Norconsult — Share Issue/Capital Change 2023

Oct 16, 2023

Norconsult intends to apply for a listing on Oslo Børs

Norconsult intends to apply for a listing on Oslo Børs

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Sandvika, 16 October 2023: Norconsult ASA (“Norconsult” or the “Company”) today announces its intention to launch an offering of shares in the Company and to apply for a listing on Oslo Børs (the “IPO”).

Norconsult is a leading pan-Nordic interdisciplinary consultancy firm solving the most complex engineering problems with the best talents. With its purpose “Every day we improve everyday life”, the Company develops the society of tomorrow by combining engineering, architecture and digital expertise across thousands of projects of all sizes, for private and public clients, in areas such as buildings, transport, renewable energy, water, industry, environment, architecture, planning and IT.

The Company is headquartered in Norway and has approximately 6,000 employees . Norconsult’s delivery model is centered around knowledge hubs and an unmatched local presence through more than 130 offices across Norway, Sweden, Denmark, Iceland, Finland and Poland.

Since it was founded in 1929, Norconsult has established a unique culture and a robust business model that yields strong and consistent growth, margins and cash conversion. For the year ended 31 December 2022, the Company’s net revenue and adjusted EBITA was NOK 7.5 billion and NOK 741 million respectively, corresponding to a 9.9% adjusted EBITA margin.

The IPO is expected to facilitate future growth and development in the Company and improve Norconsult’s ability to pursue strategic opportunities. The Company is currently 100% owned by approximately 3,700 employees with the largest beneficial shareholder owning 0.8% of the Company. The IPO is also intended to diversify the shareholder base, while safeguarding the interests of all the Company’s talented employees and the Company’s unique culture.

Company highlights

• Solid financial track-record of consistent profitable growth, margins and cash conversion. In the period 2012 to 2022 the Company generated a net revenue CAGR of 11% paired with a consistently solid adjusted EBITA margin varying between 8% and 10%, proving Norconsult’s ability to generate stable margins through-the-cycle. With a capital-light business model these profits have been converted to solid cash conversion ratios of 97% in 2021 and 98% in 2022, providing shareholders with a high dividend payout of 62 - 76% of net income over 2021 - 2022.

• Exposed to large and resilient end-markets. Norconsult is exposed to a EUR 163 billion Nordic market comprising of new-build and renovation of buildings, infrastructure, water, energy and other civil engineering services. This civil engineering market has portrayed a long-term growth with limited cyclicality balanced by large exposure to fiscal spending. The Company also benefits from secular growth and global megatrends such as urbanization wave, the green transition, digital transformation and rehabilitation backlog.

• The market leader in Norway with clear momentum as the Nordic challenger. The Company has established a clear number 1 position in Norway, where Norconsult is approximately 1.5x the size of number two . The Company is also experiencing strong momentum across Sweden and Denmark, where the Company currently employs 1,284 and 448 full-time equivalents and from 2019 to 2022 has grown gross revenue with a CAGR of 15% and 32%, respectively.

• Ability to attract, develop and retain the best and most committed people. With 95 years of history, the Company has created an entrepreneurial culture founded on continuity and common goals with strong commitment to society and customers. This has been manifested in industry-leading employee turnover, amounting to 10.7% in 2022 compared to an average of 14.9% for listed Nordic peers . Both professional engineers and engineering students consistently rank Norconsult within the top 5 most attractive employers in Norway.

• Competitive edge from full-service offering. Norconsult is offering a wide range of services within transport, buildings, renewables, industry, water, environment, architecture, planning and digitalisation. The full fledge offering is benefiting from increased complexity that requires breadth, as customers are favoring the platforms with the most comprehensive toolboxes. This is further backed by the Company’s delivery model that balances local presence, ensuring local knowledge and customer proximity, with knowledge hubs, fostering specialisation and leading innovation.

• High diversification and attractive economic model. Norconsult has a diversified business mix built on attractive contracts with long duration that create resilience and overall stable market exposure. The Company has more than 50% of its gross revenue exposed to public sector, and only approximately 8% of annual gross revenues exposed to new contracts in the private building market in a respective year. A cost-plus model centered around low-risk contracts priced on accrued hours, and index-regulated cost components on most contracts, represent further attractive economic attributes. Combined with approximately 30,000 assignments each year, the project risk of the Company is low. Further, the Company has an order backlog of NOK 5.8bn covering 75% of net revenues for the last twelve months as of Q2 2023.

• M&A compounder with demonstrated ability to accelerate value creation. Since 2012 Norconsult has successfully completed 80 acquisitions that have contributed to approximately 1/3 of revenue growth, demonstrating the Company’s ability to drive inorganic growth across geographies and technical capabilities. The Company believes it has the pre-requisites in place to support a continued high M&A pace with its high cash conversion, strong balance sheet and several actionable inorganic growth levers.

• Tangible strategy to set position as a pan-Nordic champion with clear sustainability edge. Anchored in sustainability, collaboration and excellence in digital execution, Norconsult has a clear strategy to go from the number 1 Norwegian player2 with a Nordic challenger position to a leading pan-Nordic interdisciplinary consultancy firm. The Company aims to fortify and grow the position in the Norwegian market through attracting, developing and retaining the best people across market areas. Continued growth in Sweden, Denmark and Finland will be targeted by selective geographical expansion and growing the current position within key market areas. In addition to organic growth, the Company has a well-defined and complementary M&A strategy across geographies.

• Attractive financial targets. The Company is targeting (i) an adjusted EBITA margin of 10%, (ii) a pay-out ratio of more than 50% of net income, and (iii) a capital structure not exceeding 2.0x net debt to adjusted EBITDA on an IFRS 16 basis. Per Q2’23 the Company had a capital structure with 0.77x net debt to adjusted EBITDA (on an IFRS 16 basis and adjusted for approximately NOK 600m in extraordinary dividend), providing ample flexibility for M&A activity. As of today, the company has no interest-bearing debt except for IFRS 16 leasing liabilities.

Egil Hogna, CEO Norconsult, comments: “The intention to become a publicly listed company marks an important milestone in our 95 years history. I am very proud of the long-lasting profitable growth that our highly skilled employees have accomplished, growing our position from a national leader in Norway to a true Nordic player with successful expansion into Sweden and Denmark. Going forward, we will continue to work on attracting, developing and retaining the best employees, while at the same time developing the best expertise. This will contribute to further differentiation from our competitors and a continuation of our profitable growth.”

Financial highlights

The Company generated NOK 7.5 billion in net revenue for the year ended 31 December 2022 and an adjusted EBITA of NOK 741 million for the same period, corresponding to a 9.9% adjusted EBITA margin. Current trading remains solid, and for the six months ended 30 June 2023 net revenue grew 15% year-over-year with an underlying 11% organic growth. The following table outlines selected financial data prepared in accordance with IFRS and key alternative performance measures and key alternative performance indicators for the periods presented.

In NOK millions Year ended 31 December 2021 Year ended 31 December 2022 Six months ended 30 June 2022 Six months ended 30 June 2023

Net revenue 6,588 7,493 3,861 4,456

Growth YoY, % n.a. 13.7% 12.6% 15.4%

Adj. EBITDA 995 1,125 613 708

Adj. EBITDA margin, % 15.1% 15.0% 15.9% 15.9%

Adj. EBITA 643 741 424 493

Adj. EBITA margin, % 9.8% 9.9% 11.0% 11.1%

Profit (loss) for the period 342 454 312 362

Dividend 261 280 n.a. n.a.

Dividend pay-out ratio % 76% 62% n.a. n.a.

Net interest-bearing debt 284 209 477 342

Net interest-bearing debt / Adj. EBITDA 0.29x 0.19x 0.44x 0.77x

Offering highlights

The IPO is expected to consist of a secondary offering of existing shares in the Company offered by the Company’s existing shareholders through a public offering to retail investors in Norway, Sweden, Denmark and Finland, and a private placement to certain institutional investors in Norway and internationally. The Company is currently 100% owned by its employees and a minimum of approximately 25% of the total number of shares outstanding (excluding shares held in treasury) is expected to be offered in the IPO. Additional existing shares may be offered from current shareholders and will be determined on a voluntary basis prior to the publication of the prospectus. Several large shareholders have on certain conditions indicated their intention to sell 35% of their shares in the IPO. In addition, it is expected that the Company will grant the Managers an over-allotment option of up to 15% of the shares initially allocated in the IPO. If exercised, the over-allotment option will be settled by existing treasury shares in the Company. The existing shares not sold in the IPO will be subject to lock-up, subject to customary exemptions. Employee shareholders will have a lock-up for 6 months for 50% of the remaining shares and 12 months for the other 50% of the remaining shares. Members of management and the Board of Directors will have 12 months lock-up for all its remaining shares following the IPO, and the Company will have a lock-up for 12 months for issuance of new shares following the IPO, subject to certain exemptions such as issuance of consideration shares as part of M&A activities.

Subject to receiving the relevant approvals from Oslo Børs and the Norwegian Financial Supervisory Authority, as well as prevailing equity capital market conditions, the Company is expected to have a first day of trading on Oslo Børs in November 2023. Further announcements relating to the IPO will be made in due course.

Advisors

Carnegie AS and DNB Markets, a part of DNB Bank ASA, are acting as Joint Global Coordinators and Joint Bookrunners in the IPO, and Nordea Bank Abp, filial i Norge, and Skandinaviska Enskilda Banken AB (publ), Oslo branch, are acting as Joint Bookrunners (together, the "Managers").

Advokatfirmaet BAHR AS is acting as legal advisor to Norconsult, and Advokatfirmaet Wiersholm AS is acting as legal advisor to the Managers.

For further queries, please contact:

Investors: Dag Fladby, CFO Norconsult, +47 90 89 19 35

Media: Hege Njå Bjørkmann, EVP Communication and Brand Norconsult, +47 91 18 50 29

Alternative performance measures

Net revenue is defined as operating revenue and other income after external project costs.

Adj. EBITA is defined as earnings before amortisation and impairment losses of intangible assets, share-based compensation expenses for the employee share programs for 2022 and 2023, expenses related to the IPO process, financial items and taxes. The new discounted and bonus share programs starting in 2024, is to be included in adj. EBITA.

Adj. EBITDA is defined as earnings before depreciation and impairment losses of tangible assets, amortisation and impairment losses of intangible assets, share-based compensation expenses for the employee share programs for 2022 and 2023, expenses related to the IPO process, financial items and taxes. The new discounted and bonus share programs starting in 2024, is to be included in adj. EBITDA.

Adj. EBITA margin is defined as adj. EBITA (as defined above) as a percentage of operating revenue and other income after external project costs.

Adj. EBITDA margin is defined as adj. EBITDA (as defined above) as a percentage of operating revenue and other income after external project costs.

Number of full-time equivalents (FTEs) is a mathematical calculation of employees with regards to percentage of a full-time position. The term includes all staff on pay-roll including staff on temporary leave excluding temporary personnel.

Employee turnover rate is defined as the number of employees who left the Group during the year in relation to the average number of employees.

Net capex is defined as investments in non-current assets as reported in the statements of cash flows, including investments in property, plant and equipment, capitalized development of software, excluding acquisitions and divestments less proceeds from sale of property, plant and equipment.

Change in net working capital is defined as net change in total receivables and total current liabilities excluding current lease liabilities.

Cash conversion ratio is defined as adj. EBITDA minus net capex (as defined above) minus change in net working capital (as defined above) as a percentage of adj. EBITDA.

Net interest-bearing debt is defined as current and non-current interest-bearing debt reduced by cash and cash equivalents and other current financial assets.

Net interest-bearing debt/adj. EBITDA (also presented as NIBD/adj. EBITDA) where Net interest-bearing debt and adj. EBITDA is defined above.

Payout ratio is defined as proposed dividend as a percentage of profit for the year.

Order backlog is defined as expected remaining operating revenues on new and existing contracts. Group internal contracts are excluded. Call-offs on frame agreements are included in the order backlog when signed.

Important notice

This announcement is for informational purposes only and does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in Australia, New Zealand, Canada, Japan or the United States, including its territories and possessions, any state of the United States and the District of Columbia (the “United States”) or to any person to whom, or in any jurisdiction in which, such offer or solicitation is unlawful. The securities referred to herein may not be offered, subscribed, used, pledged, sold, resold, allotted, delivered or transferred, directly or indirectly, in or into the United States absent registration under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. The offer and sale of the securities referred to herein has not been and will not be registered under the U.S. Securities Act or under the applicable securities laws of Australia, New Zealand, Canada or Japan. There will be no public offer of the securities in the United States. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Australia, New Zealand, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, New Zealand, Canada or Japan.

None of the Managers or any of their respective affiliates or any of their respective directors, officers, employees, advisors or agents accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection therewith. Accordingly, each of the Managers and the other foregoing persons disclaim, to the fullest extent permitted by applicable law, all and any liability, whether arising in tort or contract or that they might otherwise be found to have in respect of this announcement and/or any such statement. This announcement has been prepared by and is the sole responsibility of the Company.

The Managers and their affiliates are acting exclusively for the Company and no-one else in connection with the intended offering. They will not regard any other person as their respective clients in relation to the intended offering and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice in relation to the intended offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

Any offering of the securities referred to in this announcement will be made by means of a prospectus. This announcement is an advertisement and is not a prospectus for the purposes of Regulation (EU) 2017/1129 on prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (as amended) as implemented in any member state of the European Economic Area (the “EEA”) (the “EU Prospectus Regulation”). Investors should not subscribe for any securities referred to in this announcement except on the basis of information contained in the aforementioned prospectus, if a prospectus is published. Copies of any such prospectus will, following publication, be available from the Company's registered office and, subject to certain exceptions, on the website of the Company.

In any member state of the EEA, other than Norway, Sweden, Denmark and Finland, this communication is only address to and is only directed at persons who are “qualified investors” within the meaning of Article 2(e) of the EU Prospectus Regulation.

This communication does not constitute an offer of the securities referred to herein to the public in the United Kingdom. No prospectus has been or will be approved in the United Kingdom in respect of the securities referred to herein. This communication is being distributed to and is directed only at persons : (A) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), (ii) falling within Article 49(2)(a) to (d) of the Order and (iii) to whom it may otherwise lawfully be communicated; and (B) who are “qualified investors” within the meaning of Article 2(e) of the Prospectus Regulation (Regulation (EU) 2017/1129) as it forms part of retained EU law as defined in the European Union (Withdrawal) Act 2018.

In connection with the contemplated offering, the Managers and any of their affiliates, acting as investors for their own accounts, may subscribe for or purchase shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such shares and other securities of the Company or related investments in connection with the contemplated offering or otherwise. Accordingly, references in any prospectus, if published, to the shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, such Managers and any of their affiliates acting as investors for their own accounts. The Managers do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

Matters discussed in this announcement may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "aims", "expect", "anticipate", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. The Company, each of the Managers and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

The IPO may be influenced by a range of circumstances, such as market conditions, and there is no guarantee that IPO will proceed and that the listing will occur.

Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly with the total figure.

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