NRC Group — Earnings Release 2018

Nov 6, 2018

Q3 2018 Result presentation

Oslo, 6 November 2018

Disclaimer

Forward Looking Statements

This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking. You should not place undue reliance on these forward-looking statements for many reasons.

These forward-looking statements reflect current views with respect to future events and are by their nature subject to significant risk and uncertainties because they relate to events and depend on circumstances that will occur in future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity or performance will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this presentation, either to conform them to actual results or to changes in our expectations.

Highlights

Acquisition of VR Track OY

Creating the largest Nordic rail infrastructure player

An even stronger platform to capture future growth initiatives including maintenance-, design- and environmental services Creating value for NRC Group investors - strong cash flow generation and significant growth prospects

Key figures Q3

Key events

Revenues of NOK 851 million EBITDA of NOK 72 million excluding M&A cost – EBITDA in SBB of NOK –18 million due to changes in cost estimates in projects Strong order backlog Sustainability requirements create new business opportunities within environmental services – Acquisitions of Gunnar Knutsen AS and NSS Holding AS Subsequent awarded NOK 360 million Storgata tramway contract in Oslo EGM approved to increase the share capital in connection with the acquisition of VR Track Oy

Rolf Jansson and Eva Nygren elected as new Board members with effect from early January 2019

Q3 2018 key figures – profit and loss

•	Revenue in Q3 2018 of NOK 851 million (+10%)	(Amounts in NOK million)	Q3 2018	Q3 2017	YTD 2018	YTD 2017	FY 2017
	– Continued strong growth in Norway: + 65%	Revenue	851	776	2 206	1 699	2 373
	– Decrease in Sweden due to none track renewal projects in 2018	M&A expenses	14	2	14	4	6
	(Q3 17 revenue of NOK ~200 million)	EBITDA (ex M&A)	72	113	139	164	236
		EBITA (ex M&A)	54	100	93	133	190
•	EBITDA ex M&A Q3 2018 of NOK 72 million	EBIT (ex M&A)	44	91	74	107	156
	– Weak performance in SBB, Sweden, with EBITDA of NOK - 18 mill.	EBITDA % (ex M&A)	8,4 %	14,5 %	6,3 %	9,6 %	9,9 %
	• Management replaced. Projects estimates adjusted	EBITDA % (ex M&A cost and
	– No track renewal project in 2018	SBB)	10,6 %
	– Weakening SEK vs NOK of 6%
	– Strong performance in Norway: 10.7% EBITDA margin

• EBIT ex M&A in Q3 2018 of NOK 44 million
• Includes NOK 6 million of SBB remaining amortisations

Proforma Q3 2018 key figures – profit and loss

Profit and loss including acquired companies VR Track OY, Gunnar Knutsen AS (GK) and NSS Holding AS (NSS)

(Amounts in NOK million)	NRC Group*	GK+NSS	VR Track	Combined
Revenue	851	134	804	1 789
EBITDA EBITA	72 54	31 23	92 73	195 150
EBITDA ex M&A (%)	8,4 %	23,8 %	11,4 %	10,9 %

Proforma figures based on management accounts from the acquired companies with estimated IFRS adjustments EUR: 9,57

* NRC Group figures exluding M&A cost

Order book development*

Order book Q3 2016 – Q3 2018

In NOK million

*Including order book from JVs

** VR Track proforma included in Q3 2018

Order book development Q2 2018 – Q3 2018

In NOK million

Approximately 30% of the order book is estimated for production in 2018

Q3 2018 key figures – balance sheet

• Acquisition of Gunnar Knutsen AS included
• Cash is NOK 189 million
• Net debt is NOK 446 million
• Increased bank debt related to acquisitions: NOK 145 million
• Leasing from NSS Holding AS and Gunnar Knutsen AS: NOK 88 million
• Cut off payment from customers ~ NOK 60 million
• Intangible assets of NOK 1,262 million
• Equity ratio is 49%

(Amounts in NOK million)
ASSETS	30.09.2018	30.09.2017	31.12.2017
Intangible assets	1 262	955	1 048
Other non-current assets	437	266	287
Other current assets	1 059	621	741
Cash and cash equivalents	189	308	408
Total assets	2 948	2 150	2 484
EQUITY AND LIABILITIES
Total equity	1 443	1 232	1 357
Non-current interest-bearing liabilities	467	319	317
Other non-current liabilities	41	20	27
Interest-bearing current liabilities	168	114	121
Other current liabilities	829	465	662
Total equity and liabilities	2 948	2 150	2 484

Q3 2018 key figures – cash flow

•	Cash flow from operating activities of NOK 3 million	(Amounts in NOK million)	Q3 2018	Q3 2017	YTD 2018	YTD 2017	FY 2017
	– Cut-off between quarters ~ NOK 60 million	Profit/loss before tax	26	88	54	98	144
•	Net cash flow from investing activities is NOK -138 million	Net cash flow from operating activities	3	33	-44	-28	133
	– Acquisitions: NOK -139 million – Capex: NOK -1 million	Net cash flow from investing activities	-138	-138	-140	-214	-243
		Net cash flow from financing activities	102	151	-21	128	92
•	Net cash flow from financing activities is NOK 102 million – Increased bank debt for acquisitions: NOK 145 million	Net change in cash and cash equivalents	-33	46	-206	-114	-18
	– Payment of borrowings and leasing: NOK -43 million	Cash and cash equivalents at the end of the period	189	308	189	308	408

NRC Group acquires VR Track and creates the largest Nordic rail infrastructure player

* Reported figures

** Proforma figures, including NSS Holding, Gunnar Knutsen and VR Track figures LTM Q3 2018

The acquisition of VR Track represents a solid foundation for value creation

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(1) Based on transaction enterprise value. Final purchase price is subject to certain net working capital and net debt adjustments at the time of closing (2) Weighted annual interest cost on acquisition bank debt financing

(3) Calculated as: EBITDA – maintenance capex – interest cost – tax. May not add up due to rounding

The enlarged NRC Group represents a significantly enhanced platform to capture further growth opportunities

• Unique pan-Nordic capabilities
• Ability to offer larger turnkey projects to a wider customer group
• Very well positioned to capture maintenance contracts in the Norwegian market
• Cross-selling potential for groundwork in Finland, engineering & design projects in Norway and environmental services in Sweden and Finland
• Improved utilization of machine park and resources create synergies in Sweden

Present Future vision

NRC Group is now uniquely positioned to serve the Nordic market

Overview of NRC Group and VR Track offices Key market figures

	Sweden	Norway	Finland
Installed railway
	~12 000 km	~ 4 200 km	~ 6 000 km
	Annual railway passenger journeys
	219 million	74 million	86 million
	Annual railway freight volume (tons)
	68 million	33 million	36 million
Maintenance backlog* (NOK)
	18 billion	19 billion	11 billion

Source: Norway: NTP 2018-29 and 2019 national budget. Sweden: NTP 2018-29, Trafikverket and 2018 national budget. Finland: Finnish Transportation Agency, VR Track estimates.

Norway 2019 budget confirms long-term growth trend

• 2019 railway spending budgeted at NOK 21.2 billion, up 11% from 2018
• Spending on operations, maintenance and investments continues to lag levels required to meet the new NTP
• Norwegian Government supportive of increased investments in environmentally friendly transport systems

Investments in infrastructure renewal NOK billion

Long-term railway spending development

NOK billion per year

30,0

Investments and investment planning

*)Sources: The Norwegian national budget, national accounts and most recent NTP

Further growth needed to close investment gap to NTP levels

External service purchases Relative to NTP average for 2018-23 period

Operations and maintenance Investment planning Investments

Operations and maintenance Investment planning Investments

Full-service positioning confirmed by 2nd large Oslo tram award

Major contract for Storgata rehabilitation

• NOK 360 million contract awarded
• Street improvement works and tram infrastructure upgrades including track, electro and groundwork
• Modernising parts of the water and wastewater network
• Part of Sporveien's high-profile NOK 4.1 billion Tram Program (2018-2021)
• Second major turnkey tram project awarded in 2018
• Both won by NRC Group, combined value NOK 762 million
• Confirming shift towards bigger contracts involving several specialist disciplines
• In line with NRC Group's strategic positioning
• Environmental impact a key selection criteria

"NRC Group has demonstrated understanding and insight with regards to environmental impact during project execution, and also by selecting climate-friendly solutions." From letter of award

Long-term growth expected for railway activity in Sweden

• 2019 budget still pending formation of a new government after the general elections 9 September
• The new NTP announced on 4 June confirms continued growth in demand for infrastructure services
• Average maintenance spend of SEK 10.4 billion for the 2018-2029 period, up 47% from old NTP
• Average investments in new named* railway projects of SEK 12.3 billion, up 32% from old NTP

SEK billion per year Long-term railway spending development**

Sources: *) 2018-29 NTP. Named projects exceed SEK 100 million of investments, 2010-2018: Swedish national budget: Tables for Investment plan for Trafikvärket and Maintenance of the State transport infrastructure

Step-up in investments expected from 2019

• High tendering activity in the fourth quarter 2018
• Five track renewal projects for tender in 2019
• Projects with revenue and margin potential
• Three long-term maintenance contracts up for tendering in 2019
• Maintenance backlog, delays and environment are high on agenda
• Increased focus on interdisciplinary projects
• Stable competitive landscape

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Source: Dagens Nyheter, 30 September 2018

Source: Sveriges Radio, 2 October 2018

Source: SVT, 24 August 2018

Attractive growth expected in Finland

Finland railway spending* (EURbn)

Project investments and maintenance

(1) Source: Finnish Transportation Agency, VR Track estimates

Tramway and metro market in Finland

• NOK 2.7 billion tramway development programme for the city of Tampere
• VR Track is part of the Tramway Alliance in charge of designing and constructing the infrastructure and depot area
• VR Track responsible for 50% of planning and 50% of construction
• YIT Construction Services and Pöyry Finland Oy are the other alliance partners
• Section 1 (NOK 2.3 billion) is scheduled for completion in 2021
• Turnkey project including tramway and tramway stop construction, groundworks, depot construction, power supply, bridges and all technical systems
• Total length of 15 km with 23 main stops

Summary & outlook

• Focus on VR Track integration process and capture synergies
• Strong market outlook with good project pipeline visibility
• Strong order backlog
• Positioned for privatization of maintenance contracts in Norway

Appendix

20 largest shareholders

Per 5 November 2018

INVESTOR	NO OF SHARES	% OF TOTAL	COUNTRY
DATUM	5 100 000	11,58	NOR
MIDDELBORG INVEST	4 401 454	10,00	NOR
ARCTIC FUNDS	2 329 034	5,29	IRL
CARNEGIE INVESTMENT	2 242 491	5,09	SWE
NORDEA	1 951 397	4,43	FIN
CHARLOTTE HOLDING	1 328 008	3,02	NOR
NORDNET	1 307 970	2,97	SWE
GUNNAR KNUTSEN HOLDING	1 252 677	2,85	NOR
LGA HOLDING	1 168 102	2,65	NOR
NORRON SICAV	1 034 208	2,35	LUX
SOGN INVEST	1 018 807	2,31	NOR
HANDELSBANKEN NORDISKA	991 051	2,25	SWE
VERDIPAPIRFONDET ALFRED BERG	975 810	2,22	NOR
HAUGO RIVING	850 745	1,93	NOR
DNB NOR MARKETS	748 859	1,70	NOR
CATELLA SMÅBOLAGSFOND SKANDINAVISKA ENSKILDA	719 805	1,63	SWE
DANSKE BANK	681 616	1,55	SWE
SKANDINAVISKA ENSKILDA SEB	680 142	1,54	SWE
E.K HOLDING	668 102	1,52	NOR
AVANZA BANK	567 595	1,29	SWE
TOTAL NUMBER OWNED BY TOP 20	30 017 873	68,18
TOTAL NUMBER OF SHARES	44 026 270

Segments – key figures quarterly development

	Restated	Restated	Restated	Restated	Restated		Reported Reported	Reported	Reported	Reported	Reported	Reported
	Full year
Norway operations (NOK million)	2015	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018
Total revenue	349	113	162	161	168	108	189	255	219	212	335	421
EBITDA	27	-5	6	14	-2	-6	10	19	18	-1	25	45
EBITA	21	-8	3	11	-4	-10	5	13	10	-7	19	36
EBIT	19	-9	2	9	-5	-12	2	8	4	-13	16	32
	Full year
Sweden operations (NOK million)	2015	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018
Total revenue	330	207	341	439	384	233	396	525	460	316	498	433
EBITDA	44	11	34	73	56	19	42	96	62	9	45	32
EBITA	42	9	32	67	52	15	37	89	55	2	38	23
EBIT	35	3	26	61	47	9	32	84	52	1	37	17
Parent, holding companies and eliminations	Full year
(NOK million)	2015	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018
Eliminations	0	0	0	0	0	0	-3	-3	-5	-1	-5	-3
EBITDA	-39	-5	-17	-5	-7	-8	-9	-4	-10	-6	-6	-19
EBITA	-40	-5	-17	-5	-7	-8	-9	-4	-10	-6	-6	-19
EBIT	-40	-5	-17	-5	-7	-8	-9	-4	-10	-6	-6	-19

Our entire business revolves around sustainability

As populations and cities grow, efficient transportation systems with a low carbon footprint are becoming increasingly important across the world. Building such systems is our core business.

Our competence and capabilities cover all phases of the projects. Since we take a holistic view in the planning and execution of the work, our projects are sustainable and create value in both economic and environmental terms.

UN model for sustainable business Our sustainable business model

Sustainability goals in action