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Nordic Group Limited FY2024 Result · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  You know that feeling when you're looking at a company report and you just want the quick version?
• 0:12
  Like, are they doing well or not? Yeah, cutting through all the jargon and dense
• 0:15
  tables. Exactly. It can feel like hacking through a jungle sometimes.
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  So today, that's what we're doing. We're diving deep into Nordic Group Limited's
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  full year 2024 results. They were using their own investor presentation as our guide. Right.
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  Our mission, basically, is to understand how they actually performed financially.
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  What's behind those numbers, the good, maybe the less good, and what they're
• 0:39
  saying about the future. All based on the story they're telling.
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  These presentations usually cover financial highlights, trends, future plans.
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  Our job is to pull out the crucial bits for you without you needing to spend hours on it. Exactly.
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  We'll focus on that FY 2024 performance, figure out the drivers,
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  and then look at their outlook. Think of it as financial interpretation.
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  Okay, so let's get into it. Where do we start with these FY 2024 results?
• 1:03
  The headline numbers compared to FY23 seem like the logical place. Agreed.
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  So first up, net profit. It hit $17.5 million.
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  Which is what, up 10% from the $16 million in FY23? Pretty solid.
• 1:19
  Yeah, definitely a good start.
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  And EBITDA earnings before interest, taxes, depreciation, and amortization that
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  also climbed. Up 4%, right, to $28.6 million.
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  And earnings per share, EPS, mirrored the profit jump. Up 10% to 4.4 cents.
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  And one more key metric, net asset value per share.
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  That saw an 11% increase. To 32.5 cents per share.
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  So, I mean, just looking at those top figures, it paints a picture of improved
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  profitability, wouldn't you say? Absolutely.
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  And digging a bit deeper, the margins tell a similar story.
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  Gross profit margin held steady at 23%. No change there.
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  But the net profit margin, NTM, that went up. By one percentage point to 11%.
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  And the EBITDA margin also saw a one percentage point bump up to 18%.
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  So they're keeping more of each dollar of revenue as profit,
• 2:07
  essentially. Precisely.
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  Suggests better efficiency or maybe a better mix of business.
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  Now here's where it gets a little interesting. Revenue. Yeah,
• 2:15
  that was actually down slightly. Just by 1%, landing at $158.4 million compared
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  to $160.6 million the year before.
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  Now, usually you see revenue drop and alarm bells might ring,
• 2:27
  but... But their explanation is key here.
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  They say, and I'm quoting loosely, stable revenue with improving gross margins,
• 2:35
  mainly driven by a strong recovery in project services.
• 2:38
  Following successful order book replenishment in the first half of 2024. for. Right.
• 2:43
  So it sounds like maybe they swapped out some lower margin work for better stuff,
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  even if the total value dips slightly.
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  That seems to be the implication, focusing on quality over just quantity of revenue, perhaps.
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  Does that kind of shift carry risks, though, like shrinking the potential market?
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  It could, theoretically. If you get too picky, you might miss out on volume.
• 3:03
  But the fact revenue was only down 1%, it's just they managed it well.
• 3:07
  Yeah, it wasn't a drastic fall. And looking back, revenue really ramped up between
• 3:11
  FY20 in FY22, then sort of plateaued in 23 and 24.
• 3:15
  So maintaining that level while boosting margins is actually quite positive, I think.
• 3:19
  It points to good cost control or, like you said, that better project mix.
• 3:23
  And we see that profitability theme again with EBITDA, right?
• 3:26
  We do. There's a clear upward trend over the last five years,
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  $12 million in FY20, up to $28.6 million now.
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  FY24 was better than FY23. Although they did flag something about FY23, didn't they? Ah, yes.
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  A one-off gain in the fourth quarter of 2023. So it might have inflated the
• 3:43
  FY23 number a little bit.
• 3:45
  Right. But even factoring that in, the underlying trend in FY24 looks strong,
• 3:50
  especially sequentially through the year.
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  Yeah, the EBITDA performance seemed to gather strength as FY24 progressed.
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  Which reinforces that idea of maybe those better margin projects starting to
• 4:00
  really kick in. And the net profit follows that same pattern.
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  $5.5 million back in FY20, now $17.5 million.
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  Again, FY24 showed improvement over FY23, particularly in the second half.
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  The net profit margin hitting 11%, that's a decent improvement.
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  If we zoom into the quarterly numbers, you can really see it.
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  Revenue bounces around a bit, but stays broadly stable across FY23 and FY24 quarters.
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  But profitability, both EBITDA and net profit, you see a general upward trend within FY24.
• 4:27
  It really backs up that narrative, doesn't it?
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  Replenishing the order book with longer term, presumably more profitable projects,
• 4:34
  and then seeing the benefit flow through as the year went on. Exactly.
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  Predictability from the order book lets them optimize things better.
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  Okay, another positive sign they highlighted.
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  Net asset value. Both the total NAV and the NAV per share have been climbing steadily for years.
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  And they explicitly link this to value accretive acquisitions.
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  So they're not just growing the existing business, they're buying other companies
• 5:00
  and adding value that way too.
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  Seems smart. It builds a stronger foundation. Growing NAV suggests the underlying
• 5:06
  worth of the company is increasing, which is, you know, good for long-term stability and growth potential.
• 5:12
  And finally, on the financial health front, let's talk debt.
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  The net gearing ratio. Ah, yes.
• 5:18
  That's quite a story. They paid down a significant amount of debt.
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  The ratio was down to 13% at the end of 2024.
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  Which is already pretty healthy. But then they mentioned it improved even more
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  after year end. Down to around 3.8% by the end of February 2025.
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  That's really low. It's incredibly low. That drastically cuts financial risk.
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  And importantly, it gives them flexibility.
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  Flexibility. How so? Well, with less debt burden, they have more capacity,
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  more financial firepower to maybe make more acquisitions or invest in organic
• 5:48
  growth without taking on excessive risk.
• 5:50
  Right. Lower interest payments, too, presumably.
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  It shows proactive financial management. Definitely. A very strong balance sheet position now.
• 5:57
  OK, so that's the would improve profitability, stable revenue,
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  stronger balance sheet.
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  Now let's dig into the why. What drove these results? Well, they put a lot of
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  weight on their order book. That $201.6 million figure as of December 31st,
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  2024, that's substantial.
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  It provides visibility for future revenue. And they specify that the growth,
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  the replenishment, came mainly from the project service or PS segment.
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  So a healthy pipeline of work there, which should feed into future results.
• 6:25
  Exactly. And they back this up by mentioning specific contract wins during the year.
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  Yeah, quite a few big ones. $90.8 million announced in June,
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  another $32.6 million in August.
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  And $22.9 million in December. Adds up quickly. And across different areas,
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  too. Right. It wasn't just one thing.
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  System integration, precision engineering, scaffolding, insulation, clean room solutions.
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  It's a broad mix. Which speaks to healthy demand across their various services,
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  doesn't it? It certainly seems that way.
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  It shows they can win big projects in multiple fields. Also kind of proves their
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  diversification point.
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  And linked to that profitability point we discussed, they also mentioned an improved product mix.
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  So basically focusing on the stuff that makes them more money.
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  Seems like it. For anyone listening who runs a business or analyses one,
• 7:13
  what's the takeaway there?
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  I guess it's that you can't just look at the total sales number right.
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  You need to understand what you're selling.
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  Shifting towards higher margin products or services can boost the bottom line,
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  even if the top line stays flat.
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  It's about the quality of revenue, not just the quantity.
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  Working smarter. And then there's the big strategic piece.
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  Diversification through acquisitions. They listed quite a few they've made over the years.
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  Hulti Height, Austin Energy, Insurer, Envipure, Starburst, AeroTech, Avon.
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  And the stated goal was to reduce reliance on any single industry and broaden their revenue sources.
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  Looking at their revenue breakdown by service and by industry for FY24 versus
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  FY23, you can see it spread out.
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  Marine, semiconductor, infrastructure, petrochemicals. That diversification
• 8:02
  is key for resilience, isn't it?
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  If one sector has a downturn, others might still be doing okay.
• 8:07
  Makes the overall business less volatile. Investors tend to like that. Absolutely.
• 8:12
  These acquisitions look like they've been central to building that more robust,
• 8:15
  diversified model. It's not just luck. It's strategy.
• 8:18
  Okay. Performance covered. reasons explored. What about the outlook?
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  Where do they see things going? Well, the title of their presentation itself is a bit of a clue.
• 8:27
  Sustainable growth, rooted in excellence. Sounds pretty optimistic,
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  focusing on the long term.
• 8:32
  It does. The language companies use often signals their strategic focus and confidence levels.
• 8:37
  Sustainable growth implies they're building for the future, not just chasing
• 8:41
  short-term gains. And they seem to back this up with actions.
• 8:44
  They highlighted their dividend history. Right. Consistent payments over the
• 8:48
  years shows a commitment to returning value to shareholders.
• 8:51
  The dividend per share has generally trended up, and the payout ratio seems reasonable.
• 8:57
  That consistency is often seen as a sign of health, right?
• 9:01
  Management's confidence. Exactly. If a company consistently pays and grows its
• 9:06
  dividend, it suggests they're generating enough cash and believe they can continue to do so.
• 9:11
  It makes the stock appealing for income investors, too. Now,
• 9:15
  here's something I always find interesting.
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  Insider activity. Ah, yes. What did they show?
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  Directors and key executives bought quite a few shares in March 2024,
• 9:26
  significantly increasing their holdings.
• 9:28
  OK, that's often a bullish sign. People running the company,
• 9:31
  putting their own money in.
• 9:32
  Plus, they mentioned a share buyback program. They bought back shares in 2022 and again in 2024.
• 9:36
  Right. Buybacks can suggest the company thinks its stock is undervalued and
• 9:40
  it reduces the number of shares out there, which can boost earnings per share. Thank you.
• 9:45
  Both insider buying and buybacks. They tend to signal internal confidence in
• 9:50
  the future prospects. They certainly can, yeah.
• 9:53
  The market often interprets them that way. These aren't guarantees,
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  obviously, but they are positive signals from those who should know the company best.
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  And then they wrap things up with a slide titled, Building Momentum,
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  Capturing Opportunities.
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  A clear forward-looking statement reinforces that positive, growth-oriented outlook.
• 10:12
  So let's try and summarize this deep dive.
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  Nordic Group and FY24.
• 10:17
  Improved profitability, better margins, even though revenue dipped slightly.
• 10:22
  Driven by, it seems, a strong order book replenishment, especially in project
• 10:26
  services, a focus on higher margin work.
• 10:29
  And the ongoing benefits of their diversification strategy through those acquisitions.
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  Plus, a much stronger balance sheet now. And looking forward,
• 10:37
  the signals seem optimistic, the presentations tone, the consistent dividends,
• 10:41
  the insider buying and share buybacks. Now, we have to add the standard disclaimer,
• 10:45
  don't we? This is all based on their presentation.
• 10:47
  Right. And it includes forward-looking statements, which always come with risks and uncertainties.
• 10:52
  Things can change. Of course. But it gives us a really valuable window into
• 10:57
  their performance, their strategy, and how they see things progressing.
• 11:02
  Definitely. So, thinking about all this, a final thought maybe for you listening.
• 11:07
  What does this Nordic Group dive really tell us about looking beyond just that
• 11:12
  top-line revenue figure?
• 11:13
  Yeah, it seems like profitability, strategy, balance sheet strength. Yeah.
• 11:17
  They paint a much richer picture of a company's health and potential,
• 11:21
  don't they? Absolutely.
• 11:22
  And maybe another angle, considering their acquisitions and that strong order
• 11:26
  book, if you were tracking them, what key metrics would you keep an eye on to
• 11:30
  see if the sustainable growth really plays out long term?
• 11:34
  Good question. Definitely something to ponder if you're following the company
• 11:36
  or just interested in how businesses demonstrate their value.
• 11:39
  Thanks for joining us on this deep dive. Thank you.
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  Music.