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NKT A/S Q3 2019: Financial outlook updated and review of strategic alternatives for NKT Photonics announced

Company Announcement

20 November 2019
Announcement No. 15

NKT A/S Q3 2019: Financial outlook updated and review of strategic alternatives for NKT Photonics announced

NKT Chairman of the Board, Jens Due Olsen says:
- Today, we launch a review of the strategic alternatives for NKT Photonics to maximize the value creation we believe NKT Photonics possesses. The timing of such a process is now right in order to position NKT Photonics for long-term growth and to support a deleverage of the NKT A/S balance sheet.

NKT CEO Alexander Kara says:
- I am pleased to note that NKT has recorded a satisfactory order intake of high-voltage projects over the past five months, which strengthens our order backlog. With the Q3 2019 results and visibility for the rest of the year, we have updated the full-year outlook for NKT. The secured orders will not have material impact in 2019 and the anticipated profitability improvement in Applications has not materialized in 2019.  After a strong profitability improvement for NKT Photonics in 2019, we adjust our earnings outlook to the higher of the guided range, while revenue expectations are lowered, as a few projects expectedly will be postponed into 2020.

Q3 2019 financial highlights

EURm NKT NKT Photonics
Revenue 232.4* 16.7
Organic growth -16% 8%
Operational EBITDA 6.9 3.9
Operational EBITDA margin 3.0%* 23.3%

* Std. metal prices

2019 financial outlook updated
The financial outlooks for NKT and NKT Photonics are updated:

For NKT, revenue (std. metal prices) is expected to be in the lower half of the previously communicated range of approx. EUR 0.9 –1.0bn. The operational EBITDA is expected to be in the lower half of the previously communicated range of approx. EUR 10–30m.

When the financial outlook was released in November 2018, two main assumptions were to improve the profitability level in Applications and secure additional high-voltage projects with financial impact in 2019.
With the development during the first nine months of 2019, Applications is not expected to improve profitability sufficiently in 2019 and while the anticipated high-voltage orders have been awarded to NKT, these will not have material financial impact in 2019.

As previously stated, the operational EBITDA for NKT is expected to improve in 2020 compared to 2019.

For NKT Photonics, organic revenue growth is expected to be approx. 10% (previously 15–20%). The EBITDA margin is expected to be in the higher end of the previously communicated range of approx. 15–20%.

As in previous years, a large part of NKT Photonics’ revenue and earnings for 2019 are expected to be generated in Q4. The updated revenue outlook is based on the expectation that a few larger projects will be postponed to 2020 and not have the anticipated positive impact in Q4 2019.

NKT A/S announces review of strategic alternatives for NKT Photonics
The NKT A/S Board of Directors has decided to review strategic alternatives for NKT Photonics with the objectives of maximizing value creation, positioning NKT Photonics for long-term growth, and support the deleveraging of the NKT A/S balance sheet.

This is in line with the NKT A/S strategy of relevant business separations, most recently with the demerger of Nilfisk in October 2017.

NKT A/S has not set a definitive schedule to complete this review and no decision on any particular transaction or alternative has been reached at this time. Equally, there is no certainty that any transaction or alternative will be undertaken or pursued.

NKT A/S does not intend to make further announcements regarding the review unless it concludes they are warranted by the circumstances or are expressly required by law.

NKT Q3 2019: Financial performance was negatively impacted by the reduced level of activity in Solutions.
NKT generated revenue (std. metal prices) of EUR 232.4m in Q3 2019, against EUR 286.9m in Q3 2018, corresponding to organic growth of -16%. The decreased revenue was primarily due to a reduced activity
level in Solutions, which outweighed the positive organic growth delivered by Applications and Service & Accessories. The reduced revenue for NKT led to lower profitability, with operational EBITDA of EUR 6.9m for Q3 2019, against EUR 26.1m for Q3 2018.

NKT was awarded a number of projects in Q3 2019, which increased the high-voltage order backlog to EUR 1.09bn (EUR 0.97bn in std. metal prices) at end-Q3 2019. The most significant award in Q3 2019 was an approx. EUR 90m contract for the Viking Link interconnector project.

After the balance sheet date, NKT announced a contract with a value of approx. EUR 360m for the Dogger Bank offshore Wind Farms Creyke Beck A/B. This is the largest XLPE power cables order ever for NKT. Additionally, NKT confirmed being evaluated as best bidder for delivery and installation of the onshore power cable systems for the Attica-Crete interconnector project.

NKT Photonics Q3 2019: Organic growth of 8% in Q3 2019 and more than doubled its EBITDA margin
The revenue for NKT Photonics amounted to EUR 16.7m in Q3 2019, against EUR 15.2m in Q3 2018, corresponding to 8% organic growth. The growth in revenue was mainly driven by continued improved performance in Imaging & Metrology, and progress in Material Processing. Increased growth is expected in Q4.

The EBITDA increased to EUR 3.9m in Q3 2019 from EUR 1.5m in Q3 2018. This development was due to higher revenue, effective cost containment and some positive non-recurring items.
The order intake grew by 12% in Q3 2019. The number of orders continued to exceed revenue in EUR terms, supporting future growth.

Teleconference
NKT A/S hosts a teleconference for investors and financial analysts at 10:00 am CET on 21 November, and it can be accessed at investors.nkt.com. The presentation for the call will be available before the teleconference. To attend, please dial in from (confirmation code: 5755266): 

Denmark: +45 3272 8042
UK: +44 207 192 8000
US: +1 631 510 7495

Contacts
Investor Relations: Michael Nass Nielsen, Head of Investor Relations, tel: +45 2494 1654
Media Relations: Helle Gudiksen, Head of Group Communications, tel: +45 2349 9098

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