Norva24 Group AB: Solid growth, increased adjusted EBITA and strong cash flow

Interim report July-September 2024

July-September 2024

• Growth in revenue from customer contracts of 22.7% and growth in total operating revenue of 18.0%, driven by currency adjusted organic growth of 5.4%, growth from acquisitions of 14.5%. The growth is reduced by 4.5 percentage points due to a revenue adjustment.
• Total operating revenue amounted to NOK 934.8 million (792.2) for the quarter and NOK 2,642.4 million (2,296.2) for the first three quarters.
• Margin reduction on the back of a good quarter last year in Norway, Germany and Sweden, leading to decrease in adjusted EBITA margin for the Group of -1.4 percentage points. Significant margin increase in the Danish operations.
• Profit for the period before taxes was NOK 72.9 million (87.8) for the quarter and NOK 189.3 million (210.3) for the first three quarters.
• Basic/Diluted earnings per share amounted to NOK 0.27 (0.39) for the quarter and NOK 0.70 (0.87) for the first three quarters.
• Signed and completed the acquisition of Rör & Ledningsinspektion i Stockholm AB September 16, 2024.

Significant events after the reporting period

• On April 17, 2024, Norva24 signed an agreement to acquire Vitek Miljø AS. The acquisition of Vitek Miljø AS has been prohibited by the Norwegian Competition Authority. A final decision was published on September 24, 2024. The decision was appealed to the Competition Appeals Tribunal on October 15, 2024. A final decision from the Tribunal is expected in ultimo January 2025.
• On October 15, 2024, Norva24 Group signed a new credit facility agreement with Danske Bank and Skandinaviske Enskilda Banken, replacing the current credit facility in place. The new agreement extends the credit facility for 2 years and increases the facility amount from NOK 1.1 billion to NOK 1.85 billion. In all material aspects, there are no other changes compared to the previous agreement.

Solid growth, increased adjusted EBITA and strong cash flow

In the third quarter of 2024, Norva24 continued to deliver solid total growth at 18% driven by good currency adjusted organic growth of 5%, however the margin decreased on the back of an excellent Q3 in 2023.

Norway had a margin decrease compared to an excellent third quarter last year. Norway was positively affected in Q3 in 2023 by larger assignments being moved from Q2 to Q3 and extreme weather. Norway still maintains a solid margin above 20%. Sweden had a very strong currency adjusted organic growth of 10.1% and a margin in line with a solid performance last year. The total growth of 29% was enhanced by the acquisition of Rör & Ledningsinspektion i Stockholm AB, adding around NOK 18 million of annual revenues. It is also pleasing to see that Denmark continues to improve, with a significant margin increase of 5.4 percentage points for the quarter, driven by the acquisition of Nordic Powergroup.

The Vitek Miljø deal signed in April has not been closed, as The Norwegian Competition Authority has prohibited Norva24's acquisition. We do not see this will impact the Group's ability to do more acquisitions in Norway. The decision has been appealed to the Competition Appeals Tribunal, where a decision is expected ultimo January 2025.

The German operation is still impacted by the weak performance of one large unit. This unit has exposure to the construction industry which has seen reduced activity in Germany in 2024. The Norva24 model has relatively limited degree of cyclicality, which has been demonstrated over the last years, but the negative growth in GDP in Germany in 2023 and 2024 has had an impact on the activity level and hence profitability of the German operations. The impact is more noticeable in Q3. We expect this unit to improve during 2025. In 2023 the unit had high activity in projects signed prior to Norva24's ownership. The projects are currently in the closing phase and uncertainties related to revenue recognition have been identified and amounts have been re-estimated and adjusted accordingly. We will reduce our exposure to such projects going forward as this is not considered core UIM.

In the coming weeks and months, the new business platform including a full suite of processes, systematics and tooling for the operations will be implemented in the first German entities. The platform revolves around a new ERP and Field Service Management solution that has been chosen and configured to be the best in class to suit our operations specific needs. This will give the operations better tools to run the operations, improved possibilities for steering and performance development, and enable greater cooperation among Norva24 units. The roll out will continue through next year, and ultimately comprise all German units.

The second half of the year is seasonally the strongest in terms of cash generation. In Q3, cash flows from operating activities amount to NOK 242 million, compared to NOK 132 million last year. We have initiated measures to reduce working capital in Germany and Denmark. While it is pleasing to see an improved level of NWC compared to the previous quarter, we are still not at the desired level of NWC in Denmark or Germany.

We continue to work relentlessly on operational improvements, and I would like to take the opportunity to reiterate our three strategic initiatives:

1. Price optimization, ensuring compensation for cost inflation

2. Improved utilization of vehicles and personnel

3. Close follow-up of low performing branches through benchmarking, people management and firm action plans

As a clear initiative to improve margins, we are implementing a Norva24 Playbook for margin improvement. The first nine Branches across all geographies are implementing this playbook process during Q4 2024.

The market segments in which Norva24 operates are growing significantly above the general growth of the economy and are a-cyclical. The UIM industry in the four markets is experiencing long-term growth, and our financial performance is primarily dependent on operational execution. The differences in performance between our branches are closely linked to how well the branch is managed, where the right manager can significantly improve an underperforming branch with structured work to optimize prices and utilization. In the 3 years since COVID-19, Norva24 has had a quarterly currency adjusted organic growth at 6% on average.

Finally, let me once again mention the massive remaining potential for consolidation we see in the UIM market. We are the clear leader in Northern Europe and our strong financial profile and attractive cash conversion combined with a net debt/pro forma LTM EBITDA of 2.2 underpin the muscles to reach our 2025 revenue target of 4.5 bn NOK. The long-term strong trends of this industry remain robust and with our well-developed platform, I am highly optimistic about our value creation outlook.

Henrik Norrbom

Group CEO

Webcast with teleconference at 09.30 (CET)

To participate in the conference and access the phone numbers, please use the link below.

Webcast/Teleconference:

https://financialhearings.com/event/48432

https://www.norva24.com/section/investors/

For further information:
Henrik Norrbom, Group CEO
Tel. [phone]
[e-mail]

Stein Yndestad, Group CFO
Tel: [phone]
[e-mail]

[e-mail]

For further information contact:

Stein Yndestad, Group CFO
Tel: [phone]
E-mail: [e-mail]

About Norva24

Norva24 is the leading northern European player in the UIM industry[1] and offers UIM services, such as emptying services, pressure flushing and pipe services. On September 30, 2024, the company operated more than 80 branches[2] in Norway, Germany, Sweden, and Denmark, with approximately 2,000 employees. The company's history dates back to 1919 and Norva24 has since evolved from a company with Norwegian roots to being a market leader in UIM services in Norway, Germany, Sweden and Denmark. Norva24 has a history of completing acquisitions to enter new markets or to consolidate its local market position, taking advantage of the highly fragmented UIM market in Europe, which is characterized by mostly small, local companies. In its four markets, the company has conducted more than 50 acquisitions since 2015.
www.norva24.com.
[1] Measured in revenue.
[2] The term "branch" refers to places of business in various locations in which the company conducts its operations.

This information is information that Norva24 Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2024-11-15 08:00 CET.