AI assistant
NKT Interim / Quarterly Report 2022
3374_rns_2022-05-18_3f98a357-b429-4a87-8803-742130b96770.pdf
Interim / Quarterly Report
Open in viewerOpens in your device viewer
NKT
We connect a greener world
Interim Report Q1 2022
Interim Report of NKT A/S for the period 1 January – 31 March 2022
NKT A/S | Viberoilms Allé 20, DK-2605 Brøndby, Denmark | Company Regl No.: 6272 5214 | nkt.com
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 2
Contents
Management review
03 Key messages Q1 2022
04 Key highlights Q1 2022
05 NKT Group – Financial highlights and ratios
06 NKT Financial review
08 Sustainability
09 Business review – Solutions
10 Business review – Applications
11 Business review – Service & Accessories
12 NKT Photonics
14 NKT Group – Financial review
15 Shareholder information
Financial statements
17 Income statement and statement of comprehensive income
18 Balance sheet
19 Cash flow statement
20 Statement of changes in equity
21 Notes
26 Group Management’s statement
“We have had a satisfactory start to 2022. In NKT, our financial performance in Q1 2022 showed improvements compared to the same period last year. I am particularly satisfied with our performance in Applications, where positive financial development in 2021 has carried on into 2022. With execution of several offshore wind projects, we continued our contribution to the green transition. In NKT Photonics, we grew revenue further and increased focus on our core business with the divestment of the LIOS sensing business.”
Alexander Kara
President & CEO, NKT A/S
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Key messages Q1 2022
NKT Group increased operational EBITDA in Q1 2022 compared to the same period of 2021. The increased level was achieved by higher contribution from NKT.
NKT
In the power cable business, NKT, revenue and operational EBITDA improved compared to Q1 2021. The improved financial performance was driven by higher contribution from both Applications and Solutions.
At end-Q1 2022, NKT's high-voltage order backlog was EUR 2.75bn (EUR 2.35bn in std. metal prices). Several variation orders to existing projects and onshore projects were added in Q1 2022.
The free cash flow was negative in Q1 2022. Continued investments and the expected increase in working capital outweighed the positive EBITDA development.
In January 2022, NKT acquired UK-based Ventcroft Ltd to strengthen its position within fire-resistant power cable technology. NKT will focus on scaling up production to expand its presence within fire-resistant building wires across the European market.
NKT Photonics
In Q1 2022, NKT Photonics increased revenues compared to Q1 2021 driven by Aerospace & Defence, Medical & Life Science and Industrial. Operational EBITDA was slightly down due to inventory write-downs.
In 2021, the Board of Directors decided to resume the review of strategic alternatives for NKT Photonics, with the objective of maximizing value creation. The review is still ongoing and proceeding as planned.
In March 2022, NKT Photonics divested its LIOS sensing business to the US company Luna Innovations Incorporated. With the divestment, NKT Photonics is fully focusing on its core business within lasers and fibre optic solutions. The divestment led to an accounting gain of EUR 8.0m, which is treated as a one-off item.
| Amounts in EURm | NKT | NKT Photonics | NKT Group | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 2022 | Q1 2021 | FY 2021 | Q1 2022 | Q1 2021 | FY 2021 | Q1 2022 | Q1 2021 | FY 2021 | |
| Revenue | 489.5 | 414.0 | 1,827.9 | 16.1 | 15.7 | 80.1 | 505.6 | 429.6 | 1,906.7 |
| Revenue in std.metal prices** | 319.2 | 296.0 | 1,263.1 | 16.1 | 15.7 | 80.1 | 335.3 | 311.6 | 1,341.9 |
| Organic growth** | 7% | 21% | 15% | 7% | 26% | 15% | |||
| Operational EBITDA** | 38.3 | 30.2 | 131.1 | -1.7 | -1.2 | 7.5 | 36.6 | 29.0 | 138.6 |
| Operational EBITDA margin*, ** | 12.0% | 10.2% | 10.4% | -10.6% | -7.7% | 9.4% | 10.9% | 9.3% | 10.3% |
| EBIT | 19.2 | 10.8 | 23.9 | 2.8 | -4.7 | -7.1 | 22.0 | 6.1 | 16.8 |
| Net result | 11.8 | 5.9 | 11.9 | 3.1 | -4.2 | -7.8 | 14.9 | 1.7 | 4.1 |
| Working capital** | 34.6 | -65.2 | -93.2 | 31.2 | 26.3 | 33.6 | 65.8 | -38.9 | -59.6 |
| Working capital % of revenue, LTM** | 0.0% | -5.6% | -2.2% | 37.0% | 39.7% | 36.3% | 1.5% | -3.5% | -0.6% |
| RoCE*** | 4.1% | -0.9% | 3.4% | -6.6% | -9.0% | -6.2% | 3.1% | -1.7% | 2.5% |
- Std. metal prices
** Alternative performance measures
*** RoCE is calculated on Operational EBIT, LTM, as a percentage of average capital employed as defined in Note 5
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Key highlights Q1 2022
NKT
319m
Revenues (std. metal prices), EUR
Up from EUR 296m in Q1 2021, with Applications contributing with higher revenue
7%
Organic growth
Reflecting growth of -4% in Solutions, 32% in Applications and -16% in Service & Accessories
38.3m
Operational EBITDA, EUR
Up from EUR 30.2m in Q1 2021, driven by Increased level of activity in Applications, and efficiency in execution in Solutions
2.75bn
High-voltage order backlog, EUR
Down from EUR 2.87bn at end-Q4 2021. In Q1 2022, NKT added a number of projects to the backlog
Financial outlook 2022
The financial outlook is unchanged from Company Announcement No. 2 of 23 February 2022.
Revenue (in std. metal prices) is expected to be approx. EUR 1.35–1.45bn and the operational EBITDA is expected to be approx. EUR 130–155m.
The financial outlook assumes limited financial impact due to the global supply chain challenges.
NKT
Photonics
16.1m
Revenues, EUR
Up from EUR 15.7m in Q1 2021. The higher revenue was achieved despite the divestment of the LIOS sensing business in March 2022
7%
Organic growth
The growth contributors were the Aerospace & Defence, Medical & Life Science, and Industrial segments
-1.7m
Operational EBITDA, EUR
Down from EUR -1.2m in Q1 2021. The decrease was mainly due to inventory write-downs of EUR 0.5m
16%
Order intake growth
The growth for the underlying laser business was driven by the Medical & Life Science and Quantum & Nano Technology segments and was the highest ever Q1 order intake
Financial outlook 2022
The financial outlook from Company Announcement No. 2 of 23 February 2022 has been updated to reflect the accounting gain realized in Q1 2022.
Organic revenue growth is expected to be approx. 12-17%, and the operational EBITDA margin is expected to be approx. 11-14%. The operational EBITDA margin excludes the accounting gain of EUR 8.0m related to the divestment of the LIOS sensing business, which is treated as a one-off item.
An important assumption in order to fulfil the financial outlook is that the current global supply chain challenges will have limited impact on the financial results.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
NKT Group – Financial highlights and ratios
| Amounts in EURm | Q1 2022 | Q1 2021 | Year 2021 |
|---|---|---|---|
| Income statement | |||
| Revenue | 505.6 | 429.6 | 1,906.7 |
| Revenue in std. metal prices** 3) | 335.3 | 311.6 | 1,341.9 |
| Operational EBITDA** 6) | 36.6 | 29.0 | 138.6 |
| One-off items** 5) | 8.5 | 1.8 | -12.7 |
| EBITDA | 45.1 | 30.8 | 125.9 |
| Amortization, depreciation and impairment | -23.1 | -24.7 | -109.1 |
| Operational EBIT** 7) | 13.5 | 4.3 | 29.5 |
| EBIT | 22.0 | 6.1 | 16.8 |
| Financial items, net | -6.7 | -3.6 | -12.4 |
| Earnings before tax (EBT) | 15.3 | 2.5 | 4.4 |
| Net result | 14.9 | 1.7 | 4.1 |
| Cash flow | |||
| Cash flow from operating activities | -45.9 | -22.3 | 207.8 |
| Cash flow from investing activities | -39.1 | -29.6 | -225.5 |
| hereof investments in PPE | -34.4 | -22.9 | -191.3 |
| Free cash flow** | -85.0 | -51.9 | -17.7 |
| Balance sheet | |||
| Share capital | 115.4 | 115.4 | 115.4 |
| Group equity | 1,216.0 | 1,109.2 | 1,159.9 |
| Total assets | 2,677.4 | 2,245.5 | 2,553.4 |
| Net interest-bearing debt** 8) | 109.4 | 30.5 | 13.2 |
| Capital employed** 9) | 1,325.4 | 1,139.7 | 1,173.1 |
| Working capital** 10) | 65.8 | -38.9 | -59.6 |
| Q1 2022 | Q1 2021 | Year 2021 | |
| --- | --- | --- | --- |
| Financial ratios and employees | |||
| Operational EBITDA margin (std. metal prices)** | 10.9% | 9.3% | 10.3% |
| Gearing (NIBD as % of Group equity)** | 9% | 3% | 1% |
| NIBD relative to operational EBITDA** 11) | 0.7x | 0.4x | 0.1x |
| Solvency ratio (equity as % of total assets)** 12) | 45% | 49% | 45% |
| Return on capital employed (RoCE)** 13) | 3.1% | -1.7% | 2.5% |
| Number of DKK 20 shares ('000)** | 42,976 | 42,976 | 42,976 |
| EPS, EUR 1) | 0.3 | -0.0 | -0.1 |
| Diluted EPS, EUR 2) | 0.3 | -0.0 | -0.1 |
| Equity value, EUR per outstanding share** 14) | 25 | 22 | 23 |
| Market price, DKK per share** | 306 | 276 | 316 |
| Average number of employees | 4,420 | 3,972 | 4,176 |
1) -14) Definitions appear in Note 5.
** Alternative performance measures
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 6
NKT – Financial review
In Q1 2022, revenues and operational EBITDA increased compared to Q1 2021. The main contributors were Applications driven by a higher level of activity and project execution in Solutions. Cash flow generation was negative, as improved earnings were more than offset by an expected increase in working capital and continued investments in existing factories to prepare for future growth.
Improved revenue driven by Applications
NKT's revenues* in Q1 2022 increased by EUR 23.2m compared to Q1 2021, equal to organic growth of 7%. The improvement was driven by a strong level of activity in Applications, which more than outweighed the lower revenue levels in Solutions and Service & Accessories.
Increased operational EBITDA
In Applications, operational EBITDA almost doubled due to the increased activity, and Solutions also contributed with improved profitability from efficient execution. Service & Accessories had lower operational EBITDA than in Q1 2021 due to temporary cost increases relating to the centralization of high-voltage accessories production.
Generally, NKT has been able to protect profits despite the continuing global supply chain challenges, which were further impacted by the ongoing war in Ukraine. NKT has experienced some delays in deliveries but this has so far had limited impact on the financial performance.
The operational EBITDA margin* increased by 1.8%-points in Q1 2022 against Q1 2021.
In Q1 2022, NKT posted one-off items of EUR 0.5m. These related to an accounting gain on bargain purchase of EUR 1.6m arising from the acquisition of Ventcroft Ltd. due to the purchase price of Ventcroft Ltd. being lower than the net asset value (further information in Note 4). Additionally, costs related to the ongoing strategic review of NKT Photonics amounted to EUR 1.1m.
EBIT in Q1 2022 increased by EUR 8.4m against Q1 2021 due to the same factors driving operational EBITDA.
Key financials
| Amounts in EURm | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Income statement | |||
| Revenue | 489.5 | 414.0 | 1,827.9 |
| Revenue in std.metal prices** | 319.2 | 296.0 | 1,263.1 |
| Operational EBITDA** | 38.3 | 30.2 | 131.1 |
| One-off items** | 0.5 | 1.8 | -12.7 |
| EBITDA | 38.8 | 32.0 | 118.4 |
| Depreciations and amortizations | -19.6 | -21.2 | -94.5 |
| Operational EBIT** | 18.7 | 9.0 | 36.6 |
| EBIT | 19.2 | 10.8 | 23.9 |
| Financial items, net | -5.4 | -2.9 | -8.2 |
| EBT | 13.8 | 7.9 | 15.7 |
| Tax | -2.0 | -2.0 | -3.8 |
| Net result | 11.8 | 5.9 | 11.9 |
| Cash flow | |||
| Cash flow from operating activities | -40.9 | -22.7 | 208.8 |
| Cash flow from investing activities excl. acq. & div.** | -38.3 | -28.3 | -213.3 |
| Free cash flow excl. acq. & div.** | -79.2 | -51.0 | -4.5 |
| Balance sheet | |||
| Capital employed** | 1,211.7 | 1,029.7 | 1,052.6 |
| Working capital** | 34.6 | -65.2 | -93.2 |
| Financial ratios and employees | |||
| Organic growth** | 7% | 21% | 15% |
| Operational EBITDA margin*, ** | 12.0% | 10.2% | 10.4% |
| RoCE, LTM** | 4.1% | -0.9% | 3.4% |
| Average number of employees | 4,008 | 3,571 | 3,775 |
** Alternative performance measures
- Std. metal prices,
1
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 7
The net result of EUR 11.8m for Q1 2022 doubled compared to the same period of 2021. The financial items in Q1 2022 were EUR -5.4m, compared to EUR -2.9m in Q1 2021. The higher cost level was due to foreign exchange effects.
Higher level of working capital
Working capital increased from EUR -93.2m at end-Q4 2021 to EUR 34.6m at end-Q1 2022, mainly related to Solutions and Applications.
In Solutions, the increase was driven by the phasing of milestone payments relating to projects in the order backlog. In Applications, the increase was due to build-up of inventories ahead of transfer of production equipment and higher Trade receivables were from higher sales. Unrealized value adjustments of hedging instruments increased working capital by EUR 60.1m due to rising commodity prices in Q1 2022.
The working capital ratio, LTM, was 0.0% at end-Q1 2022, against -2.2% at end-Q4 2021.
Free cash flow impacted by working capital and investments
In Q1 2022, cash flow from operating activities amounted to EUR -40.9m. The positive earnings contribution was more than offset by the expected increase in working capital.
In Solutions the investment programme to upgrade NKT's high-voltage production sites continued during the quarter. As a result, cash flow from investing activities (excluding acquisitions and divestments) amounted to EUR -38.3m in Q1 2022, against EUR -28.3m in Q1 2021.
Continued positive RoCE trend
As earnings continued to improve, RoCE increased to 4.1% at end-Q1 2022 from 3.4% at end-Q4 2021.
Revenue development and organic growth
Amounts in EURm
| Q1 2021 revenue* | 296.0 |
|---|---|
| Currency effect | -2.2 |
| Acquisition | 3.6 |
| Organic growth | 21.8 |
| Q1 2022 revenue* | 319.2 |
| Organic growth, % | 7% |
- Std. metal prices
Operational EBITDA
Amounts in EURm
Operational EBITDA
- Operational EBITDA margin %, LTM, std. metal prices
Working capital
Amounts in EURm
Total working capital
- Working capital ratio, LTM
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 8
Sustainability
NKT continued its ongoing work related to ESG. NKT's supplier decarbonization programme is one of the focus areas to become a net-zero emissions company no later than 2050. Another focus is the ongoing target of 30% female representation in senior leadership positions.
Environmental
Having reduced Scope 1 and 2 corporate emissions by more than 70% since 2019, by using 100% green electricity, NKT will this year focus on the second largest source of CO2e missions, natural gas. In Q1 2022, NKT performed an energy study which will form the setting for the company's roadmap on how to eliminate the use of natural gas.
As over 90% of NKT's total carbon footprint is attributable to the supply chain, NKT started collaboration with key suppliers in 2021 to reduce emissions. The collaboration is formalized in the NKT Supplier Decarbonization Programme. Around 20 of NKT's main suppliers are participating in this programme, and their products and services represent over 60% of NKT's Scope 3 emissions. In Q1 2022, NKT continued the programme
with the aim of increasing the transparency of the emission and supplier decarbonization roadmap going forward. NKT's goal is to reduce scope 1 and 2 emissions in 2022 by 5%.
Social
NKT continues the ongoing work to be a company where talent from diverse backgrounds thrive and are inspired to perform at their best. NKT sees an inclusive culture as a key enabler of sustainable performance and has launched several initiatives to promote diversity and inclusion across the organization. The initiatives includes review of the recruitment processes in order to achieve a more balanced talent intake, and to launch flexible work options to enable talent in different life stages to view NKT as an employer of choice. NKT also continues to push towards its 2024 target of achieving 30% female representation in senior leadership positions.
Since the start of 2022, NKT has focused on strengthening its health and safety culture further and is implementing Life Saving Principles to ensure a safe working environment. NKT continues to drive the reporting of risk observations in order to reduce the risks in the workplace. The rolling twelve-month TRIR (Total Recordable Injury Rate) is currently 1.38, which is above the target of 1.2 for 2022. NKT has transferred from LTIR (Lost Time
injury Rate) to TRIR as the main indicator, which will lead to a more comprehensive understanding of the risks related to the company's operations.
Governance
NKT has ceased all activities with Russia including sourcing of certain raw materials and sales activities. With no offices or production sites in either Ukraine or Russia, NKT can ensure the safety and wellbeing of employees which remains a key priority.
NKT, together with its employees, has raised more than EUR 70,000 for the Danish Red Cross, which through its presence in Ukraine will use the donations to provide vital first aid, water, food, blankets and shelter.
The Annual General Meeting in March 2022 approved a proposal by the Board of Directors for the establishment of an Environmental, Social and Governance Committee.
> More sustainability information is available at nkt.com/about-us/sustainability
"The ongoing work related to ESG reflects strong dedication to drive sustainability and connect a greener world with our power cable solutions."
Alexander Kara
President & CEO, NKT A/S
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Business review – Solutions
Highlights
- Improved operational EBITDA in Q1 2022
- Upgrades of Cologne and Karlskrona factories continued according to plan
- High market activity continues
in operational EBITDA were mainly driven by continued efficiency initiatives in execution. Overall, the project execution during the quarter was satisfactory.
NKT progressed on a number of projects through varying stages of execution in Q1 2022. These projects included a number of the XLPE DC contracts awarded in recent years, such as Borwin 5, Dogger Bank A, Dogger Bank B, and Shetland. In addition several XLPE AC projects, including Ostwind 2, also progressed.
NKT Victoria, the company's cable-laying vessel, had satisfactory deployment during the quarter following completion of a dry-dock check in the beginning of the year, and a variety of assignments relating to project installations were accomplished in Q1 2022.
Revenue slightly down
Revenues* for Solutions in Q1 2022 was EUR 9.6m lower than in Q1 2021, corresponding to organic growth of -4%. The lower revenue was a result of a less favourable product mix. Execution of orders awarded over recent years continued to contribute to the revenue development.
Revenues measured in market prices amounted to EUR 174m in Q1 2022, against EUR 191m in Q1 2021.
Positive development in operational EBITDA margin
Despite lower revenues, Solutions increased operational EBITDA by EUR 5.2m compared to Q1 2021. Accordingly, the operational EBITDA margin* increased from 12.1% to 16.4%. The improvements
Upgrade of production sites continued to plan
The upgrade and expansion of NKT's production capabilities in Karlskrona which was initiated in 2020 progressed further and will be completed in 2022 as planned.
As announced in 2021, NKT will intensify focus on extra high-voltage AC and DC power cables at its Cologne production site in Germany. In addition, production
of the lower range of high-voltage power cables will be relocated from Cologne to NKT's factory at Velké Meziříčí in the Czech Republic. The investments will be completed in 2022.
High-voltage order backlog of EUR 2.75bn
During Q1 2022, NKT supplemented its high-voltage order backlog with a number of relatively smaller orders. These included variation orders to existing projects and onshore projects. At end-Q1 2022, the high-voltage backlog stood at EUR 2.75bn (EUR 2.35m in std. metal prices), compared to EUR 2.87bn (EUR 2.43m in std. metal prices) at end-2021.
Around 20% of the high-voltage order backlog is expected to be executed in remaining three quarters of 2022 and around 80% in 2023 and beyond.
High activity in high-voltage market
NKT estimates that project awards in the addressable high-voltage power cable market in Q1 2022 amounted to around EUR 2bn. These mainly covered projects in Europe. As stated in the Annual Report 2021, the average addressable market in 2022, 2023 and 2024 is estimated by NKT to be around EUR 7-8bn per year.
During the first part of 2022 progress continued on several project tenders across market segments and geographies, and the timing of actual project awards will depend on the timelines for the individual projects. For NKT, achieving optimal production and installation flow, and thereby optimizing earnings, is contingent upon high utilization of capacity across all production and installation phases.
The European Commission has outlined a plan to make Europe independent of Russian gas, including to speed up the introduction of renewable energy. This is expected to have a positive impact on the European power cable market.
The majority of projects awarded in the market in recent years have primarily been based on DC rather than AC technology.
151m
Revenue*, EUR
(Q1 2021: EUR 161m)
- Std. metal prices
-4%
Organic growth
(Q1 2021: 27%)
24.7m
Operational EBITDA, EUR
(Q1 2021: EUR 19.5m)
Expected revenue distribution of high-voltage order backlog (EUR 2.75bn) at end-Q1 2022
*Std. metal prices
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 10
Business review – Applications
Highlights
- Revenue growth in Q1 2022 fuelled by strong demand across markets
- Continued improvement in profitability driven by higher revenue
- Acquisition of Ventcroft Ltd to strengthen position within fire-resistant power cables
Organic revenue growth of 32%
In Q1 2022, revenues* for Applications increased by EUR 35.3m compared to Q1 2021. This was due to broad-based growth across product segments and also reflected favourable market conditions in Europe.
The exceptionally strong organic growth was achieved against a relatively weak comparison period in Q1 2021 that was negatively impacted by the COVID-19 pandemic.
Continued improvement in profitability
Driven by the growth in revenues, operational EBITDA for Applications increased by EUR 4.9m from Q1 2021 to Q1 2022. The operational EBITDA margin* was 7.9% in Q1 2022, against 5.7% in the same period of 2021.
During the past years, NKT has launched several efficiency initiatives aimed at improving profitability for Applications, and these measures are gradually translating into sustained improved performance. The ambition is to deliver a sustainable long-term cost structure combined with commercial initiatives in order to grow revenue and profitability.
Operations in Q1 2022 continued in an environment of rising input costs. The situation has been managed satisfactorily and NKT has been able to protect profit margins in cooperation with customers. The supply of raw materials represents an industry-wide challenge and NKT has taken necessary actions to ensure that the impact so far has been limited.
Growth across markets
Overall, trading conditions in NKT's operating markets were favourable in Q1 2022 for both low- and medium-voltage power cables.
With construction sentiment remaining at a high level in Europe, partly driven by the EU's refurbishment programme under the European Green Deal, the strong demand for building wires continued. This has led to a high utilization level for NKT's factory in Warszowice, Poland, which is the centre of the company's building wire production. The addition of fire-resistant power cables to the product mix through the acquisition of Ventcroft Ltd will add value for NKT in a market with strong focus on safety.
NKT's medium voltage sales are being positively influenced by the electrification of societies, the upgrade of power grids and the growth in number of electric vehicles.
The progressive roll-out of the 5G network is benefitting NKT's power cable telecom business and also contributed positively to growth in Q1 2022.
Acquisition of UK-based supplier of fire-resistant power cables
In January 2022, NKT acquired Ventcroft Ltd to strengthen its position in fire-resistant power cable technology. With this acquisition, NKT has extended its portfolio of low-voltage power cables and building wires, an important step in its growth strategy. NKT will now focus on scaling up production to expand its presence with fire-resistant building wires across the European market.
131m
Revenue*, EUR
(Q1 2021: EUR 96m)
- Std. metal prices
32%
Organic growth
(Q1 2021: 2%)
10.4m
Operational EBITDA, EUR
(Q1 2021: EUR 5.5m)
- Std. metal prices
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 11
Business review – Service & Accessories
Highlights
- Lower revenue and operational EBITDA levels in Q1 2022 against a high comparison point
- Establishment of Service hub in Gdynia, Poland finalized
- Continued positive development in medium-voltage accessories business
Lower revenue level
Revenues for Service & Accessories in Q1 2022 decreased by EUR 2.5m against Q1 2021 where the volume of service repair work was higher. Consequently, organic growth in Q1 2022 was -16%.
Operational EBITDA decreased due to temporarily higher costs
Operational EBITDA in Q1 2022 was down by EUR 4.2m against Q1 2021. The operational EBITDA margin for Q1 2022 was 8.5% against 17.1% in Q1 2021. This was due to reduced activity in the service business and temporary cost increases in the accessories business relating to the centralization of high-voltage power cable production.
Satisfactory start to 2022 for the service business
Despite a reduction in the level of offshore repair work compared to Q1 2021, the service business delivered a satisfactory start to 2022. The recurring onshore maintenance business in Q1 2022 was at a higher level than in the same period of 2021.
In Q1 2022, NKT finalized a repair of Kontiskan 2, the HVDC power cable system connecting the power grids of Sweden and Denmark. The work was completed in only 12 days thanks to close collaboration between all parties involved and NKT's extensive experience in offshore repairs.
NKT is continuously striving to increase its portfolio of service agreements with power cable owners, and further agreements were added in Q1 2022.
In Q1 2022, the establishment of the service hub in Gdynia, Poland, was completed. The ambition is to position NKT for future growth across European markets and to prepare for offshore wind expansion in Poland. This step is in line with the adopted growth strategy and will cater for the increasing market demand.
A local service business organization has also been established in the UK to cater for the high demand in the UK market and prepare for future growth.
Mixed performance for the accessories business
In Q1 2022, the medium-voltage accessories business continued to be driven by high demand in the Middle East, which has been a solid growth contributor for NKT in recent years. Increasing demand was also seen from India.
Performance in the high-voltage accessories business was impacted by the centralization of production to Alingsås, Sweden, from Cologne, Germany. The transition has led to temporary delays and cost increases and has extended execution time on parts of the orders.
NKT has experienced certain supply chain difficulties in the accessories business due to the challenges in the global transportation market and shortages of raw materials. Various initiatives have been implemented to mitigate risks and NKT has managed to protect profits.
43.6m
Revenue*, EUR
(Q1 2021: EUR 46.1m)
- Std. metal prices
-16%
Organic growth
(Q1 2021: 82%)
3.7m
Operational EBITDA, EUR
(Q1 2021: EUR 7.9m)
- Std. metal prices
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 12
NKT Photonics – Financial & Business Review
Driven by growth in three out of four market segments, revenues in Q1 2022 increased 7% organically, while operational EBITDA was slightly down compared to Q1 2021. The order intake was the highest ever recorded for Q1
Organic growth of 7% and 10% for the underlying laser business
NKT Photonics increased its revenues by EUR 0.4m from Q1 2021 to Q1 2022. The positive development was delivered on top of the strong organic growth of 26% in Q1 2021. In March 2022, NKT Photonics divested its LIOS sensing business. The divested business contributed with EUR 1.9m revenue in Q1 2021, while the contribution was EUR 0.6m in Q1 2022 as it was included only for two months. Thus, the underlying performance of the continuing laser business (excluding the LIOS sensing business) was an organic growth of 10% in Q1 2022.
The revenue growth in Q1 2022 was broad-based with contribution from the Aerospace & Defence, Medical & Life Science, and Industrial segments. The Quantum & Nano Technology segment reported lower revenues in Q1 2022 as a result of phasing of orders.
Revenue development and organic growth
Amounts in EURm
| Q1 2021 revenue | 15.7 |
|---|---|
| Currency effect | 0.3 |
| Divestment | -1.0 |
| Organic growth | 1.1 |
| Q1 2022 revenue | 16.1 |
| Organic growth, % | 7% |
EBITDA improvement due to accounting gain
NKT Photonics' EBITDA increased significantly to EUR 6.3m in Q1 2022 from EUR -1.2m in Q1 2021. The increase was due to an accounting gain of EUR 8.0m related to the divestment of the LIOS business, which is treated as a one-off item.
Excluding the accounting gain, the operational EBITDA was slightly down compared to the previous year. This development was mainly caused by write-downs related to obsolete and slow-moving raw material inventory.
NKT Photonics has so far experienced limited delays in supply of components for production, but the situation is increasingly challenging for the industry with raw material lead times and prices moving up. This continues to be a focus area for NKT Photonics and actions have been taken
Key financials
| Amounts in EURm | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Income statement | |||
| Revenue | 16.1 | 15.7 | 80.1 |
| Operational EBITDA** | -1.7 | -1.2 | 7.5 |
| One-off items** | 8.0 | 0.0 | 0.0 |
| EBITDA | 6.3 | -1.2 | 7.5 |
| Depreciations and amortizations | -3.5 | -3.5 | -14.6 |
| Operational EBIT** | -5.2 | -4.7 | -7.1 |
| EBIT | 2.8 | -4.7 | -7.1 |
| Financial items, net | -1.3 | -0.7 | -4.2 |
| EBT | 1.5 | -5.4 | -11.3 |
| Tax | 1.6 | 1.2 | 3.5 |
| Net result | 3.1 | -4.2 | -7.8 |
| Cash flow | |||
| Cash flow from operating activities | -5.0 | 0.4 | -1.0 |
| Cash flow from investing activities excl. acq. & div.** | -5.2 | -3.4 | -14.3 |
| Free cash flow excl. acq. & div.** | -10.2 | -3.0 | -15.3 |
| Balance sheet | |||
| Capital employed** | 113.7 | 110.0 | 120.5 |
| Working capital** | 31.2 | 26.3 | 33.6 |
| Financial ratios and employees | |||
| Organic growth** | 7% | 26% | 15% |
| Operational EBITDA margin** | -10.6% | -7.7% | 9.4% |
| RoCE** | -6.6% | -9.0% | -6.2% |
| Average number of employees | 412 | 401 | 401 |
** Alternative performance measures
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
to mitigate risks and ensure unimpacked production flow.
EBIT increased by EUR 7.5m and Net result increased by EUR 7.3m, from Q1 2021 to Q1 2022, reflecting the accounting gain that drove growth in EBITDA.
Free cash flow negative
The cash flow from operating activities was EUR -5.0m in Q1 2022, down from EUR 0.4m in Q1 2021. The cash flow was negatively impacted by the development in working capital due to an increase in inventories and lower payables.
In Q1 2022, the cash flow from investing activities (excl. acquisitions and divestments) was EUR -5.2m, against EUR -3.4m in Q1 2021. In Q1 2022 investments in new fiber production facilities impacted the cash flow.
Increase in order intake
The positive development in order intake in 2021 continued into 2022. The order intake for the underlying laser business (excluding the divested LIOS sensing business) increased by 16% from Q1 2021 to Q1 2022. The growth was driven by the Medical & Life Science and Quantum & Nano Technology segments and represented the highest ever Q1 order intake.
Divestment of LIOS sensing business
In March 2022, NKT Photonics divested its LIOS sensing business to the US company Luna Innovations Incorporated for an amount of EUR 20m. With the divestment, NKT Photonics fully focuses on its core business within lasers and fibre optic solutions to the medical & life science, quantum and nano technology, industrial, and aerospace & defence markets.
Revenue distribution (Q1 2022, LTM)
Medical & Life Science 29%
Quantum & Nano Technology 20%
Industrial 38%
Aerospace & Defence 13%
Operational EBITDA
Amounts in EURm
Operational EBITDA
→ Operational EBITDA margin %, LTM
Medical & Life Science
The segment delivered strong revenue growth in Q1 2022 driven particularly by the Imaging & Microscopy segment. Ophthalmology also developed favourably and is expected to contribute significantly to growth in 2022.
Industrial
In Industrial, the growth delivered in 2021 continued in Q1 2022 with the Semiconductor industry as the main contributing area. That trend is expected to continue through 2022.
Aerospace & Defence
The exceptionally high growth in the Aerospace & Defence segment for Q1 2022 was partly due to a relatively low Q1 2021 as well as favourable project timing. The market continues to grow, and new projects are expected throughout 2022.
Quantum & Nano Technology
Quantum & Nano Technology saw a slight decrease in revenue in Q1 2022 due to project timing and phasing of orders. The outlook for the segment remains strong with robust growth in especially quantum computing. Several new products within this segment were introduced to the market at the beginning of Q2 2022 and are also expected to contribute positively to growth.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
NKT Group – Financial review
Operational EBITDA and EBIT
Driven by the higher activity level, the operational EBITDA for the NKT Group amounted to EUR 36.6m in Q1 2022, an increase of 7.6m from Q1 2021. The increase with driven by the positive development in NKT.
The operational EBITDA, LTM, was EUR 146.2m at end-Q1 2022
EBIT increased by 15.9m in Q1 2022 compared to Q1 2021, reflecting the same factors driving operational EBITDA as well as the accounting gain of EUR 8.0m related to the divestment of the LIOS sensing business.
Financial items and net result
Net financial items in Q1 2022 amounted to EUR -6.7m compared to EUR -3.6m in Q1 2021. The higher cost level was due to foreign exchange effects.
Earnings before tax (EBT) totalled EUR 15.3m in Q1 2022 compared to EUR 2.5m in Q1 2021. The Group's net result increased from EUR 1.7m in Q1 2021 to EUR 14.9m in Q1 2022.
Cash flow
Cash flow from operating activities was EUR -45.9m in Q1 2022 compared to EUR -22.3m in Q1 2021. The negative cash generation in Q1 2022 was due to an expected increase in working capital in the power cable business that more than outweighed the earnings contribution.
The cash flow from investing activities amounted to EUR -39.1m in Q1 2022 against EUR -29.6m in Q1 2021. The increased investment level was due to ongoing investments in the high-voltage production facilities for the power cable business. Additionally, the cash flow included the acquisition of Ventcroft Ltd
and the divestment of the LIOS sensing business during the quarter.
Liquidity, debt leverage and equity
As the free cash flow was negative in Q1 2022, the Group's net interest-bearing debt increased to EUR 109m at end-Q1 2022 from EUR 13.2m at end-Q4 2021.
The net interest-bearing debt relative to operational EBITDA amounted to 0.7x at end-Q1 2022, up from 0.1x at end-Q4 2021.
At end-Q1 2022 the NKT Group had total available liquidity reserves of EUR 296m comprising cash of EUR 119m and undrawn credit facilities of EUR 177m. Group equity at end-Q1 2022, including the hybrid security issued in 2018, amounted to EUR 1,216m. The solvency ratio was 45% which was on par with the end of the previous quarter.
Net interest-bearing debt
Amounts in EURm
Net interest-bearing debt
Net interest-bearing debt/oper. EBITDA, LTM
The EUR 150m hybrid security issued in 2018 has the first call date on 12 September 2022. NKT currently intends to call the security no later than this date.
Q1 2022 financial development for NKT Group
| Amounts in EURm | Revenue* | Operational EBITDA | Operational EBITDA margin | |||||
|---|---|---|---|---|---|---|---|---|
| Q1 2022 | Q1 2021 | Change | Q1 2022 | Q1 2021 | Change | Q1 2022 | Q1 2021 | |
| NKT | 319.2 | 296.0 | 23.2 | 38.3 | 30.2 | 8.1 | 12.0% | 10.2% |
| NKT Photonics | 16.1 | 15.7 | 0.4 | -1.7 | -1.2 | -0.5 | -10.6% | -7.7% |
| Elimination | 0.0 | -0.1 | 0.1 | 0.0 | 0.0 | 0.0 | - | - |
| NKT Group | 335.3 | 311.6 | 23.7 | 36.6 | 29.0 | 7.6 | 10.9% | 9.3% |
- Std. metal prices
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Shareholder information
NKT A/S shares
The average daily turnover in NKT A/S shares on all trading markets was EUR 12m in Q1 2022, on par with Q1 2021. The average daily trading volume was around 320,000 shares in Q1 2022, down from around 350,000 in Q1 2021. Nasdaq Copenhagen continued to be the main trading market for the company's shares with 44% of the total traded volume in Q1 2022.
At end-Q1 2022 the NKT A/S share price stood at DKK 305.60 compared to DKK 315.60 at end-2021, equal to a share price return of -3%. The corresponding dividend-adjusted share price returns for the Group's largest European competitors, Prysmian and Nexans, were -6% and -1%, respectively. The Danish OMX C25 index, adjusted for dividends, decreased by 8% in Q1 2022.
At end-Q1 2022, two NKT A/S investors had reported shareholdings between 5.00-9.99%: ATP (Denmark), and Greenvale Capital (UK).
The total share capital at end-Q1 2022 consists of 42,976,036 shares, each with a nominal value of DKK 20, corresponding to a total nominal share capital of DKK 859,520,720 (around EUR 115m).
In February 2022, NKT bought back 75,000 own shares to meet obligations relating to the company's share-based incentive programmes for employees. At end-Q1 2022, NKT still held 38,013 own shares.
Annual General Meeting
The Annual General Meeting of NKT A/S was held on 24 March 2022. All proposals on the agenda were approved.
Jens Due Olsen, René Svendsen-Tune, Karla Marianne Lindahl, Jens Maaløe and Andreas Nauen were re-elected as members of the Board of Directors, while Nebahat Albayrak was elected to the Board for the first time. Pernille Blume, Stig Nissen Knudsen (re-elected) and Christian Dyhr were elected to the Board as employee representatives for a four-year period.
At the meeting after the Annual General Meeting, Jens Due Olsen was elected Chairman of the Board of Directors and René Svendsen-Tune was elected Deputy Chairman.
> More shareholder information is available at investors.nkt.com
NKT A/S Share price
- NKT A/S, DKK (adjusted for equity increase)
- OMX C25 (rebased), DKK
- Power cable peers (Prysmian and Nexans) (rebased)
NKT A/S shares – basic data
ID code: DK0010287663
Listing: Nasdaq Copenhagen, part of the Large Cap index
Share capital: EUR 115m
(DKK 860m)
Number of shares: 43.0 million
Nominal value: DKK 20
Share classes: 1
Financial calendar 2022
- Aug: Interim Report, Q2 2022
22 Sep: Capital Markets Day
16 Nov: Interim Report, Q3 2022
NET 50000
NET 10000
NET 15000
Consolidated financial statements
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 17
Income statement
| Amounts in EURm | Q1 2022 | Q1 2021 | Year 2021 |
|---|---|---|---|
| Revenue | 505.6 | 429.6 | 1,906.7 |
| Other operating income | 13.9 | 4.6 | 32.7 |
| Costs of raw materials, consumables and goods for resale | -346.3 | -279.6 | -1,269.3 |
| Staff costs | -85.7 | -81.9 | -355.0 |
| Other costs etc. | -42.4 | -41.9 | -189.2 |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 45.1 | 30.8 | 125.9 |
| Depreciation of property, plant and equipment | -16.8 | -17.2 | -74.9 |
| Amortization of intangible assets | -6.3 | -7.5 | -34.2 |
| Earnings before interest and tax (EBIT) | 22.0 | 6.1 | 16.8 |
| Financial items, net | -6.7 | -3.6 | -12.4 |
| Earnings before tax (EBT) | 15.3 | 2.5 | 4.4 |
| Tax | -0.4 | -0.8 | -0.3 |
| Net result | 14.9 | 1.7 | 4.1 |
| To be distributed as follows: | |||
| Equity holders of NKT A/S | 12.9 | -0.3 | -4.0 |
| Hybrid capital holders of NKT A/S | 2.0 | 2.0 | 8.1 |
| 14.9 | 1.7 | 4.1 | |
| Basic earnings, EUR, per share (EPS) | 0.3 | -0.0 | -0.1 |
| Diluted earnings, EUR, per share (EPS-D) | 0.3 | -0.0 | -0.1 |
Statement of comprehensive income
| Amounts in EURm | Q1 2022 | Q1 2021 | Year 2021 |
|---|---|---|---|
| Comprehensive income | |||
| Net result | 14.9 | 1.7 | 4.1 |
| Other comprehensive income: | |||
| Items that may not be reclassified to income statement: | |||
| Actuarial gains/(losses) on defined benefit pension plans | 0.0 | 0.0 | 1.6 |
| Items that may be reclassified to income statement: | |||
| Currency adjustment of foreign subsidiaries and value adjustment of hedging instruments, etc. | 43.2 | 31.0 | 84.4 |
| Total comprehensive income for the period | 58.1 | 32.7 | 90.1 |
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Balance sheet
| Amounts in EURm | 31 March 2022 | 31 March 2021 | 31 Dec. 2021 |
|---|---|---|---|
| Assets | |||
| Intangible assets | 616.0 | 620.2 | 621.7 |
| Property, plant and equipment | 818.0 | 662.6 | 782.9 |
| Other investments and receivables | 0.8 | 1.0 | 0.8 |
| Deferred tax | 22.0 | 32.1 | 24.9 |
| Total non-current assets | 1,456.8 | 1,315.9 | 1,430.3 |
| Inventories | 321.9 | 243.7 | 287.4 |
| Receivables | 631.8 | 429.2 | 528.9 |
| Contract assets | 136.3 | 71.4 | 97.3 |
| Income tax receivable | 11.9 | 6.2 | 8.8 |
| Interest-bearing receivables | 0.2 | 0.2 | 0.2 |
| Cash at bank and in hand | 118.5 | 178.9 | 200.5 |
| Total current assets | 1,220.6 | 929.6 | 1,123.1 |
| Total assets | 2,677.4 | 2,245.5 | 2,553.4 |
| Amounts in EURm | 31 March 2022 | 31 March 2021 | 31 Dec. 2021 |
| --- | --- | --- | --- |
| Equity and liabilities | |||
| Equity attributable to equity holders of NKT A/S | 1,061.6 | 954.8 | 1,007.5 |
| Hybrid capital | 154.4 | 154.4 | 152.4 |
| Total equity | 1,216.0 | 1,109.2 | 1,159.9 |
| Deferred tax | 86.2 | 53.5 | 71.8 |
| Provisions and pension liabilities | 62.5 | 66.1 | 62.5 |
| Borrowings | 213.3 | 196.8 | 196.4 |
| Total non-current liabilities | 362.0 | 316.4 | 330.7 |
| Borrowings | 14.8 | 12.8 | 17.5 |
| Trade payables | 379.6 | 284.6 | 341.8 |
| Other liabilities | 191.6 | 181.0 | 170.4 |
| Contract liabilities | 452.4 | 309.3 | 459.3 |
| Income tax payable | 12.5 | 14.5 | 10.5 |
| Provisions | 48.5 | 17.7 | 63.3 |
| Total current liabilities | 1,099.4 | 819.9 | 1,062.8 |
| Total liabilities | 1,461.4 | 1,136.3 | 1,393.5 |
| Total equity and liabilities | 2,677.4 | 2,245.5 | 2,553.4 |
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Cash flow statement
| Amounts in EURm | Q1 2022 | Q1 2021 | Year 2021 |
|---|---|---|---|
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 45.1 | 30.8 | 125.9 |
| Change in provisions, gain and loss on sale of assets, etc. | -23.2 | 1.9 | 47.9 |
| Changes in working capital | -60.0 | -50.9 | 46.6 |
| Cash flow from operations before financial items, etc. | -38.1 | -18.2 | 220.4 |
| Net financial items paid | -6.5 | -3.5 | -12.2 |
| Income tax paid | -1.3 | -0.6 | -0.4 |
| Cash flow from operating activities | -45.9 | -22.3 | 207.8 |
| Acquisition of businesses | -15.3 | 0.0 | 0.0 |
| Divestment of business | 19.7 | 2.1 | 2.1 |
| Investments in property, plant and equipment | -34.4 | -22.9 | -191.3 |
| Disposal of property, plant and equipment | 0.6 | 0.0 | 0.2 |
| Intangible assets and other investments, net | -9.7 | -8.8 | -36.5 |
| Cash flow from investing activities | -39.1 | -29.6 | -225.5 |
| Free cash flow | -85.0 | -51.9 | -17.7 |
| Changes in borrowings | 7.4 | -6.4 | -5.6 |
| Repayment of lease liabilities | -1.8 | -1.9 | -7.3 |
| Coupon payments on hybrid capital | 0.0 | 0.0 | -8.1 |
| Purchase of treasury shares | -2.5 | 0.0 | 0.0 |
| Cash flow from financing activities | 3.1 | -8.3 | -21.0 |
| Net cash flow | -81.9 | -60.2 | -38.7 |
| Cash at bank and in hand at the beginning of the period | 200.5 | 239.2 | 239.2 |
| Currency adjustments | -0.1 | -0.1 | 0.0 |
| Net cash flow | -81.9 | -60.2 | -38.7 |
| Cash at bank and in hand at the end of the period | 118.5 | 178.9 | 200.5 |
The above cannot be derived directly from the income statement and the balance sheet.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S
Statement of changes in equity
| Amounts in EURm | Share capital | Treasury shares | Foreign exchange reserve | Hedging reserve* | Fair value reserve | Retained comprh. income | Proposed dividends | Total | Hybrid capital | Total equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Equity, 1 January 2021 | 115.4 | 0.0 | -9.1 | 71.9 | 0.3 | 745.5 | 0.0 | 924.0 | 152.4 | 1,076.4 |
| Other comprehensive income: | ||||||||||
| Foreign exchange translation adjustments | -10.1 | -10.1 | -10.1 | |||||||
| Value adjustment of hedging instruments: | ||||||||||
| Value adjustment for the period | 57.5 | 57.5 | 57.5 | |||||||
| Value adjustment transferred to the Income statement | -0.1 | -0.1 | -0.1 | |||||||
| Tax on other comprehensive income | -16.3 | -16.3 | -16.3 | |||||||
| Total other comprehensive income | 0.0 | 0.0 | -10.1 | 41.1 | 0.0 | 0.0 | 0.0 | 31.0 | 0.0 | 31.0 |
| Net result | -0.3 | -0.3 | 2.0 | 1.7 | ||||||
| Comprehensive income for the period | 0.0 | 0.0 | -10.1 | 41.1 | 0.0 | -0.3 | 0.0 | 30.7 | 2.0 | 32.7 |
| Transactions with owners: | ||||||||||
| Share based payment | 0.1 | 0.1 | 0.1 | |||||||
| Total transactions with owners in Q1 2021 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.1 | 0.0 | 0.1 |
| Equity, 31 March 2021 | 115.4 | 0.0 | -19.2 | 113.0 | 0.3 | 745.3 | 0.0 | 954.8 | 154.4 | 1,109.2 |
| Equity, 1 January 2022 | 115.4 | 0.0 | -18.6 | 165.8 | 0.3 | 744.6 | 0.0 | 1,007.5 | 152.4 | 1,159.9 |
| Other comprehensive income: | ||||||||||
| Foreign exchange translation adjustments | -3.7 | -3.7 | -3.7 | |||||||
| Value adjustment of hedging instruments: | ||||||||||
| Value adjustment for the period | 66.3 | 66.3 | 66.3 | |||||||
| Value adjustment transferred to the Income statement | -3.3 | -3.3 | -3.3 | |||||||
| Tax on other comprehensive income | -16.1 | -16.1 | -16.1 | |||||||
| Total other comprehensive income | 0.0 | 0.0 | -3.7 | 46.9 | 0.0 | 0.0 | 0.0 | 43.2 | 0.0 | 43.2 |
| Net result | 12.9 | 12.9 | 2.0 | 14.9 | ||||||
| Comprehensive income for the period | 0.0 | 0.0 | -3.7 | 46.9 | 0.0 | 12.9 | 0.0 | 56.1 | 2.0 | 58.1 |
| Transactions with owners: | ||||||||||
| Purchase of Treasury shares | -2.5 | -2.5 | -2.5 | |||||||
| Exercise of performance shares | 1.2 | -1.2 | ||||||||
| Share based payment | 0.5 | 0.5 | 0.5 | |||||||
| Total transactions with owners Q1 2022 | 0.0 | -1.3 | 0.0 | 0.0 | 0.0 | -0.7 | 0.0 | -2.0 | 0.0 | -2.0 |
| Equity, 31 March 2022 | 115.4 | -1.3 | -3.7 | 212.7 | 0.3 | 756.8 | 0.0 | 1,061.6 | 154.4 | 1,216.0 |
- Hedging reserve consists of both the Cash flow hedge reserve as well as the Cost of hedging reserve, shown separately as of 31 December 2021. As of 31 March, the Cash flow hedge reserve was EUR 228.4 million and Cost of hedging was EUR -15.7 million (31 December 2021: EUR 182.0 million and EUR -16.2 million respectively).
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 21
Notes
Note 1 Basis of reporting
Accounting policies and new standards and interpretations
This condensed consolidated interim financial report for the period 1 January – 31 March 2022 is prepared in accordance with IAS 34 ‘Interim Financial Reporting’, which has been approved by the EU, and Danish disclosure requirements for interim reports for listed companies.
The accounting policies adopted in this Interim Report are consistent with those applied in the Annual Report for 2021.
On 1 January 2022, amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and Annual Improvements 2018-2020 became effective. None of these amendments had an impact on this Interim Report and are not expected to materially impact the Annual Report for 2022.
The Group has not prematurely adopted any standards, interpretations or amendments issued but not yet effective.
The Interim Report includes financial performance measures that are not defined according to IFRS. These measures are considered to provide valuable information to stakeholders and Management. Since other companies might calculate these differently from NKT Group, they may not be comparable to the measures applied by other companies. These financial measures should therefore not be considered a replacement for performance measures as defined under IFRS, but rather as supplementary information. Alternative performance measures are defined in Note 5.
Significant estimates and judgements
Significant accounting estimates and judgements are described in Note 1.3 of the 2021 Annual Report. They are related to the recognition of revenue from construction contracts, impairment of assets, valuation of tax assets and recognition and measurement of contingent liabilities.
As reported in the Annual Report 2021, unannounced inspections were carried out in January 2022 at NKT’s two main German sites as part of investigations by the German Federal Cartel Office into various power cable manufacturers and other industry-related companies. The reason behind the investigations are suspicions that power cable manufacturers potentially have coordinated calculations of industry-standard metal surcharges in Germany. The investigation is still ongoing and the potential financial implications remain unknown. Consequently, no material changes have been made related to the applied estimates and judgements in the first quarter of 2022 that have impacted the financial position as of 31 March 2022.
Considering the tragic circumstances in Ukraine and the further pressure on supply chains already under strain following the COVID-19 pandemic, Management has carefully considered the impact from these events. Currently the impact from these events has not materially altered the expectations related to the growth in both the power cable and the photonics markets. While management closely follows the development of these events, Management has assessed that no trigger events for impairment have been identified in Q1 2022.
NKT provides customer guarantees, mainly in high-voltage projects, to cover the risks relating to NKT’s performance inherent in these projects, quality and delays. At 31 March 2022, NKT has issued guarantees with a value of EUR 972m (EUR 1,015m at 31 December 2021), none of which are currently expected to materialize.
For the presentation of this Q1 2022 interim report, Management is required to assess whether the financial statements can be presented on a ‘going concern’ basis. Based on estimated future prospects, expectations of future cash flows, existence of credit facilities, etc., it is Management’s opinion that the financial headroom is sufficient to manage the level of activity expected in the remainder of 2022.
Risks and risk management
In the Annual Report for 2021, risks are described in Note 5.6 in the consolidated financial statement as well as on page 44 and 66 for NKT and NKT Photonics respectively. No events or risk management activities carried out in the first three months of 2022 have altered the risk assessment applied in the Annual Report.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S
Notes
Note 2 Segment reporting
| Amounts in EURm | Solutions | Applica-tions | Service & Acces-sories | Non allocated | Inter-segment transact. | NKT | NKT Photonics | Inter-segment transact. | NKT Group |
|---|---|---|---|---|---|---|---|---|---|
| Q1 2022 | |||||||||
| Income statement | |||||||||
| Goods¹⁾ | 3.4 | 277.3 | 29.9 | 0.0 | -5.0 | 305.6 | 14.5 | 0.0 | 320.1 |
| Service, etc.¹⁾ | 2.2 | 0.0 | 0.4 | 0.0 | -0.4 | 2.2 | 0.0 | 0.0 | 2.2 |
| Construction contracts²⁾ | 168.6 | 0.0 | 13.5 | 0.0 | -0.4 | 181.7 | 1.6 | 0.0 | 183.3 |
| Revenue (market prices) | 174.2 | 277.3 | 43.8 | 0.0 | -5.8 | 489.5 | 16.1 | 0.0 | 505.6 |
| Adjustment of market prices to std. metal prices | -23.3 | -146.2 | -0.2 | 0.0 | -0.6 | -170.3 | 0.0 | 0.0 | -170.3 |
| Revenue (std. metal prices) | 150.9 | 131.1 | 43.6 | 0.0 | -6.4 | 319.2 | 16.1 | 0.0 | 335.3 |
| Costs and other income, net (excl. one-off items) | -149.5 | -266.9 | -40.1 | -0.5 | 5.8 | -451.2 | -17.8 | 0.0 | -469.0 |
| Operational EBITDA | 24.7 | 10.4 | 3.7 | -0.5 | 0.0 | 38.3 | -1.7 | 0.0 | 36.6 |
| Depreciation, amortization and impairment | -14.5 | -3.9 | -1.0 | -0.2 | 0.0 | -19.6 | -3.5 | 0.0 | -23.1 |
| Operational EBIT | 10.2 | 6.5 | 2.7 | -0.7 | 0.0 | 18.7 | -5.2 | 0.0 | 13.5 |
| Working capital | -86.5 | 108.9 | 26.3 | -14.1 | 0.0 | 34.6 | 31.2 | 0.0 | 65.8 |
| Amounts in EURm | NKT | NKT Photonics | NKT Group | ||||||
| --- | --- | --- | --- | ||||||
| Q1 2022 | |||||||||
| Reconciliation to net result | |||||||||
| Operational EBITDA | 38.3 | -1.7 | 36.6 | ||||||
| One-off items | 0.5 | 8.0 | 8.5 | ||||||
| EBITDA | 38.8 | 6.3 | 45.1 | ||||||
| Depreciation, amortization and impairment | -19.6 | -3.5 | -23.1 | ||||||
| EBIT | 19.2 | 2.8 | 22.0 | ||||||
| Financial items, net | -5.4 | -1.3 | -6.7 | ||||||
| EBT | 13.8 | 1.5 | 15.3 | ||||||
| Tax | -2.0 | 1.6 | -0.4 | ||||||
| Net result | 11.8 | 3.1 | 14.9 | ||||||
| Q1 2021 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | ||
| Reconciliation to net result | |||||||||
| Operational EBITDA | 30.2 | -1.2 | 29.0 | ||||||
| One-off items | 1.8 | 0.0 | 1.8 | ||||||
| EBITDA | 32.0 | -1.2 | 30.8 | ||||||
| Depreciation, amortization and impairment | -21.2 | -3.5 | -24.7 | ||||||
| EBIT | 10.8 | -4.7 | 6.1 | ||||||
| Financial items, net | -2.9 | -0.7 | -3.6 | ||||||
| EBT | 7.9 | -5.4 | 2.5 | ||||||
| Tax | -2.0 | 1.2 | -0.8 | ||||||
| Net result | 5.9 | -4.2 | 1.7 |
1) Revenue from the sale of goods and services are recognized at a point in time.
2) Revenue from construction contracts are recognized over time.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S
Notes
Note 2 Segment reporting – continued
| Balance sheet | 31 March 2022 | 31 March 2021 | Year 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NKT | NKT Photonics | Inter-segment transact. | NKT Group | NKT | NKT Photonics | Inter-segment transact. | NKT Group | NKT | NKT Photonics | Inter-segment transact. | NKT Group | |
| Assets | ||||||||||||
| Non-current assets | ||||||||||||
| Intangible assets | 552.5 | 63.5 | - | 616.0 | 552.0 | 68.2 | - | 620.2 | 554.0 | 67.7 | - | 621.7 |
| Property, plant and equipment | 796.0 | 22.0 | - | 818.0 | 643.1 | 19.5 | - | 662.6 | 760.8 | 22.1 | - | 782.9 |
| Other investments and receivables | 0.8 | 0.0 | - | 0.8 | 0.8 | 0.2 | - | 1.0 | 0.8 | 0.0 | - | 0.8 |
| Deferred tax | 21.4 | 0.6 | - | 22.0 | 31.5 | 0.6 | - | 32.1 | 23.8 | 1.1 | - | 24.9 |
| Current assets | ||||||||||||
| Inventories | 300.6 | 21.3 | - | 321.9 | 225.2 | 18.5 | - | 243.7 | 265.2 | 22.2 | - | 287.4 |
| Receivables | 619.8 | 13.2 | -1.2 | 631.8 | 414.2 | 15.5 | -0.5 | 429.2 | 506.5 | 22.9 | -0.5 | 528.9 |
| Contract assets | 133.8 | 2.5 | - | 136.3 | 71.1 | 0.3 | - | 71.4 | 96.0 | 1.3 | - | 97.3 |
| Income tax receivables | 3.2 | 8.7 | - | 11.9 | 2.0 | 4.2 | - | 6.2 | 2.7 | 6.1 | - | 8.8 |
| Interest-bearing receivables | 129.9 | 13.6 | -143.3 | 0.2 | 111.2 | 2.3 | -113.3 | 0.2 | 129.3 | 6.2 | -135.3 | 0.2 |
| Cash at bank and in hand | 116.3 | 2.2 | - | 118.5 | 177.5 | 1.4 | - | 178.9 | 198.7 | 1.8 | - | 200.5 |
| Total assets | 2,674.3 | 147.6 | -144.5 | 2,677.4 | 2,228.6 | 130.7 | -113.8 | 2,245.5 | 2,537.8 | 151.4 | -135.8 | 2,553.4 |
| Equity and liabilities | ||||||||||||
| Equity | 1,224.1 | -8.1 | - | 1,216.0 | 1,116.9 | -7.7 | - | 1,109.2 | 1,171.0 | -11.1 | - | 1,159.9 |
| Non-current liabilities | ||||||||||||
| Deferred tax | 83.8 | 2.4 | - | 86.2 | 50.6 | 2.9 | - | 53.5 | 69.1 | 2.7 | - | 71.8 |
| Provisions and pension liabilities | 62.2 | 0.3 | - | 62.5 | 65.7 | 0.4 | - | 66.1 | 62.3 | 0.2 | - | 62.5 |
| Borrowings | 209.5 | 134.6 | -130.8 | 213.3 | 188.6 | 112.9 | -104.7 | 196.8 | 192.5 | 128.1 | -124.2 | 196.4 |
| Current liabilities | ||||||||||||
| Borrowings | 24.3 | 3.0 | -12.5 | 14.8 | 12.9 | 8.5 | -8.6 | 12.8 | 17.1 | 11.5 | -11.1 | 17.5 |
| Trade payables | 373.3 | 7.5 | -1.2 | 379.6 | 280.5 | 4.6 | -0.5 | 284.6 | 334.7 | 7.1 | - | 341.8 |
| Other liabilities | 187.2 | 4.4 | - | 191.6 | 174.6 | 6.4 | - | 181.0 | 160.7 | 10.2 | -0.5 | 170.4 |
| Contract liabilities | 451.8 | 0.6 | - | 452.4 | 308.5 | 0.8 | - | 309.3 | 458.4 | 0.9 | - | 459.3 |
| Income tax payables | 10.5 | 2.0 | - | 12.5 | 14.1 | 0.4 | - | 14.5 | 9.8 | 0.7 | - | 10.5 |
| Provisions | 47.6 | 0.9 | - | 48.5 | 16.2 | 1.5 | - | 17.7 | 62.2 | 1.1 | - | 63.3 |
| Total equity and liabilities | 2,674.3 | 147.6 | -144.5 | 2,677.4 | 2,228.6 | 130.7 | -113.8 | 2,245.5 | 2,537.8 | 151.4 | -135.8 | 2,553.4 |
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 24
Notes
Note 3 Net interest-bearing debt and working capital
| Amounts in EURm | 31 March 2022 | 31 March 2021 | 31 Dec. 2021 |
|---|---|---|---|
| Net interest-bearing debt | |||
| Borrowings, non-current | 213.3 | 196.8 | 196.4 |
| Borrowings, current | 14.8 | 12.8 | 17.5 |
| Interest-bearing receivables | -0.2 | -0.2 | -0.2 |
| Cash at bank and in hand | -118.5 | -178.9 | -200.5 |
| Net interest-bearing debt | 109.4 | 30.5 | 13.2 |
| Working capital | |||
| Inventories | 321.9 | 243.7 | 287.4 |
| Receivables | 631.8 | 429.2 | 528.9 |
| Contract assets | 136.3 | 71.4 | 97.3 |
| Income tax receivable | 11.9 | 6.2 | 8.8 |
| Trade payables | -379.6 | -284.6 | -341.8 |
| Other liabilities | -191.6 | -181.0 | -170.4 |
| Contract liabilities | -452.4 | -309.3 | -459.3 |
| Income tax payables | -12.5 | -14.5 | -10.5 |
| Working capital | 65.8 | -38.9 | -59.6 |
| Amounts in EURm | Q1 2022 | Q1 2021 | Year 2021 |
| --- | --- | --- | --- |
| Reconciliation to change in working capital in cash flow | |||
| Working capital 1 January | -59.6 | -137.1 | -137.1 |
| Working capital end of period | 65.8 | -38.9 | -59.6 |
| Change in working capital based on balance sheet | 125.4 | 98.2 | 77.5 |
| Effect of unrealized hedges reported on Equity | -63.0 | -57.5 | -127.4 |
| Effect of changes in current tax | -1.1 | 6.6 | 4.2 |
| Effect of changes in exchange rates, etc. | -1.3 | 3.6 | -0.9 |
| Change in working capital based on cash flow statement | 60.0 | 50.9 | -46.6 |
Note 4 Acquisition and divestment of companies
| Acquisitions | |
|---|---|
| Amounts in EURm | |
| Non-current assets | 20.9 |
| Current assets | 6.7 |
| Non-current liabilities | -7.3 |
| Current liabilities | -3.3 |
| Acquired net assets | 17.0 |
| Gain on business acquisition | -1.6 |
| Purchase price | 15.4 |
| Acquired cash and cash equivalents | -0.1 |
| Cash flow used for acquisition | 15.3 |
On 10 January 2022, NKT acquired 100% of the shares in Ventcroft Ltd, a UK based company. The considerations were transferred in full and there is no contingent considerations. Ventcroft Ltd are specialized in fire-resistant building wires and low voltage power cables, and the acquisition was made in order to strengthen the product portfolio and is an important step in the NKT strategy to grow the business. Ventcroft Ltd will be a part of the Applications segment.
The acquisition consists of net assets of EUR 17.0m predominantly related to tangible assets and working capital. No intangible assets have been recognized from the acquisition. As the purchase price is below the net asset value, as well as below the equity value of the company at the time of acquisition, a gain of EUR 1.6m has been recognized in the Income Statement in the line Other Operating income. Acquisition-related costs of EUR 0.2m are recognized in Other costs etc. in the income statement of the Applications segment.
From acquisition date to 31 March 2022, Ventcroft Ltd contributed positively to the results with a revenue of EUR 5.4m and a profit of EUR 0.4m. Had the acquisition occurred on 1 January 2022, the impact for period until 31 March 2022 on revenue and profit would in all material aspects have been similar.
Divestments
On 10 March 2022 NKT divested their sensing business, LIOS. The proceeds from the sale were EUR 19.7m, and the gain was EUR 8.0m, which is recognized in Other operating income in the income statement. The business was a part of the NKT Photonics segment prior to the divestment, and the gain is accordingly included in this segment.
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022 | NKT A/S | 25
Notes
Note 5 Definitions
The Group operates with the following performance measures which are calculated in accordance with the Danish Finance Society's guidelines:
Performance measures defined by IFRS:
- Earnings, EUR per outstanding share (EPS) – Earnings attributable to equity holders of NKT A/S relative to average number of outstanding shares.
- Diluted earnings, EUR per outstanding share (EPS) – Earnings attributable to equity holders of NKT A/S relative to average number of outstanding shares, including the dilutive effect of outstanding share programmes.
Further, the Group presents the following performance measures not defined according to IFRS (non-GAAP measures) in the Annual Report:
- Revenue at standard metal prices – Revenue at standard metal prices for copper and aluminium is set at EUR/tonne 1,550 and EUR/tonne 1,350 respectively.
- Organic growth – Revenue growth (standard metal price) as a percentage of prior-year adjusted revenue (standard metal price). Organic growth is a measure of growth, excluding the impact of exchange rate adjustments, internal revenue, acquisitions and divestments.
- One-off items – Consist of non-recurring income and cost related to acquisitions, divestments, integration, restructuring, severance and other one-time items.
- Operational earnings before interest, tax, depreciation and amortization (Oper. EBITDA) – Earnings before interest, tax, depreciation and amortization (EBITDA) excluding one-off items.
-
Operational earnings before interest and tax (Oper. EBIT) – Earnings before interest and tax excluding one-off items.
-
Net interest-bearing debt – Cash and interest-bearing receivables less interest-bearing debt. Specified in Section 5.4. Hybrid capital is not included in net interest-bearing debt.
- Capital employed – Group equity plus net interest-bearing debt.
- Working capital – Current assets minus current liabilities (excluding interest-bearing items and provisions).
-
Net interest-bearing debt relative to operational EBITDA – Calculated as net interest-bearing debt as defined in point 8 relative to operational EBITDA as defined in point 6.
-
Solvency ratio (equity as a percentage of total assets) – Equity incl. hybrid capital as a percentage of total assets.
- Return on capital employed (RoCE) – Operational EBIT as a percentage of average of the last five quarters of capital employed.
- Equity value, EUR per outstanding share – Equity attributable to equity holders of NKT A/S per outstanding share at 31 December. Dilution effect of outstanding share programmes is excluded.
Financial ratios
| Gearing | Net interest-bearing debt x 100 |
|---|---|
| Group equity | |
| Solvency ratio | Equity x 100 |
| Total assets | |
| Return on Capital Employed (RoCE) | Operational EBIT |
| Average last five quarters of capital employed | |
| Earnings Per Share (EPS) | Earnings attr. to equity holders of NKT A/S |
| Average number of shares outstanding | |
| Earnings Per Share Diluted (EPS-D) | Earnings attr. to equity holders of NKT A/S |
| Diluted average number of shares | |
| Book Value Per Share (BVPS) | Equity |
| Number of shares |
三
NKT Group
NKT
NKT Photonics
Interim Report Q1 2022
NKT A/S
Group Management's statement
The Board of Directors and the Executive Management Board have today considered and adopted the Interim Report of NKT A/S for the period 1 January – 31 March 2022.
The Interim Report for the period 1 January – 31 March 2022, which has not been audited or reviewed by the company auditor, has been prepared in accordance with IAS 34 'Interim Financial Reporting', as approved by the EU, and Danish disclosure requirements for interim reporting by listed companies.
In our opinion the Interim Report gives a true and fair view of the Group's assets, liabilities and financial position at 31 March 2022 and the results of the Group's activities and cash flow for the period 1 January – 31 March 2022.
We also find that the Management's review provides a fair statement of developments in the activities and financial situation of the Group, financial results for the period, the general financial position of the Group, and a description of major risks and elements of uncertainty faced by the Group.
Brøndby, 18 May 2022
Executive Management
Alexander Kara
President & CEO
Line Andrea Fandrup
CFO
Board of Directors
Jens Due Olsen
Chairman
René Svendsen-Tune
Deputy Chairman
Nebahat Albayrak
Christian Dyhr*
Stig Nissen Knudsen*
Karla Lindahl
Jens Maaløe
Andreas Nauen
Pernille Blume Simonsen*
- Employee-elected member
NKT A/S
Vibeholms Allé 20
DK-2605 Brøndby
Denmark
Company Reg: 6272 5214
T: +45 43 48 20 00
[email protected]
nkt.com
C
NKT is signatory to the Europacable Industry Charter: A commitment towards superior quality.