Slide 1: 3rd Quarter 2018 Investor presentation
3RD QUARTER 2018 Investor presentation 15 November 2018
Slide 2: Contents
CONTENTS Highlights Results – segments and group Increase profitability! Veidekke builds a subterranean car park below the future «Norra stationsparken» in Hagastaden, Stockholm, with 1 022 parking spaces 2
Slide 3: Highlights 3rd Quarter
HIGHLIGHTS 3RD QUARTER + Too low profitability; corrective measures implemented + Revenue and earnings growth in Construction Slow sales and declining results in Property Development Weak results in Asphalt Veidekke develops and builds Gartnerkvartalet in Oslo 3
Slide 4: Revenue and earnings for the 3rd quarter
REVENUE AND EARNINGS FOR THE 3RD QUARTER REVENUE PROFIT BEFORE TAX 10,0 600 90 500 8,0 400 NOK million NOK billion 6,0 300 8.8 507 498 4,0 7.4 7.9 460 200 370 390 6.0 5.9 2,0 100 - 0 Q3 14 Q3 15 Q3 16 Q3 17 Q3 18 Q3 14 Q3 15 Q3 16* Q3 17 Q3 18 * Positive one-off effect of NOK 90 mill. from changes t
Slide 5: Profit before tax – 3rd quarter
PROFIT BEFORE TAX – 3RD QUARTER 3RD QUARTER: CONSTRUCTION 3RD QUARTER: PROPERTY DEVELOPMENT 3RD QUARTER: INDUSTRIAL NOK mill. NOK mill. NOK mill. 250 250 250 12 9 37 200 23 4 200 200 3 150 150 150 -63 -6 208 100 218 100 100 195 160 141 50 50 -70 50 65 - - - Q3 2017 BC CE Sweden Denmark Q3 2018 Q3 20
Slide 6: Results and profit margin - Construction
RESULTS AND PROFIT MARGIN - CONSTRUCTION BUILDING CONSTRUCTION CIVIL ENGINEERING SWEDEN* DENMARK (HOFFMANN)* NORWAY* NORWAY* NOK bill. NOK bill. NOK bill. NOK bill. 12 8% 12 8% 12 8% 12 8% 10 10 10 10 6% 6% 6% 6% 8 8 8 8 6 4% 6 4% 6 4% 6 4% 4 4 4 4 2% 2% 2% 2% 2 2 2 2 - 0% - 0% - 0% - 0% -2 -2 -2 -2
Slide 7: Sound order book – shift towards non-residential buildings
SOUND ORDER BOOK– SHIFT TOWARDS NON-RESIDENTIAL BUILDINGS ORDER BOOK, CONSTRUCTION (NOK BILLION) ORDER BOOK BY SEGMENTS NOK bill. NOK bill. 35 35 30 30 26% 27% 29% 30% 25 25 37% 20 20 24% 21% 31% 25% 15 15 27% 10 10 40% 45% 50% 52% 5 5 36% - - Q3 14 Q3 15 Q3 16 Q3 17 Q3 18 Q3 17 Q4 17 Q1 18 Q2 18 Q3
Slide 8: Lower sales affect project starts
LOWER SALES AFFECT PROJECT STARTS NO. OF UNITS SOLD* NEW PROJECTS STARTED** UNITS UNDER CONSTRUCTION* 600 1 600 3 000 1 400 500 2 500 1 200 400 2 000 1 000 300 800 1 500 600 200 1 000 400 100 500 200 - - - Sweden Norway * Veidekke’s share ** 12-month rolling 8
Slide 9: Low asphalt volume, good development in aggregates
LOW ASPHALT VOLUME, GOOD DEVELOPMENT IN AGGREGATES PROFIT BEFORE TAX, 12M ROLLING LOW ASPHALT PRODUCTION IN SEPTEMBER GOOD DEVELOPMENT AGGREGATES, 12M R NOK mill. Mill. tonnes Mill. tonnes NOK mill. 400 0,6 Asphalt Dev. gain from sale 10 100 Aggregates Road Maintenance 300 0,5 8 75 0,4 200 6 0,3 50
Slide 10: Occupational health and safety
OCCUPATIONAL HEALTH AND SAFETY SERIOUS INJURIES* # LTI RATE* SICKNESS ABSENCE 7 40 6% 6 5% 30 5 4% 4 20 3 3% 2 2% 10 1 1% - - 0% # Veidekke employees, hired staff and sub-contractors * 12-month rolling (LTI = Number of lost-time injuries per million hours worked, Veidekke employees) 10
Slide 11: Results segments and group
Veidekke produced 1.2 million tonnes asphalt in the quarter RESULTS SEGMENTS AND GROUP
Slide 12: Business areas, 3rd quarter
BUSINESS AREAS, 3RD QUARTER 3rd quarter 2018 3rd quarter 2017 Amounts in NOK million Revenue Profit Margin Revenue Profit* Margin* Building Construction Norway 3 000 111 3.7% 2 445 88 3.6% Civil Engineering Norway 1 095 0 0% 1 005 -4 -0.4% Construction Sweden 2 290 55 2.4% 2 024 46 2.3% Construction
Slide 13: Building Construction Norway
BUILDING CONSTRUCTION NORWAY 3rd QUARTER 2018 REVENUE AND MARGIN NOK bill. Revenue growth over Q3 2017 4 7% • Particularly strong performance in eastern Norway 6% 3 3.4 5% 2.4 2.9 3.0 3.0 4% 2 Result increase 4.0% 3% 3.6% 3.5% 3.7% 3.4% • Stable margin from higher revenue 1 2% 1% 0 0% Stable order b
Slide 14: Civil Engineering Norway
CIVIL ENGINEERING NORWAY 3rd QUARTER 2018 REVENUE AND MARGIN* NOK bill. Stable revenues 1,2 6% 1.2 0,8 1.0 1.0 1.1 4% 0.9 Project portfolio yields weak profitability 0,4 2% • Comprehensive measures have been implemented, 0,0 0% and strategy is under review -2.4% 0.3% -0.4% 0.0% • Results affected by
Slide 15: Construction Sweden
CONSTRUCTION SWEDEN 3rd QUARTER 2018 REVENUE AND MARGIN NOK bill. Revenue growth 3 7% • Q2 acquisition accounts for the bulk of the increase 2.7 6% 2.5 • Increase in non-residential; drop in residential 2 2.3 5% 2.0 2.0 4% • Civil engineering remains stable 3% 1 2% Result increase 2.3% 2.5% 2.4% 2.3
Slide 16: Construction Denmark
CONSTRUCTION DENMARK 3rd QUARTER 2018 REVENUE AND MARGIN NOK bill Revenue growth in the Copenhagen area 0,7 10% 0,6 0.6 8% 0.6 0.6 0,5 0,6 8.3% Strong results and high profit margin 0.5 6% 0,4 7.0% 7.0% • High profitability in building construction in Copenhagen area 0,3 4% 5.6% 5.2% • Solid overall
Slide 17: Property Development Norway
PROPERTY DEVELOPMENT NORWAY 3rd QUARTER 2018 PROFIT BEFORE TAX NOK mill. Residential sales and production at normal levels 40 • Three projects totalling 50 units started 36 35 30 Stable results 30 26 27 20 Four projects totalling 109 units released for sale in the quarter 10 Return on invested capit
Slide 18: Property Development Sweden
PROPERTY DEVELOPMENT SWEDEN 3rd QUARTER 2018 PROFIT BEFORE TAX NOK mill. Residential sales remain low, but are up from past quarter 120 • Buyer caution and a high supply of new residential units still 105 characterise the Stockholm market 80 88 Fewer building starts and lower sales result in reduced
Slide 19: Industrial
INDUSTRIAL 3rd QUARTER 2018 REVENUE AND 12M MARGIN NOK mill. Asphalt: Lower volumes and higher capacity and raw material costs 2 000 6% result in reduced results 4.4% 5% 1 500 • Delays in major transport infrastructure projects and heavy 1 694 3.6% 1 701 4% rainfall in western Norway in September 1
Slide 20: Financial statements
Veidekke is building Ruseløkka school in Oslo. The new school building will comprise 10 300 m 2 over seven floors FINANCIAL STATEMENTS IFRS
Slide 21: Income statement
INCOME STATEMENT 3rd quarter YTD Amounts in NOK million 2018 2017 2018 2017 Revenue 8 684 7 799 25 172 22 441 Operating expenses -8 133 -7 276 -24 629 -21 424 Share of net income from associates and JVs 70 89 145 218 Depreciation/impairment -147 -131 -428 -380 Operating profit 474 480 259 855 Net fi
Slide 22: Balance sheet – assets
BALANCE SHEET – ASSETS Amounts in NOK million 30.09.2018 30.09.2017 31.12.2017 Goodwill and other intangible assets 1 831 1 460 1 530 Deferred tax assets 25 65 55 Land and buildings 684 591 615 Plant and machinery 2 541 2 159 2 286 Investments in associates and joint ventures 1 404 1 358 1 489 Finan
Slide 23: Balance sheet – equity and liabilities
BALANCE SHEET – EQUITY AND LIABILITIES Amounts in NOK million 30.09.2018 30.09.2017 31.12.2017 Equity 3 614 3 813 4 220 Pensions and deferred tax liabilities 927 788 900 Bonds 1 600 - - Amounts due to credit institutions 852 870 613 Other non-current liabilities 344 152 173 Total non-current liabili
Slide 24: Statement of cash flows
STATEMENT OF CASH FLOWS YTD 2018 YTD 2017 Property Amounts in NOK million Construction Development Industrial Other1) Group Group Profit before tax 32 226 44 -32 270 854 Depreciation/impairment 263 1 155 9 428 380 Other working capital 540 -13 -346 -87 94 -1 654 Cash flow from operating activities 8
Slide 25: Increase profitability!
…. INCREASE PROFITABILITY!
Slide 26: The challenge
THE CHALLENGE REVENUE INCREASE AS TARGETED… … BUT RESULTS DROP* NOK billion NOK billion 40 2,5 2,0 30 1,5 20 1,0 10 0,5 0 0,0 2015 2016 2017 2018 2015 2016 2017 2018 YTD YTD * Profit before tax. Includes a NOK 550 million write-down in Construction Norway in 2nd 26 quarter 2018
Slide 27: Several reasons behind the drop in results
SEVERAL REASONS BEHIND THE DROP IN RESULTS Project development Building construction Civil engineering Industrial Sweden: Lower residential sales Residential construction Stockholm Civil engineering Norway Asphalt Norway: Stable residential sales Hoffmann in Denmark Civil engineering Sweden Road Mai
Slide 28: Veidekke's business areas
VEIDEKKE’S BUSINESS AREAS Project development: Building construction: Civil engineering: Industrial: residential and non-residential groundwork and infrastructure and commercial and residential infrastructure maintenance ● Development of residential and ● Design and construction of ● Implementation
Slide 29: New operational management
NEW OPERATIONAL MANAGEMENT Project Building construction Civil engineering Industrial development Jørgen Wiese Porsmyr Hans Olav Sørlie Jimmy Bengtsson Øivind Larsen Catharina Bjerke Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice Pr
Slide 30: Implemented measures
IMPLEMENTED MEASURES GROUP MEASURES Improvement initiatives and Changes to the corporate Risk management programme resource efficiency management group BUSINESS AREA MEASURES Project development: Building Construction: Civil Engineering: Industrial: Residential and Commercial and ground work and inf
Slide 31: Project development
PROJECT DEVELOPMENT 1 Project development: Residential 2 Management of land bank portfolio 3 Project development: Commercial Develop residential projects where Veidekke has a broad land bank portfolio Selectively develop commercial projects Veidekke can benefit from overall expertise of 15 000 units
Slide 32: Civil engineering operations in Norway
CIVIL ENGINEERING OPERATIONS IN NORWAY 1 Current project portfolio 2 Inflow of new projects 3 Review civil engineering operation’s strategy Completed projects Selectivity Analysis of current situation • Settled two major legal disputes • Size • Shortcomings related to management, in the quarter – ar
Slide 33: Industrial operations in Norway
INDUSTRIAL OPERATIONS IN NORWAY 1 Asphalt 2 Aggregates 3 Road maintenance Operational measures High profitability Total profitability still low • More efficient utilisation of capacity • Above 13% margin over past • Most contracts entered into 12 months before 2016 produce a loss • Improved operatio
Slide 34: Financial discipline and cost focus
FINANCIAL DISCIPLINE AND COST FOCUS INVESTMENTS IN NON-CURRENT PROPERTY DEVELOPMENT ASSETS COST REDUCTIONS NOK mill. 1 000 Still strict requirements for Apply synergies from residential project starts improved organisation 750 -50% of activities Selectivity in land purchases Reduce cost in 500 admin
Slide 35: Increase profitability!
INCREASE PROFITABILITY! + Veidekke’s profitability is unsatisfactory and corrective measures are being implemented + Financial discipline and cost focus + Solid and well-composed order book will help provide increased margins Veidekke’s subsidiary BRA has been awarded the contract to build the Geely
Slide 36: Appendix
APPENDIX
Slide 37: Business areas, first nine months
BUSINESS AREAS, FIRST NINE MONTHS First nine months 2018 First nine months 2017 Amounts in NOK million Revenue Profit Margin Revenue Profit Margin Building Construction Norway 9 467 334 3.5% 7 423 263 3.5% Civil Engineering Norway 3 033 -559 -18.4% 3 230 -28 -0.9% Construction Sweden 6 769 147 2.2%
Slide 38: Residential portfolio
RESIDENTIAL PORTFOLIO Under Under Under Property Development construction Completed Building starts construction Completed Building starts construction Residential portfolio - Veidekke's share 31.12.2016 2017 2017 31.12.2017 2018 2018 30.09.2018 Construction - number of units Norway 600 -363 320 557