Download Q1 2017 Presentation

Company presentation – Q1 2017
1st Quarter 2017
9 May 2017
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Company presentation – Q1 2017
Today’s presenters
Harald Rafdal
Chief Executive Officer
Erik Hansen
Chief Financial Officer
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Company presentation – Q1 2017
Agenda
Update on current situation and way forward
Highlights, market and operations
Financials
Summary and outlook
Q&A
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Company presentation – Q1 2017
Update on current situation and way forward
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Company presentation – Q1 2017
Stock exchange announcements 20th March and 1st May
Stock exchange announcement 20 March 2017
Stock exchange announcement 1 May 2017
Several of the contracts that were
defined as onerous in the Q2-2016
trading update commenced during Q1
2017
Operational experience from
operating the onerous contracts
revealed worse than expected costs
and performance
Contract start-up revealed that the
company was facing additional
unavoidable costs relative to the
estimates included in the Q2 2016 recalculations
Based on this, the company decided
to make additional provisions of NOK
237m (pre tax) for Q1 2017
Additional costs are a combination of
specific one-offs related to Q1 2017
and persistent cost overruns
Company likely to be in breach of its
leverage covenant in Q2 2017
Negative impact on goodwill now
estimated at NOK 134m
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Company presentation – Q1 2017
1st Quarter 2017 highlights
Operating revenues of NOK 447.5m in the quarter, up from NOK 436.2m in the
same quarter last year
EBITDA of NOK 26.6m in the quarter, down from NOK 45.7m in the same quarter
last year
Operating profit/loss of NOK (374.8)m in the quarter, down from NOK 10.0m in the
same quarter last year
Provisions for future losses of NOK 237m on onerous contracts have been
accounted for in the quarter
Impairment of goodwill of NOK 134m mainly due to expected decreased future
earnings from onerous contracts
Adjusted EBIT of NOK (3.8)m, down from NOK 10.0m in the same quarter last year
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Company presentation – Q1 2017
How did we get here?
2015
H2
2016
Q1
Q2
2017
Q3/Q4
Q1/Q2
Period in which contracts defined as weak and
loss-making were entered into on the back of
increasing price pressure
New management team in
place, including Harald Rafdal
(CEO) and Ingrid Therese
Tjøsvold (COO and country
manager Norway)
New management took
immediate action after concerns
of mispricing in contracts won in
Q4-2015 and H1-2016
Independent consultancy firm
hired to perform a should cost
analysis
Resulted in a provision
of NOK 166m
Considerable investment
requirements relating to new
contracts combined with limited
or no EBITDA contribution puts
pressure on leverage covenant
Company initiated process to
improve financial situation pursued a NOK 350m rights
issue (completed in February
2017)
Start-up on a number of the
weak and loss-making
contracts revealed cost
overruns exceeding the
estimates that resulted in the
NOK 166m write-down in Q2
2016
Profit warning issued on 20
March 2017 and additional
provisions announced 1 May
2017
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Company presentation – Q1 2017
From Q4 2015 and into Q2 2016, RenoNorden mispriced its tenders considerably
Illustration of mispricing in tender processes
Headroom in tender relative to # 2
Comments
Analysis shows considerable
headroom to nearest losing bid in
tender processes won by
RenoNorden in the period Q4 2015 to
Q2 2016
85.9%
70.4%
64.0%
56.2%
- Only related to contracts in Norway
Deviations were caused by a
combination of:
40.5%
32.1%
25.0%
- Mispriced tenders
- Expected efficiency improvements not
realized
Contract 1 Contract 2 Contract 3 Contract 4 Contract 5 Contract 6 Contract 7
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Company presentation – Q1 2017
More than six months operational experience in majority of contracts
Share of contracts by # of months in operation1
More than six months operational
history for more than 90% of the
contract portfolio
91%
> 6 months
Comments
5%
4%
< 6 months
To be initiated
Note: (1) Distribution based on the number of contracts
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Company presentation – Q1 2017
Steps to strengthen and secure a sound operational platform
Measures implemented to date
Thorough review of tender processes with support
from PwC and Albaran to establish operational
“Best Practices” for the Group
Tender process
- Dedicated bid-team with designated roles and
responsibilities
- Critical control points and decision gates in bidding
process
- KPI database for benchmarking in new tenders
Start-up and closure
- Detailed check-lists developed to ensure that all
processes are completed according to group standard
Operations
- Introduced cost reduction and efficiency program with
specific savings targets defined both by contract and
cost center
Measures currently being implemented
External advisors appointed to perform:
- Analysis and evaluations to secure satisfactory long
term financing for the group (Carnegie)
- Comprehensive operational review to accelerate cost
reduction process (PwC)
Organizational changes to strengthen project teams
and establish a new corporate culture
- Majority of both local and group management teams
either replaced or in process of being replaced
- Additional control functions to be added
- Shorter reporting lines (key process information to flow
directly to top management)
Additional “Best Practices” to be introduced
- Frequent reporting of KPIs to reveal operational deviations
at an early point
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Company presentation – Q1 2017
The RenoNorden organization has changed considerably
Overview of organizational changes
CEO
CFO
Business development
Group level
Country mngr.
Norway
Country mngr.
Denmark
Country mngr.
Sweden
Managing director
Financial manager
HR Manager
Tender & QHSE
Route planning
Norway
Technical-/fleet manager
Regional managers
Country mngr.
Finland
Comments
Majority of old management team
replaced
Business development role eliminated
COO role added to strengthen
procurement process and monitoring of
operations
Majority of old management team
replaced
Regional manager layer eliminated to
improve flow of information through the
organization
Technical-/fleet manager role added
Department managers
Legend:
Position eliminated
Person replaced
New position
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Company presentation – Q1 2017
Financial status and way forward
Current status
As noted in the stock exchange notice on 1 May
2017, RenoNorden is anticipating to be in breach
of its leverage covenant at the end of Q2-2017
Next steps
RenoNorden is in close dialogue with its
stakeholders to secure a robust long term
solution
Current status (Q1-2017):
Total equity: NOK 256m
- Includes NOK 237m provision and NOK 134m
impairment of goodwill in Q1 2017
Equity ratio: 11 %
Unrestricted cash and cash equivalents: NOK
491m
Operational cash flow: NOK (24)m
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Company presentation – Q1 2017
Highlights, market and operations
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Company presentation – Q1 2017
Financial snapshot - Group
Revenue (NOKm)
EBITDA (NOKm)
EBITDA margin (%)
-NOK 19.1m
- 4.5%
+NOK 11.3m
436.2
447.5
10.5%
45.7
5.9%
26.6
Q1-2016
Q1-2017
Q1-2016
Q1-2017
Q1-2016
Q1-2017
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Company presentation – Q1 2017
Operational highlights
Start-up of a number of the onerous contracts in the quarter
- Extraordinary costs related to start-up of contracts in Norway
Shift in contract mix from higher to lower margin continues
Process to reach local collective wage agreements with employees in two of the
Danish contracts still ongoing
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Company presentation – Q1 2017
Development in order backlog in Q1 2017
Order backlog (NOKm)
Options
7 594
+137
Firm
-454
2 405
7 277
2 402
5 189
Backlog at
31.12.2016
Comments
4 875
Won in Q1 2017
Realized in
Q1 2017
The order backlog includes
the extension of the existing
Stockholm contract from 1
April 2017 to 30 September
2017, but excludes the
remaining contracts in
Stockholm (i.e. starting 1
October 2017), pending
appeals
Backlog at
30.03.2017
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Company presentation – Q1 2017
Distribution of order backlog by year and country
Distribution of order backlog by year
Options
1 416
Distribution of order backlog by country
Firm
1 416
1 411
133
271
Finland
8%
1 222
527
362
1 008
395
1 283
Norway…
805
Denmark
39 %
358
1 144
884
861
Sweden
20 %
613
446
2017
2018
2019
2020
2021
2022-2026
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Company presentation – Q1 2017
Financials
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Company presentation – Q1 2017
Key P&L items – Group
P&L (NOKm)
Comments
Q1 2017
Q1 2016
YoY growth
FY 2016
Revenue
447.5
436.2
+ 2.6%
1,915.5
EBITDA
26.6
45.7
- 41.8%
230.1
5.9%
10.5%
(374.8)
10.0
n.a.
(414.1)
(3.8)
10.0
n.a.
61.8
n.a.
2.3%
Profit before tax
(386.3)
3.6
n.a.
(444.7)
Net profit
(326.7)
3.9
n.a.
(396.6)
EPS
(2.27)
0.14
n.a.
(14.56)
Adj. EPS
(0.08)
0.14
n.a.
0.88
EBITDA margin
EBIT
Adj. EBIT
Adj. EBIT margin
12.0%
3.2%
Revenue growth driven by start-up
of new contracts
EBITDA affected by:
- Extra start-up costs on onerous
-
contracts in Norway
Operational challenges in Denmark
Extra truck costs due to breakdowns in
Finland and higher sick leave during
winter time
EBIT affected by:
- Provision for onerous contracts
- Impairment of goodwill
- Increased depreciation due to shortened
depreciation time from 12 to 10 years
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Company presentation – Q1 2017
Financial performance by geography
Norway
Denmark
Revenue (NOKm)
EBITDA (NOKm)
135.6
28.4
129.9
Revenue (NOKm)
130.1
EBITDA (NOKm)
7.8
143.0
5.5
8.9
Q1-2016
Q1-2017
Q1-2016
Q1-2017
Q1-2016
Q1-2017
Sweden
Revenue (NOKm)
96.5
104.1
Q1-2016
Q1-2017
Finland
EBITDA (NOKm)
11.8
12.8
Revenue (NOKm)
74.0
70.8
EBITDA (NOKm)
5.0
3.0
Q1-2016
Q1-2017
Q1-2016
Q1-2017
Q1-2016
Q1-2017
Q1-2016
Q1-2017
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Company presentation – Q1 2017
Key balance sheet items and capex – Group
Balance sheet (NOKm)
Comments
Q1 2017
Q1 2016
YE 2016
Total assets
2,344.0
2,299.1
2,163.1
Total equity
256.4
711.5
254.6
Equity ratio
10.9%
30.9%
11.8%
1,046.6
1,044.3
1,229.3
4.7x
3.8x
4.9x
116.9
15.4
354.9
NIBD
NIBD/EBITDA1
Capex
Increase in total assets driven by
investments in new trucks and
cash raised in the rights issue,
partially offset by write downs on
goodwill
Reduced equity ratio due to losses
and impairment in Q2 2016 and Q1
2017
Net Interest Bearing Debt reduced
compared to Q4 16 due to cash
from the right issue
Increased Capex due to
commencement of several
contracts in the quarter
1) EBITDA excludes special items
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Company presentation – Q1 2017
Provisions and impairment of goodwill
Total provisions (NOKm)
Impairment of goodwill (NOKm)
-NOK 375m
-11
381
1 017
-239
-134
+237
-2
642
+154
Provisions
- YE 2016
Provisions
- Q1 2017
Note: (1) Includes exchange rate effect of NOK 492,000
Reversals
- Q1 20171
Total
provisions
- Q1 2017
Goodwill - Write-down Write-down
Q1-2016 - Q2-2016 - Q1 2017
Currency
Goodwill Q1-2017
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Company presentation – Q1 2017
Key cash flow items – Group
Cash flow (NOKm)
Comments
Q1 2017
Q1 2016
YE 2016
Opening cash balance
222.6
195.6
195.6
Cash from operations
(24.3)
51.5
208.1
Cash from investing
(2.2)
(7.0)
(21.2)
Cash from financing
293.5
(20.7)
(151.6)
Cash flow in the
period
268.2
21.4
27.1
Closing cash balance
490.8
217.0
222.6
Cash from operations negative
with NOK 24.3m mainly due to
negative development in profits,
increased working capital,
prepayments and prepaid tax
Cash from financing activities
includes the net effect of the rights
issue (NOK 327.6m)
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Company presentation – Q1 2017
Summary and outlook
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Company presentation – Q1 2017
Summary and outlook
Q1 2017 a disappointing quarter
Additional provisions of NOK 237m required for Norway and
Denmark in the quarter
Additional goodwill impairment of NOK 134m in the quarter
Group wide performance improvement project commenced H2 2016
Performance improvement project focusing solely on Norway and
Denmark commenced in April 2017 (ongoing)
Work carried out with support from an external consulting firm
External advisors engaged to secure satisfactory long term
sustainable financing solution for the group (ongoing)
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Company presentation – Q1 2017
Upcoming events:
Annual General Meeting
Half-yearly report
Q3 report
Q4 report
10.05.2017
16.08.2017
07.11.2017
13.02.2018
Investor contact:
Erik Hansen - CFO
[email protected]
Tel: +47 920 77 268
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Company presentation – Q1 2017
Q&A
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Company presentation – Q1 2017
Disclaimer
This presentation contains forward-looking statements that reflect RenoNorden’s current views with respect to future developments and performance. These forwardlooking statements may be identified by the use of forward-looking 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.
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