Growth by M&A

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Established in 1998, Nordic Group was listed in SGX on Nov- 2010. Organisation is structure into the following divisions:

• System Integration (SI): Flow, automation and navigation

• Precision Engineering (PE): Design, build tooling systems; turnkey solutions for aerospace, marine, medical, O&G and electronic industries.

• Scaffolding Services (SS): Scaffolding services for O&G, petrochemical, construction and marine industries

• Insulation Services (IS): Thermal & cryogenic insulation, thermal spray aluminium & passive fireproofing in the petrochemical, marine, O&G and pharmaceutical industries

• Petrochemical & Engineering (PEES): Cleaning for heat exchanger & tank, process plant recover work, decontamination services, product filtering in the petrochemical, manufacturing and infrastructure industries.

• Cleanroom Air & Water Solutions Engineering (CAW): facilities engineering services, maintenance, engineering, project management, air pollution control system, water and waste treatment system to semiconductor, pharmaceutical, O&G, power plant & municipal sectors.

• Maintenance, Overhaul & Trading: After-sales service support for marine, O&G and infrastructure industries.

Businesses are segmented into:

• Project Services: Design, EPC, machining, scaffolding works, insulation services and passive fireproofing services

• Maintenance: Maintenance & repair services, trading & supply of materials, spare parts & components.

• Others

Key geographical markets are Singapore, China (Suzhou based), and Malaysia. Through a network of agents, the company also serves Korea, Taiwan, India, Qatar, Turkey, Cyprus, Greece and Romania.

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Business

Revenue last peaked between 2017~2018 and trended lower from 2019 accompanied by declining margin. Despite the onset of Covid-19 pandemic in 2020; sales fell only 5% with earning lower by 35%.

The acquisition of ENVIPURE in Nov-19 played an important role in boosting CAW revenue from $5.1M in FY19 to $20.2M in FY20 supporting the group top-line. Without which, sales would have declined more than 20%.

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FY21 revenue grew 28% in FY21 with most divisions recording growth except for System Integration which declined 21%. Strongest growth were from Precision Engineering 59% and Scaffolding Services 77%.

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Margin recovered to slightly above pre-pandemic level but below FY17 performance. Project Services margin held at 16.6%. Maintenance Services improved from 13.7% to 16.2%.

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Growth by acquisition have resulted in debt uptrend. Goodwill is $29.6M. Balance sheet remain healthy at time of review.

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Opinion

CAW was Nordic revenue driver in FY20 & 21 contributing between 23% ~ 25% of sales. PE is the only 'old' division just exceeding historical sales peak in FY21. Rest of division generally perform below historical sales peak.

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CAW revenue grew only 17% in FY21. Any sign of weakness could derail overall growth. However, the notable jump in debt between FY20 & FY21 signal that further M&A activity could be in the horizon. Management have a decent history of executing measured acquisitions over the years.

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Note

Nordic announced acquisition of Starburst Holdings for up to $59M. Starburst is a specialist engineering firm for firearm shooting ranges and tactical training mock-up, . Acquisition was completed on Mar-2022.