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Second quarter 2017 Investor presentation
18 August 2017
1
Content
2
§ Highlights - Morten Holum, CEO
§ Results and financials - Svein Vestermo, CFO
§ The road ahead - Morten Holum, CEO
Saferoad Group was listed on the Oslo Stock Exchange on 29 May 2017 with the ticker “SAFE”
Highlights Q2 2017
3
§ Revenue growth § Stable earnings § High activity in main markets
§ Cost efficiencies and strategic portfolio adjustments
1,597 1,701 1,537 904
1,626
-
500
1,000
1,500
2,000
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying revenue, NOK mill.
152 221
152
(56)
153
-100
-
100
200
300
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying EBITDA, NOK mill.
Stable underlying Group earnings
4
Underlying EBITDA – change quarter-on-quarter Underlying EBITDA margin, rolling 12 months
152 153
100
110
120
130
140
150
160
Q2 16 RS Nordic RS Europe RI Nordic RI Europe Other & elim.
Q2 17
NOK million
Road Safety Road Infrastructure
9.0 % 9.1 % 9.3 % 9.5 % 9.5 %
7.1 % 7.7 % 8.0 %
7.3 % 6.7 %
0%
2%
4%
6%
8%
10%
12%
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
NOK million
Road Safety Road Infrastructure
(7) (3) (7) 10 6
Key developments in the quarter
5
§ High activity in the Nordics, good traction in work zone protection
§ Positive market development in Germany and Poland
§ Export sales picked up in the quarter
§ Large contract of NOK 50 million in Denmark for a full range of road safety solutions in 2017-2019
§ Stable Nordic markets § Favorable European market conditions,
particularly for EU-financed projects in Poland and in the Baltics
§ Export activities are increasing
§ Reached agreement to divest the Water & Sewage business in Sweden for approximately SEK 90 million
Road Safety Road Infrastructure
6
Results and financials Svein Vestermo, CFO
Overview – Group and business areas
7
Amounts in NOK million
Second quarter 2017 Second quarter 2016 Last 12 m – June 2017 Last 12 m – June 2016
Operating revenues* EBITDA* Margin* Operating
revenues* EBITDA* Margin* Operating revenues* EBITDA* Margin* Operating
revenues* EBITDA* Margin*
Road Safety Nordic 769 86 11.1% 758 93 12.3% 2 668 233 8.7% 2 673 273 10.2%
Road Safety Europe 368 38 10.2% 356 27 7.6% 1 451 153 10.6% 1 394 85 6.1%
Total Road Safety 1 123 123 11.0% 1 100 120 10.9% 4 044 386 9.5% 3 984 358 9.0%
Road Infrastructure Nordic 236 18 7.8% 261 21 8.1% 819 49 5.9% 824 32 3.9%
Road Infrastructure Europe 301 19 6.5% 272 26 9.6% 1 001 70 7.0% 1 075 104 9.6%
Total Road Infrastructure 519 38 7.3% 510 47 9.3% 1 765 119 6.7% 1 841 131 7.1%
Other and Eliminations (15) (9) - (13) (15) - (40) (35) (37) (42) -
Total Group 1 626 153 9.4% 1 597 152 9.5% 5 768 468 8.1% 5 787 448 7.7%
* Underlying figures
Road Safety Nordic – on track
8
§ Sales and earning improvements in signs and work zone protection
§ Margins in road restraint systems were lower than the same quarter last year, but higher than the fourth quarter 2016
§ Lower export volumes of rock support products
§ Lower capacity utilization in the production
2nd quarter Year to date
NOK million 2017 2016 2017 2016
Underlying operating revenue 769
758
1 218
1 198
Underlying EBITDA 86
93
67
71
Underlying EBITA 65
73
25
32
Reported EBITDA 73
93
54
67
Underlying EBITDA margin 11.1 % 12.3 % 5.5 % 5.9 %
93 112
53
(19)
86
-40
-20
-
20
40
60
80
100
120
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying EBITDA, NOK million
Road Safety Europe – solid performance and improved margins
9
§ 8% revenue growth adjusted for sale of Limes Mobile
§ Increased sales volume within road restraint systems in Poland and Germany - Large upfront material sales due to new regime
- Increased export sales
§ Sales volume positively impacts margins
§ Improved operational efficiencies and supply management
2nd quarter Year to date
NOK million 2017 2016 2017 2016
Underlying operating revenue 368
356
588
575
Underlying EBITDA 38
27
39
22
Underlying EBITA 31
19
27
6
Reported EBITDA 32
27
50
22
Underlying EBITDA margin 10.2 % 7.6 % 6.6 % 3.9 %
27
49 66
1
38
-
10
20
30
40
50
60
70
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying EBITDA, NOK million
Road Infrastructure Nordic – on par with last year
10
§ Decline in total sales - Lower sales of traded products in Sweden
- Sales impacted by phasing of projects within technical products year over year
- Combined sales in Norway, Finland and Denmark on par with last year
§ Earnings and margin on par with last year
§ Agreement to sell water and sewage business in Sweden
2nd quarter Year to date
NOK million 2017 2016 2017 2016
Underlying operating revenue 236
261
371
403
Underlying EBITDA 18
21
10
13
Underlying EBITA 18
20
8
11
Reported EBITDA 18
21
10
13
Underlying EBITDA margin 7.8 % 8.1 % 2.7 % 3.2 %
21 33
5
(9)
18
-20
-10
-
10
20
30
40
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying EBITDA, NOK million
Road Infrastructure Europe – high sales activity
11
§ High sales volumes of plastic pipes in Poland and the Baltics
§ Export sales picked up towards the end of the quarter
§ Earnings and margin negatively impacted by product mix - Higher share of plastic pipes and water and
sewage products
§ Acquisition of Elikopol in Poland approved in August
2nd quarter Year to date
NOK million 2017 2016 2017 2016
Underlying operating revenue 301
272
426
425
Underlying EBITDA 19
26
1
22
Underlying EBITA 13
19
(11)
9
Reported EBITDA 19
26
1
22
Underlying EBITDA margin 6.5 % 9.6 % 0.3 % 5.2 %
26 36 33
(18)
19
-30
-20
-10
-
10
20
30
40
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Underlying EBITDA, NOK million
Profit and loss statement
12
2nd quarter YTD
NOK million 2017 2016 2017 2016
Operating revenue 1 625 1 597 2 546 2 526
Total operating cost (1 539) (1 445) (2 513) (2 427)
EBITDA 86 151 33 99
Depreciation and impairment (37) (40) (74) (80)
EBITA 49 111 (41) 19
Amortisation and impairment (16) (19) (32) (41)
EBIT 33 92 (73) (21)
Net financial income/expense 128 (76) 72 (163)
Income (loss) before tax 161 16 (1) (184)
Income taxes (17) (15) 15 20
Net income (loss) 144 1 13 (165)
Of which non-controlling interests 5 9 (4) 6
Earnings per share (NOK) 2 0 0 (3)
EBITDA reported 86 151 33 99
Items excluded from underlying EBITDA 67 1 63 6
EBITDA underlying 153 152 96 105
§ Reported EBITDA of NOK 86 million impacted by transaction costs related to the listing on the Oslo Stock Exchange
§ Increase in financial income mainly explained by debt extinguishment of NOK 139 million
§ Financial expenses impacted by significantly lower level of net interest bearing debt going forward
-400
-200
-
200
400
600
800
1,000
1,200
1,400
Cash per 31.03.17
EBITDA underlying
Non-recurring items
Changes in working capital
Other items Net CF from investment activities
Proceeds from share issue
Net proceeds from borrowings
Other financing activities and fx
Cash per 30.06.17
NO
K m
illio
n Development in cash flow during Q2 2017
13
Cash flow from operations Cash flow from financing activities
102
153
(67)
(212) (18) (48)
1 400
(1 019) (58)
234
Balance sheet
14
NOK million 30.06.2017 30.06.2016 31.12.2016
Total intangible assets 1 548 1 878 1 524
Total fixed assets 940 953 934
Other non-current assets 79 54 57
Total non-current assets 2 567 2 884 2 515
Inventories 1 144 1 004 910
Trade receivables 1 076 934 844
Other receivables 366 312 220
Cash and cash equivalents 234 179 329
Total current assets 2 822 2 428 2 302
Total assets 5 389 5 312 4 818
Share capital 7 0 2
Other equity 2 599 637 968
Non-controlling interests 38 251 252
Total equity 2 643 888 1 222
Provisions 53 68 56
Non-current liabilities 1 453 2 899 1 950
Total non-current liabilities 1 506 2 967 2 006
Accounts payables 730 615 496
Other current liabilities 510 842 1 093
Total current liabilities 1 240 1 457 1 589
Total shareholders' equity and liabilities 5 389 5 312 4 818
§ Comprehensive changes in debt and equity during the quarter due to IPO and refinancing
§ Equity ratio at the end of the quarter at a solid 49 % up from 25% at year-end
§ Net interest bearing debt at NOK 1.2 billion. Net interest bearing debt to underlying EBITDA ratio of 2.6 at end of quarter
§ The Group’s financial position is good, with sufficient financial capacity to execute the current projects and initiatives
15
The road ahead Morten Holum, CEO
491 615
2015 2019F
We are executing our strategic agenda
16
Grow our business in attractive markets
1
Raise profitability through operational
improvements
2
Optimise the portfolio
3
Road spend is growing in selected Saferoad markets1 (NOK bill.)
1) Source: External market study, Euroconstruct, European Commission; EU Energy, Transport and GHG emissions – Trends to 2050, World Economic Forum – The Global Competitiveness Report 2015–2016, European Transport Safety Council, OECD ¹ Norway, Sweden, Germany, Poland, Lithuania, Romania, Denmark, Finland, UK, Turkey, Hungary, Czech Republic
+6% p.a.
Large, well funded road infrastructure development programs underway in key markets
Leading positions in the most attractive geographies
Moved labour intensive products to our own low cost facility in Poland
Invested in a fully automated production line for lighting columns
Divestment of Water & Sewage business in Sweden to focus on technical products
Acquisition of Elikopol in Poland to strengthening our position in Road Infrastructure in Europe
Short-term outlook
17
Road Safety Road Infrastructure
§ High project tender activity in the Nordics
§ Efficiency measures to gradually impact earnings
§ Underperforming RRS business in Sweden. The Group is launching additional measures
§ Strong demand in the two main markets in Europe, Germany and Poland
§ Competitive situation is tightening
§ The activity in the Nordic markets is high but the pricing environment in Finland has tightened
§ The Polish market remains strong
§ Project activity in the Baltics is increasing
§ Order situation better than a year ago and includes a larger export project
Our medium term financial targets
18
Organic growth
EBITDA margin
Net debt / EBITDA
Dividend policy
~5%
10%
<2.5x
~50%
Saferoad targets ~5% annual revenue growth in the medium-term supported by a healthy market outlook
Potential for additional growth through selected acquisitions to strengthen current strongholds and grow into new segments or geographies
Saferoad targets to develop its underlying EBITDA margin towards 10% in the medium term
Business mix shifts, procurement optimisation, production consolidation and other margin enhancing initiatives expected to have significant positive impact
Saferoad targets a net debt in relation to underlying EBITDA below 2.5x, with some flexibility to handle normal business seasonality
The capital structure should allow the company to explore strategic opportunities, including M&A, while maintain a robust financial position
Saferoad targets dividend payments corresponding to ~50% of underlying net income, with a potential to increase this ratio over time
The dividends should be carefully considered in relation to liquidity position, future cash flow, investment needs as well as strategic opportunities
Summing up
19
§ Q2 2017: continued growth and stable earnings
§ Executing the strategy to reach our targets
§ Positive overall market outlook
§ Cost and operational improvement initiatives
§ Portfolio optimisation
Saferoad has been awarded a contract for Fjord Link Frederikssund in Denmark, delivering guardrails, bridge parapets, signage, noise protection, road marking and work zone protection solutions in excess of NOK 50 million in 2017-2019