OSLO: NRC Group, the largest rail infrastructure entrepreneur in the Nordic region, targets NOK 10 billion of revenue at 7% EBITA for 2024 through capitalizing on leading Nordic position and strong markets through profitable organic growth, utilizing Nordic capabilities to expand into complementary services.

NRC presented the Group’s strategic development, ambitions and outlook after completion of the strategy process initiated in the second half of 2019.

NRC Group was created to capitalise on strong Nordic infrastructure markets. Organic and M&A driven growth, with 14 acquisitions including VR Track Oy in January 2019, has enabled NRC Group to fulfil the goal of becoming a leading Nordic rail infrastructure company.

After years of growth and good margins, profitability declined in 2018 and 2019. Full-year 2019 revenue was NOK 6,193 million, an increase of 95% from 2018.

Group EBITA after project margin adjustments and before M&A expenses was NOK 70 million, corresponding to an EBITA-margin of 1.1%. The margin adjustments are mainly related to Rail and Civil Construction contracts in Sweden and Rail construction in Norway.

“We have good performance in several units and both Finland and the Civil construction and Environment units in Norway deliver on growth and margins. In Sweden and Rail Norway however, we need to improve performance. We have already started a turnaround process to restore profitability, with targeted measures to strengthen project management capabilities, project selection and tendering processes, and the project execution model,” said Henning Olsen.

In late 2019, NRC Group completed a strategy update and stablished clear strategic priorities to restore profitability and drive growth, with a 2024 ambition of NOK 10 billion of revenue at 7% EBITA margin.

For 2020, the main priority is to execute the improvement programs and create the platform for continued profitable growth from 2021 and onwards.  The main elements of the turnaround are;

• attract and retain the right leadership, project managers and skilled workforce,
• strengthen project selection and tender process, and
• strengthen execution model and portfolio governance.

“Our top priority is to improve profitability. We have established new management with proven track records in the non-performing business units, and this is already taking effect. We expect our new disciplined tendering process to improve project portfolio margins going forward, and in combination with a cost reduction program this will lead to improved profitability,” said Olsen.

To restore profitability to the levels seen in 2016 and 2017 and in line with NRC Group’s long-term ambition, the Company has implemented local operational improvement programs in each country and a Group-wide overhead reduction program targeting NOK 55 million in cost reduction from 2020.

The NOK 10 billion revenue ambition reflects an extensive group-wide process. The Nordic rail services market is expected to grow by around 9% annually in coming years. NRC Group will also target additional opportunities for growth and expansion in complementary services and capture synergies between existing segments and across countries. Revenue growth will primarily be organic, supported by bolt-on M&As in existing segments and services.

“We have created a Nordic leader in sustainable infrastructure, with a unique position in the growing Nordic rail infrastructure market and additional complementary service offerings in attractive niche segments. Now it is time to start harvesting from that position,” said Henning Olsen, CEO of NRC Group.

“To do that, we need the right people and a strong performance culture based on NRC values. The foundation was built in 2019 with new management installed in key positions, ready to implement proven processes for project selection, tendering and execution.”

For 2020, NRC Group will prioritise implementation of the updated strategy, focusing on improvement measures to restore the Group profitability. The market outlook is positive. Focus will be to build a solid platform in 2020 to be positioned for further growth from 2021 and onwards. NRC Group expects revenue for the full year 2020 to be in line with 2019. For 2020, the Group targets an EBITA margin exceeding 2.8%. For 2021, the Group targets an EBITA margin up towards 5%, before gradually realising additional improvements towards the ambition level of 7% for 2024.

“We are in large and growing markets driven by strong mega trends of population growth, urbanisation and sustainability.  For us, it is all about having the right people to win the right projects at the right price and execute them in the right way. Then we can fully address our organic growth opportunities and selective bolt-on M&As,” said Henning Olsen.

Edited by Kazim Rizvi