Slide 1: Q2 2014 Investor Presentation
Q2 2014 Investor Presentation Thursday 14 August 2014
Slide 2: Contents
CONTENTS Highlights President & CEO Arne Giske Results, Segments and Group Executive Vice President Terje Larsen, CFO Future and Focus President & CEO Arne Giske Asphalt work on E6 2
Slide 3: A Good Quarter
A GOOD QUARTER + Solid results + Stable order backlog + Strong financial position Team Veidekke Trøndelag 3
Slide 4: Key Financials
KEY FINANCIALS OPERATING REVENUES EARNINGS BEFORE TAX 7 450 6.0 242 * 6 400 5.4 5.4 350 5 4.6 4.3 300 225 NOK bill. 4 NOK mill. 250 163 166 3 200 145 148 150 2 100 1 50 0 0 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 * Acquisition and revaluation of Bouwfonds and sale of Veidekke Gje
Slide 5: Earnings Before Tax Solid in All Segments
EARNINGS BEFORE TAX SOLID IN ALL SEGMENTS 2ND QUARTER: CONSTRUCTION 2ND QUARTER: PROPERTY DEVELOPMENT 2ND QUARTER: INDUSTRY 200 200 200 133* 180 180 180 109 ** 160 160 160 140 140 140 116 NOK mill. NOK mill. NOK mill. 120 110 120 120 100 100 87 100 100 73 82 80 80 80 60 60 50 60 48 52 46 44 40 36 40
Slide 6: Changes in Earnings Before Tax
CHANGES IN EARNINGS BEFORE TAX EARNINGS BEFORE TAX 250 45 -4 225 200 13 -3 11 21 -3 145 NOK mill. 150 100 50 0 Construction Property Development Q2 2013 Norway Sweden Denmark Norway Sweden Industry Other Q2 2014 6
Slide 7: Write-down E6 – Dovrebanen
WRITE-DOWN E6 – DOVREBANEN Large and complex civil engineering project Initial contract value NOK 1.6 billion Joint venture between Veidekke (Norway and Sweden) 60% and Hochtief 40% Veidekke has written down the project by NOK 60 million in the quarter • Significant unresolved issues with the client
Slide 8: Increased Sales – Lower Production in Property
INCREASED SALES – LOWER PRODUCTION IN PROPERTY SALES IN THE QUARTER (NUMBER OF HOMES) IN PRODUCTION AT END OF QUARTER (NUMBER OF HOMES) 350 2500 Gross Sweden Norway Gross Sweden Norway 300 2000 250 200 1500 150 1000 100 500 50 0 0 2011** 2008** 2009** 2010** Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13
Slide 9: Strong Financial Position
STRONG FINANCIAL POSITION Net debt 1 billion lower now than a year NET INTEREST-BEARING DEBT AT MID-YEAR (NOK MILLION) ago • Improved liquidity in Construction units 1 766 1 656 • Lower capital tied up in Property Development Expected land purchases and increased 877 878 capital tied up in Property
Slide 10: Health, Safety and Environment
HEALTH, SAFETY AND ENVIRONMENT LTI RATE (NUMBER OF LOST-TIME INJURIES PER MILLION HOURS WORKED) SICKNESS ABSENCE (PERCENT) 30,0 Norway Denmark Sweden 6% Norway Denmark Sweden 25,0 5% 4.4 % 20,0 4% 3.4 % 15,0 3% 12.2 10,0 2% 5,0 5.9 1% 1.2 % 2.6 - 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 13
Slide 11: Highlights
HIGHLIGHTS Increased operating revenue for the quarter Good results, despite significant project write-down Potential for improvements Veidekke's new asphalt plant at Sørli, Hedmark 11
Slide 12: Business Areas
Sädesärlan, Östermalm BUSINESS AREAS
Slide 13: Business Areas, Second Quarter
BUSINESS AREAS, SECOND QUARTER Q2 2014 Q2 2013 Amounts in NOK mill. Operating Operating Profit Margin Profit Margin revenues revenues Construction Norway 3,033.1 103.7 3.4% 3,113.9 82.5 2.7% Construction Sweden 1,266.7 -9.4 -0.7% 866.4 -6.7 -0.8% Construction Denmark 447.5 21.6 4.8% 304.5 10.8 3.5%
Slide 14: Construction Norway
CONSTRUCTION NORWAY Operating revenues down 3% NOK mill. Q2 14 Q2 13 2013 • Civil engineering – high current production Operating revenues 3,033.1 3,113.9 12,131.7 • Building construction – lower activity, primarily in residential Operating profit (EBIT) 85.9 74.1 333.8 Significant improvement in pr
Slide 15: Construction Sweden
CONSTRUCTION SWEDEN Revenue growth +40% NOK mill. Q2 14 Q2 13 2013 • Arcona accounted for 28% of growth - other growth in Civil Operating revenues 1,266.7 866.4 3,499.4 engineering Operating profit (EBIT) -5.4 -6.1 12.8 Negative result for the quarter (-0.7%) Net financial expenses -4.0 -0.6 -1.4 •
Slide 16: Construction Denmark
CONSTRUCTION DENMARK Strong revenue growth +47% NOK mill. Q2 14 Q2 13 2013 • The increase is largely due to a few large commercial building Operating revenues 447.5 304.5 1,336.5 projects. Operating profit (EBIT) 19.1 9.5 65.7 Continuing strong profitability Net financial expenses 2.5 1.2 8.6 Good o
Slide 17: Property Development Norway
PROPERTY DEVELOPMENT NORWAY NOK mill. Q2 14 Q2 13 2013 Lower operating revenues Operating revenues 198.1 235.0 1,069.8 • More projects in joint-venture operations Operating profit (EBIT) 37.5 27.5 160.0 • Reduced activity, especially in Oslo region Net financial expenses 0.2 -2.4 10.0 Improved earni
Slide 18: Property Development Sweden
PROPERTY DEVELOPMENT SWEDEN NOK mill. Q2 14 Q2 13 2013 Increased activity Operating revenues 223.8 191.1 712.8 A slightly lower quarterly results Operating profit (EBIT) 8.1 17.7 54.5 Projects in start-up phase Net financial expenses 3.9 -2.8 -4.0 • Increased pre-sales Earnings before Tax (EBT) 12.0
Slide 19: Industry
INDUSTRY NOK mill. Q2 14 Q2 13 2013 Increased revenues from Asphalt • High demand Operating revenues 1,109.9 899.9 3,475.9 • Good start to production season Operating profit (EBIT) 92.4 42.1 178.0 Strong earnings for Asphalt Net financial expenses -10.6 -5.7 -19.8 • Good operational and cost efficie
Slide 20: Asphalt Operations
ASPHALT OPERATIONS VOLUME (THOUSAND TONNES) 450 2012 2013 2014 400 350 300 250 200 150 100 50 - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20
Slide 21: Consolidated Results (IFRIC 15)
Asphalt work at Lyngen CONSOLIDATED RESULTS (IFRIC 15)
Slide 22: Income Statement
INCOME STATEMENT Amounts in NOK mill. (IFRIC 15) Q2 14 Q2 13 2013 Operating revenues 6,218.3 5,453.1 21,780.9 Operating expenses -5,957.8 -5,305.8 -20,833.3 Profit/loss from associates 55.5 12.7 65.2 Depreciation/impairment -78.9 -75.0 -321.1 Operating profit 237.1 85.1 691.7 Net financial income 10
Slide 23: Statement of Financial Position Assets
STATEMENT OF FINANCIAL POSITION ASSETS Amounts in NOK mill. (IFRIC 15) 30/06/2014 30/06/2013 2013 Goodwill and other intangible assets 880.6 690.9 879.7 Deferred tax assets 55.5 62.4 55.5 Property 507.6 512.4 499.5 Machinery/equipment 1,353.8 1,222.2 1,229.6 Investments in associates 1,012.9 778.5 9
Slide 24: Statement of Financial Position Equity and Liabilities
STATEMENT OF FINANCIAL POSITION EQUITY AND LIABILITIES Amounts in NOK mill. (IFRIC 15) 30/06/2014 30/06/2013 2013 Equity 2,220.4 1,877.5 2,466.4 Pension liabilities and deferred tax 559.9 449.2 557.6 Bonded debt 750.0 500.0 750.0 Liabilities to credit institutions etc. 762.7 1,004.5 53.4 Other non-c
Slide 25: Cash Flow Statement
CASH FLOW STATEMENT FIRST 6 MONTHS 2014 FIRST 6 MONTHS 2013 Amounts in NOK mill. (IFRIC 15) Constr./Other Property Industry Dividend Group Group Profit/loss before tax 219.6 126.6 -59.1 287.0 18.6 Depreciation/impairment 92.8 0.6 66.8 160.2 148.2 Other working capital -80.2 239.1 -206.7 -47.8 49.2 C
Slide 26: Future and Focus
Marienfryd, Oslo FUTURE AND FOCUS
Slide 27: Veidekke's Two-Fold Mission
VEIDEKKE'S TWO-FOLD MISSION 1. OBTAIN PROJECTS 2. EXECUE PROJECTS Order intake Project and profit margin Quality of order backlog; margin and risk Customer satisfaction Order coverage LTI rate and number of injuries 27
Slide 28: Good Growth in Scandinavian Construction Markets
GOOD GROWTH IN SCANDINAVIAN CONSTRUCTION MARKETS INVESTMENTS IN CONSTRUCTION 2011 PRICES (VOLUME) (NOK BILLION)* Norway: High activity, moderate growth 300 • Residential market improving +1%** • Civil engineering market continues growth 250 +6%** Sweden: Good growth in building and civil 200 enginee
Slide 29: Strong Growth in Swedish Residential Market
STRONG GROWTH IN SWEDISH RESIDENTIAL MARKET RESIDENTIAL BUILDING PERMITS TO END OF Q1 (THOUSANDS) The market for new homes is back 35 • Better economic conditions and prospect of 33 28% growth continuing low interest rates year/year 31 • High population growth in Stockholm, 29 27 Gothenburg and Malm
Slide 30: Stabilisation of Norwegian Residential Market
STABILISATION OF NORWEGIAN RESIDENTIAL MARKET SECOND-HAND HOME PRICES, TO END OF Q2 (NOK THOUSAND) Positive growth 43 • Continuing growth in prices and sales in 41 the second-hand homes market 39 • Positive trends in the new homes market 37 • Underlying drivers indicate a stable, 35 positive market:
Slide 31: Order Situation
ORDER SITUATION ORDER BACKLOG (NOK BILLION) ORDERS FOR REVENUE IN NEXT 12 MONTHS 20 Industry Denmark Sweden Norway 20 Norway Sweden Denmark Industry 16 16 12 12 8 8 4 4 0 0 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 At Q2 2014 At Q2 2013 31
Slide 32: PPP Schools in Capital Region
PPP SCHOOLS IN CAPITAL REGION PROJECT TYPE PPP contracts for Jessheim College and Rykkinn School DESCRIPTION Construction, 25-year operation and financing of school buildings CONTRACT VALUE Total NOK 950 million 32
Slide 33: Renovation of Parliament's Administration
RENOVATION OF PARLIAMENT'S ADMINISTRATION PROJECT TYPE Construction of new offices for Parliament DESCRIPTION Demolish everything except the façade and build new office premises CONTRACT VALUE NOK 372 million 33
Slide 34: Medicinaren 5 – Huddinge Hospital
MEDICINAREN 5 – HUDDINGE HOSPITAL PROJECT TYPE Construction of 'Technology for Health – Medicinaren 5' DESCRIPTION Teaching premises, laboratories etc., total 20,000 m2 CONTRACT VALUE SEK 317 million 34
Slide 35: Veidekke's Two-Fold Mission
VEIDEKKE'S TWO-FOLD MISSION 1. OBTAIN PROJECTS 2. EXECUTE PROJECTS Order intake Project and profit margin Quality of order backlog; margin and risk Customer satisfaction Order coverage LTI rate and number of injuries 35
Slide 36: Margin Development Construction: 12-Month Rolling
MARGIN DEVELOPMENT CONSTRUCTION: 12-MONTH ROLLING CONSTRUCTION NORWAY CONSTRUCTION SWEDEN CONSTRUCTION DENMARK (HOFFMANN) 7% 7% 7% 6% 6% 6% 5% 5% 5% 4% 4% 4% 3% 3% 3% 2% 2% 2% 1% 1% 1% 0% 0% 0% Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 36
Slide 37: Frederiksberg Centre
FREDERIKSBERG CENTRE PROJECT TYPE Shopping centre expansion and upgrading DESCRIPTION Upgrading and expansion of the centre's total retail space of approx. 10,000 m2 (approx. 25 new stores) CONTRACT VALUE DKK 447 million 37
Slide 38: E16 - Slomarka
E16 - SLOMARKA PROJECT TYPE Four-lane motorway between Kløfta and Kongsvinger DESCRIPTION 9.6 km with three bridges and four footbridges CONTRACT VALUE NOK 566 million 38
Slide 39: Väg 40 – Dällebo - Hester
VÄG 40 – DÄLLEBO - HESTER PROJECT TYPE Four-lane motorway between Borås and Ulricehamn DESCRIPTION 7.2 km with seven bridges and a tunnel CONTRACT VALUE SEK 540 million 39
Slide 40: Industry on 'The Right Way'
INDUSTRY ON ’THE RIGHT WAY’ OPERATING REVENUES (12-MONTH ROLLING) EARNINGS BEFORE TAX (12-MONTH ROLLING) 4 000 Asphalt Agg. RM Asphalt Agg. RM 250 3 500 200 3 000 2 500 150 2 000 100 1 500 1 000 50 500 0 - 2011* 2012 2013 Q2 2014 2011 2012 2013 Q2 2014 -50 *Excl. sale of Veidekke Gjenvinning 40
Slide 41: Looking Back
LOOKING BACK Improvement measures implemented Profitability clearly improved Market positioning Strengthened organisation Stronger position, but profitability Strategic acquisitions challenges remain Focus on margin improvements Improved margins, particularly in Unprofitable units highlighted buildi
Slide 42: Areas of Improvement
AREAS OF IMPROVEMENT CONSTRUCTION PROPERTY DEVELOPMENT INDUSTRY Improve operations with low Bring new and attractive + Further improvement and profitability projects to the market in efficiency of operations Stockholm Continued strengthening of + Strategic market positioning building construction St
Slide 43: A Solid Quarter, Potential for Improvements, A Good Market
A SOLID POTENTIAL FOR A GOOD QUARTER IMPROVEMENTS MARKET Asphalt work on E6
Slide 44: Economic Activity Report Q3 2014
ECONOMIC ACTIVITY REPORT 15 SEPTEMBER 2014 Q3 2014 6 NOVEMBER 2014
Slide 45: Appendix
x< lay Z || um Ww o o l <
Slide 46: Residential Portfolio
RESIDENTIAL PORTFOLIO Property Under construction Completed Start-up Under construction Completed Start-up Under construction Housing portfolio - Net at 31 Dec. 2012 2013 2013 at 31 Dec. 2013 2014 2014 at 30 June 2014 Construction - number of homes Norway 906 -500 343 749 -354 62 456 Sweden 371 -135
Slide 47: Solid Land Bank
200 SOLID LAND BANK Total 13,400 units • Veidekke's share 10,900 2,300 In Norway: 150 • 6,100 units • Veidekke's share 3,900 2,050 In Sweden: 350 • 7,300 units 4,400 1,775 • Veidekke's share 7,000 750 • 75% options 300 1,125 47
Slide 48: Business Areas, First 6 Months
BUSINESS AREAS, FIRST 6 MONTHS FIRST 6 MONTHS 2014 FIRST 6 MONTHS 2013 Operation Operating Profit Margin Profit Margin Amounts in NOK mill. revenues revenues Construction Norway 5,839.1 167.5 2.9 % 5,686.5 132.8 2.3 % Construction Sweden 2,359.8 -3.5 -0.1 % 1,601.4 -18.3 -1.1 % Construction Denmark
Slide 49: Business Areas
BUSINESS AREAS 2013 2012 Operation Operating Profit Margin Profit Margin Amounts in NOK mill. revenues revenues Construction Norway 12,131.7 359.9 3.0 % 11,480.2 356.7 3.1 % Construction Sweden 3,499.4 11.4 0.3 % 3,555.6 87.7 2.5 % Construction Denmark 1,336.5 74.3 5.6 % 1,275.1 52..3 4.1 % Total Co