Slide 1: 2nd Quarter 2017 Investor presentation
2ND QUARTER 2017 Investor presentation 17 August 2017
Slide 2: The Growth Continues
THE GROWTH CONTINUES + Revenue growth + High number of residential units under construction + Good order intake provides high order backlog + Weak profitability in parts of Construction Construction start of 212 units in Barkarbystaden, Stockholm in the second quarter 2
Slide 3: Contents
CONTENTS Highlights CEO Arne Giske Results – segments and Group CFO Terje Larsen Construction Norway EVP Dag Andresen Summing up CEO Arne Giske 3
Slide 4: Revenue and Earnings – 2nd Quarter
REVENUE AND EARNINGS – 2ND QUARTER REVENUE PROFIT BEFORE TAX 9 500 400 6 NOK bill. NOK bill. 300 450 8.1 8.3 200 421 3 6.0 6.2 318 5.4 100 225 145 0 0 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 Q2 13 Q2 14 Q2 15 Q2 16 Q2 17 4
Slide 5: Profit Before Tax – 2nd Quarter
PROFIT BEFORE TAX – 2ND QUARTER 2ND QUARTER: CONSTRUCTION 2ND QUARTER: PROPERTY DEVELOPMENT 2ND QUARTER: INDUSTRIAL 250 250 250 200 200 200 NOK mill. NOK mill. 150 150 NOK mill. 150 228 100 193 100 100 159 161 159 50 116 50 100 50 87 82 81 84 85 40 50 36 0 0 0 2013 2014 2015 2016 2017 2013 2014 2015
Slide 6: Changes in Profit Before Tax
CHANGES IN PROFIT BEFORE TAX PROFIT BEFORE TAX 500 450 450 +7 421 +9 +5 +19 +1 400 -50 NOK mill. -20 350 300 250 200 150 Construction Property Development Q2 2016 Norway Sweden Denmark Norway Sweden Industrial Other Q2 2017 6
Slide 7: Solid Order Intake
SOLID ORDER INTAKE REVENUE AND ORDER INTAKE (“BOOK-TO-BILL” 1.07) ORDER INTAKE PER QUARTER, CONSTRUCTION 12 30 10 25 8,1 8 20 NOK bill. NOK bill. 15 6 10 4 5 2 12m Revenue 12m Order intake 0 0 Q2 14 Q2 15 Q2 16 Q2 17 Q2 14 Q2 15 Q2 16 Q2 17 7
Slide 8: Increased Order Backlog
INCREASED ORDER BACKLOG ORDER BACKLOG CONSTRUCTION AND INDUSTRIAL ORDERS IN REVENUE NEXT 12 MONTHS 30 30 Road Maintenance Denmark Sweden Norway 25 25 20 20 18.8 17.7 NOK bill. NOK bill. 15 15 10 10 5 5 - 0 Q2 14 Q2 15 Q2 16 Q2 17 Per Q2 2016 Per Q2 2017 Order backlog for Industrial is presented as R
Slide 9: Best Bid for New E6 Arnkvern-Moelv
BEST BID FOR NEW E6 ARNKVERN-MOELV Veidekke has submitted the best bid for the construction of the new E6 Arnkvern- Moelv road section • Lowest price: NOK 2.04 billion • Best score on the quality criterias The road section is 24 km in length and is scheduled for completion in 2021 Signing the design
Slide 10: Profit Margin Construction
PROFIT MARGIN CONSTRUCTION NORWAY* SWEDEN* DENMARK (HOFFMANN)* 16 8% 16 8% 16 8% 12 6% 12 6% 12 6% NOK bill. NOK bill. NOK bill. 8 4% 8 4% 8 4% 4 2% 4 2% 4 2% 0 0% 0 0% 0 0% Revenue Margin (%) * 12-month rolling. Adjusted for positive one-off effects from changes in the pension scheme in Norway in 2
Slide 11: Residential Sales and Production
RESIDENTIAL SALES AND PRODUCTION NO. OF UNITS SOLD* NO. OF UNITS UNDER CONSTRUCTION 1 600 3 000 1 400 2 500 1 200 2 000 1 000 800 1 500 600 1 000 400 500 200 - - Sweden Norway * 12-month rolling, Veidekke’s share 11
Slide 12: Results Property Development
RESULTS PROPERTY DEVELOPMENT OMSETNING PROFIT BEFORE OG MARGIN* TAX* RETURN ON CAPITAL INVESTED Sweden Norway 25% 700 600 20% 500 NOK mill. 400 15% 300 10% 200 100 5% 0 0% 2013 2014 2015 2016 12m * 12-month rolling. Adjusted for positive one-off effects from changes in the pension scheme in Norway i
Slide 13: Exploit Our Good Land Bank
200 EXPLOIT OUR GOOD LAND BANK Industrial and long-term residential developer 1 825 The land bank provides flexibility 200 • Offer residential units with attractive location • … in the most important regions 1 100 • … at a price the market is willing to pay 3 500 A total of 17 100 residential units
Slide 14: Robust Residential Projects
ROBUST RESIDENTIAL PROJECTS EXAMPLE OSLO - PRICE AND CONSTRUCTION COST PER UNIT 80 000 Avg. price per BRA new unit Construction cost per BRA Price increase has led to high profitability 60 000 NOK per m2 (BRA) Relatively stable construction costs 40 000 20 000 Robust profitability calculations 0 Off
Slide 15: The Residential Development Cycle
THE RESIDENTIAL DEVELOPMENT CYCLE Land purchase Construction start 3-7 years 1-3 years LAND DEVELOPMENT STRATEGY SALES CONSTRUCTION DELIVERY PURCHASE AND ZONING 2 600 units sold the Status: 13 700 units in the land bank 2 800 units in production last two years Segment Result = reporting: project res
Slide 16: Industrial
INDUSTRIAL REVENUE AND MARGIN BEFORE TAX ASPHALT PRODUCTION 5 6% 3,0 5% 2,5 4 4% 2,0 NOK bill. Million tonnes 3 3% 1,5 2 2% 1,0 1 0,5 1% 0 0% 0,0 2013 2014 2015 2016 12m Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Revenue Margin (%) 2015 2016 2017 * 12-month rolling. Adjusted for positive one-of
Slide 17: Occupational Health and Safety
OCCUPATIONAL HEALTH AND SAFETY SERIOUS INJURIES* # LTI RATE* SICKNESS ABSENCE 40 10 6% 5% 8 30 4% 6 20 3% 4 2% 10 2 1% 0 0 0% # Veidekke employees, hired staff and sub-contractors *12-month rolling (LTI = Number of lost-time injuries per million hours worked for Veidekke employees) 17
Slide 18: Business Areas
Veidekke to build 169 units in the first stage of Frysjaparken in Oslo BUSINESS AREAS TERJE LARSEN, CFO
Slide 19: Business Areas, 2nd Quarter
BUSINESS AREAS, 2ND QUARTER 2nd quarter 2017 2nd quarter 2016 Amounts in NOK million Revenue Profit Margin Revenue Profit Margin Construction Norway 3 783 120 3.2% 4 010 170 4.2% Construction Sweden 2 217 44 2.0% 2 090 35 1.7% Construction Denmark 487 29 6.0% 390 24 6.0% Total Construction 6 487 193
Slide 20: Construction Norway
CONSTRUCTION NORWAY 2nd quarter YTD Revenue decrease in the quarter Amounts in NOK million 2017 2016 2017 2016 Lower results Revenue 3 783 4 010 7 252 7 218 • Building C.: Good profitability in most units, but low in the Operating profit (EBIT) 111 163 181 245 Southern and Western regions of Norway
Slide 21: Construction Sweden
CONSTRUCTION SWEDEN 2nd quarter YTD Increased revenues Amounts in NOK million 2017 2016 2017 2016 • Increase in both Building Construction and Civil Engineering Revenue 2 217 2 090 4 094 3 863 Improved profitability Operating profit (EBIT) 45 34 65 38 • Result and margin improvement in both Building
Slide 22: Construction Denmark
CONSTRUCTION DENMARK 2nd quarter YTD Significant revenue growth Amounts in NOK million 2017 2016 2017 2016 • Higher level of activity in most units Revenue 487 390 987 740 A strong result Operating profit (EBIT) 28 22 53 35 • High profitability in the project portfolio Net financial items 1 1 2 2 Or
Slide 23: Property Development in Norway
PROPERTY DEVELOPMENT IN NORWAY 2nd quarter YTD A good result Amounts in NOK million 2017 2016 2017 2016 • Fewer units under construction and lower property development gains than last year Revenue 263 101 359 135 • Tax-adjusted EBT at NOK 60 mill. (NOK 86 mill.) Operating profit (EBIT) 53 76 97 79 H
Slide 24: Property Development Sweden
PROPERTY DEVELOPMENT SWEDEN 2nd quarter YTD Strong results Amounts in NOK million 2017 2016 2017 2016 • High residential production Revenue 920 762 1 550 1 279 High residential sales and high sales ratio Operating profit (EBIT) 112 94 209 140 High number of units under construction Net financial ite
Slide 25: Industrial
INDUSTRIAL 2nd quarter YTD Result at par with last year Amounts in NOK million 2017 2016 2017 2016 Asphalt Revenue 1 246 1 221 1 723 1 661 • High level of activity Operating profit (EBIT) 92 91 -87 -85 • Lower results due to higher capacity cost and portfolio mix Net financial items -8 -6 -12 -10 Ro
Slide 26: Financial Statements
Veidekke added 927 000 tonnes of asphalt on Norwegian roads in the quarter FINANCIAL STATEMENTS IFRS
Slide 27: Income Statement
INCOME STATEMENT 2nd quarter YTD Amounts in NOK million 2017 2016 2017 2016 Revenue 7 927 7 955 14 202 13 444 Operating expenses -7 483 -7 494 -13 726 -13 048 Share of net income from associates and JVs 57 71 91 95 Depreciation/impairment -125 -111 -249 -219 Operating profit 375 420 318 272 Net fina
Slide 28: Balance Sheet – Assets
BALANCE SHEET – ASSETS Amounts in NOK million 30.06.2017 30.06.2016 31.12.2016 Goodwill and other intangible assets 1 419 1 348 1 385 Deferred tax assets 65 65 65 Land and buildings 563 555 560 Plant and machinery 2 042 1 889 1 954 Investments in associates and joint ventures 1 247 1 216 1 363 Finan
Slide 29: Balance Sheet – Equity and Liabilities
BALANCE SHEET – EQUITY AND LIABILITIES Amounts in NOK million 30.06.2017 30.06.2016 31.12.2016 Equity 3 171 2 827 3 465 Pensions and deferred tax liabilities 866 928 877 Bonds - 750 750 Amounts due to credit institutions 570 1 379 212 Other non-current liabilities 139 117 136 Total non-current liabi
Slide 30: Statement of Cash Flows
STATEMENT OF CASH FLOWS YTD 2017 YTD 2016 Property Amounts in NOK million Construction Industrial Other1) Group Group Development Profit before tax 319 295 -98 -191 324 302 Depreciation/impairment 154 1 88 6 249 219 Other working capital -26 -450 -322 113 -685 -501 Cash flow from operating activitie
Slide 31: Construction Norway
CONSTRUCTION NORWAY DAG ANDRESEN, EVP
Slide 32: Nationwide Construction Company
NATIONWIDE CONSTRUCTION COMPANY STRONG POSITION AND COMPETENCE DISTRIBUTION OF VOLUME - ONGOING PROJECTS Annual revenue of NOK 15 billion Other Order backlog of NOK 16 billion infrastructure 14% Commercial buildings 19% Large share of repeat customers and negotiated contracts Public infrastructure P
Slide 33: Contracts- and Collaboration Forms
CONTRACTS- AND COLLABORATION FORMS Planning / Project development Construction Maintenance Engineering VALUE ADDING COLLABORATION 15% Design and build contract 30% Building Civil Eng. 70% 85% Execution contract 33
Slide 34: Profitability Challenge
PROFITABILITY CHALLENGE REVENUE AND PROFITABILITY* 18 000 Revenue (NOK mill.) Margin before tax (%) 5% Half of the business with above-target margins of 5% 15 000 4% 12 000 3% Building: High level of activity and good NOK mill. 9 000 profitability in the majority of the business, except 2% in Southe
Slide 35: Building Construction
BUILDING CONSTRUCTION REGIONAL DISTRIBUTION MARGIN CONSTRUCTION 5% Good profitability in the 4% Southern majority of the business Eastern, Northern and 3% Revenue Western and Mid Norway NOK Norway ~75% 10 bill.* ~25% Weak markets and low 2% profitability in Southern and 1% Western Norway 0% 2012 201
Slide 36: Profitability Measures in the South and West
PROFITABILITY MEASURES IN THE SOUTH AND WEST The business in Stavanger • Carve out the production of concrete concept solutions (Block Berge Bygg) • New product- and customer segments Remaining organisation adjusted to the reduced level of activity Strengthened organisation and management Block Berg
Slide 37: Civil Engineering
CIVIL ENGINEERING PROJECT DISTRIBUTION MARGIN CIVIL ENGINEERING 5% PUBLIC INFRASTRUCTURE: Energy Large variation in project 4% Rail profitability Rock cavern plant Other Public 3% Civil Revenue infrastructure Eng. NOK Maritime 5 bill.* High capacity- and tendering 2% installations ~30% ~70% cost Fou
Slide 38: The Key to a Successful Project
THE KEY TO A SUCCESSFUL PROJECT WIN PROJECTS EXECUTE PROJECTS The right project Correct pricing Good production Completion and handover ■ Market strategy ■ Right cost, risk and margin ■ Highly performing team ■ Satisfied customers and good ■ Creating the right project mix ■ Each project is treated ■
Slide 39: Profitability Measures in Civil Engineering
PROFITABILITY MEASURES IN CIVIL ENGINEERING Organisation and management • Organisation for large projects and design and build contracts • Focused project organisation • Keep and develop strong special units • New management Focus areas • Prioritise projects where we have the best prerequisites • Un
Slide 40: Lifting Profitability
LIFTING PROFITABILITY FOCUS ON INCREASED MARGINS* IN CONSTRUCTION NORWAY 800 8% 700 7% 3% margin last 12 months 600 6% 5% margin target 500 5% NOK mill. 400 4% Measures and continuous improvement 300 3% 200 2% to lift profitability 100 1% 0 0% Good market position, solid project portfolio and a good
Slide 41: Summing Up
Veidekke is cooperation partner in the bike race Arctic Race of Norway SUMMING UP ARNE GISKE, CEO
Slide 42: Summing Up
SUMMING UP + The growth continues + Strengthened positions and high level of activity + Measures to lift profitability Veidekke was in the quarter awarded the contract to build Trondheim's new sports and multi-purpose hall at Nidarø 42
Slide 43: Appendix
APPENDIX
Slide 44: Business Areas, Year to Date
BUSINESS AREAS, YEAR TO DATE First 6 months 2017 First 6 months 2016 Amounts in NOK million Revenue Profit Margin Revenue Profit Margin Construction Norway 7 252 200 2.8% 7 218 263 3.6% Construction Sweden 4 094 63 1.5% 3 863 36 0.9% Construction Denmark 987 56 5.6% 740 37 5.0% Total Construction 12
Slide 45: Housing Portfolio
HOUSING PORTFOLIO Under Under Under Property Development construction Completed Start-up construction Completed Start-up construction Housing portfolio - Veidekke's share 31.12.2015 2016 2016 31.12.2016 2017 2017 30.06.2017 Construction - number of units Norway 541 -293 352 600 -121 67 546 Sweden 1