we, therefore, established a new business area of Energy & Industry. It's partly to increase and strengthen the capability with respect to electrification. This area that we call green industry. We see an increased demand for factories related to batteries, hydrogen, ammonia, and we expect that this will continue also in the next few years. We're also making sure that we are strengthening us to be positioned for offshore wind and similar projects. With respect to ESG, we have just completed a major project in -- office project in Oslo. It is the first future built building when it comes to rehabilitation and reuse of materials. We believe that the circular economy will have a boost. It will be expected from our clients, and we are all well positioned to support our clients in this very important journey that they need to make developing their infrastructure and the buildings that they have. We have also, for 2021 reported on the EU-taxonomy with respect to green aligned turnover. And we have a goal to be among the leading companies to have a majority of the project aligned as green. With respect to social, we donated SEK 2 million to the Red Cross to support the position and the situation in Ukraine. And when it comes to governance, we have included sustainability in all our business strategies. And also for 2022, the executive bonus program includes a sustainability criteria. We are 3,246 people as we leave the quarter, a growth of 10.9%, mainly driven by the acquisitions that we made in 2021. We have a new chair of the board, Rikard Appelgren. We have made one change in the executive team, and Thor Orjan Holt has taken over as EVP for Sales. And we also have appointed a new CFO, Ove Haupberg, who will take position on the 1st of September, 2022. When it comes to excellence, we have on PhD candidate, who just finished in the first quarter. We have won some prices in the school building of the year. And in Norway, the construction - building and construction industry always give a price to the best infrastructure project and the best building. And of the 8 nominated projects, Multiconsult has been involved with 5 of those. And that, of course, makes us very proud. And with this, I'll leave you over to Hans-Jorgen.

[Hans-Jørgen Wibstad, executive]

Thank you, Grethe, and Good morning. I will, as normal, go through the financial results for the first quarter for Multiconsult. And as Grethe mentioned, we've had a very strong quarter, strong growth. We have record high profitability and also very good sales or order intake. Getting into some more details. So net operating revenues are up 16.2% to SEK 1.138 billion. Strong growth, partially driven by the acquisition of Erichsen & Horgen, which we did in the summer of 2021, contributing strongly to that, as well as the fact that we have 4 more working days in the first quarter of this year compared with the same quarter last year. The organic growth is 1.6% if we take out your acquisitions and calendar days. However, if you look at the growth of the business, without consideration to the calendar days, the underlying growth is about 10.3%. Very strong EBIT, record high levels, with a good margin at NOK 169.2 million compared with NOK 98.5 million last year, giving a margin of 14.9%. The strong profitability is driven by several factors. One thing is, of course, the acquisition of Erichsen & Horgen, where we see the benefits and the contribution from that acquisition in the first quarter. We have -- the operating expenses are in control. We're also seeing increased prices in the market. And what is also very important is that we have -- we're able to improve our billing ratio to 71.4%, which is up 0.3% compared with last year. And which is very important for us. And also taking into account, which we mentioned in the report, that our short-term sick leave is about 2% higher than it was in the same quarter last year. And that directly impacts this figure. It is a very good figure for Multiconsult. So that also then, of course, contributes strongly as we've had like the society as a whole, a bigger or higher short-term sick leave in the first quarter. And as mentioned earlier, the order intake or the sales in the quarter is close to record level at SEK 1.467 billion, which gives a book-to-bill of significantly above 1 in the quarter. So this shows our figures in a little bit more historical context. We see on the upper left-hand corner, a strong growth in the business, a 16.2% compared with the quarter and also a strong overall growth over the last 3 years. And of course, with the boost after the recent acquisition. What's maybe even more interesting is to look at the EBITDA figures. Historically, we came in 2019 starting the turnaround project with very poor results, and then seeing the effects of that. And this being a quarter -- after consecutive quarters of strong results and the best quarter in quite some time. To give some comparison, of course, the end calendar effect impacts the figures. And the last time we had the same number of working days was in the first quarter 2020, where we delivered SEK 117 million as a result. So that's just a comparison. Of course, a lot of things has happened since then, including acquisitions and further improvements of the operations, but it is somewhat a comparable figure, although it's a few years ago. The other thing I wanted to mention on this thing is, and I've mentioned calendar effect a few times, is that in the second quarter of this year, we will have 3 fewer calendar days than in the second quarter of 2021. And also in the second quarter of this year, we will have 8 fewer working days than in the first quarter. So these are just normal fluctuations. And when we summarize the year at the end of 2022, we'll have one more working day than we had in 2021. So these are figures that our analysts and shareholders generally are in control of, but I just wanted to mention this, that this will, of course, impact on our second quarter financial performance. Looking at the segments, it's also a good picture. We have strong and good activity in all segments, particularly impressive performance with Norwegian Oslo with revenue going from NOK 311.6 million to NOK 412 million. We're more than doubling the EBITDA from $40.5 million to NOK 89.3 million, driven by a high billing ratio, driven by also acquisitions and strong operation and a very busy unit. And we also see that all the units within Region Oslo are improving their performance. So a very, very impressive performance, giving an EBITDA margin of 21.7%. Region Norway, which is the largest region with revenues of NOK 457.7 million. Also a very strong performance, NOK 71.4 million of EBIT and 15.6% of margin. So a very, very solid performance by Region Norway again. And we're seeing that the organic growth in this unit is 5.8% as also they get some contribution from the acquisition of Erichsen & Horgen of the units outside Oslo and Lillehammer. Energy. Also -- of course, they are much smaller, but still we're seeing that they're delivering a margin of 12.3%, which is much better than we've seen in the last quarters, a strong performance, giving an EBIT of NOK 8.1 million. So, happy to see that this is improving. Also, we've seen the impact of what we've done in our operations in U.K., which has been loss-making for several years. Now we have restructured that as well as some improvement in the market conditions, and this also contributes to the good results in our Energy unit. Then on the LINK Arkitektur side. It's a little bit different picture. Norway, the LINK Norway, which is the largest unit has had a somewhat slow start to the year. Partially more -- even more impacted by short-term sick leave than Multiconsult unit. And that is impacting the results. What we should also see is that -- what we've done for LINK Sweden and LINK Denmark, we're seeing that, that is continuing to deliver results as these units were loss making for a period -- both of them, and now they are on a breakeven result, which is given where they are in the turnaround process, a good result. And then we have strong belief that both LINK Norway will have a better performance as we move through the year, and also gradually improving the LINK Denmark and LINK Sweden result. So we are optimistic about how LINK will perform as we look a little bit further down the road. International business, which is Multiconsult Polska and Iterio in Sweden. A good first quarter for both units, particularly strong performance in Sweden, in Iterio. Also a good performance in Poland, although they had also had a little bit of a slower start than we saw last year. But overall, a good performance with an EBITDA margin of 9% for these 2 units combined. Then a few words on our financial position. We've had, as we can see a good result, cash flow from operations. We've had some working capital buildup in the quarter, where we see that this figure is negative by NOK 236 million. However, these are just normal fluctuations. Our working capital structure is quite considerably between quarters. And in this particular quarter, we've seen a somewhat buildup of the working capital. So fundamentally, nothing to worry about, but it's something that we're watching very carefully, of course. But overall, we're getting -- coming out of the quarter with a net interest-bearing debt of NOK 139 million, giving a gearing ratio of only 0.35, excluding IFRS 16 adjustments, which gives the business and Multiconsult a very strong position and good financial flexibility as we move forward into 2022. So that's -- and also we have a very solid bank lines, which gives us strong flexibility and maneuverability as we move forward into the market we see ahead of us. So that's that. As this is my last quarterly review with Multiconsult, before I move in as CFO of Norwegian, I would like to say thank you. It's been a pleasure and an honor to work for Multiconsult. It's been a fantastic journey. Together with great colleagues and a good business with a strong culture, and I believe that Multiconsult is very well positioned for -- to support future growth -- profitable growth, and take the many opportunities that Grethe will talk more about as we move into the future. So again, thank you very much.

[Grethe Bergly, executive]

Thank you, Hans-Jorgen. Looking at the revenue within the 4 business areas. As you can see, there's been a good growth in 3 of them and a steady result with respect to revenue also within Water & Environment, really reflecting what we're saying that we have good sales, good revenues, and also a good balanced portfolio. Buildings & Properties are now the largest area affected by the M&A that we did of Erichsen & Horgen last year. Forward, we would like to go a bit deeper into each of the 4 business areas. And this time, we will give you a bit more insight into the area of Mobility & Transportation. Enabling social development through sustainable, efficient, and safe movement of people is a core in the strategy that we have set for the next 5 years. And although, there's been a slight reduction in the order backlog and also with respect to sales in the quarter, we -- this is just within the normal fluctuations that we expect to see in this business area. We are working on public transport systems. We are looking to strengthen our position when it comes to mobility and transportation hubs as we see that this is a growth area going forward. The same goes for urban planning. More and more people live in the cities, we need to think differently about how we form them and also how we develop the areas that we already have. And we have great competence and skills within this area. We also have a very good capability base when it comes to large bridges, and they are expected to be quite a few large bridges built in Norway. And at the same time, we continue to maintain the position that we have with respect to railways and roads. The largest projects we've already mentioned then, the Sotra project, the tram in Oslo, Fornebubanen. Sandefjord station is a station for the railway authorities. And also, we've been given -- awarded a large project to early phase planning with respect to the possibilities of a railway connecting all the way up to the far north of Norway. And this is a very interesting project. It's a project that I'm sure there will be a lot of writing in the public year, because this is of huge relevance to that region. Looking into -- this is Sandefjord railway station. Going back a few years, the majority of the work that we would have done here would have been in connection with all the technical issues with the station. But now we see that in addition to that, work is included to see how can we use the station area, how can it be an important part of the development of the city, and how do we make sure that railway stations no longer represent a barrier in the tram. So we're seeing here that new skills are required, and these are skills that we have in the company. Fornebubanen public transport, largest and first really development of the tram system in Oslo since the late '60s, enormous infrastructure project. And this is a sustainability project. This is what we need to take the cars off the road. So in that sense, it's a very good in the profile that we're seeing on helping society become more green. Large bridges, in Norway there is a plan to remove the ferries from the main road going along the coast. To do this, you have to have large bridges crossing the [ fields ]. We are one of 2 partnerships now working on this fantastic bridge. It's an example of how Norwegian skills and technology is at the forefront. Really, this is world-class engineering. And it's an example where partnerships and also using some of the skills and the partners that we have from the work that we've done in the oil and gas industry can now be transferred into other business areas. This is top notch technology. Summing it up. We leave this quarter with a high backlog. The overall market outlook is good within the areas that Multiconsult operates. We are seeing a growing market and demand for capability and skills for creating sustainable solutions. There are, however, some uncertainty due to the unstable macroenvironment that we are seeing in Norway and in the world at the moment. But we are on a steady course with a good and balanced project portfolio. Just finally, reminding you of the dates for the next quarterly presentations, 17th of August and the 2nd of November. And with that, we completed this presentation, and we open up for questions.

[Unknown Executive]

There are no questions right now, but I'll -- so you think you can sum it up. But if there are questions, I will let you know.

[Grethe Bergly, executive]

Okay. It seems like there are no questions. I would just -- before we finish, I would just like to thank Hans again for his contribution to Multiconsult in these 3 years. We've been a good pair. And I wish you luck in your new job.

[Hans-Jørgen Wibstad, executive]

Thank you very much.

[Grethe Bergly, executive]

And there are no questions. So with that, we sum it up from Oslo. Have a nice day.