Year-end report 2023

Norva 24, Webcast with teleconference, Q4, 2023

February 23rd 2024 09:30 (Europe/Stockholm)
  • Dial-in numbersDial-in number Dial-in number to the teleconference will be received by registering on the link below. After the registration you will be provided phone numbers and a conference ID to access the conference
  • SpeakerCEO Henrik Norrbom, CFO Stein Yndestad
  • ListingMid Cap
  • Revenue 855.7 MNOK (719.5)
  • EBIT 60.0 MNOK (35.3)
  • Cash flow 244.5 MNOK (143.3)

Year-end January-December 2023

October-December 2023

  • Total operating revenue amounted to NOK 855.7 million (719.5), an increase of 18.9%. Currency adjusted organic growth was 5.2%.
  • Revenue from customer contracts amounted to NOK 854.4 million (712.6), an increase of 19.9%.
  • EBIT amounted to NOK 60.0 million (35.3).
  • The period was charged with non-recurring items amounting to NOK 7.2 million (25.8).
  • Adjusted EBITA amounted to NOK 81.6 million (71.0), up 14.9%.
  • Profit for the period was NOK 66.9 million (13.3), up 403.0%.
  • Cash flow from operating activities totaled NOK 244.5 million (143.3).
  • Basic/Diluted earnings per share amounted to NOK 0.37 (0.07).

January-December 2023

  • Total operating revenue amounted to NOK 3,151.9 million (2,466.5), an increase of 27.8%. Currency adjusted organic growth was 6.3%.
  • Revenue from customer contracts amounted to NOK 3,131.9 million (2,445.3), an increase of 28.1%.
  • EBIT amounted to NOK 283.9 million (211.7).
  • The period was charged with non-recurring items amounting to NOK 14.9 million (32.5).
  • Adjusted EBITA amounted to NOK 347.7 million (278.6), up 24.8%.
  • Profit for the period was NOK 226.6 million (139.5), up 62.4%.
  • Cash flow from operating activities totaled NOK 553.9 million (343.3).
  • Basic/Diluted earnings per share amounted to NOK 1.24 (0.76).

Significant events during the January-December 2023 period

  • During the year Norva24 acquired Gravco AS and Septik Tank Co AS in Norway, Tom’s Kloakservice Aps in Denmark and ControTech i Malmö AB in Sweden. Through these acquisitions the Group has added approximately NOK 150 million in yearly revenues.
  • Mikael Smedborn assumed the position as new CEO of Sweden from April 1, 2023.
  • Henrik Norrbom took on the role as Group CEO from September 18, 2023.

Significant events after the reporting period

  • Stein Yndestad has been appointed Group CFO. This is a role Yndestad held from 2017 to Q1 2023.
  • Norva24 acquired in January 2024 Baier Rohrreinigung GmbH in Germany and in February 2024 the UIM operations of Svein Klungtveit AS in Norway in a carve-out transaction. Through these acquisitions the Group has added approximately NOK 65 million of yearly revenues.

The leading European operator in the fragmented UIM service sector

As I reflect on my first full quarter with the company, I am greatly encouraged by the powerful mega-trends fueling UIM (underground infrastructure maintenance) market growth. We are maintaining an aging sewerage infrastructure, that on average exceeds 40 years of age across the four Norva24 markets. As aging pipes require more service and maintenance compared to newer ones, the need for UIM services continues to increase. Furthermore, climate change, more extreme weather, population growth and urbanization are putting the underground infrastructure under more pressure. These drivers are expected to keep the industry significantly outgrowing the general economy.

The markets where Norva24 operate are massive. The total addressable market was around NOK 40 billion in current geographies and more than NOK 140 billion for Europe in total in 2020. This, combined with the robust growth and the low cyclicality, gives reason to be optimistic about the future of Norva24.

Norva24’s leading position in Northern Europe entails competitive advantages from economies of scale, as high density enables better and quicker services to our customers and a superior cost position due to higher utilization. In Norway, Norva24 has an approximate market share of 30%, while in Sweden and Denmark it is around 10%. In the largest of our current markets, Germany, our revenues of NOK 1.2bn represents only a market share of 3 to 4%, so there is ample room for growth through further consolidation of the UIM market in Germany.

Climate change plays a key role in the growth and development of Norva24. We are witnessing increasingly unusual weather patterns both globally and within our markets. Last summer, Norway and Sweden faced 50-year flood levels in certain regions, which led to additional work, and, more importantly, an increased attention to the severe underinvestment in the underground infrastructure. We expect this to lead to increased activity in the UIM industry.

During 2023, the uncertainty surrounding the broader economic development has implications across various industries. The demand for UIM services, however, is to a large extent unaffected by such impacts, and in 2023, Norva24 grew by 22% with currency adjusted organic growth of 6%. In Q4, the growth was 19% and the currency adjusted organic growth was 5%. Our adjusted EBITA margin was slightly lower in Q4 than in the corresponding quarter in 2022, significantly curbed by exceptional weather conditions in the most important regions in Norway and Sweden. Normally Q1 (always winter and always unfavorable conditions) and Q3 (no snow and favorable conditions) are quarters where the weather impact is similar each year, whereas Q2 is impacted by timing of spring, and Q4 is impacted by timing of winter and potential heavy snowfall, effects that differ from year to year and impact comparability of Q2 and Q4 versus the corresponding period the previous year. While the profitability in both October and November 2023 was above the 2022 levels in all markets, the profitability in December was significantly below 2022. December’s weather was notably atypical, exemplified by conditions in Oslo: the month of December in 2023 experienced much colder temperatures, averaging –4.6°C compared to the –0.4°C average of the previous ten years. Furthermore, snow levels in December 2023 averaged 11 cm, almost four times the snow levels during the ten preceding years when it was on average 3 cm. This materialized with extreme snow dumps during very short time periods, paralyzing the areas for some time. Such events occurred both in the south of Norway and Sweden.

Accounting for the severe weather impact in December, we remain on a positive trajectory regarding operating margins from Q3, persistently concentrating on price optimization and improved utilization.

The long-term outlook of the UIM industry has not changed, particularly since severe winter conditions are becoming less frequent, and we firmly believe that we operate within a market that is experiencing growth surpassing that of the general economy.

Despite the margin development in Q4 2023 compared to last year, the long-term trend is that operations that have been part of Norva24 for some time see improved margins. Looking at the portfolio of companies that constituted Norva24 at the end of 2019 (72% of group in 2021) we see a margin improvement of 300 basis points from 2021 to 2023. This underlines the improvements seen as companies get into the operational structure of Norva24. On the revenue side we see the positive effects of cross-selling, improved tender processes, enhanced service offering to regional and national customers as well as improved local density. On the cost side there are benefits from coordinated procurement, shared IT solutions and best practice sharing amongst others.

In Q4 2023, Norva24 achieved a total revenue growth of 19%. Currency adjusted organic growth was 5%. The adjusted EBITA was NOK 82 million, an increase of 15% from NOK 71 million last year. This growth was observed across all markets, with Denmark recording the most significant rise. Norway and Germany had an adjusted EBITA margin reduction in the quarter, where Norway delivered an adjusted EBITA margin of 8% and Germany delivered an adjusted EBITA margin of 14% in the quarter. Sweden had an increase of 70 basis points in the quarter while Denmark continued the improvement from last quarters and improved margins by 530 basis points. Throughout the second half of the quarter, cold weather and heavy snow adversely affected most of our operations, leading to reduced efficiency and decreased customer activity. This impact was most pronounced in December and particularly noticeable in Norway.

The strength of Norva24’s business model is the ability to efficiently convert profits into cash flows. With an operating cash flow of NOK 245 million in the fourth quarter, up 71%, the year-on- year cash conversion of the quarter was up by 50 percentage points to 153%. The operating cash flow for the year also shows a strong cash conversion of 87%. The operating cash flow is significantly stronger in the second half of the year due to the seasonality of our business. Despite the solid cash conversion, the group’s net working capital is higher than it should be, and we are working actively to improve the capital tied up in operations during the coming year.

We are comfortable with our financial position, excellent cash flow and a leverage just below 2.0x LTM adjusted EBITDA at the end of Q4. During the last 12 months we have had cash flow from operating activities amounting to NOK 554 million. This is providing us with significant headroom in relation to our financial covenants in the financing facility. In addition to our current cash balance of NOK 267 million, we currently have NOK 500 million available in the credit facility to enable continued strong M&A pace going forward.

We have a solid M&A pipeline and during 2023 four new entities were acquired and consolidated. They represent around NOK 150 million of yearly revenues and have healthy profit margins.

The target group of companies in the pipeline are well-run and profitable medium-sized operations with a strong local presence and brand name.

Henrik Norrbom

Group CEO

“We are comfortable with our financial position providing us with significant headroom to enable continued strong M&A pace.”

Webcast with teleconference at 09.30 (CET)

To participiate in the conference and see the phone numbers, please go to link below

Webcast/Teleconference :

For further information:
Henrik Norbom, Group CEO
Tel. +46 72 708 1515

Stein Yndestad, Group CFO
Tel: +47 916 86 696


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