NRC Group — Investor Presentation 2020

Nov 10, 2020

Q3 2020 Result presentation NRC Group CEO – Henning Olsen and CFO – Dag Fladby

Disclaimer

• This draft presentation (hereinafter referred to as the "Presentation") has been prepared exclusively for information purposes and does not constitute an offer to sell or the solicitation of an offer to buy any financial instruments.
• This Presentation includes and is based on, among other things, forward-looking information and statements. Such forward-looking information and statements are based on current expectations, estimates and projections. Such forward-looking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions. We cannot give any assurance as to the correctness of such information and statements.
• Several factors could cause the actual results, performance or achievements of the companies mentioned herein to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in this Presentation, including, among others, risks or uncertainties associated with the company's business, segment, development, growth management, financing, market acceptance and relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors. Should one or more of these risks or uncertainties materialise, or should underlying assumption prove incorrect, actual results may vary materially from those described in this document. We do not intend, and do not assume any obligation, to update or correct the information included in this Presentation.
• There may have been changes in matters which affect the companies herein subsequent to the date of this Presentation. Neither the issue nor delivery of this Presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the company/companies have not since changed, and we do not intend, and do not assume any obligation, to update or correct any information included in this Presentation.
• This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of Norwegian courts with Oslo City Court AS exclusive venue.

Highlights Q3 2020

Revenue	• NOK 1.96 billion • 6% growth due to currency effects
EBITA*	• NOK 88 million • Strong profitability in Finland
Orders	• Order intake of NOK 1.2 billion • Order backlog of NOK 6.8 billion
Liquidity	• Solid cash flow from operations of NOK 129 million • Cash position of NOK 606 million

Operations and business during Covid-19

Main priorities	• Keep employees safe and minimize impact on operations • Compliant with public restrictions and recommendations • Monitor potential effects on the industry and NRC Group's business	bilde
Operations	• Limited impact on project execution to date • Maintenance and upgrade activities considered critical infrastructure • Most tender processes progressing as normal except in Sweden where tenders for maintenance and upgrades from Storstockholms Lokaltrafik (SL) are on hold • Increasing uncertainty due further increase of infection • Restrictions related to workforce mobility, will lead to higher production cost
Risk management	• Maintaining robust financial position • National public transport agencies represent ~95% of backlog • Outbreaks may impact productivity, project execution and value chain • Dependent on customers announcing and awarding tenders as scheduled

Health and safety first

*LTI-1: Injuries resulting in absence at least one full day per million man-hours (incl subcontractors)

**LTI-2: lost time injuries in total per million man-hours, also including injuries that require medical treatment and alternative work (incl subcontractors)

Figures YTD per 30 September 2020 compared with YTD 30 September 2019

Q3 key figures – profit & loss

• Revenue in Q3 20 of NOK 1,956 million

• EBITA* in Q3 20 of NOK 88 million

• Strong margins in Finland
• Write downs of zero margin projects in Sweden of NOK -35 million
• Lower margins in Norway
• Depreciations of NOK 53 million
• Net financial items: NOK -23 million

(Amounts in NOK million)	Q3 2020	Q3 2019	YTD 2020	YTD 2019	FY 2019
Revenue	1 956	1 850	4 871	4 531	6 193
Operating expenses	1 816	1 697	4 650	4 277	5 927
EBITDA*	140	153	221	254	267
Other income and expenses (M&A expenses)	-5	-7	-10	-59	-91
EBITDA	136	146	210	195	176
Depreciation	53	48	160	152	212
EBITA*	88	105	61	102	55
EBITA	83	98	50	43	-36
Amortisation	13	18	44	53	70
Operating profit/loss (EBIT)	70	80	6	-10	-105
Net financial items	-23	-17	-64	-53	-73
Profit/loss before tax (EBT)	47	63	-58	-63	-178

Q3 2020 key figures – balance sheet

• Continued weak NOK vs EUR and SEK affecting the balance sheet
• Goodwill and other intangible assets: NOK 3,028 million
• Cash: NOK 606 million
• Interest-bearing debt including leasing: NOK 1,830 million
  • Operating lease: NOK 158 million
• Net interest bearing debt incl. leasing: NOK 1,223 million
• Equity ratio: 45%

(Amounts in NOK million)
ASSETS	30.09.2020	30.09.2019	31.12.2019
Intangible assets	3 028	2 757	2 799
Right-of-use assets	572	576	522
Total other non-current assets	316	288	301
Cash and cash equivalents	606	74	154
Other current assets	1 654	1 916	1 648
Assets classified as held for sale	0	419	0
Total assets	6 177	6 031	5 423
EQUITY AND LIABILITIES
Total equity	2 795	2 046	2 033
Long-term financial lease liabilities	284	203	214
Long-term operating lease liabilities	104	217	125
Other non-current interest-bearing liabilities	1 109	1 454	1 161
Other non-current liabilities	71	98	34
Short-term financial lease liabilities	117	106	123
Short-term operating lease liabilities	54	66	63
Other interest-bearing current liabilities	162	198	101
Other current liabilities	1 482	1 549	1 569
Liabilities classified as held for sale	0	94	0
Total equity and liabilities	6 177	6 031	5 423

Q3 2020 key figures – cash flow

			Q3	Q3	YTD	YTD	FY
•	Solid cash flow from operating activities of NOK 129 million.	(Amounts in NOK million)	2020	2019	2020	2019	2019
	YTD improvement vs YTD 2019 of NOK 302 million
		Profit/loss before tax	47	63	-58	-63	-178
•	Net cash from investments of NOK -110 million	Net cash flow from operating activities - continuing	129	-21	202	-100	-37
	• Settlement of contingent payment for NSS and GK	Net cash flow from operating activities - discontinued	1	-4	15	55	109
	• Payment for 70% of the shares in GSP	Net cash flow from operating activities	129	-24	217	-46	71
•	Net cash flow from financing activities of NOK -100 million	Net cash flow from investing activities	-110	-4	-148	-1 364	-931
		Net cash flow from financing activities	-100	-112	402	1 108	628
		Net change in cash and cash equivalents	-80	-141	471	-301	-232
		Cash and cash equivalents at the end of the period	606	84	606	84	154

Robust financial position as per 30 September

• Cash position of NOK 606 million
• NIBD of NOK 1,223 million
• Undrawn Revolver Credit Facility of NOK 200 million

Operational review

Improvement programs – activities implemented according to plan

	Sweden	Rail Norway	Finland
People	• New Country Manager and project directors • Strengthen project management skills through internal training and recruiting	• New management team and proven resources in place • Strengthen project management skills through internal trainings and closer integration with Civil	• Strengthen project management skills through internal training and recruiting • Strengthen management capacity in Maintenance
Tender process	• Improve tender process • Pricing discipline key to regain profitability	• Improve tender selection, risk assessment and pricing • Recruit proven calculation resources on complex Rail construction projects	• Group-wide processes on tender process and risk assessment
Execution	• Project- and contract management, cost control and risk management • Extract operational synergies between Rail construction and Maintenance • Joint machine operations with Norway	• Project and contract management, cost control and risk management • Resource planning and sub-contractor strategy • Joint machine operations with Sweden • Cooperation with Civil on complex projects	• Risk assessment to be implemented on new projects • Reorganize machine operations and optimize capacity • Capacity adjustments Maintenance

Execution of cost reduction in Norway and Sweden is going according to plan

NRC Finland – Strong profitability

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

NRC Finland – Confirmed continued high level of investment in 2021

Rail investments and maintenance spending¹ EUR billion, CAGR 2019-24

• Budget proposal Estimated investments and spending at EURO 0.92 Bn
  • Investments and renewals at high levels

Light rail projects

• Continued high investment level expected
• NRC Finland is market leader
• Crown Bridge project is expected to be decided second half 2021

NRC Finland – Increase in tender pipeline from 2021

EUR 0.25 billion tender pipeline²

EUR million value, # of tenders, next 9 months

Tender pipeline

• Increased with NOK 1 Bn from Q220 pipeline
• Mainly increase in Rail construction projects
• Maintenance expected to be at the same level
• Indications of increase in tenders in second half 2021

NRC Sweden – High activity

NRC Sweden – High investment level in line with expectations

Rail investments and maintenance spending¹

Total budget proposal • SEK 30.4 Bn for 2021, +7% higher than estimated in the NTP • The high investment level is expected to continue also in 2022 Rail investments • SEK +2.9 Bn mainly targeted to existing larger projects Maintenance • Additional allocation of SEK 700 mill in 2020 and SEK 500 mill each year in 2021-2023 Renewal • SEK 3.7 bn in 2021 vs SEK 4.3 bn in 2020

Maintenance backlog • SEK ~18 Bn in 2020 and expected to be stable going forward

1) Sweden: National budget 2021 with estimated for 2022-23, Swedish Transport Administration estimates for 2024 excluding estimated railroad tax; Maintenance is including renewal/reinvestments and . Excluding tram and metro

NRC Sweden – Still strong tender pipeline in rail construction

NRC Norway – Low activity and reduced margins

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

NRC Norway - Investment growth in 2021 mainly related to on-going projects

Rail investments and maintenance spending¹

NOK billion, CAGR 2019-24

Total budget proposal • NOK 26.5 bn for 2021, +20% from 2020 and approximately NOK +1.7 Bn vs NTP level for 2021 Rail investments • Increase of NOK +4.5 bn mainly targeted to already awarded Inter City investment (IC) projects in Vestfoldbanen, Meråkerbanen and other IC projects Budget for operations, maintenance and renewal • NOK 9.2 bn - up NOK 0.5 bn mainly related to implementation of ERTMS • Renewal and upgrade NOK 2.3 bn in 2021 (NOK 2.2 bn in 2020) Maintenance backlog • NOK 21 bn in 2020 and expected to increase to NOK 23 bn during 2021

NRC Norway - Strong tender pipeline

NOK 6.1 billion tender pipeline²

(NOK million value, # of tenders, next 9 months)

Strong pipeline

• Continued high tender activity expected
• Decline in projects above 500 million in Rail construction
• Civil and Environment at same level as Q2 pipeline

Summary CEO and CFO

Summary

Financials	• EBITA* margin in Q3 at 4.5% • 2020 EBITA margin expected to be in the lower end of 1.5-2.0% • Solid cashflow from operations
Outlook	• Continued strong outlook for investments in sustainable infrastructure confirmed by budget proposals in Norway, Sweden and Finland • Solid tender pipeline in Norway and Sweden

Organisation • Arild Moe new managing director in Norway

Appendix

Segments – key figures quarterly development

					Reported	Reported	Reported	Reported	Reported**	Reported**	Reported	Reported***	Reported	Reported	Reported
Norway operations (NOK million)	FY 2016	FY 2017	FY 2018	FY 2019	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020
Total revenue	604	771	1 598	2 281	212	335	421	630	470	545	683	583	407	476	541
EBITDA*	13	43	136	186	-1	26	46	65	14	65	75	32	7	50	41
EBITA*	2	21	96	97	-7	19	36	48	-5	43	52	8	-14	27	16
EBIT*	-2	5	75	70	-13	16	33	39	-13	35	45	2	-18	23	16
Sweden operations (NOK million)	FY 2016	FY 2017	FY 2018	FY 2019	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020
Total revenue	1 371	1 613	1 591	1 539	316	498	433	344	299	411	460	370	311	487	583
EBITDA*	173	221	27	-77	9	46	32	-60	-7	-13	14	-71	-15	0	4
EBITA*	160	198	-8	-125	2	38	23	-71	-20	-24	2	-83	-27	-13	-7
EBIT*	136	179	-16	-125	1	37	17	-71	-20	-24	2	-83	-28	-14	-8
Finland operations (NOK million)	FY 2016	FY 2017	FY 2018	FY 2019	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020
Total revenue				2 388					361	601	712	713	540	700	831
EBITDA*				191					4	64	70	53	16	37	100
EBITA*				116					-13	45	55	29	-3	19	84
EBIT*				75					-24	35	45	19	-14	7	72
Total group segment accounts	FY 2016	FY 2017	FY 2018	FY 2019	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020
Total revenue	1 975	2 373	3 176	6 193	528	827	851	971	1 130	1 551	1 850	1 663	1 254	1 661	1 956
EBITDA*	152	236	132	267	2	66	71	-7	-3	103	153	13	-1	81	140
EBITA*	128	190	57	55	-12	51	54	-36	-54	51	105	-47	-54	27	88
EBIT*	99	156	29	-15	-18	48	44	-44	-72	34	87	-63	-69	11	75

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

**Design operations restated as discontinued operations.

***Restated due to deviation from Q4 to full-year 2019 report related to the final settlement of a dispute from 2015 decided by an arbitration court.

Orderbook and order intake Q3 2020

• Order book NOK 6,835 million
• Order intake of NOK 1.2 billion

341

Q3 20

Q2 20

• Announced orders NOK 341 million
• Unannounced orders NOK 852 million

Orderbook indicates moderate growth in 2021

Order book execution by country NOK million

Book-to-bill ratio Period order intake/revenue