NTG Nordic Transport Group AS
CSE:NTG
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
250
314.5
|
| Price Target |
|
We'll email you a reminder when the closing price reaches DKK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
NTG Nordic Transport Group AS
You don't have any saved screeners yet
Welcome to our Q3 webcast presentation, and thank you for dialing in. If we move on straight to Page #3. Here, you see the presenting team. My name is Michael Larsen, and I'm the group CEO of NTG Nordic Transport Group. And with me today, I have Christian Jakobsen, our group CFO. If we then flip to Page #4. These are the topics that we intended to go through on the presentation today. And we'll end the presentation with a Q&A session, where the line will be open to questions from the audience. If we move on to Page #5. These are the main highlights for the third quarter. Q3 was a very busy quarter for us as the strong rebound in activity resulted in a lot of goods being moved across borders. But from a management perspective, that amount of resources has also been spent on making sure that we are fully capable of serving customers after Brexit. Also continuing to harvest the remaining synergies in Ebrex and to push forward with the restructuring of Gondrand. And we are, therefore, very pleased to see that the hard work is starting to pay off now. For example, we achieved a record high-margin of 5.7% in Q3. And we have already harvested more than 50% of the synergies in Ebrex. And last, but certainly not least, the extensive efforts to restructure contracts are now starting to bear fruit. And I'm very happy to say that Gondrand contributed positively to the adjusted EBIT in Q3 with approximately DKK 1.8 million. As a result of this strong performance, we updated our guidance on the 22nd of October to an adjusted EBIT between DKK 240 million and DKK 260 million compared to our previous range of DKK 200 million to DKK 230 million. In addition to COVID-19, Brexit is another factor that causes uncertainty in the freight boarding market for the moment. And the situation is likely to have caused elevated activity in September 2020, and it may continue into Q4 as well. But in any case, we are fully prepared to support existing and new customers with the customer services as we have implemented and internally recognized custom software in our U.K. Growth and Logistics division. The software will be fully integrated with our TMS in Q1 2021. With these words, Christian will now take you through a financial review of the results in the third quarter.
Thank you, Michael. As Michael mentioned, Q3 has been a busy quarter. Remember, we're very proud of the financial results that we present today, especially in these uncertain times. If you flip to Page 6, then we have presented the main highlights of the group. Net revenue in Q3 reached close to DKK 1.4 million, up 2.6% versus the same quarter last year. The organic growth was minus 3.6%. And growth from the Ebrex acquisition was 6.2%. I'll delve deep on the growth component when we go through each segment shortly. But in general, Q3 was characterized by a strong performance in the Road & Logistics division and an Air & Ocean division that continues to be impacted by the unusual market situation. Adjusted EBIT increased 53% to DKK 78 million in Q3. The margin was up 5.7% versus 3.8% in Q3 2019. And as Mike mentioned, this is the highest margin in NTG's history. The increase was driven by exceptionally -- sorry, the increase was driven by exceptional performance in the Road & Logistics division, which I'll come back to on the next slide. But before we flip page, I just want to repeat what Mike said, highlight is that Gondrand, for the first time, showed flat numbers in Q3. We have worked hard to achieve that, and it's something which is a turning point for us. But we will also keep working hard to increase the EBIT in the Gondrand division. Now we can flip to Page 7, where we have shown the results of the Road & Logistics division. The division realized net revenue in Q3 of DKK 1.3 billion, 10% above the same period last year. The growth was primarily driven by the acquisition of Ebrex, which contributed to 8.1%, but also a strong growth in the existing business of 3.5%, which mainly originating from the retail, e-commerce, automotive and recycling sectors. Please also remember that we've had a close-down of our nonperforming activities in Germany, Italy and Czech Republic, which had a negative effect on the growth of minus 2%. In total, the organic growth was 1.7% in Q3. Adjusted EBIT increased 77% to DKK 74 million, corresponding to a margin of 6.5% versus 4.1% in Q3 2019. The increase was driven by the gross margin uptick, resulting from a favorable development in direct costs, and the increase of conversion ratio, resulting from economies of states in our mature packs in Denmark, Sweden, Finland and Poland; the successful turnaround of nonperforming entities in Germany; and then we had the divestment of the loss-making activities in the Czech Republic which in Q4 2019. In addition to that, the acquisition of Ebrex had a positive effect on the adjusted EBIT margin. And then if we flip to Page 8, then we have presented the Air & Ocean figures. As you see the results of the Air & Ocean division, you see that we have realized a net revenue in the quarter of -- fourth quarter of DKK 236 million, which is 20% below the same period last year. The negative growth was driven by demand remaining significantly below at prepandemic levels and the close-down of nonperforming activities recently. And then we also made some downstream in underperforming activities around -- in the division. However, our start-ups in the U.S. contributed positively to the growth in Q3. Adjusted EBIT decreased 59% to DKK 4 million, corresponding to a margin of 1.6% versus 3.0% in Q3 2019. The development was driven by the tough market situation, the division's limited scale and low performing with changes. Partially offsetting these challenges, we also saw positive developments in more countries. We are not satisfied with the results in the Air & Ocean division and we stay committed to strengthen the performance by increasing the division's scale, introducing efficiency improvements across the Air & Ocean subsidiaries. And we'll work hard in Q4 and in 2021 to achieve these. And then we flip to Page 9, where we presented some of the key figures. In the top left, you see the net working capital. We are still on a very attractive level at minus DKK 176 million. Please remember that Q3 is normally showing a high networking capital. The increase was mainly driven by to -- in the Q2 was mainly driven by the expiry of deferred payments on certain public debt programs or an effect of approximately DKK 10 million and a reclassification of Danish Holidays payment with [indiscernible] of DKK 13 million. It has been now reclassified as interest-bearing debt as 30th September, 2020 which is due to the new Danish Holiday Act. The strong operating performance and a very efficient cash management enabled us to generate a lot of cash. And as you see on the top right, the adjusted cash flow of DKK 36 million in Q3 2020. Finally, in the bottom, interest-bearing debt, excluding IFRS 16, continues to expand into negative territory. And as a result of the strong cash flow in Q3, we have a net cash position of DKK 173 million at the end of Q3. And then we flip to Page 10. Then we have our outlook. We have announced -- updated the outlook at 22nd of October 2020. We'll maintain this guidance. And for the full year, we expect a revenue of DKK 5 billion to 5.4 billion and adjusted EBITDA of DKK 240 million to DKK 260 million. However, this guidance remains subject to more uncertainty than usual. Visibility is really limited at the moment. And we face the assumption of unchanged market position in Q4 and no new material adverse events. Finally, we reiterate our estimated minority shares of adjusted EBIT for 2020 of around 10%. And then on which this compares with 11.1% for the first 9 months of 2020. And then we are open -- we will be open for questions from the audience.
[Operator Instructions] The first question comes from the line of Marcus Bellander from Nordea.
Thank you. A few questions to start with some housekeeping items. Revenue in Q3 was quite a bit higher than you indicated when you issued your trading update in October. I'm just curious as to what happened there.
I don't think anything happened. We were a little bit conservative before finalizing our figures. So -- and then when we choose a conservative approach on that and we said at least, so I think that we are around what we guided.
All right. And I noticed there are no special items in Q3. Does that mean there were no restructuring costs related to Ebrex?
We are expecting that the large part of the Ebrex will probably be in Q1 2021. I might comment a little bit in Q4, but then the last half of the year and the main part will be in Q1 2021.
Okay. Okay. So no change in your expectations regarding integration costs?
No.
Okay. Great. And then regarding Air & Ocean, revenue is down quite a bit in Q3 compared to Q2. And I guess that's a slightly different development than we've seen from other freight forwarders. Most of them seem to show progress in Q3 versus Q2. I'm just wondering why -- what's going on in your Air & Ocean business and why it differs so much from the market?
I think that we are -- we have, as we said, down still some of our low-performing activities and nonperforming activities, so that definitely has an impact. And then we are also a little bit changed with the margin conditions. We saw, however, that it was also picking up at the end of September. So I don't think that it's -- and then we have some customers who have more or less. So we don't see that we have lost any particular customers in Q3 versus Q2. So I think there's a lot of minor components in that development.
Okay. Okay. Understood. And yes, can we also talk a little bit about the new incentive program that you're launching? I mean, we got most of the details yesterday, but I guess I'm curious to know how many people will be part of this incentive program.
Yes. So we are in early days, we have just rolled it out and had some plans with some people in the moment. I think that just we are having plans of around something below 50 and probably also above 30, so in that range that we will see to start with, but we will start working with this instrument and now it's the replacement of the partnership model. So we will slowly also roll it out more down in the organization. So that's how we see it at the moment.
And how do you decide -- I mean, is it 1 or 2 people per subsidiary that gets to be a part of it? Or is it only the best-performing subsidiaries? What are the inclusion criteria?
The inclusion criteria will be, of course, the most important people and that not. And we can't say whether it's 1 or 2 in 1 pet or it's more than 1 pet. we will have focus on the top performers that we would incentivize them and also have some retention probably in that. So that is the idea of the program.
Okay. And what decides whether they get allocated options or warrants?
I think that we will make a focus on giving options to the basic employees down in the organization. And once, I think it will be more limited to how we will deal with that.
Okay. Because I seemed to recall from the press release that there were, was it 700,000 warrants being awarded, and 550,000 options or something so.
I think for the persons in group, that would mainly be the warrants and key persons in the group. And then for the key persons in the subsidiaries, it will mainly be share options.
Okay. Okay. Okay. Yes, I understand. I understand. And these options and warrants, they will be allocated before the end of 2021 essentially, and then this program will just run its course, I guess. But what about new people? Will there be another program or new options in 2022, for example?
Of course, it hasn't been decided, but it would be very easy to assume that. But we haven't made any decisions about 2022 yet. But we see it as a new instrument that we will use as another replacement of the partnership model products as a supplement to the partnership model, so probably, but I can't tell you what it -- why it was that.
Okay. Okay. Understood. Yes. And then one last question for me. When it comes to recruitment of a new, well, CEO or Head of the Air & Ocean division, how is that process going?
Yes, it's progressing. We have had a lot of interesting dialogues, and we hope that we can do the closing that you've somebody, what else. We can't say anything at the moment.
[Operator Instructions] Dear speaker, there are no further questions at this time. Please continue.
Okay. Thank you very much for listening. We will go back and work hard and keep the high performance, and then we will talk to you again in March. Thank you very much.