Cash flow from operations in the quarter of NOK 51.5 million

Transcription

1 Revenues of NOK million, an increase of 5.1 %. EBITDA of NOK 46.1 million down from NOK 62.5 million. One-off costs for recruitment and severance of NOK 3.7 million taken in the quarter. EBITDA margin of 10.6 % versus 15.1 % in Q1 2015, was negatively affected by expired contracts, continued operational challenges in new contracts and investments into building the organization. Order backlog maintained at NOK 7.1 billion. New contracts secured after end of the quarter (not included in the backlog) - value NOK 1.3 billion. Cash flow from operations in the quarter of NOK 51.5 million RenoNorden is the Nordic region s leading domestic waste collection and transportation company, providing services to over five million people across four countries.

2 Finland 74,0 Denmark 130,1 Norway 135,6 Sweden 96,5 Other -7,2 Finland 5,4 Denmark 7,8 Sweden 11,8 Norway 28,4 2

3 RenoNorden continued to grow revenue during first quarter of 2016, but experienced disappointing profit levels. This is partly explained by the timing of Easter, one-off costs taken in the quarter. While the result is, as expected, affected by the continued gradual shift in contract mix from highermargin geographic areas to lower-margin geographic areas, a major contributor this quarter is the expiry of a high-margin contract in Norway, as previously reported. Although compensating efficiency programs are in progress, we need to reinforce efforts to ensure we maximize potential savings. Furthermore, we continue to experience operational challenges in certain contracts in the start-up and ramp up phases. These contracts are delivering margins below expectation, a situation exacerbated by the delay in the delivery of trucks from a key supplier. Corrective actions are underway to rectify these issues, however improvement will be gradual and we expect operational costs above plan until resolved. Finally, we have also increased our personnel costs due to reorganization and investment to strengthen the management capacity in the group. Harald Rafdal joined RenoNorden on 1 April as CEO. Mr. Rafdal has, for the last six years, held the position as CEO of Mesta AS, a Norwegian government enterprise delivering services within construction, modification and operation of roads. RenoNorden has won several new contracts in Norway and Finland during the quarter, in what remains a competitive market. Our order backlog is stable at NOK 7.1 billion. Including Stockholm, which was won in April, the order backlog will surpass NOK 8 billion. Several appeals have been raised from some competitors regarding the result of the outcome of the tender competition, which might lead to a delay in the final signing of the contracts. Group EBITDA in the first quarter was NOK 46.1 million (incl. NOK 3.7 million in one-off costs), compared to NOK 62.5 million in the same period last year. The EBITDA margin decreased to 10.6 % compared to 15.1 % in the same period last year, mainly due to changes in the contract portfolio in Norway, operational challenges across several markets and reorganization and strengthening of staff. On constant currency, Q EBITDA margin was 10.7 %. Easter holidays also negatively impacted operating costs in March, in comparison to last year when Easter holidays came in April. Group EBIT was NOK 10.0 million for the quarter, giving a margin of 2.3 % compared to 7.9 % in the first quarter last year. On constant currency, Q EBIT margin was 2.2 %. EBIT in the first quarter last year was NOK 32.9 million. Higher depreciations, mainly due to investments in trucks, contributed to the reduced EBIT. Net financial items were NOK -6.4 million this quarter compared to a NOK -8.9 million last year. Currency effects related to re-evaluation of loans by NOK 2.7 million had a positive effect on net financial items. Net income for 2016 was NOK 3.9 million, compared with NOK 18.8 million last year. Cash flow from operations was NOK 51.5 million for the quarter. Net cash increase was NOK 21.4 million this quarter. Net debt / EBITDA ratio at the end of the quarter was 3.8x, broadly in line with Q Group operating revenues increased 5.1 % to NOK million in the first quarter 2016 compared to NOK million in the same period last year, of which NOK 25.4 million came from currency impact. On constant currency, revenues decreased by 1 %. 3

4 The order backlog on 31 March 2016 was NOK 7.1 billion, including NOK 4.9 billion in firm contracts and NOK 2.2 billion in prolonging options. This is a decrease of NOK 224 million compared to the order backlog presented in Q Norway and Denmark have increased their order reserves with new contracts and several prolongations. Sweden and Finland have seen a decrease in their order backlog. However, the recently announced contracts won in Stockholm in April have not been included in the order backlog this quarter. The impact of the Stockholm tenders is close to 1 billion SEK. Several appeals from competitors have been filed with the Stockholm municipality, which might lead to a delay in the final signing of the contract. The NOK has strengthened and we are seeing a negative currency effect of NOK 119 million on the order backlog. The sizable backlog provides a strong platform for further development of the Company. Order backlog NOK millions Order backlog by country (incl. options) Contracts Options Finland 10 % Denmark 40 % Norw ay 25 % Sw eden 25 % 4

5 Norway generated operating revenues in the quarter of NOK million, -8.4 % compared to the same quarter last year. The main reason for the decline is the expired VESAR contract, Easter timing and lower add-on sales in Q EBITDA in the first quarter was NOK 28.4 million, compared to NOK 39.3 million in the same quarter last year, reflecting an EBITDA decrease of 27.7 %. The decrease is mainly due to changes in the contract portfolio. Some contracts have also experienced lower volume and less add-on sale than in the same period last year. Higher administration costs and one-offs are also reflected in the quarter compared to the same period last year. Sweden generated operating revenues for the quarter of NOK 96.5 million, an increase of 8.9 % compared to last year (-0.7 % on constant currency). EBITDA in the first quarter was NOK 11.8 million, compared to NOK 13.1 million generated in the first quarter of The decrease by 10.2 % (-18.1 % on constant currency) was mainly driven by cost relating to startup of several new contracts and late delivery of trucks. Also the Swedish organization has been strengthened, which have resulted in some higher personnel costs. CAPEX in the quarter was NOK 3.2 million, mainly related to investments in electronic equipment. CAPEX in the quarter was NOK 4.0 million, mainly for trucks in Askim. Denmark generated operating revenues of NOK million in the quarter, representing a growth of 9.5 % compared to the same quarter last year (0.5 % on constant currency). EBITDA in the first quarter was NOK 7.8 million, compared to NOK 10.2 million in the same quarter last year. The decrease by 24.2 % (30.6 % on constant currency) was mainly due to operational challenges, as we also reported in Q The late delivery of new trucks has generated lower efficiency and inhibited the implementation of planned logistics solutions, as previously communicated. New contracts with normal margins have replaced old contracts with higher margins and we have also taken on additional administrative cost in order to strengthened the local organization. CAPEX in the fourth quarter was NOK 0.7 million, related to new trucks in Holbæk and Høje-Taastrup. 5

6 Finland generated operating revenues in the first quarter of NOK 74.0 million, an increase of 24.6 % compared to the same quarter last year (14.2 % on constant currency). The growth is a result of several new smaller contracts. EBITDA in the first quarter was NOK 5.4 million compared to NOK 5.7 million in the same quarter last year. The decrease of 6.1 % (13.9 % on constant currency) mainly comes from low indexation, higher personnel expenses and an earlier start up than planned during the period, adding earlier star-up costs into this quarter. CAPEX in the first quarter was NOK 7.6 million, related to trucks and bins in the southern parts of Finland. The other segment primarily contains administration costs related to the Group. The Group has continued to strengthen the organization and incurred one-off recruitment and other costs related to replacement of the CEO. 6

7 7

8 Net financial items in the first quarter 2016 were NOK -6.4 million, compared to NOK -8.9 million in Q1 last year. The currency effect on net financial items was NOK 2.8 million. RenoNorden had an estimated tax expense of NOK million for Q compared to 5.2 last year. RenoNorden had a positive net change in cash and cash equivalents of NOK 21.4 million in Q The cash generated from operations in Q1 was NOK 51.5 million compared to NOK 11.6 million last year. Cash used in investing activities was NOK 7.1 million in Q compared to NOK 14.9 million in Q Net cash from financing activities was negative NOK 20.7 million in Q compared to negative NOK million in Q1 2015, the change mainly due to the restructuring of our credit facilities in Q1 last year. As of 31 March 2016, total assets amounted to NOK 2.3 billion. Total equity was NOK million, giving an equity ratio of 30.9 %. In addition to bank loans, the Group has guarantees of approximately NOK million. Cash and cash equivalents amounted to NOK million as of 31 March 2016 and the Group has leasing facilities available for truck financing. On 31 March 2016, net interest bearing debt amounted to NOK 1,044 million. Net debt/ EBITDA excluding special items is 3.8x. The Board has proposed a payout of NOK 50.1 million for 2015, equal to NOK 1.84 per share. The dividend represents 60 % of the net result for The dividend will be paid out after approval by the Annual General Meeting. We are still experiencing delays in the delivery of trucks for some of our Swedish and Danish contracts. While we are actively managing the situation and trucks are now being delivered, we still expect some further delays. This will result in some additional cost until resolved. The slower than anticipated deliveries may also have an effect on contracts we are starting up in the near future. Apart from this, RenoNorden s risks and uncertainties are described in Annual Report, which is available on No significant changes have taken place that has changed the view of the risks and uncertainties. 8

9 Tender activity was high during the quarter. RenoNorden successfully secured several smaller contracts in Norway, and, after the end of the quarter, the Company won 7 out of 11 contracts in the Stockholm area, the biggest single win ever for RenoNorden. Post Q1, the Company also submitted the Drammen tender, a large and profitable contract currently operated by RenoNorden and we are currently waiting for the decision. Going forward, important tenders are coming to the market, like Bærum and Asker in Norway. The preparation for these tenders is well underway. Competition across our markets remains strong, especially for bigger tenders in central areas. We expect this will continue. Group resources coordinate activities across borders to define optimal solutions for some of the tenders in order to deliver superior service and competitive prices to our customers at sustainable and attractive margin levels. This is a critical effort for us in order to ensure a profitable growth. For the months ahead, a core focus for us will be to resolve the prolonged operational issues relating to contracts in start-up and ramp up phases. These operational challenges, coupled with delayed deliveries of vehicles from a core supplier, have burdened the results this quarter and will continue to do so in the months to come. It is important that all contracts deliver to expectation and, despite that corrective actions are underway, even more focused efforts are needed to ensure this is well managed. Renewed focus in the local organizations will be emphasized and we will use group resources to support these programs to ensure we deliver in all countries as quickly as possible. We will place continued emphasis on the planning for startup of all new contracts, including Stockholm in 2017 and Copenhagen in May this year, to ensure that we mitigate risks relating to contract start up. We will reinforce our efforts to share best practice to optimize efficiency of operations. Programs to pursue continuous improvement in the daily operations, to improve efficiency and to reduce cost will have priority on managements agenda going forward. We have recently invested to strengthen our organization across all levels, and believe that our current organization should be well prepared to effectively manage the daily operations and also pursue new business development opportunities. 10 May 2016 The Board of Directors and CEO of RenoNorden ASA 9

10 RenoNorden s specialist focus and pan-nordic coverage coupled with operations based on strong local management have proven successful. Our core values; quality, respect, efficiency and environment are steering our priorities. Today, tenders are becoming more complex and the customers are requiring higher environmental standards in the contracts. RenoNorden works with our customers to identify improvement areas and support their objectives to improve the environmental impact of was te handling. Equally important is our ambition to conduct our business according to the highest professional, ethical and legal standards. RenoNorden considers good corporate governance essential for sound sustainable business activities and key to building trustworthiness, access to capital and value creation. To win in the market, we need to deliver differentiated, innovative, high quality and cost effective solutions to our customers. Recent contract successes, including the significant Stockholm and Copenhagen contracts, demonstrate our ability to do this. Intensified knowledge sharing between countries in operations and business development functions ensure a continuing process where innovative solutions developed and proven in existing contracts are worked into new tenders. This culture of continuous improvement delivers increased efficiency, and also secures the quality of our service offering. It also enables us to secure contracts on competitive terms. Our deep industry credentials and experience means we can appropriately balance the many variables in what is a complex service offering. Examples include the utilization and technical set-up of vehicles and compactors, systems for tagging, registration and weighing of bins and the critical need for advanced route planning systems and skilled route planners. Finally, our significant scale benefits on key expense items like equipment and financing provide us a competitive advantage to help us deliver competitive terms to customers at a healthy margin for us. 10

11 11

12 12

13 13

14 14

15 The Board of Directors of RenoNorden ASA approved these unaudited condensed consolidated interim financial statements on 10 May The unaudited condensed consolidated interim accounts are prepared in accordance with IAS 34 Interim Financial Reporting. The Group's accounting principles are presented in Note 2 Accounting policies in RenoNorden Group's IFRS Consolidated Financial Statements for the year ending 31 December The interim financial information should be read in conjunction with the RenoNorden Group 2015 IFRS Consolidated Financial Statements. There was no material effect on the unaudited condensed consolidated interim financial statements from the implementation in 2014 of new or amended IFRS standards or interpretations. New or amended IFRS standards or interpretations with implementation dates on or after 1 April 2016 are not expected to have a material effect on recognition and measurement in the Group consolidated financial statements, but may affect notes disclosures As a result of rounding adjustments, the figures in one or more columns may not add up to the total of that column. Judgements and estimates The preparation of the interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ending 31 December Income tax expense is assessed based on annual results and, accordingly, determining the tax charge for the interim period involves making an estimate of the likely effective tax rate for the year for each material tax jurisdiction. The tax effect of 'one-off' items are not included in the estimated effective annual tax rate, but are recognized in the same period as the relevant 'one-off' item. 15

16 RenoNorden Group identifies its reportable segments and discloses segment information under IFRS 8 Operating Segments. This standard requires RenoNorden Group to identify its segments according to the organization and reporting structure used by management. Management considers the business from both a geographic and a service perspective. Geographically, management considers the performance in Norway, Denmark, Sweden and Finland. From a service perspective, all geographic segments have municipal contracts and, additionally, Finland has specific corporate contracts. Management assesses the performance of the operating segments based on a measure of EBITDA. This measurement basis excludes discontinued operations and the effects of non-recurring expenditures from the operating segments such as restructuring costs, legal expenses and goodwill impairments when the impairment is the result of an isolated, non-recurring event. The measure also excludes the effects of equity-settled sharebased payments and unrealised gains/losses on financial instruments. The Group s business is seasonal, and has historically realised a higher portion of its operating revenue and EBITDA in the second and third quarter of each year. This seasonality is a characteristic of the business in which it operates. During the warmer summer months, the Group increases the frequency of collection for biodegradable waste matter. Furthermore, the Group also collects from areas where holiday properties require additional collections in the summer holiday season. 16

17 Total operating revenue specified by segment: NOK 1,000 Q Q Audited Norway 135, , ,100 Sweden 96,496 88, ,084 Denmark 130, , ,832 Finland 74,039 59, ,344 Total operating revenues 436, ,812 1,808,359 EBITDA by segment: NOK 1,000 Q Q Audited Norway 28,430 39, ,786 Sweden 11,776 13,119 69,413 Denmark 7,760 10,240 50,606 Finland 5,361 5,710 34,894 Other (7,241) (5,926) (25,452) Total EBITDA 46,087 62, ,247 Less depreciation and amortization 36,118 29, ,819 Operating income 9,969 32, ,428 CAPEX specified by segment: NOK 1,000 Q Q Audited Norway (3,993) (15,241) (56,230) Sweden (3,162) (1,117) (13,698) Denmark (691) (19,505) (81,635) Finland (7,595) (8,126) (34,977) Total CAPEX (15,442) (43,989) (186,540) Non-current operating assets specified by segment: NOK 1, Audited Norway 237, , ,355 Sweden 217, , ,611 Denmark 236, , ,502 Finland 87,337 72,163 87,489 Total equipment 779, , ,958 17

18 The Group s bank borrowings consist of a term loan facility of NOK million and an RCF facility of NOK million. Both facilities are 5-year bullets. In addition to the bank loans, the Group has guarantees of approximately NOK million. There are no subsequent events with material effect. 18

19 19

20 This report contains forward-looking statements that reflect RenoNorden s current views with respect to future developments and performance. These forward-looking statements may be identified by the use of forwardlooking terminology, such as the terms anticipates, assumes, believes, can, could, estimates, expects, forecasts, intends, may, might, plans, projects, should, will, would or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements are not historic facts. The forward-looking statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management s examination of historical operating trends, data contained in RenoNorden s records and data available from third parties. Although RenoNorden believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control, and many factors can therefore lead to actual developments and performance deviating substantially from what has been expressed or implied in such statements. Accordingly, no assurance can be given with respect to such developments and performance. RenoNorden disclaims any obligation to update or revise any forward-looking statements, unless required to do so by applicable law or listing rules. Annual General Meeting Q Q Q Øystein Disch Olsrød Group CFO o.olsrod@renonorden.com