Veidekke ASA · OSL:VEI
Veidekke ASA — Q1 2010 Earnings Presentation
71 slides from Veidekke ASA's earnings presentation, May 6, 2010
Slide 1: Q1 2010 Presentation for investors
Q1 2010 Presentation for investors Thursday, 6 May 2010 www.veidekke.com 1
Slide 2: Agenda
Agenda Highlights Terje R. Venold, President & CEO Performance of Group and Business Segments Jørgen W. Porsmyr, CFO Property Development Arne Giske, Executive Vice President, Property Development Scandinavia The Road Ahead Terje R. Venold, President & CEO Q1 2010 2
Slide 3: A start to the year as anticipated
Q1 2010 A start to the year as anticipated MNOK 600 500 400 300 200 100 0 -100 2006 2007 2008 2009 2010 -200 Q1 Q2 Q3 Q4 Q1 2010 3
Slide 4: Steady development in Q1
Health, Safety and Environment Steady development in Q1 Injury rate* Absence Good HSE work is a prerequisite for Accumulated Q1 2010 Q4 2009 Q1 2010 Q4 2009 the company’s value creation Norway 5.1 5.2 5.6% 5.7% – Still too many injuries Sweden 9.4 7.6 3.1% 3.1% – Sickness absence levelling off, bu
Slide 5: Year to date 2010
Year to date 2010 MNOK Turnover Demanding market situation 20 000 – Still overcapacity and keen 15 000 competition in market 10 000 Hard winter 5 000 – Leading to reduced productive - efficiency 2006 2007 2008 2009 12 months MNOK rolling Earnings Brief strike in the building and 1200 construct
Slide 6: New Accounting Rules for AFP and IFRIC 15
New Accounting Rules for AFP and IFRIC 15 New law for contractual early retirement, AFP – Successive cost accounting – Reversal of previous allocations resulted in a gain of MNOK 95 in the accounts IFRIC 15, housing projects for own account – Implemented in the financial accounts, to be recognis
Slide 7: Highlights Q1
Highlights Q1 Construction: Somewhat lower margins in operations – Demanding market – Higher winter expenses than normal – 2.4% margin in operations, excluding AFP gains (3.5%) Property development: Increasing activity – 435 units under production, against 311 units at year end – 107 units sold
Slide 8: Change in earnings before tax
Q1 2010 against Q1 2009 Change in earnings before tax 0 -20 -14 -40 -60 -80 -100 -120 +1 + 95 -140 -134 + 26 -160 -180 - 34 + 32 Q1 2010 8
Slide 9: Business Segments Q1
Business Segments Q1 Q1 2010 Q1 2009 Operating Operating Figures in MNOK revenues EBT Margin revenues EBT Margin Construction Norway 2 032.3 121.6 6.0 % 1 992.2 84.9 4.3 % Construction Sweden 479.8 11.7 2.4 % 551.8 9.1 1.6 % Construction Denmark 274.6 5.8 2.1 % 398.3 8.0 2.0 % Total construction 2 7
Slide 10: Slight decline in orders-on-hand
Construction Slight decline in orders-on-hand MNOK Q1 2010: 16 000 ■ Satisfactory volume of 14 000 new orders for smaller 12 000 and medium building 10 000 projects 8 000 ■ More housing projects in 6 000 the order book 4 000 2 000 ■ Low volume of new orders in heavy 0 construction in Norway, but bet
Slide 11: Annual General Meeting on 5 May 2010
Annual General Meeting on 5 May 2010 New board members – Gro Bakstad, CFO in Posten Norge – Annika Billström, Managing Director of Inchefia AB, previous positions i.a. Mayor (Finansborgarråd) in Stockholm – Hans von Uthmann, Industrial Advisor EQT, previous positions i.a. Managing Director of Vatt
Slide 12: Results Q1
Results Q1 The Hamsun Centre in Hamarøy Q1 2010 12
Slide 13: Gain due to changes in AFP scheme
Gain due to changes in AFP scheme Gain of MNOK 95 in the accounts – New law for contractual early retirement (AFP) adopted on19 February 2010, effective from 2010 – In accordance with recommendation of The Norwegian Accounting Standards Board, allocations in previous years will be re-allocated A
Slide 14: IFRIC 15 Main principles
IFRIC 15 Main principles We are implementing the principles in the financial accounts only – Residential projects will be recognised in income statement upon delivery All important management parameters for the property development segment remain unchanged – Project contribution, cash flow and r
Slide 15: Delayed recognition in Financial accounts
IFRIC 15 Delayed recognition in Financial accounts 120 Projects will be recognised earlier in the 100 segment reporting than in the financial 80 accounts 60 – Normal project period 1.5 years 40 20 Differences in periods of activity variations 0 – Increased activity: segment reporting> Period 1 P
Slide 16: Reconciliation of results
IFRIC 15 Reconciliation of results Q1 2010 Q1 2009 Year 2009 Operating Operating Operating Figures in MNOK revenues EBT revenues EBT revenues EBT Segment reporting 3 147.8 -14.3 3 325.3 -133.5 15 558.0 523.1 Effect of IFRIC 15 -37.3 -11.7 32.4 -0.7 365.4 88.2 Property Development Effect of IFRIC 15
Slide 17: Income Statement
In accordance with IFRIC 15 Income Statement Q1 Q1 2009 2010 Figures in MNOK 2009 2008 3 357.7 3 110.5 Operating revenues 15 923.4 20 225.7 -3 374.2 -3 055.0 Operating expenses -14 994.9 -18 959.3 -80.5 -84.8 Ordinary depreciation -335.6 -296.0 -97.0 -29.3 Operating profit (EBIT) 592.9 970.4 -9.5 -1
Slide 18: Balance sheet - Assets
In accordance with IFRIC 15 Balance sheet - Assets Figures in MNOK 31 March 2010 31 Dec. 2009 31 March 2009 Goodwill and intangible assets 548.3 549.7 562.4 Buildings/land 507.2 510.5 571.4 Machinery, etc. 1 195.5 1 206.2 1 250.0 Investments in associated companies 650.5 637.7 505.3 Deferred tax ass
Slide 19: Balance sheet – Equity and liabilities
In accordance with IFRIC 15 Balance sheet – Equity and liabilities Figures in MNOK 31 March 2010 31 Dec. 2009 31 March 2009 Equity 1 976.5 2 021.7 1 797.4 Pension commitments and deferred tax 327.3 424.0 342.9 Debt to credit-issuing institutions 872.3 306.7 555.5 Creditors 3 439.4 3 336.3 3 499.5 Un
Slide 20: Cash flows 1 January – 31 March 2010
In accordance with IFRIC 15 Cash flows1 January – 31 March 2010 Construction/ Other Property Figures in MNOK operations development Industry Group Earnings before tax 108.7 -10.7 -127.0 -29.0 Depreciation 41.6 1.7 41.0 84.3 Other working capital, etc. -429.1 -159.4 80.2 -508.3 Other operating capita
Slide 21: Business Segments
Business Segments The Holmenkollen ski jump, Oslo Q1 2010 21
Slide 22: Construction, Norway: Good results, but pressure on margins
Construction, Norway Good results, but pressure on margins AFP gain of MNOK 71 Q1 Q1 Year Figures in MNOK 2010 2009 2009 As anticipated, margin pressure Operating revenues 2 032.3 1 992.2 8 121.4 Operating expenses -1 894.1 -1 910.2 -7 549.6 in Q1 Depreciation -29.6 -27.8 -118.5 – Adjusted for A
Slide 23: Construction, Sweden: Improving results
Construction, Sweden Improving results Margin 2.4% (1.6%) Q1 Q1 Year Figures in MNOK 2010 2009 2009 – Still strong margins in Stockholm Operating revenues 479.8 551.8 2 355.0 Operating expenses -462.0 -536.3 -2 299.4 – Negative figures, but some bright spots in West Sweden Depreciation -6.1 -5.0 -
Slide 24: Construction, Denmark: Demanding market
Construction, Denmark Demanding market Stable and good results Q1 Q1 Year – Margin 2.1% (2.0%) Figures in MNOK 2010 2009 2009 Operating revenues 274.6 398.3 1 618.5 Operating expenses -268.5 -388.8 -1 578.3 Turnover down by 31% Depreciation -2.1 -2.5 -9.7 compared with Q1 2009 Operating profit (
Slide 25: Industry: A good Q1
Industry A good Q1 Profit improvement of MNOK 53 − Positive effect on 2010 figures of MNOK 21 Q1 Q1 Year due to AFP Figures in MNOK 2010 2009 2009 − Negative effect on 2009 figures of MNOK 27 Operating revenues 252.3 274.9 2 968.0 due to write-downs Operating expenses -328.4 -395.6 -2 777.3 Deprec
Slide 26: Large share of contracts, good basis for year
Bid opened on 11 March for public asphalt contracts: Large share of contracts, good basis for year 2010 2009 2008 Company Tonnes Share Tonnes Share Tonnes Share Kolo Veidekke 982 000 53% 520 000 28% 652 000 39% NCC Roads 386 000 21% 137 000 7% 391 000 24% Lemminkäinen 174 000 9% 325 000 17% 210 000
Slide 27: Property development: Upward activity trend
Property development, Scandinavia Upward activity trend Improvement Q1 Q1 Year 2010 2009 2009 – However, results are still marked by Figures in MNOK Operating revenues 134.3 143.9 711.2 low activity Operating expenses -140.5 -152.0 -726.7 Gradually increased start-up of Depreciation -1.7 -1.6 -6
Slide 28: Property development, Scandinavia
Property development, Scandinavia Q1 2010 Q1 2009 2009 Operating Operating Operating Figures in MNOK revenues EBT Margin revenues EBT Margin revenues EBT Margin Property development, 97.1 0.7 0.7% 65.3 -36.6 -56.0% 349.1 -47.9 -13.7% Norway Property development, 37.2 -9.1 -2.4% 77.6 6.9 8.% 359.3 21
Slide 29: Property development, Scandinavia
Property development, Scandinavia Topics: Organisation, value creation and success factors Status Q1 Our project possibilities Prospects Q1 2010 29
Slide 30: Building owner for Veidekke’s own projects
Property development,Scandinavia Building owner for Veidekke’s own projects Our business is property development – Not property management and operation Our main business is the housing segment – To some extent non-residential buildings (often in connection with residential projects) Our main
Slide 31: Making use of the Group’s resources
Property development, Scandinavia Making use of the Group’s resources Independent business area VEIDEKKE ASA Exploits the Group’s resources – Expertise – Capital Construction Property Industry Close cooperation with Veidekke’s construction operations produces high value creation – Construction
Slide 32: Organisation
Property development,Scandinavia Organisation Norway: Veidekke Eiendom 200 – 45 employees Sweden: Veidekke Bostad 1 100 – 50 employees 300 Focus on growth areas 2 000 2 600 100 Site portfolio: 7 800 housing units 700 800 1. kvartal 2010 32
Slide 33: Our value creation
Property development,Scandinavia Our value creation Acquisition Start-ups 3-5 years 1.5 years Time axis Purchase Ideas/ Con- Hand- of site concept Regulation Sale struction over Value creation, property X X X X (X) (X) development Location What Utilisation Pricing Quality Flawless Price For whom Cos
Slide 34: Most important success and risk factors
Property development,Scandinavia Most important success and risk factors Success factors Acquisition of the right sites – Price, location, regulation, ground conditions, etc. Right product and concept for the market Competence throughout value chain Risk reducing factors Achieve largest poss
Slide 35: A cyclical business
Property development,Scandinavia A cyclical business Earnings Housing units under production MNOK 600 2500 534534 500 2000 400 390 390 220 90 1500 559 667 300 275 275 50 922 200 1000 300 314 1485 100 225 1230 1244 500 453 102 0 627 699 0 46 19 247 185 -74 0 64 2003 2004 2005 2006 2007 2008 2009 -100
Slide 36: A cyclical business
Property development,Scandinavia A cyclical business Earnings Return on capital invested MNOK % 600 534 30 500 25 400 390 220 90 20 300 275 50 15 Goal 200 25.2 300 314 10 20.8 100 225 18.6 102 0 46 19 5 8.6 9.7 8.0 0 -74 -100 2003 2004 2005 2006 2007 2008 2009 0 0 2003 2004 2005 2006 2007 2008 2009
Slide 37: Strategy and goals
Property development,Scandinavia Strategy and goals Allocated capital: BNOK 2.5 in capital invested Goal: 15% return on capital invested – Average over past five years: 14.1% What does this mean? BNOK 2.5 x 15% = MNOK 375 (EBIT) - Financial cost - MNOK 100 (BNOK 2 x 5%) EBT goal = MNOK 275
Slide 38: Strategy and goal – calculation
Property development,Scandinavia Strategy and goal – calculation An average flat gives a contribution of MNOK 0.35 (3 MNOK x 12%) EBT goal MNOK 275 Overhead + MNOK 75 (including capitalised financial expenses) MNOK 350 (covered by projects) We must have MNOK 350/MNOK 0.35 = approximately 1 0
Slide 39: Based on the land bank
Property development,Scandinavia Based on the land bank Direct Purchase No. of housing units purchases options Total Norway 2 900 800 3 700 Sweden 1 100 3 000 4 100 Total 4 000 3 800 7 800 These are scheduled to be ready for construction as follows: Scheduled for construction No. of housing units 20
Slide 40: Our most promising project possibilities
Property development, Scandinavia Our most promising project possibilities Q1 2010 40
Slide 41: Freia – Chocolate factory, Oslo
Property development,Scandinavia Freia – Chocolate factory, Oslo ”Child-friendly in city centre” Rodeløkka 250 flats Subterranean parking 6 floors Sales start for phase 1 with 84 flats: 27 May Q1 2010 41
Slide 42: Marienfryd at Ensjø, Oslo
Property development,Scandinavia Marienfryd at Ensjø, Oslo 380 flats, ”Unique view , located in the centre of the park” distributed over 5-7 building phases First building phase: reconstruction of Narvesen’s old head office 81 flats 14 floors 52% sold Construction start: May 2010 Q1 2010
Slide 43: Fornebu, Bærum
Property development,Scandinavia Fornebu, Bærum ”Flats for families with children” 50/50 partnership with Fornebu Utvikling AS 309 flats and terraced houses Regulation completed in Q1 2011 Phase 1: 60 units Sales start: Q2 2011 Q1 2010
Slide 44: Kalkbrottet, Malmo
Property development,Scandinavia Kalkbrottet, Malmo In all 150 flats 1st building phase: Korallen BRF (housing cooperative) 29 flats Design phase started Planned construction start: Q3 2010 Q1 2010 44
Slide 45: Sädesärlan, Stockholm
Property development,Scandinavia Sädesärlan, Stockholm Prestige project – Upper Östermalm In all, 74 flats in the project Sport centre and gym Sales start of 45 flats in Q1 2011 50/50 partnership with Selvaag Pluss Q1 2010 45
Slide 46: Svea Fanfar, Stockholm Centre
Property development, Scandinavia Svea Fanfar, Stockholm Centre Partnership with Akademiska Hus – Includes construction of the Royal College of Music 380 flats 1 500 m2 shops Plan approval in Q4 2010 First construction phase: – 120 flats – Construction start 2012 Q1 2010 46
Slide 47: Tellhus – Ytterskär, Brf Snökristallen, Stockholm
Property development,Scandinavia Tellhus – Ytterskär, Brf Snökristallen, Stockholm First TellHus project – Veidekke’s climate- smart housing concept ”Fill in project” in Stockholm 36 flats Construction work in progress Ready for occupancy in Q3 2011 Q1 2010 47
Slide 48: Status Property Development, Scandinavia
Status Property Development, Scandinavia Q1 2010 48
Slide 49: Housing market and Veidekke
Property development,Scandinavia Housing market and Veidekke At Q1 2010: Market is improving, but no boom Market best for family dwellings – Terraced housing, larger flats Lower construction costs and increased prices in second hand market makes it more profitable with new construction Prosp
Slide 50: Housing sales
Property development in Norway and Sweden Housing sales Norway Sweden Denmark Total 2007 289 699 5 993 Average in quarter 72 175 1 248 2008 41 86 3 130 Average in quarter 10 21 1 32 2009 215 215 0 430 Average in quarter 54 54 0 108 2010 – Q1 68 39 0 107 Q1 2010 50
Slide 51: Veidekke’s housing portfolio
Veidekke’s housing portfolio Property In production Completed Start-up In production Completed Start-up In production Housing portfolio - Veidekke's share at 31.12.08 2009 2009 at 31.12.09 2010 2010 31.03.2010 In production - number of units Norway 185 -172 50 63 127 190 Sweden 453 -391 185 247 -27
Slide 52: Capital tied up at 31 March 2010 (MNOK)
Property Development, Scandinavia Capital tied up at 31 March 2010 (MNOK Property Development Scandinavia Properties for sale: Assets (MNOK) Norway Sweden Denmark Total Investement in TKS 375 102 478 Non-residential properties, Non-residential property 535 42 577 Norway MNOK 400 Residential projec
Slide 53: Prospects for Property development, Scandinavia
Prospects for Property development, Scandinavia Q1 2010 53
Slide 54: Housing market in the long perspective
Housing market in the long perspective Analyses: Need for housing is clearly greater than the construction of houses Especially in large city areas with population growth – High birth rate – Longer lifetime (elderly boom) – New arrivals and immigration – Large population of young people This i
Slide 55: Building and construction market in Norway
Building and construction market in Norway Slight increase anticipated in housing construction Number of housing units started 40000 19 500 started in 2009 35000 30000 23 000 in 2010 25000 (own estimates 20000 Wooden Blocks 25 000 i 2011 15000 (own estimates) 10000 5000 Long-term need estima
Slide 56: Building and construction market in Sweden
Building and construction market in Sweden Housing start-ups Number of housing units started 50 45 Started 15 000 in 2009 40 35 18 000 in 2010 30 (own estimates) 25 Wooden houses 20 Multi-family houses 27 000 in 2011 15 (own estimates) 10 5 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: SCB
Slide 57: Flats in production – delivery 2010
Property development,Scandinavia Flats in production – delivery 2010 Flats in production in Q1 435 Prognosis start-ups Q2-Q4 approx. 750 Approx. 25 projects, 50/50 Norway/Sweden Deliveries in 2010 approx. 185 Prognosis 31 December 2010 approx. 1 000 50% to be delivered in 2011 50% to be delivered in
Slide 58: Summary
Property development,Scandinavia Summary Our goal is to get the best possible return (15%) on capital To achieve this, we must – Deliver cost effective, high quality projects – Have expertise on regulation, market and product – Have a capital effective land bank and a continuous supply of new good
Slide 59: The road ahead
The road ahead Q1 2010 59
Slide 60: Probably new growth from the end of 2010
Building and construction market Scandinavia Probably new growth from the end of 2010 Norway: Accessible market: Total market in BNOK less public Market up by 2% in 2010 work for own account executed by smaller companies – Improved housing market from 2010 180 – Still decline in private non-reside
Slide 61: Our position is still strong
Our position is still strong Passed safely through the financial crisis Market still demanding – Pressure on construction margins – Satisfactory volume of new orders Good basis for optimism – Increasing housing production and good prospects for property development – Considerable lag in public
Slide 62: Veidekke in Q1 – Summary
Veidekke in Q1 – Summary Result of MNOK -14 before tax – AFP gain of MNOK 95 recognised in income statement As anticipated, somewhat lower margins in construction segment Prospects of higher production in Property Development High number of new asphalt contracts in the Industry segment Q1 20
Slide 63: Web version of Annual and CSR report 2009
See our IR pages at veidekke.com/ir Web version of Annual and CSR report 2009 Q1 2010 63
Slide 64: Financial Calendar
Financial Calendar The share is noted ex dividend on 6 May 2010 Dividend to be paid: 20 May 2010 Publication dates in 2010 – Q2: 12 August – Q3: 4 November Q1 2010 64
Slide 65: Appendices
Appendices Q1 2010 65
Slide 66: Financial key figures
IFRIC 15 Financial key figures Q1 Q1 2010 2009 2009 2008 Equity (MNOK) Investments 76 151 455 714 Net-interest bearing items -432 -162 102 -260 Equity 1 977 1 797 2 022 1 973 Equity ratio (%) 23.8 21.3 25.7 21.5 Profitability (%) Operating profit margin -0.9 -2.9 3.7 4.8 Profit margin -0.9 -4.1 3.9
Slide 67: Status – Orders-on-hand
Status – Orders-on-hand Change past Figures in MNOK 31 March 2010 31 Dec. 2009 31 March 2009 12 months Norway 7 938 8 581 6 487 22 % Sweden 3 122 2 764 2 215 41 % Denmark 983 978 1 147 -14 % Other operations 2 11 92 Total orders-on-hand 12 045 12 334 9 941 21 % Q1 2010 67
Slide 68: Major ongoing projects
Major ongoing projects Project Type Turnover Norway: Økern project Communication/infra structure MNOK 1 485 Gulskogen Senter Shopping centre MNOK 860 Sky-Langangen Highway MNOK 635 Sørlandssenteret Shopping centre MNOK 570 FMC Kongsberg Offices MNOK 520 E6 Boksrud - Minnesund Highway MNOK 392 Dobbel
Slide 69: Construction, Norway: Margin development
Construction, Norway Margin development Margin Project margin Overhead costs Project Margin – Decline expected in 2010 due to keen competition in the market since 2009 Margin – Pressure on margins in 2010 as decline in project margin is larger than the reduction in overhead costs Overhead costs – Sl
Slide 70: Unsold apartments at 31 March 2010
Property development Scandinavia Unsold apartments at 31 March 2010 No. of No. of No. of Original Market Book Number of unsold unsold unsold sales price value value units hired units units units at MNOK MNOK MNOK out at 31 Dec. at 31 Dec. 31 March 2008 2009 2010 In production 101 19 63 207 207 176 -
Slide 71: Result in Property Development in accordance with new principle (EBT)
IFRIC 15 Result in Property Development in accordance with new principle (EBT) 600 500 400 300 200 100 - 2004 2005 2006 2007 2 008 2 009 -100 Result previous Resultat gammel Result IFRIC Resultat IFRIC Q1 2010 71