Presentation 1st quarter 2020
7 May 2020
Group CEO Jimmy Bengtsson, CFO Terje Larsen, and EVP Jørgen Wiese Porsmyr
Highlights 1st quarter 2020 Limited impact from COVID-19
- The COVID-19 pandemic had limited impact on production in construction and civil engineering projects and residential sales in the first quarter
- Solid underlying operations and good cash flow in the quarter
- Demerger of the property development operation is progressing according to plan
- Considerable uncertainty with regards to how economic consequences of measures to prevent spread of the coronavirus will impact Veidekke in the future
- The board of directors cancelled proposal for dividend distribution in respect of financial year 2019
Photo: Siri Øverland Eriksen, Aftenposten
Employees and organisation Safety and health are first priority
- Veidekke has implemented a number of measures to protect employees and those working on Veidekke's projects against spread of the coronavirus
- Minimum distance of two meters on construction sites and restricted number of people permitted in common rooms
- Personal protective equipment to be used when required to avoid virus transmission and potential quarantine
- Quarantine imposed for foreign workers
- Instances of local quarantine regulations posed challenges
- Increased use of home office for administrative staff
Value and supply chains Different challenges on the supply and demand side
Challenges in ongoing projects (short term)
● Strict national infection control measures can cause operational disruptions and increased absence from work
Supply chain constraints (medium term)
- Global measures to limit infection can reduce or delay supply of components and equipment
- Curtailed transport capacity can cause supply chain disruptions
Market consequences (private and public)
- A weaker economic development may negatively impact demand for Veidekke's services and products
- Amplified by oil price drop and weaker currency
- Measures to stimulate demand may have a positive effect on public builders
1
2
3
Operational flexibility Capacity and cost
Share per cost category (illustration)
Veidekke has a flexible business model
- Operates between 450 and 600 projects across Scandinavia
- Large proportion of cost base is directly related to project deliveries
- Flexibility to adapt capacity and cost structure to expected demand
- Flexibility to serve different market segments
Tools related to short-term changes in demand
● Temporary layoffs and salary adjustments are applied in connection with short-term fluctuations
Main financial figures Revenue and earnings 1st quarter
Pre-tax profit 1st quarter, per business area
Order book Construction
Robust financial position provides satisfactory financial capacity
• Increased free cashflow
- Improved operations and lower investments
- Also, dividend for 2019 postponed
- December 2019 refinancing provided satisfactory financial capacity
**Cashflow from housing cooperatives is included from Q1 2020 and amounts to approx. NOK -200 million
Net interest-bearing debt NOK billion, quarter-end
*NIBD was NOK 2.6 bill. at quarter-end, or NOK 3.4 bill. including housing cooperative debt
Construction
1
Civil Eng.
Sweden
Denmark
- 5% increase in revenue, primarily in Oslo and Bergen regions
- Profit margin 3.3% (3.2%)
- Profit margin 1.3% (-2.2%)
- Norway ● Improvement in portfolio profitability following conclusion of several major loss-making projects
- Profit margin 1.1% (1.4%)
- The civil engineering operation achieved a significant profit increase, improving both revenues and profitability, but reduced building construction activity in Stockholm negatively impacted profits
- Profit margin 5.0% (5.3%)
- Revenue increase and robustly profitable project portfolio
st quarter 2020 Revenue and margin
Industrial
1
- Seasonal downturn in Q1 and unrealised foreign exchange loss
- Approx. 30% lower demand from Norwegian Public Roads Administration and counties, in addition to lower road construction activity
- Bitumen sourcing situation in Eastern Norway is more resolved
st quarter 2020 Revenue and 12m margin
● Seasonal downturn
● Profit for the quarter on a par with the preceding year
Aggregates
Asphalt
- Good profit of NOK 10 mill., compared to NOK (6) mill. in Q1 2019
- Profit increase attributed to improved profitability in new contracts
- Six maintenance contracts to conclude in 2020; four new contracts won, including three extensions
Pre-tax profit 1st quarter (NOK mill.)
A leading residential development company
A strong position in Norway and Sweden
An organisation that develops, implements and renews its positions
Veidekke ASA: 1 © Veidekke st quarter 2020
Property Development
1 Pre-tax profit st quarter 2020
Norway
Sweden
- Good result from ongoing residential production
- Strong sales in ongoing projects (85 units)
- Two projects in Oslo with a total of 111 units released for sale
-
Residential production increased to 728 units, vs. 643 units one year ago. Sales ratio 74%
-
Good result; profit improvement is primarily attributable to higher sales in ongoing projects, and higher prices, particularly in Stockholm
- Residential production reduced to 638 units, vs. 1,571 units one year ago. Sales ratio 81%
- Three projects in Stockholm area and one in Gothenburg released for sale, comprising 229 units in total
Residential production and sales, Veidekke's share (no. of units)
Residential sales and production figures denote Veidekke's share
Results and activity in Property Development Good value creation over time
An important strategic change Progressing according to plan
- Work to split the group and establish the property development operation under a new ownership structure is progressing according to plan
- We are actively pursuing both tracks a stock exchange listing or an industrial sale
- The solution selected will create value for Veidekke's shareholders and contribute to growth for both Property Development and Veidekke
- A final decision about the transaction model and execution will be made within the first half of 2020
Facsimile from Veidekke's third quarter 2019 presentation
Summary and concluding remarks
7 May 2020 Jimmy Bengtsson, group CEO
1 st quarter summary
- The COVID-19 pandemic had limited impact on 1st quarter results
- The demerger of the property development operation is progressing according to plan
- Solid underlying operations and good cash flow in 1st quarter
- The proposed distribution of dividend for 2019 was suspended, and investment levels for 2020 have been reduced
- Veidekke has high operational flexibility and a good financial position
Veidekke has signed a contract with Vestfold and Telemark county municipality in Norway to build and refurbish Sandefjord Upper Secondary School
Outlook for 2020
- High uncertainty related to the consequences of COVID-19 measures and the financial impacts from the pandemic
- Activities and cost base to be adapted to market developments and order intake
- Veidekke's long-term objectives are maintained, but the previously communicated profit forecast for 2020 has been withdrawn
Facsimile from Veidekke's forth quarter 2019 presentation
Appendix
Business areas 1st quarter
|
1st quarter 2020 |
|
|
1st quarter 2019 |
|
|
Amounts
in NOK million |
Revenue |
Profit |
Margin |
Revenue |
Profit |
Margin |
| Building Construction Norway |
3 563 |
119 |
3.3 % |
3 390 |
110 |
3.2 % |
| Civil Engineering Norway |
1 119 |
15 |
1.3 % |
1 143 |
-25 |
-2.2 % |
Construction
Sweden |
2 596 |
28 |
1.1 % |
2 409 |
33 |
1.4 % |
| Construction Denmark |
653 |
33 |
5.0 % |
569 |
30 |
5.3 % |
| Total Construction |
7 930 |
194 |
2.4 % |
7 510 |
148 |
2.0 % |
Property
Development
Norway |
252 |
56 |
|
242 |
39 |
|
Property
Development
Sweden |
509 |
46 |
|
476 |
19 |
|
Total
Property Development |
761 |
101 |
|
718 |
57 |
|
| Industrial |
568 |
-222 |
-39 % |
615 |
-202 |
-33 % |
| Other |
-231 |
-90 |
|
-312 |
-24 |
|
| Total Group |
9 029 |
-16 |
-0.2 % |
8 531 |
-21 |
-0.2 % |
Income statement (IFRS)
|
|
st
1
quarter |
Full year |
| Amounts in NOK million |
2020 |
2019 |
2019 |
| Revenue |
8 443 |
8 076 |
36 569 |
| Operating expenses |
-8 331 |
-7 990 |
-35 034 |
| Share of net income from associates and JVs |
5 |
8 |
-67 |
| Depreciation/impairment |
-226 |
-214 |
-887 |
| Operating profit |
-109 |
-120 |
581 |
| Net financial income |
-56 |
5 |
2 |
| Pre-tax profit |
-165 |
-115 |
582 |
| Income tax expense |
37 |
15 |
-142 |
| Post-tax profit |
-128 |
-99 |
440 |
| Of which non-controlling interests |
48 |
134 |
522 |
| Post-tax profit (net) |
-79 |
35 |
962 |
| Earnings per share (NOK) |
14 |
2 |
48 |
| Pre-tax profit, segment |
-94 |
33 |
914 |
| Amounts in NOK million |
-0.7 |
0.2 |
6.8 |
| Revenue |
-16 |
-21 |
786 |
Balance sheet: Assets
| Amounts in NOK million |
31.03.2020 |
31.03.2019 |
31.12.2019 |
| Goodwill and other intangible assets |
1 939 |
1 924 |
1 884 |
| Deferred tax assets |
7 |
- |
8 |
| Land and buildings |
1 321 |
1 346 |
1 253 |
| Plant and machinery |
2 575 |
2 815 |
2 644 |
| Investments in associates and joint ventures |
196 |
1 355 |
219 |
| Financial assets |
468 |
503 |
535 |
| Total non-current assets |
6 506 |
7 943 |
6 542 |
| Non-residential and residential projects |
62 |
6 331 |
53 |
| Inventories |
630 |
593 |
544 |
| Trade and other receivables |
5 769 |
6 377 |
5 683 |
| Cash and cash equivalents |
725 |
194 |
241 |
| Total current assets |
7 186 |
13 494 |
6 522 |
| Total assets |
9 147 |
- |
8 920 |
| Amounts in NOK million |
22 839 |
21 438 |
21 985 |
Balance sheet: Equity and liabilities
| Amounts in NOK million |
31.03.2020 |
31.03.2019 |
31.12.2019 |
| Equity |
3 935 |
3 462 |
3 949 |
| Pensions and deferred tax liabilities |
862 |
846 |
915 |
| Bonds |
1 600 |
1 600 |
1 600 |
| Amounts due to credit institutions |
1 944 |
2 190 |
1 507 |
| Other non-current liabilities |
1 154 |
1 046 |
1 161 |
| Total non-current liabilities |
5 560 |
5 682 |
5 184 |
| Debt to credit institutions |
11 |
890 |
12 |
| Trade payables and warranty provisions |
6 260 |
6 114 |
6 957 |
| Public duties and taxes payable |
1 084 |
1 068 |
751 |
| Other current liabilities |
3 494 |
4 222 |
2 800 |
| Total current liabilities |
10 848 |
12 293 |
10 520 |
| Total liabilities operations held for sale |
2 496 |
- |
2 331 |
| Total equity and liabilities |
22 839 |
21 438 |
21 985 |
Net
interest-bearing debt |
-2 605 |
-3 440 |
-2 653 |
| Cash and interest-bearing debt housing cooperatives in Sweden1) |
-796 |
-842 |
-643 |
interest-bearing debt incl. housing cooperatives in Sweden1)
Net |
-3 401 |
-4 283 |
-3 296 |
1) Amended the accounting treatment of housing cooperatives in Sweden
Cash flow statement
|
Q1 2020 |
|
|
|
|
Q1 2019 |
|
| Amounts in NOK million |
Construction |
Industrial |
Other1) |
Continued
business |
Held
for sale |
Group |
Group |
| Pre-tax profit |
194 |
-222 |
-136 |
-165 |
51 |
-114 |
-115 |
| Depreciation/impairment |
147 |
64 |
15 |
226 |
2 |
228 |
214 |
| Other working capital |
171 |
-37 |
35 |
168 |
-151 |
17 |
-484 |
| Cash flow from operating activities |
512 |
-194 |
-87 |
230 |
-98 |
132 |
-385 |
| Acquisition/disposal of PP&E |
-62 |
-59 |
-2 |
-123 |
-1 |
-124 |
-113 |
| Other investing activities |
24 |
5 |
4 |
33 |
4 |
37 |
-34 |
| Cash flow from investing activities |
-38 |
54 |
2 |
-90 |
3 |
-87 |
-147 |
| Dividend paid |
- |
- |
- |
- |
- |
- |
- |
| Disposal equity housing cooperatives in Sweden |
- |
- |
- |
- |
-85 |
-85 |
- |
| Other financial items |
-18 |
-3 |
-8 |
-29 |
-36 |
-64 |
-18 |
| Cash flow from financing activities |
-18 |
-3 |
-8 |
-29 |
-120 |
-149 |
-18 |
| Change in net interest-bearing position |
455 |
-251 |
-93 |
111 |
-216 |
-104 |
-550 |
1) IFRS adjustment and group eliminations included