Section

2024 III quarter and 9 months consolidated interim report (unaudited)

By Manila Times - 2 weeks ago

In the third quarter of this year, the downward trend in the construction market did not experience a significant shift. Forward-looking indicators that characterize both the construction market and the broader macroeconomic environment are contradictory, making it difficult to predict a market upturn in the coming quarters. This uncertainty affects both the public and private sectors' willingness and confidence to make broad-based investments in buildings and infrastructure.

Despite the challenging market conditions, all three key economic indicators of Nordecon AS show a positive trend. In the third quarter, the group continued to see growth in profitability and sales revenue, and the backlog of unfinished work increased as well.

The group's gross profit margin reached 7.1% for the first nine months of 2024 (compared to 3.3% in the first nine months of 2023) and 8.7% in the third quarter (compared to 3.5% in Q3 2023). Profitability improved in both the Building and Infrastructure segments, driven by better risk management in general contracting projects and the completion in 2023 of long-term contracts signed before the war in Ukraine, which were impacted by previous years' rapid growth in construction input costs. The improvement in the Infrastructure segment was partly influenced by an investment made earlier this year in an asphalt concrete plant, which has reduced production costs and marked a significant step forward in materials recycling.

The group's net profit for the first nine months amounted to 4,547 thousand euros (compared to a loss of 2,772 thousand euros for the same period in 2023).

Sales revenue for the first nine months of 2024 was 178,722 thousand euros, a 37% increase compared to the sales revenue from continuing operations in the same period last year. Sales revenue in the building segment grew by 57%, while it decreased by 18% in the infrastructure segment.

As of 30 September 2024, the volume of order book was 195,628 thousand euros, marking an 11% increase compared to the same period last year. New contracts worth a total of 131,801 thousand euros were signed in the first nine months, of which 67,771 thousand euros were signed in the third quarter.

Condensed consolidated interim statement of financial position

€'00030 September 202431 December 2023ASSETS  Current assets  Cash and cash equivalents11,47611,892Trade and other receivables39,33237,010Prepayments3,9511,789Inventories23,54125,879Total current assets78,30076,570Non-current assets  Other investments7676Trade and other receivables9,6079,113Investment property5,5175,517Property, plant and equipment13,26414,292Intangible assets14,96114,964Total non-current assets43,42543,962TOTAL ASSETS121,725120,532   LIABILITIES  Current liabilities  Borrowings8,11910,188Trade payables52,26939,855Other payables8,2839,241Deferred income8,92120,602Provisions6511,129Total current liabilities78,24381,015Non-current liabilities  Borrowings8,8888,563Trade payables5,1756,011Provisions2,4932,405Total non-current liabilities16,55616,979TOTAL LIABILITIES94,79997,994   EQUITY  Share capital14,37914,379Own (treasury) shares(660)(660)Share premium635635Statutory capital reserve2,5542,554Translation reserve4,2883,786Retained earnings4,292919Total equity attributable to owners of the parent25,48821,613Non-controlling interests1,438925TOTAL EQUITY26,92622,538TOTAL LIABILITIES AND EQUITY121,725120,532

Condensed consolidated interim statement of comprehensive income

€'0009M 2024Q3 20249M 2023Q3 20232023Revenue178,72263,777130,79944,273186,464Cost of sales(165,955)(58,204)(126,488)(42,745)(182,655)Gross profit12,7675,5734,3111,5283,809      Marketing and distribution expenses(301)(129)(402)(176)(497)Administrative expenses(5,011)(1,638)(4,337)(1,353)(6,564)Other operating income1456824030286Other operating expenses(628)(170)(309)(123)(465)Operating profit (loss)6,9723,704(497)(94)(3,431)      Finance income437120267136613Finance costs(2,625)(1,079)(2,298)(515)(3,356)Net finance costs(2,188)(959)(2,031)(379)(2,743)      Profit (loss) before tax4,7842,745(2,528)(473)(6,174)Income tax expense(237)0(244)0(244)Profit (loss) for the period from continuing operations4,5472,745(2,772)(473)(6,418)Profit for the period from a discontinued operation--2,4081,6998,474Profit (loss) for the period4,5472,745(364)1,2262,056Other comprehensive income (expense)

Items that may be reclassified subsequently to

profit or loss     Exchange differences on translating foreign operations502337(48)(302)470Total other comprehensive income (expense)502337(48)(302)470TOTAL COMPREHENSIVE INCOME (EXPENSE)5,0493,082(412)9242,526      Profit (loss) attributable to:     - Owners of the parent3,3732,353(2,452)41(942)- Non-controlling interests1,1743922,0881,1852,998Profit (loss) for the period4,5472,745(364)1,2262,056      Comprehensive income (expense) attributable to:     - Owners of the parent3,8752,690(2,500)(261)(472)- Non-controlling interests1,1743922,0881,1852,998Comprehensive income (expense) for the period5,0493,082(412)9242,526      Earnings per share from continuing operations attributable to owners of the parent:     Basic earnings per share (€)0.110.07(0.16)(0.05)(0.31)Diluted earnings per share (€)0.110.07(0.16)(0.05)(0.31)      Earnings per share from a discontinued operation attributable to owners of the parent:     Basic earnings per share (€)--0.080.050.28Diluted earnings per share (€)--0.080.050.28

Condensed consolidated interim statement of cash flows

€'0009M 20249M 2023Cash flows from operating activities  Cash receipts from customers199,510249,453Cash paid to suppliers(173,448)(211,054)VAT paid(7,048)(8,563)Cash paid to and for employees(15,051)(18,225)Income tax paid(237)(574)Net cash from operating activities3,72611,037   Cash flows from investing activities  Paid for acquisition of property, plant and equipment(289)(318)Proceeds from sale of property, plant and equipment193384Loans provided(35)(524)Repayments of loans provided112Dividends received612Interest received15925Net cash from (used in) investing activities35(409)   Cash flows from financing activities  Proceeds from loans received9021,344Repayments of loans received(1,857)(799)Lease payments(1,689)(2,194)Interest paid(819)(935)Dividends paid(661)(1,347)Net cash used in financing activities(4,124)(3,931)   Net cash flow(363)6,697   Cash and cash equivalents at beginning of period11,8927,238Effect of movements in foreign exchange rates(53)1Change in cash and cash equivalents(363)6,697Cash and cash equivalents at end of period11,47613,936

Financial review

Financial performance

Nordecon delivered a gross profit of €12,767 thousand in the first nine months of 2024 (9M 2023: €4,311 thousand). The group's gross margin improved significantly year on year, rising to 7.1% for the nine months (9M 2023: 3.3%) and 8.7% for the third quarter (Q3 2023: 3.5%). Both main operating segments earned a profit in the nine months and the third quarter, showing a year-on-year margin improvement. The gross margin of the Buildings segment was 8.5% for the nine months and 10.2% for the third quarter (9M 2023: 4.5% and Q3 2023: 3.7%). The Infrastructure segment's gross margin was lower, reaching 5.1% for the nine months and 9.2% for the third quarter (9M 2023: 2.0% and Q3 2023: 4.5%). While both segments have improved their profit margins, the volumes of the Infrastructure segment are low and therefore most of the group's profit was generated by the Buildings segment. The margin improvement was supported by better mitigation of the risks associated with general contracting and the expiry last year of a number of long-term contracts signed before the war, which had been severely affected by earlier increases in construction input prices. The improved performance of the Infrastructure segment is partly due to the investment in an asphalt concrete plant made earlier this year, which has reduced the cost price and represents a major step forward in material recycling.

The group's administrative expenses for the first nine months of 2024 were €5,011 thousand. Administrative expenses increased by around 16% compared to the same period last year (9M: €4,337 thousand) due to growth in staff costs. The ratio of administrative expenses to revenue (12 months rolling) decreased year on year to 3.1% (9M 2023: 3.3%).

The group ended the nine months of 2024 with an operating profit of €6,972 thousand (9M 2023: an operating loss of €497 thousand). EBITDA for the period was €9,154 thousand (9M 2023: €1,799 thousand).

The group's finance income and costs are affected by exchange rate fluctuations in the group's foreign markets, particularly movements in the exchange rate of the Ukrainian hryvnia. During the period, the Ukrainian hryvnia weakened against the euro by around 8% and the translation of the loans provided to the group's Ukrainian subsidiaries in euros into the local currency gave rise to a foreign exchange loss of €534 thousand (9M 2023: a foreign exchange gain of €66 thousand).

The group's net profit for the period was €4,547 thousand (9M 2023: a net loss of €2,772 thousand). The net profit attributable to owners of the parent, Nordecon AS, was €3,373 thousand (9M 2023: a net loss of €2,452 thousand).

Cash flows

Operating activities produced a net cash inflow of €3,726 thousand in the nine months of 2024 (9M 2023: an inflow of €11,037 thousand). Operating cash flow is strongly influenced by the fact that the contracts signed with most public and private sector customers do not require them to make advance payments, while the group has to make prepayments to subcontractors and materials suppliers. Cash inflow is also reduced by contractual retentions, which extend from 5 to 10% of the contract price and are released at the end of the construction period only.

Investing activities of the period resulted in a net cash inflow of €35 thousand (9M 2023: an outflow of €409 thousand). Investments in property, plant and equipment amounted to €289 thousand (9M 2023: €318 thousand) and proceeds from the sale of property, plant and equipment amounted to €193 thousand (9M 2023: €384 thousand). Loans provided amounted to €35 thousand (9M 2023: €524 thousand) and interest received amounted to €159 thousand (9M 2023: €25 thousand).

Financing activities generated a net cash outflow of €4,124 thousand (9M 2023: an outflow of €3,931 thousand). The largest items were related to loans and leases. Proceeds from loans received amounted to €902 thousand (9M 2023: €1,344 thousand), consisting of the use of development loans. Repayments of loans received totalled €1,857 thousand (9M 2023: €799 thousand), consisting of regular repayments of long-term investment and development loans and the change in the overdraft balance. Lease payments were €1,689 thousand (9M 2023: €2,194 thousand). Dividends paid in the nine months of 2024 amounted to €661 thousand (9M 2023: €1,347 thousand).

The group's cash and cash equivalents as at 30 September 2024 amounted to €11,476 thousand (30 September 2023: €13,936 thousand).

Key financial figures and ratios

Figure/ratio9M 20249M 20239M 20222023Revenue (€'000)*178,722

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