Multiconsult ASA
OSE:MULTI

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OSE:MULTI
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Price: 188.5 NOK 1.34% Market Closed
Market Cap: 5.2B NOK
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Earnings Call Transcript

Earnings Call Transcript
2021-Q4

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G
Grethe Bergly
Chief Executive Officer

Good morning, and welcome to this fourth quarter and full year presentation for 2021 for Multiconsult. My name is Grethe Bergly. I'm the CEO. And with me today, I also have our CFO, Hans-Jorgen Wibstad, who will take you through some of the more details regarding the figures for this year. We come out of this quarter with a revenue of just about NOK 1 billion and an EBIT of NOK 90 million. For the year, the same figures are NOK 3.8 billion and the EBIT of around NOK 350 million. It's important to note that the Erichsen & Horgen, the purchase we did just after the summer, is included in all these figures. We have a billing ratio of 70.5 for the quarter and 70.4 for the full year. Operating expenses came in at NOK 139 million for the quarter and NOK 450 million for the year, giving an earnings per share of NOK 8.67. Looking at the fourth quarter. We have -- we come out of the quarter with a solid profitability, good cash flow, and we leave the quarter with a robust financial position. We have strengthened our market position through acquisitions and also some of the contracts that have been awarded in the quarter. We have completed a successful integration of Erichsen & Horgen into the Norwegian engineering business, and we have strengthened our position in Nordland County through the acquisition of Nordland Teknikk. The quarter shows a solid performance through our continued focus on core business, sales and project execution. We have also completed our share purchase program for our employees. That's where we see now an increase in the number of employees who are also then part owners of Multiconsult. And the Board will propose a dividend of NOK 6 per share at the General Assembly. Looking at the fiscal year 2021. We have had solid profitability and operations. We have strengthened the footprint through strategic acquisitions. We have also strengthened market position, and we see a substantial increase in revenue from new industry and the green shift. And in the third quarter this year, we launched our new strategy and new strategic direction and also our ambitions. Some of the projects that we would like to highlight from this year is Sotra Link. It is the largest infrastructure project in Norway ever, where we are just now working very intensely with the consortium of 3 contractors. Construction City, large development here in Oslo, 90,000 square meter of office space that our arkitektur LINK are just now involved with the detailed engineering of. We have also the Ocean Space Center, just awarded after the new year. This is an ambitious plan for the Norwegian authorities to create Norway as an important player in the opportunities given by the ocean space. And we are very pleased to have been given the trust from Statsbygg to be their adviser on the development of this. There's also a huge project in Poland, a hub being developed for roads, rail and airports just outside Warsaw. And last, I would like to mention a project in Mozambique, where we are working with our client to get an independent power supplier for solar energy to provide very highly needed energy sources in Mozambique. Looking at the order intake. For the fourth quarter, it was NOK 1.1 million -- NOK 1.1 billion. And for the year 2021, it was NOK 4.3 billion. There's -- slightly down from the fourth quarter, if you compare the quarters, but this is within the variations that we expect to see as our portfolio gradually become more and more with large projects. And sometimes the contracts are awarded just after the calendar year, sometimes just before. So looking at our order book. We can see that there's a slight -- a very small movement. This is a very solid order book. And I would also need to mention that the order book of the Erichsen & Horgen is not included in these figures. We are just in the process now of aligning the figures according to Multiconsult Group's practice, and we will include this then from the first quarter 2022. Again, I remind you all that the sales in connection with frame agreement is not included until the call-off has been made. If you look at the strategic moves for 2021. We've had growth through 3 acquisitions, the major one being Erichsen & Horgen, but also Nordland Teknikk and Smidt & Ingebrigtsen. It gives us a #1 position now within HVAC, energy and environment, and we are also well positioned to take the #1 place within Buildings & Properties. We have strengthened our geographical footprint in Innlandet. We haven't had an office there previously. In Nordland and Vestland counties and also strengthened our position in the large industrial area of Grenland, just southwest of Oslo. We have also made our first investment in the startup sector with 7Analytics. We're working here together with this model platform provider to look at models for surface water, both with respect to -- with today's situation, but using artificial intelligence, modeling what it would be like in the future. And dealing with water would be a major challenge for society as we see the climate changes going forward. The green shift. We see now that there's unleashed new opportunities. We have a strong position here in a growing market, and we've had a significant growth in revenue in 2021. And we see that we can now leverage on the experience and the expertise that we have working -- from working within renewable energy, oil and gas and industry. And I would like to give you some insight into 5 projects where we are involved at the moment. One is the NOA Krafla platforms where we're now helping the client to power it from shore. Similarly, with a huge onshore plant at Melkoya electrification, giving assistance on how to increase the power in this area. We are also doing work in connection with electrification of the Grane field. And then this very important project for Norway as well in creating a position with technology with regards to carbon capture. And there's a huge development called Northern Lights, where we are involved for the clients, Equinor. And last, I would like to mention this Horisont Energi, the client, where we are now looking at first phase at developing the largest -- the first large-scale factory for producing ammonia. And there are plans here to make a hub to create an industry of this in Norway. Organization and people. We are 3,192 employees as we leave 2021. We've had a substantial increase compared to the fourth quarter in 2020. We have the acquisition of Nordland Teknikk. And we also had Ida Bryn, appointed Discipline Sector Director of HVAC Energy and Environment. And just to remind you all, skilled engineers is the foundation for everything we do in Multiconsult. We were also part of the team who have been awarded the Name of the Year in Norway. And this is the group of people who was part of the rescue team in connection with the quick landslide in Gjerdrum just at the start of 2021. There is also some increased short-term sick leave in the quarter related to COVID-19, and this is in line with what society as a whole is experiencing at the moment. And with that, I give you over to Hans-Jorgen, who will take you some -- through some of the details.

H
Hans-Jørgen Wibstad

Thank you, Grethe, and good morning. I will, as usual, take you through the fourth quarter results as well as the full year 2021. The net operating revenues ended at NOK 1.068 billion, which is a healthy increase of 10.5% compared with the same period last year. The increase is particularly caused by the acquisition of Erichsen & Horgen, which is in for the first full quarter, still a healthy increase year-on-year. The organic growth rate is 2.4%. The EBIT came in at a reasonably good level at NOK 89.8 million, equal to an 8.4% margin, which is 8.2% higher than the same figure last year which ended up at NOK 83 million. Billing ratio is down 0.5% to 70.5%, taking into account that we have seen somewhat higher short-term leave due to the COVID situation in the fourth quarter. It's a reasonably good figure. We're quite happy with that. The operating expenses came in at NOK 139.1 million, which is an increase largely explained by higher IT costs that we have experienced through 2021 as well as the inclusion of a full quarter by Erichsen & Horgen as well as finally some periodic normal effects. The order intake ended up at NOK 1.1 billion, just in excess of that which is at a good level, somewhat lower than the fourth quarter last year. But these are periodic changes. And as Grethe mentioned, we've had a good sales in the first part or year-to-date in 2022. Looking at the full year, we see revenue -- net revenues at NOK 3.8 billion, which an increase of 3.9%, again driven mostly by acquisitions. While the organic growth rate is about 1.1%, which is not very high, but taking into account that it's been a very special year with the COVID situation also impacting our business, it's a reasonable figure. And with the EBIT coming in at NOK 348.9 million, equal to 9.2% margin, a reasonably good result, the second best result in the history of the company, somewhat lower than last year, which was at a very high level for various reasons that we've talked about earlier. The billing ratio came in at 70.4%, down 0.5% from last year, which was a quite high level, again largely explained by the COVID situation, and it's a figure that we're constantly monitoring as it is a very important KPI. Also operating expenses coming up a little bit due to the acquisitions as well as IT costs and some other cost increases, but still at a manageable level. We're seeing the OpEx ratio coming down from 15% -- or worsening from 15.6% to 16.4% during the year. Still a reasonably good level and much, much better than we saw before the turnaround in 2019 and 2020. The order intake, NOK 4.35 billion, a pretty good order intake for the year. Book-to-bill, above 1, which is quite satisfactory even though it's somewhat lower than the very high level in 2020, which gives us a good and solid order backlog at the end of the year at NOK 3.26 billion. Then I would like to just mention that we will change our main performance KPI on operating performance from EBIT to EBITA starting from 2022. And the reason for that is that we're seeing that our peers, industry peers is using that as their main KPI as well as acquisitions and amortization of goodwill and immaterial assets is impacting this EBIT figure as we do acquisitions. And we think that EBITA gives perhaps a better picture of the underlying operations of the business. So, these are the 2 main reasons for our intention to change that main KPI from EBIT to EBITA. So just to summarize a little bit on putting our figures into perspective and some historic figures. We see operating expenses -- sorry, operating revenues having a healthy increase over the last 4 years, with a particular jump now in the fourth quarter due to acquisitions. And we're happy to see that growing 10.5%. EBIT, we see that we've had, basically with the exception of perhaps the third quarter this year, which was a disappointment, we see that we have stabilized at quite a good level coming in with NOK 90 million for this quarter in the bottom left-hand corner. We also addressed the billing ratio which has come up from the third quarter, which was at a disappointing level to 70.5%. Still, we think that there is room for -- to improve that further. But taking into account that we've been through a challenging year with -- also with COVID impacting short-term sick leave, it's not a bad figure. And finally, on the number of employees, we see quite a significant jump there, naturally because of acquisitions that we've talked about several times. Now I'd like to address the main segments of the business. Region Oslo has had a good year with a 6.4% increase in revenues, driven largely by acquisitions. A healthy EBIT of NOK 150.4 million, equal to a margin of 12%. Quite a significant decrease from last year, which was exceptionally good. And the reduction is largely due to one area, which is infrastructure, which -- and transportation, which has reduced its EBIT by NOK 30.2 million comparing with 2020, quite a significant figure. However, we believe that this is something which is -- they are in a transition period and had a bad year, but the outlook generally for the transportation business is good. So we're not too worried about that, but of course, this particular challenging year also impacted by the cancellation of the Majorstuen project has been hitting the region Oslo during 2021. Billing ratio, down as we've seen through the business, but still at a quite a healthy level, 71.9%. A number on employees naturally going up quite a bit because most of the Erichsen & Horgen employees are located in Oslo as well as Lillehammer, which is now included in the Oslo region. On Norway, Region Norway, another good year for Region Norway, growth of 4.3% to NOK 1.5 billion. EBIT of NOK 173 million, down a little bit from last year, but still at a healthy 11.5% margin. Order intake going actually up, which is -- we're very happy to see that happening. And of course, the billing ratio at quite more -- less reduction than the rest of the business which, overall, we can say that Region Norway has had a good, good year. Energy, as a year which is quite similar to last year when it comes to EBIT, has had a good performance in this last part of 2021. They have very good positions in the market, very interesting as we move into the green shift that Grethe has talked about quite a bit, and although the financial performance is still not what we want to see. So we're working hard to improve that. They are -- the Norwegian business is doing well, but we are still being hurt a little bit by the Multiconsult U.K. business, which has been undergoing a restructuring, has been hitting our P&L by between NOK 5 million and NOK 10 million over the last couple of years annually. That has now been restructured. So we're quite optimistic that this kind of leakage or poor financial performance in U.K. will not be hurting our business in Energy as we move forward. LINK arkitektur, a mixed picture. The Norwegian business is doing very well, as you can see in the bottom line there with an EBIT of NOK 31.4 million at the bottom right-hand box. NOK 31.4 million, equal to a healthy margin of 9.7%, while slightly lower than last year but still at a healthy level. But the business has experienced quite a dramatic drop in Sweden, and they're going through a massive or extensive restructuring as we speak and are positioning themselves for what we believe is a prosperous and good market in Sweden. And we are expecting that business to turn around as we move forward. The same thing is happening -- which has happened in Denmark, which hit us last year with a NOK 14.7 million loss, which is now turned into a breakeven result for 2021 in LINK Denmark. So a mixed picture, which is the reason why the EBIT margin for LINK as a whole is poor. But we're very happy to see that Norway is performing well. We're very happy to see that Denmark has strongly improved. And we're optimistic that the efforts being -- that are put in place in Sweden, we'll see this business turning around as we move through 2022. The International business, which consists of Multiconsult Polska as well as Iterio in Sweden has had a good year. Both of the businesses have been doing well. We're pretty stable on revenues at NOK 243.3 million, EBIT 23.7%, equal to about 10% margin, pretty much the same as last year. Strong order intake driven largely by large contracts in Poland. And we see that the order backlog there has increased 19.2%. The Polish business is quite interesting. It has a slightly different business model than Multiconsult in Norway, and they have -- some of the contracts are very, very long term. And this is the reason why the order backlog in the International business is relatively higher than for the rest of Multiconsult. So looking at the operating revenues by business area. Clearly, Buildings & Properties and Mobility & Transportation is by far the largest. We see Buildings & Properties being pretty stable, while we see quite a significant drop, 7% on the Mobility & Transportation. And you can recognize that also from the figures that I mentioned earlier with the transportation business in Region Oslo having a NOK 30 million lower result this year than last year, which we think is a temporary reduction. But still a temporary reduction in activity level. While we still believe that the outlook for this business is quite good. So we're not worried for the longer term. Industry, an amazingly strong year with increase of 49% year-on-year in terms of revenues, going from -- to NOK 530 million, driven by our position in the industry and the green shift in our industry. And we have taken their fair share of that growth. So we're very happy to see that. And that looks very good as we move forward. Water & Environment, also a very good strong increase in revenues. And Renewable Energy, still pretty stable but with a good outlook. Ending up talking a little bit about our financial position for 2021, on our cash flow. We had strong cash flow in the fourth quarter. And we ended up, therefore, with a flat working capital development, plus 20, as you can see from the graph. But that's a good result, taking into account that we have grown the business. But as many of the shareholders have been used to, our working capital is fluctuating quite a bit. So our position has changed quite positively during the fourth quarter, which is seasonal. We've had quite heavy investments in 2021, NOK 364 million as a net figure. Most of that is the acquisition of Erichsen & Horgen, which was financed by cash as well as -- 80% cash and 20% shares. We've also had our organic investments as well as the investments in Nordland Teknikk. This has been financed through our cash resources. We've drawn down on loan facilities. And we've issued some shares, as I talked about with Erichsen & Horgen. Overall, we're coming out of the quarter with a very solid financial position. We have a net debt to EBITDA of 0.06, equal to that means that we are net debt free if we exclude the IFRS 16 debt. And we also have total undrawn loan facilities of NOK 590 million, which gives us a good and solid financial flexibility as we move into 2022. Finally, the Board's dividend proposal is NOK 6, which you can see from this graph, historically at a high level, somewhat lower than the very, very high level in 2020, but at a solid level. When the Board has considered the level of dividend, they have taken into account our solid financial results. We have a strong balance sheet. It's important for us to have a good financial flexibility and ability to invest in our business as we move forward. And therefore, we ended up with NOK 6, which is well within our dividend policy, which is at least 50% of net profit. This number is equal to 69% of net profit. All right. Thank you very much. Grethe.

G
Grethe Bergly
Chief Executive Officer

Thank you, Hans-Jorgen. Then looking forward, we are seeing a situation now where we can leverage on our core business position within the 2 business areas of Buildings & Properties and Infrastructure for new opportunities. We see a growing demand for solution related to climate change and climate adoption. We see that we have a leading expertise and experience in the growing green industry and energy segment. And the overall outlook looks good for all the 5 business areas that we operate in. There is, however, still some uncertainty regarding the post-COVID situation, but it is no different for us than it is for the society in general. And we see a somewhat higher risk related to sick leave just for the start of the 2022. But we have also had a very good sales at the start of 2022. So we are seeing that we're entering this year at a high level. So summing it all up. From a foundation of highly skilled workforce and a solid client base, we are set for long-term profitable growth with sustainable solutions for clients, society as a whole. Thank you. And then we open up for questions.

U
Unknown Executive

Yes. We have -- from the Norwegian presentation earlier, we have a question from Bengt Jonassen at ABG Sundal Collierr. And that was regarding organic recruitment. And he says, we got the impression of this -- that this has been a focus area in recent quarters without us having seen any growth. What do you think about organic growth in the number of employees in the future?

G
Grethe Bergly
Chief Executive Officer

We have -- I think we can say that we still have an aftereffect of the turnaround position where we are. We've actually had layoffs and it's been a systematic change of the workforce. So we are seeing now that the turnover in Oslo has slowed down somewhat. So we will see a growth. But we -- as you have seen also, we still have some areas where, of course, there is still a turnaround position, and that's why it's difficult to say how the sum of it will be. But in Norway, we are expecting to see a growth with respect to organic and number of employees.

U
Unknown Executive

Yes. And then there was a question also from Bengt Jonassen, and that was regarding accrual costs in other OpEx that needs a deeper explanation, what it causes. And what do you think -- what -- how should we think about this lining going forward?

H
Hans-Jørgen Wibstad

I think what we have experienced in the fourth quarter is our normal periodic effects within our business. There are -- not all of our businesses are based on hours invoiced, and there are also some normal fluctuations in the periodic effects. I think looking at our business as a whole, we are -- it's advisable to look at the margin and performance for the year overall when measuring our margin level.

U
Unknown Executive

And then there's a question from Ole Jorgen Groneng Nielsen at Pareto Asset Management. Will you be able to compensate the higher level of other operating expenses through pricing? And to what extent is that already implemented?

G
Grethe Bergly
Chief Executive Officer

We are -- our main cost, of course, is related to salaries to the -- our employees. And we would say that what we have seen, that we have through 2021, we have managed to maintain a higher level on the rates that we get in the jobs. And we don't know when it's going to hit our books. Normally, we're talking about maybe 6 months. So we are not that concerned. Although -- and as a whole, we have seen that we have managed to close that gap over a few years. That was a much bigger challenge if you go 4, 5 years back.

U
Unknown Executive

Thank you. I think that answers it.

G
Grethe Bergly
Chief Executive Officer

Okay. That's it then. Okay. Thank you all for being on the call. Have a nice day, and we see you back in April and May. Thank you.