Veidekke

Quarterly Report • Aug 15, 2019

Presentation 2nd quarter 2019

15 August 2019 Arne Giske, CEO, and Terje Larsen, CFO

Highlights 2nd quarter 2019

• Improvement initiatives continue
• Improved margin and results
• Increased order book
• A stable residential market in Norway and signs of improvements in Sweden

Veidekke is building the second stage of Frysjaparken residential project in Oslo for OBOS Nye Hjem and Stor-Oslo Eiendom

Revenue and earnings 2nd quarter

2 nd quarter: Revenue 2 NOK billion NOK million

nd quarter: Profit before tax

Q2 2018 includes NOK 550 million write-downs in Civil Engineering Norway

Profit before tax 2 nd quarter per business area

108

12

2Q 2019

Order intake segment breakdown Construction Growing and diversified product portfolio

Revenue and order intake Order book per product

NOK billion – "Book-to-bill ratio" 1.07 Strong focus on commercial and public buildings

Order book Construction Project portfolio in excess of NOK 35 billion

NOK billion NOK billion

Order book* Orders in revenue next 12 months

*Remaining revenue in projects that are not expected to generate profit comprises approx. NOK 3.7 billion of the order book

Residential sales and construction

No. of units sold* Units under construction*

© Veidekke

Occupational health and safety

Number of serious injuries

Facsimile from www.bygg.no

Results Segments and group

Terje Larsen, CFO 2 nd quarter 2019

Business areas 2nd quarter

	2nd quarter 2019		2nd quarter 2018
Amounts in NOK million	Revenue	Profit	Margin	Revenue	Profit	Margin
Building Construction Norway	3 518	131	3.7%	3 449	122	3.5%
Civil Engineering Norway	1 258	16	1.2%	928	-562	-60.5%
Construction Sweden	2 762	72	2.6%	2 511	64	2.5%
Construction Denmark	600	33	5.4%	581	41	7.0%
Total Construction	8 139	251	3.1%	7 469	-335	-4.5%
Property Development Norway	316	73		157	35	-
Property Development Sweden	435	39		625	53	-
Total Property Development	750	111		782	88	-
Industrial	1 499	108	7.2%	1 339	66	4.9%
Other	-324	-18		-441	-18	-
Total Group	10 064	451	4.5%	9 148	-199	-2.2%

Building Construction Norway

2 ND QUARTER 2019

• Revenue on a par with last quarter and 2nd quarter 2018
• Increased result and margin
  • The majority of profits generated by operations in central east Norway
  • Performance improvement from a year ago is primarily attributable to increased profitability of operations in southwest Norway
• Improvement work and restructuring
  • Closing business in Bodø
• Strong order book
  • New contracts in the main segments, especially in residential

	nd 2	quarter		YTD
NOK million	2019	2018	2019	2018
Revenue	3 518	3 449	6 908	6 467
Profit before tax	131	122	241	224
Profit margin	3.7%	3.5%	3.5%	3.5%

REVENUE AND MARGIN

ORDER BOOK AND ORDER INTAKE

Civil Engineering Norway

2 ND QUARTER 2019

• High level of activity in ongoing transport projects
• The profitability of the project portfolio is weak
  • Several ongoing large-scale projects were written down in 2018 and do not generate positive results
  • Execution of the large projects according to plan
  • Comprehensive measures have been implemented
• Selective bidding resulted in low order intake in the quarter
  • Good market conditions and several contracts to be clarified

	nd 2	quarter		YTD
NOK million	2019	2018	2019	2018
Revenue	1 258	928	2 401	1 937
Profit before tax	16	-562	-10	-559
Profit margin	1.2%	-60.5%	-0.4%	-28.9%

REVENUE AND MARGIN*

ORDER BOOK AND ORDER INTAKE

Construction Sweden

2 ND QUARTER 2019

• Revenue growth

• Growth in both building construction and civil engineering
• Lower activity level in residential
• Higher result and margin
  • High level of activity and improved profitability for non-residential buildings in both Stockholm and Gothenburg
• Stable order book
  • Non-residential buildings and civil engineering have good order intake

REVENUE AND MARGIN

ORDER BOOK AND ORDER INTAKE

	nd 2	quarter	YTD
NOK million	2019	2018	2019	2018
Revenue	2 762	2 511	5 171	4 479
Profit before tax	72	64	105	92
Profit margin	2.6%	2.5%	2.0%	2.1%

Construction Denmark

2 ND QUARTER 2019

• Stable revenue
  • Still high level of activity in the Copenhagen area
• Solid overall project profitability in the portfolio
• Strong order book
  • No new large contracts in 2nd quarter

REVENUE AND MARGIN

ORDER BOOK AND ORDER INTAKE

	nd 2 quarter		YTD
NOK million	2019	2018	2019	2018
Revenue	600	581	1 169	1 086
Profit before tax	33	41	63	67
Profit margin	5.4%	7.0%	5.4%	6.2%

Property Development Norway

2 ND QUARTER 2019

• A good result

• Good sales in ongoing projects, especially in Oslo
• Development gain of NOK 43 million from sale of a residential project
• Increase in residential production
  • Construction started on five projects with 190 residential units
• 119 units in three projects were released for sale in the quarter
• Return on invested capital* 9.4%

	nd 2 quarter			YTD
	2019	2018	2019	2018
Profit before tax (NOK million)	73	35	111	62
Number of units sold	75	96	237	163
Numbers of units started	190	217	234	226
Units under construction	785	598	785	598
Sales ratio (units under construction)	71%	75%	71%	75%

Figures in table denote Veidekke's share *Return past 12 months

PROFIT BEFORE TAX

RESIDENTIAL SALES & PRODUCTION, VEIDEKKE'S SHARE (NO. OF UNITS)

Property Development Sweden

2 ND QUARTER 2019

• Increased residential sales
  • Small houses are selling very well, and demand for new residential units is strong in both Gothenburg and Malmö
  • Stockholm market remains cautious, but signs of improvement are emerging
• Result at a moderate level; production decreasing
• 198 units in five projects were released for sale in the quarter
  • Three in the Malmö region, one in Uppsala and one in Gothenburg
• Return on invested capital* 12.5%

	nd 2 quarter		YTD
	2019	2018	2019	2018
Profit before tax (NOK million)	39	53	57	98
Number of units sold	131	47	243	83
Numbers of units started	-	147	91	147
Units under construction	1 359	1 578	1 359	1 578
Sales ratio (units under construction)	91%	81%	91%	81%

Figures in table denote Veidekke's share *Return past 12 months

PROFIT BEFORE TAX

RESIDENTIAL SALES & PRODUCTION, VEIDEKKE'S SHARE (NO. OF UNITS)

© Veidekke

Industrial

2 ND QUARTER 2019

• Asphalt: Result improvement
  • Changed pricing strategy and cost control
• Aggregates: A good result
  • Increased level of activity and good product mix
• Road Maintenance: Result improvement
  • Good profitability in more recent contracts

	nd 2	quarter	YTD
NOK million	2019	2018	2019	2018
Revenue	1 499	1 339	2 113	1 814
Profit before tax	108	66	-95	-151
Profit margin	7.2%	4.9%	-4.5%	-8.3%

REVENUE AND 12M MARGIN*

PROFIT BEFORE TAX 2ND QUARTER

© Veidekke *Margin shown in the graph is exclusive of a development gain of NOK 70 million in Q4 2017

Financial Statements IFRS

Income statement (IFRS)

			Full year
Amounts in NOK million	2019	2018	2018
Revenue		10 031	9 465	35 667
Operating expenses		-9 405	-9 531	-34 656
Share of net income from associates and JVs		56	55	163
Depreciation/impairment		-214	-143	-594
Operating profit		469	-154	580
Net financial income		1	7	21
Profit before tax		470	-146	602
Income tax expense		-70	11	-28
Profit after tax		399	-135	574
Of which non-controlling interests		16	9	34
Profit after tax (net)		384	-144	540
Earnings per share (NOK)		2.9	-1.1	4.0
Profit before tax, segment		451	-199	591

IFRS 16 implemented as of 1 January 2019 and historical figures have not been adjusted. See note 18 in Veidekke's quarterly report for further details.

Balance sheet – Assets

Amounts in NOK million	30.06.2019	30.06.2018	31.12.2018
Goodwill and other intangible assets	1 926	1 834	1 957
Deferred tax assets	-	19	-
Land and buildings	1 312	703	646
Plant and machinery	2 765	2 480	2 694
Investments in associates and joint ventures	1 403	1 452	1 433
Financial assets	527	572	508
Total non-current assets	7 933	7 060	7 238
Non-residential and residential projects	5 588	3 738	4 309
Inventories	637	641	564
Trade and other receivables	7 870	7 213	6 527
Cash and cash equivalents	181	583	197
Total current assets	14 275	12 174	11 597
Total assets	22 208	19 234	18 835

IFRS 16 implemented as of 1 January 2019 and historical figures have not been adjusted. See note 18 in Veidekke's quarterly report for further details.

Balance sheet – Equity and liabilities

Amounts in NOK million	30.06.2019	30.06.2018	31.12.2018
Equity	3 453	3 133	3 983
Pensions and deferred tax liabilities	837	920	846
Bonds	1 600	1 600	1 600
Amounts due to credit institutions	2 001	1 643	248
Other non-current liabilities	1 026	365	414
Total non-current liabilities	5 464	4 527	3 108
Bond debt and debt to credit institutions	1 036	25	36
Trade payables and warranty provisions	7 195	6 853	6 989
Public duties and taxes payable	1 098	1 019	867
Other current liabilities	3 962	3 677	3 852
Total current liabilities	13 291	11 574	11 744
Total equity and liabilities	22 208	19 234	18 835
Net interest-bearing debt	-4 268	-2 458	-1 470

IFRS 16 implemented as of 1 January 2019 and historical figures have not been adjusted. See note 18 in Veidekke's quarterly report for further details.

Cash flow statement

	Per 2Q 2019					Per 2Q 2018
Amounts in NOK million	Construction	Property Development	Industrial	Other1)	Group	Group
Profit before tax	399	169	-95	-117	356	-213
Depreciation/impairment	269	1	129	28	428	281
Other working capital	-689	-1 422	-348	3	-2 455	-142
Cash flow from operating activities	-20	-1 253	-313	-85	-1 671	-73
Acquisition/disposal of PP&E	-138	-21	-95	-	-253	-478
Other investing activities	15	12	-1	-50	-25	-258
Cash flow from investing activities	-123	-9	-96	-50	-278	-736
Dividend paid	-	-	-	-669	-669	-668
Other financial items	-109	-52	-34	15	-180	-217
Cash flow from financing activities	-109	-52	-34	-653	-849	-885
Change in net interest-bearing position	-253	-1 314	-443	-788	-2 798	-1 694
30 June2) Invested capital at		6 110	1 759		8 053	6 373

22 1 Includes IFRS adjustment and group eliminations ²

Invested capital only calculated for the capital-intensive business areas Property Development and Industrial

Veidekke shall be a solid company Significant ratio improvement expected

• Significant improvement expected in second half of 2019
  • Large land investments and low season in first half of 2019
  • Increased cash flow expected in second half of 2019
• Veidekke has solid long-term financing
  • At the end of the quarter, undrawn bank facilities amounted to NOK 1.7 billion

Net interest bearing debt/EBITDA (12m)

Expect to satisfy requirements with solid margin

Concluding remarks

Arne Giske, CEO 2 nd quarter 2019

Efforts to improve profitability continue

Positive outlook in our main markets

CONSTRUCTION MARKET

• High growth in public buildings markets
• Stable civil engineering market
• Expected total growth 0-2% p.a.

• High growth in public and commercial buildings markets
• Growing civil engineering market
• Expected total growth 4-5% p.a.

• Moderate growth in commercial buildings market
• Expected total growth 2-4% p.a.

• Good sales of new residential units in urban areas so far this year, especially in Oslo
• Expect good demand to continue
• The market is on the mend and has clearly passed the low point
• Stockholm market is showing signs of improvement

© Veidekke

Veidekke's ambitions towards 2022 Increased profitability and attractive dividend

Appendix

Business areas first six months

	First six	months 2019		First six months 2018
Amounts in NOK million	Revenue	Profit	Margin	Revenue	Profit	Margin
Building Construction Norway	6 908	241	3.5%	6 467	224	3.5%
Civil Engineering Norway	2 401	-10	-0.4%	1 937	-559	-28.9%
Construction Sweden	5 171	105	2.0%	4 479	92	2.1%
Construction Denmark	1 169	63	5.4%	1 086	67	6.2%
Total Construction	15 649	399	2.5%	13 969	-176	-1.3%
Property Development Norway	558	111		310	62
Property Development Sweden	910	57		1 105	98
Total Property Development	1 468	169		1 415	160
Industrial	2 113	-95	-4.5%	1 814	-151	-8.3%
Other	-636	-42		-943	-44
Total Group	18 595	431	2.3%	16 255	-210	-1.3%

Residential portfolio

	Under			Under			Under
Property Development	construction	Completed	Building starts	construction	Completed	Building starts	construction
Residential portfolio - Veidekke's share	31.12.2017	2018	2018	31.12.2018	2019	2019	30.06.2019
Construction - number of units
Norway	557	-343	385	599	-49	235	785
Sweden	1 948	-726	295	1 517	-249	91	1 359
Total under construction	2 505	-1 069	680	2 116	-298	326	2 144
Of which sold
Norway	445			421			555
Sweden	1 631			1 276			1 239
Total sold under construction	2 076			1 697			1 794
Sales rate %	83 %			80 %			84 %
Completed unsold units
Norway	19			20			17
Sweden	1			2			4
Total completed unsold units	20			22			21
Number of projects under construction
Norway	18	-11	9	16	-6	8	18
Sweden	27	-10	2	19	-5	3	17
Total projects under construction	45	-21	11	35	-11	11	35