Nobina : interim report 1 June 2020–31 August 2020

Q2 NOBINA Q2 1 JUNE-31 AUGUST 2020

Active management has yielded results

SEK 2.6billion

IN NEWLY SECURED CONTRACT VALUE

The corona pandemic continues to affect Nobina's markets with lower travel volumes as a result, although a continued recovery has been noted. As previously announced Nobina was able to improve earnings during the second quarter compared with the same period last year through increased cost controls, efficiencies, rapid adjustment and also retroactive revenues of SEK 27 million. The retroactive revenues are driven by the company reaching agreement with a number of PTA's on the effects of the pandemic on incentive revenue contracts. In addition, the subsidiary Samtrans Omsorgsresor­ has adjusted its operating model to be able to meet societies need for mobile test stations for Covid-19. Finally, positive­ effects from contract migration in Norway and Finland also contributed to the overall improvement in earnings.

104

COVID-19 TESTING STATIONS SET UP BY SAMTRANS

The second quarter

• Net sales amounted to SEK 2,564 million (2,528), an increase of 1.4 percent compared to the prior-year quarter, of which +3.4 percent was organic growth offset by -2.0 percent of currency effects.
• EBITA amounted to SEK 190 million (162).
• EBIT amounted to SEK 175 million (156).
• Profit after tax amounted to SEK 114 million (81), and earnings per share totalled SEK 1.29 (0.92) before dilution.
• Cash flow from operations was SEK 483 million (472).

The first half of the year

• Net sales amounted to SEK 5,073 million (5,277), a decrease of 3.9 percent, of which -2.6 percent was organic growth and -1.3 percent derived from currency effects.
• EBITA amounted to SEK 279 million (330).
• EBIT amounted to SEK 245 million (308).
• Profit before tax amounted to SEK 169 million (198).
• Profit after tax amounted to SEK 135 million (157), and earnings per share totalled SEK 1.53 (1.78) before dilution.
• Cash flow from operations was SEK 1,051 million (803).

Significant events during the second quarter

• In the quarter, Nobina started new traffic with a total of 268 buses in Linköping, Sjuhärad, Halland and Vejle due to the contacts secured in spring 2019.
• Nobina secured a new contract, valued at appr. EUR 127 million, from HSL to operate and develop city transport services in Helsinki and Vantaa. The contract extends for a total of seven years with an option to extend for three additional years and involves a total of 68 scheduled buses, of which 58 will operate solely on electricity. Services are scheduled to start in August 2021.
• Nobina has been awarded3) a contract by Östgötatrafiken to operate and develop express and regional transport services in Linköping. The contract entails extended collaboration with Östgötatrafiken and is valued at approxi- mately SEK 1.1 billion over 11 years. The services will be launched in December 2021 and involve a total of 49 buses, of which 30 are new double-deckers.
• In August, Nobina was awarded its third contract in a short period of time in Region Norrbotten, when Länstrafiken i Norrbotten entrusted Nobina with developing local transport in Piteå Municipality as well as local coach hire for schools. The contract involves 13 scheduled buses and has a total value of SEK 150 million over the contract period of ten years.

Significant events after the end of the quarter

• The City of Turku has awarded a new contract to Nobina to operate and develop city transport services in the Turku region. The contract is worth more than EUR 71 million over eight years, with an option for two additional years and includes 42 fully electric buses. Traffic is scheduled to start in July 2021.

Key metrics	Quarter			Period			Full year		Rolling 12 months
(SEK million, except as otherwise indicated)	Jun-Aug 2020	Jun-Aug 2019		Mar-Aug 2020	Mar-Aug 2019		Mar 2019-Feb 2020	Sep 2019-Aug 2020
Net sales	2,564	2,528	5,073		5,277	10,645	10,441
EBITDA	481	438	847		869	1,764	1,742
EBITA	190	162	279		330	662	611
EBIT	175	156	245		308	597	534
EBT	138	101	169		198	399	370
Adjusted EBT1)	153	107	203		220	464	447
Adjusted EBT margin	6.0%	4.2%	4.0%		4.2%	4.4%	4.3%
Profit after tax	114	81	135		157	305	283
Cash flow for the period2)	86	-536	491		-606		-753	344
						31 Aug 2020		31 Aug 2019		29 Feb 2020
Net debt/EBITDA						3.2x		3.1x		3.1x
Net debt/EBITDA, excluding bus financing						0.2x		0.3x		0.5x
Equity/assets ratio, %						14.9	13.6	14.7

A complete table of key metrics, including definitions, can be found on pages 24-25.

1. Adjusted for income, costs and amortisations related to acquisition accounting effects.
2. Cash flow for the quarter was positively impacted by the non-payment of a dividend and less bus investments compared with the corresponding period previous year.
3. The award is under appeal and pending decision.

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"Nobina should be an appealing choice when there is an urgent need for a provider of creative mobile infrastructure

solutions"

STATEMENT FROM THE CEO

Statement from the CEO

The second quarter of the fiscal year was again clearly marked by the coronavirus pandemic. The authorities kept recommending people to avoid travel by public transport as much as possible, while expecting traffic volumes to remain at least at previous levels: people who must travel should be able to do so as safely as possible from a contagion perspective. This situation naturally impacts revenue for public transport authorities, and state subsidies offered to mitigate the financial impact still differ significantly between the Nordic countries. Nobina is adjusting to the current, exceptional circumstances while continuing its long-term planning and investment in an expanding, fossil-free ­critical public transport market.

Strong commitment

Despite the pandemic, we noted a positive financial development in our operations during the second quarter. Year-on-year, sales rose marginally and adjusted profit before tax rose to SEK 153 million (107). The renegotiation of incentive agreements mainly contributed to the improved profitability, but contributions also came from increased cost control, efficiencies, contract migration in Norway and Finland and finally from the effects of the adjustment of operations that our subsidiary Samtrans was able to implement.

I am particularly proud of the strong commitment within the organisation to solve the challenges in the wake of the pandemic, and this enabled us to deliver 99.97 percent of our traffic services. The use of steering groups at various levels and decisions based on real-time analysis of passenger flows were some key success factors. Through close dialogue with clients and authorities, we were able to modify timetables, expand traffic whenever necessary and create an understanding among the general public and the business community of the measures needed, for example, to avoid crowding. Moreover, we are happy that our employees currently are as healthy as before the pan- demic, in all parts of the company. The fact that we are always ready to do our job enhances our efficiency, and thereby profitability.

Important redeployment

Let me return to the important role played by Samtrans during the ­pandemic. Our subsidiary within special needs transportation in the Stockholm region current runs 104 mobile test stations throughout the country. At the peak of the crisis last spring, Samtrans also acted as an extra transport resource when transferring infected patients between the home and hospital. Samtrans' swift redeployment of parts of its operations demonstrates the flexibility of our organisation, and was widely appreciated by the community. This infrastructure will help society gain control of the spread of the virus and allows people to get tested in an easy and accessible manner. We believe the use of mobile units for a range of public services may increase in the future. With the Nordic region's largest bus fleet and operations in many regions, Nobina should be an appealing choice when there is an urgent need for a provider of creative mobile infrastructure solutions.

Properly equipped

Travel in society has begun to recover, partly due to the return to school and as more people choose to return to their workplaces. But we are still far from the situation before Covid-19, and we expect a return to normality will take some time, based on the restrictions and recommendations that the authorities still have in place.

The pandemic also meant that several tenders were postponed, including contracts in Stockholm and Skåne, where allocation decisions are now expected this autumn. During the second quarter, we secured new contracts in Sweden and Finland with a total contract value of SEK

2.6 billion. I am pleased to note our new progress in Finland, in Helsinki where we are already market leader but also in Turku, a new region for us with excellent growth opportunities. The two contracts awarded in the country will also help us advance our position in electric power and

have made us the largest electric bus operator in the Finnish

market­ . No new contracts were won in Denmark or Norway, though the positive performance in Norway has contin- ued, resulting in a sharp improvement in earnings. This

was an effect of continuous improvements and a more favourable contract mix.

The pandemic will continue to make its presence felt in our markets and in our business during the coming quarters, but in recent months we have shown that we are properly equipped to emerge successfully from this situation. The swift transition of our

operations, with a clear governance structure in all areas, enabled us to offer our passengers efficient and safe services when it was most needed. We have developed

new services and business models that demonstrate that, as a large public transport company possessing a high degree of flexibility and adaptability, we can serve as a critical resource in challenging times.

The recent stable and successful development of the business has, of course, further strengthened the company's financial position. This gives us even better space to quickly and flexibly be able to act in a market where the good long-term growth conditions remain - not least important from a sustainability perspective - and thus be able to continue to create value for all our stakeholders.

Magnus Rosén,

President and CEO

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FINANCIAL PERFORMANCE

Nobina's financial performance

Second quarter (1 June-31 August 2020) and first half of the year (1 March-31 August 2020)

Net sales

The second quarter

Nobina's second-quarter net sales amounted to SEK 2,564 million (2,528), up 1.4 percent compared with the prior year period. Adjusted for currency effects, net sales increased 3.4 percent. The net sales development was largely due to the strong performance of Samtrans and retroactive1) compensation in incentive revenue linked to Covid-19.

The first half of the year

Nobina's net sales for the first half of the year amounted to SEK 5,073 million (5,277), a decrease of 3.9 percent compared with the prior year period. Adjusted for currency effects, the decrease was 2.6 percent.

The decrease is primarily because of negative contract migration and lower revenue resulting from the decline in travel due to Covid-19.

Results

The second quarter

EBITA for the second quarter amounted to SEK 190 million (162), an increase of 17.3 percent, largely attributable to the performance of Samtrans, improved cost control and retroactive negotiated revenue. Contract migration had a negative impact on the quarter. EBIT for the

1. Nobina usually accounts for incentive contracts, even in the pandemic, based on the provisions of the contract in force at the time and will only accrue revenue based upon passengers recorded as travelling. When PTA's come to an agreement on alternative measures for the contracts this is normally retroactive and Nobina will identify where possible the retroactive element of revenue.

second quarter amounted to SEK 175 million (156), an increase of 12.2 percent. Profit before tax amounted to SEK 138 million (101). Adjusted profit before tax totalled SEK 153 million (107).

The first half of the year

EBITA for the first half of the year amounted to SEK 279 million (330), a decrease of 15.5 percent. The decrease is a result of the decline in travel linked to Covid-19, and negative contract migration. EBIT for the first half of the year amounted to SEK 245 million (308), a decrease of 20.4 percent. Profit before tax amounted to SEK 169 million (198). Adjusted profit before tax totalled SEK 203 million (220).

Income tax

Nobina's income tax in the income statement for the second quarter comprised current tax of SEK -1 million (-1) and the change in estimated deferred tax of SEK -23 million (-19). The effective rate of tax was 17.4 percent (19.8). Tax paid in the second quarter amounted to SEK 0 million

(2). Nobina's income tax for the first half of the year comprised current tax of SEK -4 million (-2) and a change in estimated deferred tax of SEK -30 million (-39). The effective rate of tax was 20.1 percent (20.7). Tax paid in the first half of the year amounted to SEK 4 million (2).

Net sales

SEKm
3,000
2,400
1,800
1,200
600
0
Q2	Q3	Q4	Q1	Q2
	2019/2020		2020/2021

EBITA
SEKm
250
200
150
100
50
0
Q2	Q3	Q4	Q1	Q2
	2019/2020		2020/2021

Adjustments and adaptation during a pandemic

Even in the midst of a pandemic, public transport has a central role in keeping society functioning. To address these challenges in the best possible manner, Nobina set up a task force back in February comprising experts from different parts of the company. This group has monitored developments on a daily basis in the macro environment and advice from expert bodies, with the aim of drawing up clear guidelines for operations. Nobina's Head of Security Peter Boström chairs the task force and summarises work to date.

"We continued to provide a critical service during the time when large parts of society stayed at home, and helped those people who had to travel to do so safely and sustainably. We provided a very high delivery volume and were also prepared to quickly make any changes needed to traffic and other services.

One key factor in successfully achieving this was Nobina's technology to monitor travel in real time,

which enabled us to analyse various travel patterns and then use the information to adapt and change bus services. Bram Lauwers, who is responsible for the company's operational steering group, has seen the direct result of the analyses.

"We found normality in an abnormal situation, reor- ganised and adapted. During the pandemic, we have noted that peak occur at completely new times during the day from what we are used to. To avoid crowding, we have changed the timetable, put extra buses into service at short notice, and also offered advice, for example, in relation to changes to the return to school or other modifications to external activities.

Work by the task force, the real-time analyses and other initiatives by Nobina during this exceptional time have made the company an even more relevant partner for clients and authorities. Peter Boström:

"By working together to stay informed, we can make proper decisions based on facts. We have demonstrated that we are alert and innovative, ­systematic and dynamic. We have also continued to build on new operations, such as the logistics resource for mobile testing stations initiated by our subsidiary Samtrans in Stockholm and that we are now expanding to other regions.

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Financial position

Cash and cash equivalents amounted to SEK 786 million (460) at the end of the period. Nobina has an available bank credit facility of SEK 300 million (300) as of 31 August 2020. Nobina's interest-bearing liabilities amounted to SEK 6,302 million (5,835), mainly divided between right-­‑of-use liabilities of SEK 2,975 million (3,198) and other external liabili- ties, mainly loans for bus financing, of SEK 3,327 million (2,637). The bus financing includes also Nobina's green bond of SEK 500 million (500), which was launched in February 2019. Nobina's liabilities are primarily attributable to the financing of investments in buses and equipment used in operations, but also include certain strategic debt in the form of two loans related to acquisition financing amounting to SEK 428 million (283), which replaced a previous bridge loan, see Note 1. Nobina has pledged shares in Samtrans Omsorgsresor AB and Nobina Danmark Holding AS as collateral for the two acquisition loans, see Note 2. Net debt totalled SEK 5,516 million (5,375) at the end of the period, and net debt/EBITDA was 3.2x (3.1x). Shareholders' equity totalled SEK 1,491 million (1,303). The equity/assets ratio at the end of the period was 14.9 percent (13.6).

Investments and divestments

The second quarter

Bus investments in the second quarter amounted to SEK 313 million (1,164) and other investments were SEK 19 million (-). Nobina signed right-of-use agreements of SEK -27 million (-525) and new loans of SEK -253 million (-224). Nobina's cash investments for procurement of buses, accessories and other PPE amounted to SEK 52 million (415). Nobina sold buses and other PPE for a value of SEK 2 million (16).

The first half of the year

Bus investments in the first half of the year amounted to SEK 956 million (1,815) and other investments were SEK 38 million (9). Nobina signed finance leases of SEK -27 million (-528) and new loans of SEK -825 million (-813). Nobina's cash investments for procurement of buses, accessories and other PPE amounted to SEK 142 million (483) and consisted ­primarily of investments in loan-financed buses. Nobina sold buses and other PPE for a value of SEK 7 million (20). The sale generated a capital loss of SEK -1 million (0).

FINANCIAL PERFORMANCE

Cash flow

The second quarter

Cash flow from operations before changes in working capital amounted to SEK 485 million (421). The change in working capital amounted to SEK -2 million (53) and was primarily related to various timing effects.

Cash flow from investing activities amounted to SEK -350 million (-623) and included an additional consideration of SEK -47 million related to the Samtrans acquisition and investments in buses and equipment, which were financed by loans amounting to SEK 253 million (224). The previous year's cash flow from investing activities for the second quarter was weighed down by bus investments of SEK -300 million financed by the green bond which had been issued in the fourth quarter of 2018-2019.

Cash flow from financing activities amounted to SEK -47 million (-385), which was impacted by the decision not to pay a dividend, which amounted to SEK -331 million in the preceding year. Total cash flow for the quarter was SEK 86 million (-536).

The first half of the year

Cash flow from operations before changes in working capital amounted to SEK 848 million (855). Working capital changes amounted to SEK 207 million (-50) and reflected the impact of postponed final settlements ­pertaining to incentive contracts due to Covid-19 and increased accounts payables in the fleet organization due to new financing method.

Cash flow from investing activities amounted to SEK -1,007 million (-1,282) and was impacted by an additional consideration of SEK -47 million related to the Samtrans acquisition and investments in buses and equipment of SEK -967 million (-1,296), which were financed by loans amounting to SEK 1,025 million (813) which also included the proceeds of SEK 200 million from the financing of previous acquisitions. The cash flow from investing activities during the first half of 2019 was impacted by the refinancing, with loans, of buses which were previously lease-financed, corresponding to SEK 753 million in both investments and new loans. No similar refinancing has been carried out during the first half of 2020. Cash flow during the first half of last year was also affected by bus investments of SEK -338 million financed by proceeds from the green bond which had been issued in the fourth quarter of 2018-2019.

Cash flow from financing activities amounted to SEK 447 million (-127) which was affected by the decision not to pay a dividend, which amounted to SEK -331 million in the preceding year. Total cash flow for the first half of the year was SEK 491 million (-606).

Cash flow effect relating to Investments	Quarter			Period			Full year
Jun-Aug 2020	Jun-Aug 2019		Mar-Aug 2020	Mar-Aug 2019 Mar 2019-Feb 2020
Investments in new buses	-313	-1,164		-956	-1,815		-2,353
Other investments	-19	-		-38	-9		-79
Total investments	-332	-1,164		-994	-1,824		-2,432
Lease-financed investments	27	525	27	528	905
Non-lease-financed investments	-305	-639		-967	-1,296		-1,527
Of which loan-financed investments	253	224	825	813	860
Total cash investments1)	-52	-415		-142	-483		-667

1) The investment table includes investments in buses and other equipment but excludes acquisition financing.

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