NRC Group — Earnings Release 2019

Feb 12, 2020

NRC GROUP ASA - FOURTH QUARTER 2019 RESULTS

NRC GROUP ASA - FOURTH QUARTER 2019 RESULTS

NRC Group today published its financial results for the fourth quarter of 2019

and preliminary results for the full year 2019.

The Company will present the quarterly results followed by a Capital Markets

Update (CMU) from 08:30 to 12:00 CET tomorrow at Felix Conference Centre,

Bryggetorget 3, Oslo, Norway.

Below you will find a summary and highlights from the report.

Key figures Q4 2019

· Revenues of NOK 1,663 million vs NOK 971 million in Q4 2018

· Total EBITA* of NOK -32 million vs NOK -36 million in Q4 2018

· Net project margin adjustments of NOK -110 million

· Order intake in the quarter amounting to NOK 1,926 million

· Order backlog of NOK 7,151 million

Key figures 2019

· Revenues of NOK 6,193 million vs NOK 3,176 million in 2018

· Total EBITA* of NOK 69 million vs NOK 57 million in 2018

Key events

· Completed a strategy with clear priorities to restore profitability and

drive growth with a 2024 ambition of NOK 10 billion of revenue and a 7% EBITA

margin

· Appointed to NOK 793 million rail services contract for Nykirke and Barkåker

on Vestfoldbanen in Norway, confirming our strong position in the Norwegian

market

· Sale of Design business for EUR 42.5 million was closed

Comments on fourth quarter 2019 results:

Fourth quarter negatively affected by project margin adjustments - measures

initiated to restore profitability

Fourth quarter revenue was NOK 1,663 million, an increase of 71% from NOK 971

million reported for the same period of 2018, mainly driven by the acquisition

of VR Track. The organic growth was -6% in fourth quarter and +2% for 2019.

Group EBITA* was NOK -69 million in the quarter as a result of net project

margin adjustments of NOK -110 million. The margin adjustments are mainly

related to Rail and Civil Construction contracts in Sweden and Rail Construction

in Norway, where the costs have become higher than anticipated. This reflects

that the processes and competence on tender selection and calculation, risk

assessment and execution processes have not been satisfactory in these units.

The projects were all tendered before changes in the management team in Sweden

and in Rail Construction in Norway, which was implemented in the second half of

"We are obviously not satisfied with the results and project write-downs

reflecting weak performance in Sweden and in some of the rail construction

projects in Norway. We have already started a turnaround process to restore

profitability, with targeted measures to strengthen project management

capabilities, project selection and tendering processes and the project

execution model," said Henning Olsen the CEO of NRC Group.

Several measures have been initiated and implemented to restore profitability,

including strengthening the processes and competence in tender selection, risk

assessment and execution. Furthermore, an overhead cost reduction programme for

2020 targeting savings of NOK 55 million has been initiated.

For 2020, non-performing projects including the above projects will represent

approximately NOK 400 million of revenue which is expected to yield zero margin.

Most of the projects are scheduled to be completed by the end of 2020.

Full year 2019 revenue was NOK 6,193, an increase of 95% from 2018, and in line

with previously communicated expectations. Full year revenue-growth reflected

acquisitions and strong organic growth in Finland and Norway, partly offset by

reduced activity in Sweden. Organic growth for 2019 was +2%. Group EBITA* was

NOK -26 million, a decrease from NOK 29 million in 2018.   The Norwegian

operation has a revenue of NOK 583 million in fourth quarter compared to NOK 630

million in the fourth quarter of 2018. The organic growth was -7% in the quarter

but +16% for the full year. Continued strong margins in Civil construction and

Environment, was offset by net project adjustments in Rail construction,

amounting to approximately NOK -50 million, which reduced the EBITA* margin to

3.9%.

The Group operating profit (EBIT) for the quarter amounted to NOK -85 million

compared to NOK -59 million in 2018. In addition to certain projects with margin

adjustments as described above, EBIT includes M&A expenses (other income and

expenses) of NOK 37 million and amortisations of NOK 17 million. The M&A

expenses relate to subsequent adjustment of contingent considerations in the

business combination of NSS recognised in profit or loss.

Strong order intake and year-end backlog

Fourth-quarter order intake was NOK 1,926 million. Announced contracts amounted

to NOK 1,396 million and unannounced order intake was NOK 529 million.

In Norway, new orders included the NOK 793 million rail services contract for

Nykirke and Barkåker on Vestfoldbanen and a NOK 175 million award for ground and

railway technical works, on the railway connection between Drammen and

Gulskogen. Both contracts are part of the Intercity development programme and

were bid and won under the new tender selection and -execution model implemented

in Rail Construction Norway.

In Finland, NRC Group was awarded an EUR 20.3 million signal system renewal

contract on the Tampere-Seinäjoki railway section. In Sweden, The Swedish

Transport Administration (Trafikverket) exercised a two-year option for railway

maintenance Västra Götaland Väst region worth SEK 130 million.

Full-year 2019 order intake was NOK 7,913 million and the year-end backlog

amounted to NOK 7,151 million, a more than doubling compared to prior year.

Approximately 44% and 24% of the backlog is estimated for production in 2020 and

2021, respectively.

Strategy update and long-term ambitions

In the fourth quarter, NRC Group completed a strategy update following a period

of strong organic and M&A driven growth, including the acquisition of VR Track

Oy in January 2019. After achieving the ambition of being the leading Nordic

player within rail infrastructure, the focus has been turned to harvesting the

benefit of this. The main priorities are to restore profitability through

operational improvements, capitalize on the leading Nordic position and strong

markets through profitable organic growth, and utilising Nordic capabilities to

expand into complementary services.

The implementation of the improvement processes started in the second half of

2019. In 2020, the main priority is to complete the execution of the improvement

programs. This will be the platform to increase profitability and continued

profitable growth from 2021 and onwards.

NRC Group has established clear strategic priorities to restore profitability

and drive growth with a 2024 ambition of NOK 10 billion of revenue and a 7%

EBITA margin. (Please see separate statement issued today with more details on

long-term ambitions and ongoing improvement program.)

For 2020, NRC Group will prioritise implementation of the updated strategy,

focusing on improvement measures to restore the profitability in the Group. The

market outlook is positive, however focus will be to build a solid platform to

be positioned for further profitable growth from 2021 and onwards. NRC Group

expects revenue for the year to be in line with 2019.

*Before other income and expenses (M&A expenses)

Q4 and CMU presentation

NRC Group will tomorrow present the quarterly results followed by a Capital

Markets Update (CMU) from 08:30 to 12:00 CET at Felix Conference Centre,

Bryggetorget 3, Oslo, Norway. Group management will provide an in-depth overview

of the strategic development, ambitions and outlook after completion of the

strategy process. The event includes presentations by CEO Henning Olsen, CFO Dag

Fladby and country managers Harri Lukkarinen (MD Finland) and Robert Röder (MD

Sweden).

The presentation will be held in local language with supporting material in

English.

The fourth quarter 2019 result report and result presentation can be found

attached and will be made available on the company's homepage: www.nrcgroup.com.

The CMU presentation will be distributed in a separate stock exchange release

and made available on the company homepage.

For further information, please contact Dag Fladby, Chief Financial Officer, NRC

Group ASA on tel: +47 90 89 19 35.

About NRC Group

NRC Group is the largest rail infrastructure entrepreneur in the Nordic region.

NRC Group has experienced significant growth since its inception in 2011 and has

regional offices throughout Norway, Sweden and Finland. The company is

headquartered at Lysaker, nearby Oslo, in Norway. NRC Group is listed on the

Oslo Stock Exchange under ticker "NRC". The company's chief executive officer is

Henning Olsen.

This information is subject of the disclosure requirements pursuant to section 5

-12 of the Norwegian Securities Trading Act.