Nyab AB (publ) (NYAB) Earnings Call Transcript & Summary

Hello, and welcome to NYAB's results presentation for the first quarter of 2024. NYAB has published its interim report this morning and introducing the significant events and financial information for the first quarter, we have NYAB CEO, Johan Larsson; and CFO, Aku Valiaho. And I am NYAB's Director of Investor Relations, Marko Peltonen. [Operator Instructions] And now without further introduction, I hand over to Johan, who will start with describing our start for the year.

Hi, everyone, and welcome. This is Johan speaking. So we ended up with a revenue exceeding EUR 59 million, which gives a growth of 51.1% in relation to the comparison period. EBIT, on the positive side, improvement with EUR 2.5 million. And in percent, it's 5.9% units. And the cash flow growth, significantly, EUR 13.5 million. This gives us a R12 cash flow of close to EUR 35 million. And our order backlog amounted to EUR 296.3 million. And that's an improvement with close to 22% in relation to the comparison period. So revenue for the first time, although it was low season, our strong growth in revenue, that doesn't have too much effect on full year, makes us pass the EUR 300 million mark for the first time. Hopefully, we will keep ourselves north of EUR 300 million going forward. Our EBIT R12 has an improvement as well as EBIT margin. The EBIT margin improved 0.5%. And the free cash flow, as mentioned, that's a 56.4% improvement from Q4 '23. And our order backlog only decreased by 2.9%, which is quite strong. If you take seasonality into consideration, in Q1, we always have a lot of activities in tenders, bids that seldom materialize into contracts during the first quarter. And having this high level of revenue and only decreasing order backlog in Q1 with 2.9% is really strong. We are more than pleased with that. The bigger picture, we aim to build a better and stronger company, always ongoing. Some important steps for the future has been taken. The cross-border conversion plan was approved by the Extraordinary General Meeting on April 29, meaning that we transferred NYAB registered office to Luleå, Sweden. And related to that, a listing transfer. We also signed a letter of intent with Dyk & Anläggning, who is a marine contracting company, who works in a niche that we see a lot of growth potential in. So we expect to have a closing in that acquisition within the coming weeks. And the strategy execution continues according to plan. And we have clearly improved our work ways further. Selection on new projects, a few of them signed during Q1. Trafikverket in a long series of Opto 2.0. We signed a new contract with Trafikverket for Åby-Järna, which is in Södermanlands. We agreed on a contract with LKAB for the renovation of previously moved culture buildings as they are called in their transformation of society, which enables future mining in Gällivare. And in Luleå, we are pleased that Duroc Rail shows us to construct a new industrial building. The construction site is on a real hotspot, Luleå Industrial Park, where loads of green transition investments are taking place and are expected to take place. And with Trafikverket, we signed a replacement of railway tracks in Katrineholm. So the underlying market growth is expected to remain at high levels. Not much has happened since Q4. What has happened is all slightly in a positive direction. And the three megatrends that drive investments in our addressable markets are green transition, deglobalization and urbanization. And to break it down in our addressable markets, you see that if we exclude the housing, we have a soft growth of our markets in Sweden. In Norrbotten, we have a significant growth. And Finland moved sideways. Here, we are, of course, very happy to have strong clients both in public sector and private sector. And we have a really favorable position. Key in this matter going forward is, of course, having inflation under control and that interest rates are at least at a stable level. Swedish Riksbanken announced today that they lowered their interest for the first time in close to a decade or something. That is, of course, very positive. With our strong financial position, the positivity, of course, comes from it improves for our clients doing their investments and it's favorable for many of our subcontractors as well, meaning that when there are higher interests, we, to some extent, get pushed from both directions. So that's really, really positive news, makes an optimistic CEO even more optimistic. So here, I hand over to Aku.

Thanks, Johan, and good day to all listeners from me as well. My name is Aku Valiaho. And then let's take a bit more deep dive into our Q1 financials. So as stated already earlier, our revenue grew by over 51%. Good progress in energy projects especially, was the main contributor in Q1 revenue growth. Our revenue from Sweden amounted to 75% and revenue from public sector amounted to 59% in Q1. And those figures represent a small uptick from the rolling figures, which we are pleased. We have a good, balanced and strong set of clients both in public and private sectors. Then continuing on the country level. So Sweden grew reportedly by over 83% year-over-year. That's, of course, an indication of improving local market conditions, which is good for NYAB and due to our position in Sweden. Good to notice though that still the cold winter conditions in Northern Sweden caused some delayed progress in some of the projects. So taken into that consideration as well, we can be pleased on our revenue development during the Q1. Even though Q1 is seasonally our weakest quarter, we still managed to push on the black figures. So EBIT landed to approximately EUR 400,000, illustrating a 0.7% margin, where there is an improvement of 5.9 percentage points. Higher volumes with favorable project mix enabled the good performance improvement. Operational leverage is visible in the P&L as the share of fixed costs from total costs decreased during the quarter 1. And for the rolling 12 months, even though this is a small volume quarter, we managed to make an uptick in the EBIT percentage so that it was 5.9%. So we are moving toward better situation and towards normalized market conditions. Order backlog grew by almost 22% year-over-year. We have seen that volumes that were postponed last year have started to materialize, especially in Sweden. We are pleased of the order book composition. It is well-balanced between countries, customer groups and maturities. And what creates confidence for the short-term future is also that the level of projects at the tendering stage are higher currently than for the comparison period. And we continued our strong cash flow generation. So Q1 free cash flow was over EUR 13 million, which was impacted by a EUR 2.4 million investment to our joint venture, Skarta Energy. In Skarta Energy, there was financing rounds conducted during the Q1, which diluted our current ownership from 40% to 34%. We ended up the quarter in heavy cash position. So net cash was almost EUR 20 million, when in the comparison period, we had EUR 10 million net debt position. This, of course, means that we have a strong balance sheet. Net debt to EBITDA was minus 0.8 and equity ratio of over 74%. And our return on capital employed continued to improve and was now 8%. So now I hand back over to Johan. Thank you.

Thank you, Aku. Yes. If you see, first here down to the right, the importance of this slide, where we are trying to position ourselves as favorable as possible, building a better and stronger company, constantly ongoing work to get another decade with rising staples. To narrow it down to how we performed against our long-term financial targets. Annual revenue growth, we have the target to exceed the 10% on an annual basis. With the outcome of this Q1, which is the seasonally weakest quarter, we must state that it's a remarkable growth that we -- with the comparison period, the earlier R12. It is remarkable to almost reach the annual revenue growth target in this quarter. Our EBIT margin improved with 0.5% units, also remarkable, taking into consideration our strong seasonality. Our net debt is negative. So we are on a very steady level there, of course. And dividend can't be measured for now. But with a very high and nice cash conversion that, of course, stems from the performance of our company, we feel quite confident that we will be able to reach our target. So not much to add on Q1 in relation to long-term targets. If we try to summarize this, most are more or less obvious. But it feels good that we proved and utilized our favorable position. It's also a great importance for now and for the future that we are able to smoothen out the seasonality of our operations. That stems extra from that we have such a higher presence in the north. Of course, the north is very attractive markets with big industrial investments coming up, defense investments, et cetera. But it's still a great value that we see the outcome. We have, for a couple of years, been struggling very hard to smoothen out seasonality. So we're so much on the right track. Our operations are developing in line with our strategic plan. I'm happy to see that. Strategy is one thing, execution is another. Thanks to our skilled employees and great managers, the execution is really good in both Sweden and Finland. I don't feel that there is a glitch. So we have implemented and are executing on our strategic plan to a very satisfying level. And the transition to a Swedish company, it supports our position. Of course, in my role as a CEO, I think mainly from an operating perspective, and I knew it will be favorable in many ways, so I'm very happy with the decision that was made in April at our EGM. And of course, all of this makes us well positioned to both reach and exceed last year's outcome and execute to all our long-term financial targets. That's it. Thank you.

Thank you, Johan and Aku. Let's move on to the questions we have received. First question, NYAB had a very strong start to the year, considering the seasonality in our business. How much growth was supported by the postponement of projects from last year to the current year?

Yes. That is quite easy. Slim to none because when you postpone projects due to cold weather, we had an extremely early winter, extreme weather conditions, where we lost like 6 weeks of higher production. The thing is that in Q1, you have even more winter. So the postponements on those projects will materialize starting from May to August, September.