Solid organic growth in most markets during the first quarter
• Total operating revenue amounted to NOK 526.4 million (408.9), an increase of 28.7%. Currency-adjusted organic growth was 13.1%.
• Revenue from customer contracts amounted to NOK 518.2 million (407.4), an increase of 27.2%.
• EBIT amounted to NOK 36.3 million (20.4).
• The quarter was charged with non-recurring items amounting to NOK 0.0 million (–6.5).
• Adjusted EBITA amounted to NOK 43.3 million (33.2).
• Adjusted cash EBITA amounted to NOK 46.2 million (31.8).
• Profit for the period was NOK 18.2 million (–5.4).
• Cash flows from operating activities totaled NOK 34.4 million (41.8).
• Basic/Diluted earnings per share amounted to NOK 0.10 (–0.37).
Strong organic growth and record high Q1 margin in Norway
2022 is off to a promising start, confirming that we are on the right track towards achieving our financial targets in 2025. In Q1 2022, Norva24 achieved satisfactory total revenue growth of 29%, supported by strong currency-adjusted organic growth of 13%. Our acquisition pipeline remains solid, and we expect 2022 to be a strong acquisition year. Adjusted EBITA in the quarter was NOK 43 million, an increase of 30% year-on-year.
Norva24’s organic growth of 13% and satisfactory margin development in Q1 proves that our business model is inflation resistant. As previously communicated, we expect customer price increases to compensate for potential cost increases (e.g., fuel, energy and salaries) in 2022 and it is important to note that fuel only accounts for 6% of our revenues.
Year-on-year margin development is positive, although marginally, and we also see an improvement to the organic EBITA margin compared to the same period last year.
Norway’s performance for the quarter was robust, with 21% organic growth and a 14% adjusted EBITA margin driven by a very high overall level of activity, price adjustements and the backlog of postponed assignments from 2020 and 2021 due to Covid-19. Q1 is usually a quarter with lower activity in Norway due to the cold weather, so it is gratifying to see the strong performance of the Norwegian business with solid growth across different customer segments and branches.
The signs of improvements we noted in the Danish operations in previous quarters continued in the first quarter with double-digit organic growth and a 7 percentage point improvement in adjusted EBITA margin year-on-year. The first-quarter figures confirm, in line with our previous communication, that Denmark is on the right track.
Growth in Sweden was also strong, with total revenue growth of 65% due to acquisitions combined with currency-adjusted organic growth of 12% driven by increased customer activity, operational improvements that resulted in greater utilization of personnel and vehicles, and general price increases. In addition, we also noted clear signs of improvement in the one underperforming branch, which we expect will continue.
The omicron variant of the Covid-19 virus had a greater impact on sick leave in Q1 compared to the first quarter in previous years. The restrictions in Scandinavia generally differed from that in Germany, which resulted in differing impacts on sick leave ratios. In Scandinavia, short-term sick leave increased by 3 percentage points between Q1 2021 and Q1 2022, and in Germany short-term sick leave increased by 5 percentage points from 4% to 9% over the same period. This development was driven by sickness and not quarantine restrictions. The increased absence of staff has temporarily impacted our business operations, growth and margin in Germany. Despite this, the segment posted a healthy Q1 EBITA margin of 12%.
As communicated in the IPO process and in the Q4 report, Q1 is historically the weakest quarter due to weather conditions and lower levels of activity in the UIM market. As a result of this seasonality, the margin is significantly lower in Q1 than in the other quarters of the year, which is also the case this year.
Regarding acquisitions, two deals were signed. One is Zimmerbeutel in the Rhein/Ruhr area of Germany and the other is IRG Rörinspektion in the Gothenburg region in Sweden. Both companies have a strong local position in strategic markets, and I welcome them to the Group. Both deals were closed in April.
With the acquisition of Zimmerbeutel, Norva24 has now expanded into the strategically important German Rhein/Ruhr metropolitan area.
Moreover, IRG Rörinspektion is strategically important for our development of new technological solutions within IoT, sensor technology and digital monitoring in addition to regular UIM services on the west coast of Sweden. We are already working to integrate IRG’s state-of-the-art technical solutions for use across the Group’s branches to improve customer service level and drive growth.
Norva24 has acquired a total of ten companies since Q4 2020, adding annual revenues of NOK 700 million. In 2022, two acquisitions were completed, and with a strong pipeline of acquisition candidates and solid financing capabilities we expect high levels of acquisition activity going forward. We will continue to act in a prudent and orderly fashion in accordance with our acquisition strategy, with diligent assessment and integration of candidates, in order to ensure continued strong organic development.
Our vision is clear: We want to be the market leader in underground infrastructure maintenance in Europe. We will continue to strengthen our position through both acquisitions and organic growth in order to fully live up to our promise to our customers: “We always help!”
The market we operate in is non-cyclical, and our business is resilient as our services are mission-critical with market growth driven by factors such as an ageing underground infrastructure, increased regulation, and a higher frequency of extreme weather events due to climate change. Our services are critical to the functioning of society and there is a need for them regardless of any economic cycles and inflationary environments.
We have a clear and proven consistent acquisition strategy, with 34 acquisitions completed since Norva24 was established. We operate in the European UIM market, with a total addressable market of NOK 140 billion, and have a clear #1 position in Northern Europe, a market worth NOK 36bn, which provides a unique opportunity for a compounder like us to reach our financial target of 4.5bn in revenue by 2025.
Maintenance of underground infrastructure is a key factor for a sustainable future, and we recently presented Norva24’s first sustainability report as a listed company. We work continually to further develop Norva24’s sustainability initiatives to safeguard the UN Global Sustainable Development Goals for clean water, sanitation and clean energy in order to further consolidate our position as the leading player in the industry.
Chief Executive Officer
Strenghtening of Group Management
In order to strengthen the Group Management Team in Norva24 and prepare for further expansion, current Group CFO Stein Yndestad will become Group Chief Business Development Officer reporting to Group CEO and remaining part of the Group Management Team. In this role, Stein Yndestads main responsibilities will be M & A, geographical expansion and investor relations – areas of responsibility that Stein Yndestad has extensive experience with. Stein Yndestad will remain in his current role as Group CFO until a new Group CFO has been recruited and has started in this role.
Shareholders, Investors, analysts and journalists are welcome to attend the company’s presentation in Stockholm or webcast with teleconference at 09.30 (CEST) on the same day.
Henrik Damgaard, CEO, Stein Yndestad, CFO, and Sture Stölen, Head of IR, will present the report. The presentation will be held in English.
Date: 31 May 2022
Time: Report published at 08.00 (CEST)
Webcast with teleconference at 09.30 (CEST)
To participate in the conference, please go to link or dial in on the telephone numbers below
If you want to be present physically at the meeting in Stockholm please send an email to firstname.lastname@example.org to register to get details of venue.
- DE: +4969222220377
- DK: +4578723250
- SE: +46851999383
- UK: +443333009262
- US: +16467224957
For further information contact:
Sture Stölen, Head of IR
Tel: +46 723 68 65 07