Quarterly Report • May 9, 2019
Quarterly Report
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Veidekke to build Oksenøya centre at Fornebu
| Figures in NOK million | Q1 2019 | Q1 2018 | 20182) |
|---|---|---|---|
| Revenue, segment | 8 531 | 7 107 | 35 584 |
| Pre-tax profit, segment | -21 | -11 | 591 |
| Construction | 148 | 158 | 219 |
| Property Development | 57 | 72 | 388 |
| Industrial | -202 | -217 | 40 |
| Other | -24 | -25 | -56 |
| Earnings per share, segment | -0.1 | -0.1 | 4.0 |
| Profit margin, segment (%) | -0.2 | -0.2 | 1.7 |
| Revenue, IFRS2) | 8 330 | 7 023 | 35 667 |
| EBITDA, IFRS | 102 | 78 | 1 174 |
| Pre-tax profit, IFRS | -113 | -67 | 602 |
| Earnings per share, IFRS (NOK)3) | -0.7 | -0.5 | 4.0 |
| Net interest-bearing debt | 3 440 | 1 613 | 1 470 |
| Total order backlog | 35 875 | 31 930 | 34 640 |
1) The comments in the report relate to figures taken from the segment accounts. Comments on the IFRS accounts are specified in the text.
2) In accordance with IFRS, revenue from residential sales in Norway is not recognised until a residential unit is taken over by the buyer. In segment reporting, revenue is recognised using the following formula: estimated final profit x sales ratio x stage of completion.
3) No dilutive effect.
PRE-TAX PROFIT 12-MONTH ROLLING NOK MILLION
EARNINGS PER SHARE 12-MONTH ROLLING NOK
Veidekke's first-quarter performance was marked by the customary seasonal downturn in the industrial operation, and was as expected overall. Several of the construction businesses improved their sales and profits, although the group-wide profit was impacted by reduced profitability in the Norwegian civil engineering operation. While the Norwegian property development operation achieved strong sales and satisfactory profits, lower production and falling residential property prices had a negative effect on margins and profits in Sweden.
Over the next few years, Veidekke will give priority to improving profits, rather than continued expansion. In the short term, this means working on returning to historical profit levels. In the period to 2022, our focus will be on developing current investments and operations with the aim of further profit growth. We have launched targeted initiatives throughout the group to reduce overall project portfolio risk, boost profits and improve cash flow. We are more selective at the tender stage, working to improve risk management and project management, and cutting costs and capital expenditure.
We are well-positioned to achieve our ambitious objectives. Our construction and civil engineering order book is at an all-time high, and has a better composition. We have made management and organisational adjustments, and the property development operation has a large, attractive project portfolio with sales pending in the upcoming years.
In 2014, Veidekke set itself the ambitious target of achieving a zero-serious injury rate by 2020. Since then, we have reduced the number of serious injuries significantly, but have not come as far as we had hoped. This is why, going forward, we will intensify risk management measures and initiatives to ensure learning from incidents and injuries.
Arne Giske, Group CEO
Veidekke generated sales of NOK 8.5 billion in the first quarter, an increase of 20% on the same quarter of last year. Growth occurred primarily in the Norwegian and Swedish construction operations, although several other business areas also achieved increased sales.
The pre-tax profit amounted to NOK -21 million, compared to NOK -11 million last year. The first quarter is normally a weak quarter for Veidekke due to seasonal fluctuations in the industrial operation and parts of the civil engineering operation. While the profits of the building construction operation were boosted by increased sales, overall performance was undermined by weak profitability in the Norwegian civil engineering operation. Strong residential sales during the quarter increased the profits of the Norwegian property development operation, although profits in Sweden were negatively impacted by continued low demand and falling prices in Stockholm, as well as lower residential production. High activity levels in the aggregates operation improved the profitability of the industrial operation compared to last year.
The financial accounts are prepared in accordance with IFRS, which among other things regulates the recognition of revenue from residential projects in Norway. In the first quarter, the pre-tax result in accordance with IFRS totalled NOK -113 million. The difference between the financial and segment accounts is attributable to high activity in ongoing projects and the fact that no residential units were completed and delivered in the first quarter.
The Q1 order intake of NOK 9.2 billion was 37% higher than during the same period last year. As at quarter-end, the building construction order book amounted to NOK 34.9 billion, representing an increase of NOK 1.1 billion during the quarter. Approximately 70% of the order book will be converted into revenue over the next 12 months.
Net interest-bearing debt totalled NOK 3.4 billion at quarterend, compared to NOK 1.5 billion at the beginning of the year. The majority of the increase is attributable to the payment for previously agreed plot purchases. Cash flow is normally weak in the first quarter due to low activity in the industrial operation and parts of the civil engineering operation.
| NOK million | Q1 2019 | Q1 2019 | 2018 |
|---|---|---|---|
| Revenue | 7 510 | 6 500 | 29 569 |
| Profit before tax | 148 | 158 | 219 |
| Profit margin (%) | 2.0 | 2.4 | 0.7 |
| Order backlog | 34 851 | 30 988 | 33 708 |
REVENUE NOK BILLION
PROFIT MARGIN1) PER CENT
ORDER BACKLOG NOK BILLION
Veidekke's construction operation achieved sales of NOK 7.5 billion in Q1, compared to NOK 6.5 billion in Q1 2018. Both the building construction operation and the civil engineering operation achieved improved sales.
The first-quarter pre-tax profit totalled NOK 148 million, compared to NOK 158 million in the first quarter of 2018. The quarterly profit margin was 2.0%, slightly down from 2.4% one year ago. Increased sales in all three countries contributed to the strong profitability of the building construction operation, although the quarterly profit was reduced somewhat by lower profitability in the Norwegian civil engineering operation.
The Q1 order intake amounted to NOK 8.6 billion. As at 31 March, the building construction operation order book stood at NOK 34.9 billion, up from NOK 33.7 billion at the beginning of the year and NOK 31.0 billion at the end of Q1 2018.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 3 390 | 3 018 | 13 070 |
| Profit before tax | 110 | 101 | 443 |
| Profit margin % | 3.2 | 3.3 | 3.4 |
| Order backlog | 15 799 | 13 458 | 14 223 |
The Norwegian building construction operation generated revenues of NOK 3.4 billion in the first quarter, up 12% from the same quarter in 2018. The operations in the Oslo region and Trøndelag county contributed most to this growth.
The Q1 pre-tax profit totalled NOK 110 million, compared to NOK 101 million in Q1 2018. The profit improvement is attributable to increased sales.
The first-quarter order intake amounted to NOK 5.1 billion. Major projects won in the first quarter:
At quarter-end, the Norwegian building construction order book totalled NOK 15.8 billion, up from NOK 14.2 billion at year-end 2018.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 1 143 | 1 009 | 4 427 |
| Profit before tax | -25 | 3 | -584 |
| Profit margin % | -2.2 | 0.3 | -13.2 |
| Order backlog | 4 657 | 6 062 | 5 056 |
The Norwegian civil engineering operation achieved revenues of NOK 1.1 billion in the first quarter, compared to NOK 1.0 billion in the first quarter of last year. The increase is attributable to high production in major transport infrastructure projects.
The quarterly loss of NOK -25 million compares to a profit of NOK 3 million in Q1 2018. The decline in profitability is due to weak project portfolio profitability. Several large ongoing projects were written down in 2018 and do not make a profit contribution. The civil engineering operation aims to reduce shared and administrative costs by NOK 100 million by the end of 2020.
The first-quarter order intake totalled NOK 418 million. The civil engineering operation has sought to reduce project portfolio risk, including through a much more selective approach to project tendering. This has reduced the order intake.
The largest contract signed during the quarter relates to re-asphalting of the eastern runway at Oslo Airport. The contract with Avinor is valued at NOK 135 million.
As at the end of Q1 2019, the civil engineering order book stood at NOK 4.7 billion, compared to NOK 5.1 billion at the beginning of the year.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 2 409 | 1 968 | 9 855 |
| Profit before tax | 33 | 28 | 214 |
| Profit margin % | 1.4 | 1.4 | 2.2 |
| Order backlog | 11 493 | 9 722 | 11 880 |
The Swedish building construction operation recorded revenues of NOK 2.4 billion in the first quarter, up from NOK 2.0 billion in the same quarter of last year. Measured in local currency, this equates to revenue growth of 27%. This growth is primarily attributable to the non-residential segment, with the acquisition of the construction business Billström Riemer Andersson AB contributing most to the increase in sales. The civil engineering segment also achieved higher sales compared to the corresponding quarter of 2018, while residential construction activity declined by almost 30%.
The Q1 2019 pre-tax profit amounted to NOK 33 million, up from NOK 28 million in the first quarter of last year. Collectively, the businesses acquired in the second quarter of 2018 made a positive contribution to the quarterly profit, although profits suffered under reduced production and weak profitability in the residential segment and somewhat lower profitability in the civil engineering operation. Overall, the profit margin was on a par with last year, at 1.4%.
The order intake for the first quarter was NOK 2.4 billion, up from NOK 1.6 billion in Q1 2018.
Major projects won in the first quarter:
At the end of Q1 2019, the Swedish construction operation order book stood at NOK 11.5 billion, compared to NOK 11.9 billion at the end of Q4 2018. Measured in local currency, the order book is the same size as at the beginning of 2019.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 569 | 505 | 2 218 |
| Profit before tax | 30 | 26 | 146 |
| Profit margin % | 5.3 | 5.2 | 6.6 |
| Order backlog | 2 902 | 1 747 | 2 548 |
The Danish building construction operation achieved revenues of NOK 569 million in the first quarter of 2019, compared to NOK 505 million in the corresponding quarter of last year. The increase – amounting to 12% in local currency – is attributable to high activity in the Copenhagen region.
The first-quarter pre-tax profit was NOK 30 million, compared to NOK 26 million in Q1 2018. The quarterly profit margin was 5.3%, compared to NOK 5.2% last year. The project portfolio enjoys robust profitability.
The quarterly order intake was NOK 995 million, compared to NOK 902 million in Q1 2018.
Major projects won in the first quarter:
The order book amounted to NOK 2.9 billion at quarter-end, compared to NOK 2.5 billion at the beginning of the year.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 718 | 633 | 2 899 |
| Profit before tax | 57 | 72 | 388 |
| Capital invested | 6 106 | 4 662 | 4 748 |
PROFIT BEFORE TAX
RETURN ON INVESTED CAPITAL, 12-MONTH ROLLING1) PER CENT
| Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2017 | 2017 | 2018 | |
|---|---|---|---|---|---|---|---|
| Number of units sold | 274 | 161 | 153 | 148 | 105 | 979 | 567 |
| Norway | 162 | 52 | 73 | 96 | 67 | 304 | 288 |
| Sweden2) | 112 | 109 | 79 | 47 | 36 | 645 | 271 |
| Denmark | - | - | 1 | 5 | 2 | 30 | 8 |
| Construction starts | 135 | 185 | 122 | 364 | 9 | 1 374 | 680 |
| Norway | 44 | 109 | 50 | 217 | 9 | 320 | 385 |
| Sweden | 91 | 76 | 72 | 147 | - | 1 054 | 295 |
| Denmark | - | - | - | - | - | - | - |
| Number of units under construction | 2 214 | 2 116 | 2 189 | 2 251 | 2 514 | 2 620 | 2 116 |
| Norway | 643 | 599 | 576 | 598 | 534 | 557 | 599 |
| Sweden | 1 571 | 1 517 | 1 613 | 1 578 | 1 905 | 1 948 | 1 517 |
| Denmark | - | - | - | 75 | 75 | 115 | - |
| Sales ratio, units under construction (%) | 84 | 80 | 80 | 80 | 84 | 83 | 80 |
| Norway | 75 | 70 | 75 | 75 | 82 | 80 | 70 |
| Sweden | 88 | 84 | 82 | 81 | 85 | 84 | 84 |
| Denmark | - | - | - | 96 | 91 | 91 | - |
| Number of units in land bank | 14 800 | 15 100 | 15 340 | 15 200 | 15 250 | 14 050 | 15 100 |
| Norway | 5 300 | 5 400 | 5 350 | 5 400 | 5 600 | 5 300 | 5 400 |
| Sweden | 9 500 | 9 700 | 9 990 | 9 800 | 9 650 | 8 750 | 9 700 |
1) The return on invested capital is adjusted for taxes in joint ventures and associates.
2) The sales totals for the first and second quarters of 2018 have been corrected for cancelled pre-sales in discontinued projects.
The first-quarter sales of Veidekke's property development operation totalled NOK 718 million, up from NOK 633 million in Q1 2018. The pre-tax profit amounted to NOK 57 million, compared to NOK 72 million in the corresponding quarter of last year. The quarterly result reflects ongoing residential production, while the drop in profits compared to last year is linked to lower residential construction activity in Sweden. Although there were no sale transactions during the quarter, ongoing residential and commercial projects in both countries will boost profits going forward.
Veidekke sold 404 residential units – including partner share – in Q1 2019, compared to 200 in Q4 2018 and 134 in Q1 2018. Veidekke's share of sales during the quarter was 274 units. Excellent pre-sales in the Middelthunet residential project in Oslo had a positive impact on the sales figures.
The number of residential units under construction was 2,214 at quarter-end, up from 2,116 at the beginning of the year. There were few unsold residential units under construction, and the overall sales ratio for the portfolio was 84%. During the quarter, construction started on six residential projects – three in Norway and three in Sweden.
As at the end of the first quarter, the group's land bank encompassed approximately 18,100 potential residential units, with Veidekke's share amounting to 14,800 units.
Veidekke paid for previously agreed plot purchases in the first quarter, increasing the capital invested in the property development operation to NOK 6.1 billion, up from NOK 4.7 billion at the end of the preceding quarter. The 12-month rolling return on invested capital was 10.2%.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 242 | 153 | 735 |
| Profit before tax | 39 | 27 | 163 |
| No. of units under construction1) | 643 | 534 | 599 |
| No. of units sold1) | 162 | 67 | 288 |
1) A significant portion of Veidekke's Norwegian property development operations takes place in joint ventures. The figures in the table illustrate Veidekke's share.
First-quarter revenues totalled NOK 242 million, compared to NOK 153 million in the same quarter of last year. The pre-tax profit amounted to NOK 39 million, up from NOK 27 million in Q1 2018. The increase is attributable to increased sales in ongoing projects.
The Norwegian property development operation sold 288 residential units in Q1 2019, partners' share included, compared to 89 in Q4 2018 and 93 in Q1 2018. Some 158 of the 182 residential units in the first phase of the Middelthunet project in Oslo, which was released for sale during the quarter, have been sold. The project is a 50/50 joint venture with OBOS. Two further projects were also released for sale in Q1 – one in Oslo and one in Trondheim.
Veidekke had 643 residential units under construction at quarter-end, compared to 599 at the end of 2018. The sales ratio for residential units under construction was 75% in Q1 2019, somewhat higher than in Q4 2018. Construction started on three smaller projects totalling 44 residential units during the first quarter. Two of the projects are situated in Lørenskog, outside Oslo, and one in Hamar.
At quarter-end, the Norwegian operation's land bank encompassed approximately 7,600 potential units, of which Veidekke's share amounted to 5,300 units.
In March, Veidekke took over a plot at Nedre Skøyen vei 24–26 in Oslo. Veidekke paid NOK 50 million when the contract was signed in 2015, and the remaining NOK 750 million in Q1 2019. Combined with an increase in the number of own-account projects, this boosted the invested capital to NOK 4.1 billion, from NOK 3.1 billion at the beginning of the year. Adjusted for tax costs arising in associated and jointly controlled companies, the return on invested capital over the preceding 12 months was 8.6%.
After quarter-end, Veidekke signed an agreement for the sale of a regulated and zoned residential plot in Bærum which will generate a gain of approximately NOK 40 million in the second quarter. Additionally, sales of several commercial projects in Norway are being prepared. These sales will have a substantial impact on profits in the quarters they are realised.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 476 | 480 | 2 165 |
| Profit before tax | 19 | 45 | 225 |
| No. of units under construction1) | 1 571 | 1 905 | 1 517 |
| No. of units sold1) | 112 | 36 | 271 |
1) Veidekke's share. The sales total for the first quarter of 2018 has been corrected for cancelled pre-sales in discontinued projects.
The Swedish property development operation achieved revenues of NOK 476 million in the first quarter of 2019, compared to NOK 480 million in the same quarter of last year. The pre-tax profit totalled NOK 19 million, compared to NOK 45 million in Q1 2018. The result reflects current residential production in Sweden. Although residential sales were significantly higher than in the same quarter in 2018, declining residential property prices in Stockholm and lower residential production reduced profits compared to last year.
The Swedish property development operation sold 116 residential units in Q1, of which Veidekke's share amounted to 112 units. Partners' share included, the operation sold 111 units in Q4 2018 and 39 in Q1 2018. Thirty-three of the residential sales made in the first quarter were of small new-build houses offering flexible, space-efficient solutions. Sales in Mälardalen were weak, while residential demand was strong in both Gothenburg and Malmö. To boost sales, market adjustments were made to several projects last year, primarily in the Stockholm region. Continuous consideration is given to new sales initiatives in projects nearing completion.
As at quarter-end, there were 1,571 residential units under construction in Sweden, compared to 1,517 units at the end of Q4 2018. In the first quarter, construction started on three projects totalling 131 residential units: an apartment development in Uppsala and two small-house developments in Uppsala and Gothenburg, respectively. Veidekke's share of these projects totals 91 units. The sales ratio for residential units under construction was 88%, compared to 84% at the beginning of the year.
The Swedish property development operation's land bank encompassed 10,500 potential residential units at the end of Q1, with Veidekke's share amounting to 9,500 units.
Payment for previously agreed plot purchases, including a large plot in Hagastaden, Stockholm, increased the invested capital to NOK 1.9 billion during the quarter, up from NOK 1.6 billion at the end of Q4 2018. The return on invested capital over the preceding 12 months was 15.0%.
| NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| Revenue | 615 | 475 | 4 894 |
| Profit before tax | -202 | -217 | 40 |
| Profit margin (%) | -33 | -46 | 0,8 |
| Order backlog | 1 025 | 942 | 933 |
NOK MILLION
PROFIT AND MARGIN, 12-MONTH ROLLING NOK MILLION
REVENUE BY BUSINESS AREA, LAST 12 MONTHS
Asphalt Aggregates Road Maintenance
The industrial operation generated revenues of NOK 615 million in Q1 2019, compared to NOK 475 million in the same period last year. Increased activity in the road maintenance and aggregates operations helped boost revenues compared to the first quarter of 2018.
The pre-tax loss for the quarter totalled NOK -202 million, an improvement of NOK 15 million on the first quarter of last year. The Q1 result was marked by the seasonal downturn in the asphalt operation, with maintenance work, seasonal preparations and fixed costs contributing to the negative result.
The asphalt operation achieved sales of NOK 124 million in Q1, up from NOK 51 million last year. The loss of NOK -201 million is on a par with the first quarter of 2018. Following last year's poor result, various measures have been implemented to improve profitability. Veidekke increased its asphalt prices ahead of this year's competitive tender process with the Norwegian Public Roads Administration, and succeeded in securing 40% of the volumes on offer. This equates to 840,000 tonnes of asphalt in 2019. By comparison, Veidekke secured 46% of the available volumes in 2018, corresponding to 1,095,000 tonnes.
It is expected that the decline in the volume supplied to the Norwegian Public Roads Administration will be compensated for by increased deliveries to major road projects.
Activity was high in the road maintenance operation in the first quarter. Compared to the same quarter last year, sales increased by 7%, to NOK 361 million. The NOK -6 million loss is on a par with last year. The Norwegian Public Roads Administration has decided to exercise one-year extension options under four of the six contracts due to conclude in 2019. The result for the quarter reflects an increased loss allocation of NOK 15 million linked to the contract extensions.
The aggregates operation improved sales to NOK 136 million in Q1, up from NOK 94 million last year. The NOK 1 million profit represents an improvement on the loss of NOK -16 million made in Q1 2018. The profit improvement is attributable to increased spoil reception activity, new landfill operations and higher prices.
Veidekke aims to reduce the number of serious injuries to zero by the end of 2020. Since adopting this objective in 2014, the number of serious injuries has been reduced substantially, but not enough to achieve the objective on schedule. The group is therefore implementing several forceful measures, including an improvement programme designed to ensure better risk management and that the entire organisation learns from injuries and incidents.
A total of 111 injuries were reported in the first quarter, representing an increase from the preceding quarter's total of 80 and the Q1 2018 total of 84. Two of the injuries were classified as serious.
The first-quarter LTI (lost time injury) rate was 5.0, compared to 4.5 in the preceding quarter and 4.6 in Q1 2018.
The group's sick leave rate was 4.6% in the first quarter, up from 4.1% in the previous quarter but on a par with the first quarter of 2018. Veidekke seeks to prevent sick leave by providing training, physical exercise and facilitation aimed at enabling persons on sick leave to return to work more quickly. Veidekke's rate of sick leave is lower than the industry average.
LTI rate: Lost-time injuries per million hours worked, own employees. Sickness absence, own employees, per cent.
Number of injuries, own employees and subcontractors.
Number of injuries, own employees and subcontractors.
Other operations consist of unallocated costs associated with the group's corporate administration and financial management, the group's ownership role in Public–Private Partnerships (PPP) and the elimination of intra-group profits. The result for the first quarter was a loss of NOK 24 million, on par with the first quarter of 2018.
At the end of the first quarter of 2019, net interest-bearing debt amounted to NOK 3,440 million, up from NOK 1,470 million at year-end 2018 and NOK 1,613 million one year ago. The increase since the beginning of the year is primarily attributable to payments totalling NOK 1.1 billion for previously agreed plot purchases in both Norway and Sweden, as well as normal seasonal fluctuations in the industrial operation and parts of the civil engineering operation. Investments in machinery and equipment were significantly lower than in the same period last year.
Veidekke has a sound financial capacity. The group has a NOK 3.6 billion borrowing facility with DNB. At quarter-end, unutilised borrowing capacity amounted to NOK 1.5 billion. Veidekke has also issued two bond loans: a NOK 600 million loan maturing in March 2025 and a NOK 1.0 billion loan maturing in May 2023.
| Largest shareholders as at 31 December 2018 | Ownership share in % |
|---|---|
| OBOS BBL | 18.1% |
| FOLKETRYGDFONDET | 10.6% |
| IF SKADEFORSÄKRING AB | 5.1 % |
| HANDELSBANKEN NORDEN SELEKTIV | 3.0% |
| VERDIPAPIRFONDET DNB NORGE (IV) | 2.5% |
| DANSKE INVEST NORSKE INSTIT. II. | 2.3% |
| MUST INVEST AS | 2.2% |
| MP PENSJON | 2.1% |
| ODIN NORGE | 1.9% |
| VANGUARD GROUP | 1.2% |
| Foreign shareholders | 24.1% |
| Employees, total ownership | 14.7% |
A total of 9.2 million Veidekke shares were traded in the first quarter of 2019. The share price ranged from NOK 87.60 to NOK 98.80, and was NOK 90.50 at 31 March 2019.
Veidekke has ongoing transactions with related parties during the course of its ordinary operations, including contracts for the development of specific projects. There were no significant related party transactions in the first quarter of 2019 beyond this. For a more detailed description of related party transactions, see Veidekke's 2018 Annual Report.
Risk management is an important aspect of Veidekke's business, which primarily involves the execution of individual projects. The projects vary greatly in terms of complexity, size, duration and risk, and systematic risk management in all parts of the business and during all project phases is of crucial importance. This encompasses matters such as project selection, processes, tender quality, project follow-up and project execution. Having the necessary expertise to ensure optimal assignment execution is key when deciding which projects to tender for. At the tender preparation stage, risks are identified and assessed, and plans are made for managing risk during the execution phase. Veidekke's project portfolio is increasing in size and complexity, making risk management a very high priority for the group.
Certain forms of contract permit differing interpretations of contractual performance, giving room for disagreement between contractor and client regarding final payment. This applies particularly to transport infrastructure projects, in which the contractual sums are large. Although Veidekke seeks to reach agreement with clients through negotiations, some disputes do end up in the court system. As at the end of the first quarter, Veidekke was involved in two major disputes currently before the courts. A nonbinding judgment has been pronounced in one of these.
The residential market is sensitive to cyclical fluctuations, and earnings in the property development operation are closely related to new project building starts. To reduce the risk associated with unsold residential units, Veidekke does not generally initiate construction work until a sales ratio of 50% has been achieved. As at the end of Q1 2019, the sales ratio for all residential production was 84%. The Swedish residential market, particularly in the Stockholm region, has weakened considerably over the past 18 months. As at quarter-end, Veidekke had no unsold, completed residential units in Sweden, although there were 194 unsold units under construction. Continuous consideration is given to new sales initiatives in projects nearing completion. Lower residential sales lead to the deferment of new residential project building starts.
The Norwegian residential market is well-functioning, with satisfactory sales overall. New projects are being released for sale, and building starts are being approved on an ongoing basis as the sales ratio reaches 50%.
Veidekke's financial risks are primarily related to trade receivables and interest-bearing debt. These risks are classified as credit, market and liquidity risks. For a more detailed statement on the company's financial risks, see Note 28 to Veidekke's 2018 Annual Report.
| NORWAY | SWEDEN | DENMARK | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 20181) | 20171) Growth |
20182) Growth |
20192) Growth |
20202) Growth |
20181) | 20171) Growth |
20182) Growth |
20192) Growth |
20202) Growth |
20181) | 20171 ) Growth |
20182) Growth |
20192) Growth |
20202) Growth |
|
| Apartments and small houses |
63 | 24% | 8% | -12% | -15% | 98 | 22% | 1% | -17% | 0% | 37 | 22% | 5% | 3% | 0% |
| Commercial buildings |
51 | 6% | 0% | -5% | -4% | 48 | 21% | 3% | -7% | 4% | 45 | 18% | 7% | 7% | 7% |
| Public buildings |
26 | -4% | -4% | 1% | 2% | 34 | 12% | 8% | -9% | -11% | 19 | 12% | 3% | 5% | 5% |
| Civil engineering |
86 | 9% | 6% | 4% | 0% | 81 | 5% | 7% | 6% | 7% | 68 | 2% | 9% | 3% | 5% |
| Total contracting production |
226 | 10% | 4% | -3% | -4% | 261 | 15% | 4% | -7% | 2% | 169 | 11% | 7% | 4% | 4% |
1) Source: Statistics Norway, Statistics Sweden, Statistics Denmark
2) Veidekke's forecasts
Following several years of growth, production is falling in the Norwegian construction and civil engineering market. While activity levels continue to rise in the civil engineering segment, lower production of apartments and small houses is having a negative impact on overall activity. This trend was expected based on the reduced number of new residential building starts in 2018. Last year's positive sales trend for new residential units continued into the first quarter of 2019, and is expected to extend well into 2020. Production of non-residential buildings is forecast to remain at current levels or decline slightly in the next few years, fluctuating within the normal range for the segment. One exception is the market for health and residential care buildings, which is expected to grow substantially going forward. Norway's general economic outlook is stable and positive, with moderate interest rate rises anticipated in the next few years.
Growth in the Swedish economy has peaked, although the economic upturn is forecast to continue until the end of 2020. Interest rate rises are considered unlikely. Production in the Swedish construction and civil engineering market will fall in 2019 following a significant drop in the number of new residential building starts in 2018. While the decline is most obvious in the Stockholm region, activity levels continue to rise in other major cities. New residential unit sales have remained stable and somewhat higher in recent quarters than in the preceding period. Veidekke anticipates a moderate increase in residential sales going forward, although a large supply of new and used residential units will keep market conditions challenging in the short term. The market for non-residential buildings is expected to decline following high activity in both the private and the public sector in recent years. High production is expected in the civil engineering sector, driven by demand in the transportation infrastructure, energy and industrial segments.
The outlook for the Danish economy is positive. Labour supply has fallen in recent years, making it difficult to find qualified workers. No significant interest rate rises are anticipated in the next few years. Production in the building construction sector is expected to continue increasing in 2019 and 2020, albeit at a somewhat slower pace than in recent years. Production in the market for non-residential buildings is expected to rise in 2019 and 2020, while activity in the residential sector will decline. The civil engineering market grew more than expected in 2018. Market forecasts for the next few years are moderately positive.
| Hans von Uthmann | Gro Bakstad | Ingalill Berglund | Daniel Kjørberg Siraj |
|---|---|---|---|
| Ingolv Høyland | Inge Ramsdal | Odd Andre Olsen | Arve Fludal |
Arne Giske Group CEO
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| Revenue | 8 330 | 7 023 | 35 667 | 31 175 |
| Operating expenses | -8 232 | -6 965 | -34 656 | -29 700 |
| Share of net income from joint ventures | 3 | 20 | 163 | 369 |
| Operating profit before depreciation (EBITDA) | 102 | 78 | 1 174 | 1 844 |
| Impairment of non-current assets | - | - | -1 | -6 |
| Depreciation | -214 | -139 | -593 | -517 |
| Operating profit (EBIT) | -112 | -61 | 580 | 1 320 |
| Financial income | 25 | 12 | 88 | 67 |
| Financial costs | -26 | -17 | -66 | -60 |
| Pre-tax profit | -113 | -67 | 602 | 1 327 |
| Income tax expense | 17 | 10 | -28 | -122 |
| Post-tax profit | -96 | -57 | 574 | 1 205 |
| Of which non-controlling interests | 2 | 8 | 34 | 27 |
| Earnings per share (NOK) 1) | -0.7 | -0.5 | 4.0 | 8.8 |
1) No dilutive effect.
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| Post-tax profit | -96 | -57 | 574 | 1 205 |
| Revaluation of pensions | - | - | -7 | -72 |
| Net items that will not be reclassified subsequently to profit or loss |
- | - | -7 | -72 |
| Currency translation differences | -73 | -96 | -48 | 115 |
| Fair value adjustment of financial assets | -7 | -2 | -1 | -15 |
| Net items that may be reclassified subsequently to profit or loss |
-80 | -98 | -49 | 100 |
| Total comprehensive income | -177 | -155 | 518 | 1 233 |
| of which non-controlling interests | 1 | 6 | 34 | 29 |
| Figures in NOK million | 31.03.2019 | 31.12.2018 | 31.03.2018 | 31.12.2017 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 1 774 | 1 807 | 1 449 | 1 401 |
| Other intangible assets | 150 | 149 | 120 | 129 |
| Deferred tax assets | - | - | 55 | 55 |
| Land and buildings | 1 346 | 646 | 605 | 615 |
| Plant and machinery | 2 815 | 2 694 | 2 306 | 2 286 |
| Investments in joint ventures | 1 493 | 1 433 | 1 451 | 1 489 |
| Financial assets | 503 | 508 | 549 | 508 |
| Total non-current assets | 8 081 | 7 238 | 6 536 | 6 482 |
| Current assets | ||||
| Residential projects | 5 502 | 4 309 | 3 910 | 3 941 |
| Inventories | 593 | 564 | 638 | 518 |
| Trade and other receivables, contract assets | 6 539 | 6 527 | 6 026 | 5 695 |
| Cash and cash equivalents | 182 | 197 | 476 | 392 |
| Total current assets | 12 816 | 11 597 | 11 051 | 10 546 |
| Total assets | 20 897 | 18 835 | 17 586 | 17 028 |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 67 | 67 | 67 | 67 |
| Other equity | 3 704 | 3 892 | 3 945 | 4 131 |
| Non-controlling interests | 20 | 25 | 18 | 22 |
| Total equity | 3 791 | 3 983 | 4 030 | 4 220 |
| Non-current liabilities | ||||
| Pensions and deferred tax liabilities | 848 | 846 | 903 | 900 |
| Bonds | 1 600 | 1 600 | 600 | - |
| Amounts due to credit institutions | 2 190 | 248 | 942 | 613 |
| Other non-current liabilities | 1 046 | 414 | 217 | 173 |
| Total non-current liabilities | 5 684 | 3 108 | 2 662 | 1 686 |
| Current liabilities | ||||
| Certificate debt and debt to credit institutions | 36 | 36 | 8 | 10 |
| Bonds | - | - | 750 | 750 |
| Trade payables and warranty provisions | 6 114 | 6 989 | 5 510 | 5 710 |
| Public duties and taxes payable | 1 068 | 867 | 1 039 | 887 |
| Other current liabilities and contract liabilities | 4 204 | 3 853 | 3 586 | 3 766 |
| Total current liabilities | 11 421 | 11 744 | 10 894 | 11 122 |
| Total equity and liabilities | 20 897 | 18 835 | 17 586 | 17 028 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| Pre-tax profit | -113 | -67 | 602 | 1 327 |
| Tax paid | -46 | -30 | -106 | -155 |
| Depreciation/impairment | 214 | 139 | 594 | 524 |
| Other operational items | -1 777 | -609 | 311 | -994 |
| Cash flow from operating activities | -1 722 | -567 | 1 400 | 702 |
| Acquisition/disposal of property, plant and equipment | -120 | -155 | -938 | -615 |
| Other investing activities | -29 | -86 | -284 | -324 |
| Change in interest-bearing receivables | 12 | 7 | - | 146 |
| Cash flow from investing activities | -137 | -234 | -1 221 | -792 |
| Change in interest-bearing liabilities | 1 943 | 922 | 376 | 498 |
| Dividend paid | - | - | -668 | -602 |
| Change other non-current liabilities | -57 | 18 | 20 | 3 |
| Other financial items | -40 | -34 | -93 | -79 |
| Cash flow from financing activities | 1 846 | 905 | -365 | -179 |
| Change in cash and cash equivalents | -12 | 105 | -185 | -269 |
| Cash and cash equivalents, start of period | 197 | 392 | 392 | 644 |
| Exchange rate adjustment foreign cash balances | -3 | -20 | -10 | 17 |
| Cash and cash equivalents, end of period | 182 | 476 | 197 | 392 |
| Figures in NOK million | 31.03.2019 | 31.03.2018 | 31.12.2018 |
|---|---|---|---|
| Cash and cash equivalents | 182 | 476 | 197 |
| Interest-bearing assets (long-term) | 204 | 210 | 216 |
| Interest-bearing liabilities | -3 826 | -2 300 | -1 884 |
| Net interest-bearing position | -3 440 | -1 613 | -1 470 |
| Change in net interest-bearing position (from 1 Jan) | -1 970 | -849 | -706 |
| Figures in NOK million | 31.03.2019 | 31.03.2018 | 31.12.2018 |
|---|---|---|---|
| Order backlog (NOK million) | 35 875 | 31 930 | 34 640 |
| Equity ratio (%) | 18 | 23 | 21 |
| Number of employees | 8 461 | 7 756 | 8 568 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| CONSTRUCTION (specification page 27) | ||||
| Revenue | 7 510 | 6 500 | 29 569 | 25 674 |
| Operating expenses | -7 247 | -6 270 | -29 057 | -24 774 |
| Share of net income from joint ventures | 3 | 2 | 8 | 8 |
| Depreciation/impairment | -121 | -85 | -365 | -316 |
| Operating profit (EBIT) | 145 | 148 | 156 | 592 |
| Net financial items | 4 | 10 | 63 | 36 |
| Pre-tax profit (EBT) | 148 | 158 | 219 | 629 |
| Total assets, segment | 13 285 | 12 022 | 12 442 | 11 177 |
| PROPERTY (specification page 28) | ||||
| Revenue | 718 | 633 | 2 899 | 3 456 |
| Operating expenses | -692 | -587 | -2 603 | -3 117 |
| Share of net income from joint ventures | 39 | 37 | 126 | 239 |
| Depreciation/impairment | -1 | -2 | -6 | -4 |
| Operating profit (EBIT) | 64 | 82 | 416 | 574 |
| Net financial items | -7 | -10 | -28 | -25 |
| Pre-tax profit (EBT) | 57 | 72 | 388 | 549 |
| Total assets, segment | 7 884 | 6 441 | 6 885 | 6 179 |
| INDUSTRIAL | ||||
| Revenue | 615 | 475 | 4 894 | 4 761 |
| Operating expenses | -748 | -636 | -4 617 | -4 372 |
| Share of net income from joint ventures | - | -2 | 6 | 36 |
| Depreciation/impairment | -64 | -50 | -211 | -192 |
| Operating profit (EBIT) | -197 | -212 | 72 | 232 |
| Net financial items | -5 | -4 | -32 | -26 |
| Pre-tax profit (EBT) | -202 | -217 | 40 | 206 |
| Total assets, segment | 2 444 | 2 057 | 2 467 | 2 280 |
| OTHER OPERATIONS 1) | ||||
| Revenue | - | - | 2 | 1 |
| Operating expenses | -20 | -24 | -88 | -102 |
| Share of net income from joint ventures | 5 | 5 | 25 | 22 |
| Depreciation/impairment | -14 | -3 | -12 | -12 |
| Operating profit (EBIT) | -28 | -22 | -73 | -92 |
| Net financial items | 11 | -1 | 22 | 21 |
| Pre-tax profit (EBT) | -18 | -23 | -51 | -71 |
1) Other operations include the group's central unassigned costs and net financial items, plus Veidekke's involvement in public-private partnerships (PPP).
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| GROUP ELIMINATIONS | ||||
| Revenue | -312 | -501 | -1 780 | -2 453 |
| Operating expenses | 324 | 499 | 1 779 | 2 450 |
| Share of net income from joint ventures | - | - | - | |
| Depreciation/impairment | -15 | - | - | |
| Operating profit (EBIT) | -3 | -2 | -2 | -3 |
| Net financial items | -4 | - | -4 | 1 |
| Pre-tax profit (EBT) | -6 | -2 | -6 | -2 |
| TOTAL VEIDEKKE GROUP | ||||
| SEGMENT ACCOUNTS | ||||
| Revenue | 8 531 | 7 107 | 35 584 | 31 438 |
| Operating expenses | -8 383 | -7 017 | -34 586 | -29 915 |
| Share of net income from joint ventures | 47 | 43 | 165 | 305 |
| Depreciation/impairment | -214 | -139 | -594 | -524 |
| Operating profit (EBIT) | -20 | -6 | 570 | 1 304 |
| Net financial items | -1 | -6 | 21 | 7 |
| Pre-tax profit (EBT) | -21 | -11 | 591 | 1 311 |
| Total assets | 21 153 | 17 815 | 18 999 | 17 198 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| TOTAL VEIDEKKE GROUP SEGMENT ACCOUNTS | ||||
| Revenue | 8 531 | 7 107 | 35 584 | 31 438 |
| Operating expenses | -8 383 | -7 017 | -34 586 | -29 915 |
| Share of net income from joint ventures | 47 | 43 | 165 | 305 |
| Depreciation/impairment | -214 | -139 | -594 | -524 |
| Operating profit (EBIT) | -20 | -6 | 570 | 1 304 |
| Net financial items | -1 | -6 | 21 | 7 |
| Pre-tax profit (EBT) | -21 | -11 | 591 | 1 311 |
| Total assets, segment | 21 153 | 17 815 | 18 999 | 17 198 |
| IFRS 15 ADJUSTMENTS, DEVELOPMENT OF RESIDENTIAL UNITS IN NORWAY 1) 2) |
||||
| Revenue | -200 | -85 | 83 | -263 |
| Operating expenses | 151 | 52 | -71 | 215 |
| Share of net income from joint ventures | -43 | -23 | -2 | 64 |
| Depreciation/impairment | - | - | - | - |
| Operating profit (EBIT) | -93 | -55 | 10 | 16 |
| Net financial items | - | - | - | - |
| Pre-tax profit (EBT) | -93 | -55 | 10 | 16 |
| Total assets, segment | -256 | -229 | -163 | -170 |
1) Under IFRS, income and earnings from completed residential units in Norway are not recognised until the date on which a unit is delivered to the buyer. In the internal monitoring of residential projects, the reporting occurs on a percentage of completion basis, meaning that revenue and expenses are recognised based on the following formula: estimated final outcome x stage of completion x sales ratio.
2) See also Note 2 Accounting policies.
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| TOTAL VEIDEKKE GROUP | ||||
| FINANCIAL ACCOUNTS | ||||
| Revenue Operating expenses |
8 330 -8 232 |
7 023 -6 965 |
35 667 -34 656 |
31 175 -29 700 |
| Share of net income from joint ventures | 3 | 20 | 163 | 369 |
| Depreciation/impairment | -214 | -139 | -594 | -524 |
| Operating profit (EBIT) | -112 | -61 | 580 | 1 320 |
| Net financial items | -1 | -6 | 21 | 7 |
| Pre-tax profit (EBT) | -113 | -67 | 602 | 1 327 |
| Total assets, segment | 20 897 | 17 586 | 18 835 | 17 028 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| BUILDING CONSTRUCTION NORWAY | ||||
| Revenue | 3 390 | 3 018 | 13 070 | 10 309 |
| Operating expenses | -3 254 | -2 913 | -12 615 | -9 910 |
| Share of net income from joint ventures | - | - | - | - |
| Depreciation/impairment | -35 | -17 | -70 | -66 |
| Operating profit (EBIT) | 101 | 88 | 386 | 333 |
| Net financial items | 9 | 13 | 57 | 45 |
| Pre-tax profit (EBT) | 110 | 101 | 443 | 378 |
| CIVIL ENGINEERING NORWAY | ||||
| Revenue | 1 143 | 1 009 | 4 427 | 4 411 |
| Operating expenses | -1 104 | -955 | -4 798 | -4 290 |
| Share of net income from joint ventures | - | - | 3 | 4 |
| Depreciation/impairment | -57 | -46 | -193 | -166 |
| Operating profit (EBIT) | -18 | 8 | -561 | -41 |
| Net financial items | -7 | -5 | -23 | -15 |
| Pre-tax profit (EBT) | -25 | 3 | -584 | -56 |
| TOTAL CONSTRUCTION NORWAY | ||||
| Revenue | 4 533 | 4 027 | 17 497 | 14 720 |
| Operating expenses | -4 358 | -3 868 | -17 413 | -14 199 |
| Share of net income from joint ventures | - | - | 3 | 4 |
| Depreciation/impairment | -92 | -63 | -263 | -233 |
| Operating profit (EBIT) | 82 | 96 | -175 | 291 |
| Net financial items | 2 | 8 | 35 | 31 |
| Pre-tax profit (EBT) | 85 | 104 | -141 | 322 |
| Total assets, segment | 8 494 | 7 644 | 7 628 | 7 051 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| CONSTRUCTION SWEDEN | ||||
| Revenue | 2 409 | 1 968 | 9 855 | 8 810 |
| Operating expenses | -2 356 | -1 924 | -9 566 | -8 571 |
| Share of net income from joint ventures | 3 | 2 | 5 | 4 |
| Depreciation/impairment | -23 | -20 | -93 | -75 |
| Operating profit (EBIT) | 33 | 27 | 201 | 169 |
| Net financial items | 1 | 1 | 13 | 1 |
| Pre-tax profit (EBT) | 33 | 28 | 214 | 170 |
| Total assets, segment | 3 372 | 3 164 | 3 487 | 2 872 |
| CONSTRUCTION DENMARK | ||||
| Revenue | 569 | 505 | 2 218 | 2 144 |
| Operating expenses | -533 | -478 | -2 079 | -2 003 |
| Share of net income from joint ventures | - | - | - | - |
| Depreciation/impairment | -6 | -2 | -9 | -8 |
| Operating profit (EBIT) | 30 | 25 | 130 | 132 |
| Net financial items | 1 | 1 | 16 | 5 |
| Pre-tax profit (EBT) | 30 | 26 | 146 | 137 |
| Total assets, segment | 1 419 | 1 214 | 1 326 | 1 254 |
| TOTAL CONSTRUCTION OPERATIONS | ||||
| Revenue | 7 510 | 6 500 | 29 569 | 25 674 |
| Operating expenses | -7 247 | -6 270 | -29 057 | -24 774 |
| Share of net income from joint ventures | 3 | 2 | 8 | 8 |
| Depreciation/impairment | -121 | -85 | -365 | -316 |
| Operating profit (EBIT) | 145 | 148 | 156 | 592 |
| Net financial items | 4 | 10 | 63 | 36 |
| Pre-tax profit (EBT) | 148 | 158 | 219 | 629 |
| Total assets, segment | 13 285 | 12 022 | 12 442 | 11 176 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| PROPERTY DEVELOPMENT NORWAY | ||||
| Revenue | 242 | 153 | 735 | 610 |
| Operating expenses | -236 | -144 | -653 | -590 |
| Share of net income from joint ventures | 41 | 29 | 116 | 157 |
| Depreciation/impairment | -1 | -1 | -4 | -1 |
| Operating profit (EBIT) | 46 | 37 | 194 | 175 |
| Net financial items | -7 | -10 | -31 | -30 |
| Pre-tax profit (EBT) | 39 | 27 | 163 | 146 |
| Total assets, segment | 4 663 | 3 793 | 3 599 | 3 551 |
| PROPERTY DEVELOPMENT SWEDEN | ||||
| Revenue | 476 | 480 | 2 165 | 2 845 |
| Operating expenses | -456 | -443 | -1 949 | -2 526 |
| Share of net income from joint ventures | -2 | 9 | 9 | 82 |
| Depreciation/impairment | - | - | -3 | -2 |
| Operating profit (EBIT) | 18 | 45 | 222 | 398 |
| Net financial items | 1 | - | 3 | 5 |
| Pre-tax profit (EBT) | 19 | 45 | 225 | 404 |
| Total assets, segment | 3 221 | 2 648 | 3 287 | 2 628 |
| TOTAL PROPERTY DEVELOPMENT | ||||
| Revenue | 718 | 633 | 2 899 | 3 456 |
| Operating expenses | -692 | -587 | -2 603 | -3 117 |
| Share of net income from joint ventures | 39 | 37 | 126 | 239 |
| Depreciation/impairment | -1 | -2 | -6 | -4 |
| Operating profit (EBIT) | 64 | 82 | 416 | 574 |
| Net financial items | -7 | -10 | -28 | -25 |
| Pre-tax profit (EBT) | 57 | 72 | 388 | 549 |
| Total assets, segment | 7 884 | 6 441 | 6 885 | 6 179 |
| EQUITY HOLDERS OF VEIDEKKE ASA | MINORITY | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Figures in NOK million | Share capital |
Other paid-in capital 1) |
Re evaluation of pensions |
Currency translation differences |
Other retained earnings |
Fair value adjust ment 2) |
Total | Non controlling interests |
Total |
| Equity at 1 January 2018 | 67 | 305 | -22 | 107 | 3 843 | -101 | 4 199 | 22 | 4 220 |
| Profit for the period | -59 | -59 | 3 | -57 | |||||
| Other comprehensive income | -95 | -2 | -97 | -1 | -98 | ||||
| Transactions, non-controlling interests |
-4 | -4 | 4 | - | |||||
| Option, non-controlling interests | -26 | -26 | -26 | ||||||
| Additions, aquisitions of opera tions, non-controlling interests |
7 | 7 | |||||||
| Dividend | -17 | -17 | |||||||
| Equity at 31 March 2018 | 67 | 305 | -22 | 12 | 3 753 | -102 | 4 012 | 18 | 4 030 |
| Equity at 1 January 2018 | 67 | 305 | -22 | 107 | 3 843 | -101 | 4 199 | 22 | 4 220 |
| Profit for the year | 540 | 540 | 34 | 574 | |||||
| Other comprehensive income | -7 | -48 | -1 | -56 | -56 | ||||
| IFRS 2 – share-based transactions employees |
-23 | -23 | -23 | ||||||
| Additions, aquisitions of opera tions, non-controlling interests |
77 | 77 | |||||||
| Transactions, non-controlling interests |
-33 | -33 | -85 | -118 | |||||
| Dividend | -668 | -668 | -23 | -691 | |||||
| Equity at 31 December 2018 | 67 | 305 | -30 | 60 | 3 658 | -101 | 3 959 | 25 | 3 983 |
| Equity at 1 January 2018 | 67 | 305 | -30 | 60 | 3 658 | -101 | 3 959 | 25 | 3 983 |
| Profit for the year | -99 | -99 | 2 | -96 | |||||
| Other comprehensive income | -72 | -7 | -79 | -1 | -80 | ||||
| Transactions, non-controlling interests |
-10 | -10 | 5 | -5 | |||||
| Dividend | -10 | -10 | |||||||
| Equity at 31 March 2019 | 67 | 305 | -30 | -12 | 3 550 | -109 | 3 771 | 20 | 3 791 |
1) Paid-in capital over and above nominal value of shares.
2) Change in fair value of available-for-sale shares and hedging instruments that qualify for hedge accounting.
There have been no purchases of own shares in 2019.
Veidekke is a Scandinavian construction and property development company headquartered in Oslo. The consolidated accounts for Q1 2019 include Veidekke ASA and its subsidiaries and the group's investments in associates and joint ventures. At the end of Q1 2019, the group comprised essentially the same entities as described in the 2018 annual report. Details of business combinations in 2019 can be found in Note 8.The interim financial statements are unaudited.
The group's financial reports are prepared in accordance with international accounting standards (IFRS) approved by the EU. The quarterly accounts have been prepared in accordance with IAS 34 on interim financial reporting, and comply with applicable stock-exchange rules. The quarterly accounts were prepared in accordance with the same accounting principles as the annual accounts for 2018, with the exception of the new IFRS 16 standard on the accounting treatment of leases, which became effective on 1 January 2019.
IFRS 16 Leases took effect on 1 January 2019, and requires the recognition of leases (the right to use an asset) and associated lease obligations in the balance sheet. The former classification of leases as either operational or financial leases has been eliminated. Short-term leases (with a duration of less than 12 months) and leases relating to low-value assets are exempt from the balance-sheet recognition requirement. When a lease is recognised as an asset in the balance sheet, the group also recognises a corresponding debt in respect of future lease obligations. In the profit and loss account, this entails an increase in depreciation and interest costs and a reduction in other operating costs, thus improving EBITDA compared to accounts prepared under the old principle.
Veidekke owns few of the commercial buildings from which it operates its business, and the new standard has therefore entailed a substantial increase in assets linked to leases for office premises (Property). Veidekke leases equipment in connection with construction and civil engineering projects. Many of these agreements have a duration of less than 12 months, although leases for e.g. workmen's huts and cranes normally have a longer duration and therefore require recognition of future lease liabilities in the balance sheet.
Implementation of IFRS 16 has inflated the balance sheet item Property by NOK 747 million, and Machinery, etc. by NOK 198 million, as at 1 January 2019. Depreciation is expected to increase by approximately NOK 260 million annually, and interest costs by approximately NOK 30 million a year, with an approximately equivalent reduction in other operating costs.
Implementation has been effected using the modified retrospective method, meaning that the accounts for earlier years have not been restated.
Reference is made to note 16, which presents the accounting effects of implementing IFRS 16.
To understand the group's accounts, it is important to understand how sales of completed residential units are treated in the accounts.
In the financial accounts, revenue from the sale of residential units in Sweden and Denmark is recognised on an ongoing basis in accordance with the final forecast, completion ratio and sales ratio, whereas in the case of Norwegian residential projects revenue is only recognised at the time of contractual delivery to the purchaser. This difference in the revenue recognition approach is due to differences in national legislation governing residential construction and sales.
In the segment accounts, revenue from residential projects forming part of the property development operation is reported in accordance with the principle of ongoing revenue recognition, regardless of the country in which the activity takes place. This is considered to provide the best picture of value creation in the residential development segment, and is consistent with Veidekke's internal reporting system.
The quarterly accounts do not include all information required in a complete set of annual accounts, and should therefore be read in conjunction with the group's annual accounts for 2018, which are available on veidekke.com/en.
The group consists of three segments: Construction, Property Development and Industrial. The segment results for Q1 2019 are presented in the table on page 24.
Construction and property development projects represent a large part of Veidekke's operations. Accounting for project activities is largely based on estimates. Significant judgements used in applying the group's accounting
policies and the main sources of estimate uncertainty at the end of Q1 2019 are unchanged from those in the 2018 annual report.
The group's asphalt and aggregates operations, which are reported under the Industrial business area, are subject to seasonal fluctuations as a result of climatic conditions. Most of the production takes place between May and October, and the majority of the revenues from operations accrues during these months. However, expenses related to administrative staff, maintenance of
production equipment and depreciation are spread over the full year. This means that there will normally be significant fluctuations in the quarterly accounts for Veidekke's industrial operations.
| Figures in NOK million | 12-month rolling at 31.3.2019 |
12-month rolling at 31.3.2018) |
2018 |
|---|---|---|---|
| INDUSTRIAL1) | |||
| Revenue | 5 033 | 4 758 | 4 894 |
| Pre-tax profit | 54 | 172 | 40 |
| GROUP1) | |||
| Revenue | 37 007 | 32 026 | 35 584 |
| Pre-tax profit | 582 | 1 253 | 591 |
1) The figures are taken from the segment accounts.
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| PROPERTY, PLANT, EQUIPMENT AND OTHER INTANGIBLE ASSETS |
||||
| Carrying amount at start of period | 3 489 | 3 029 | 3 029 | 2 651 |
| Implementation of IFRS 16 Leases at 01.01.2019 | 945 | 174 | 1 139 | 769 |
| Additions | 145 | |||
| Additions from acquisitions of operations | - | 3 | 105 | 162 |
| Depreciation and amortisation | -214 | -139 | -594 | -524 |
| Currency translation differences, etc. | -35 | -26 | -6 | 26 |
| Disposals of non-current assets | -19 | -11 | -184 | -55 |
| Carrying amount at end of period | 4 311 | 3 030 | 3 489 | 3 029 |
| Other intangible assets | 150 | 120 | 149 | 129 |
| Land and buildings | 1 346 | 605 | 646 | 615 |
| Plant and machinery | 2 815 | 2 306 | 2 694 | 2 286 |
| Carrying amount at end of period | 4 311 | 3 030 | 3 489 | 3 029 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
| GOODWILL | ||||
| Carrying amount at start of period | 1 807 | 1 401 | 1 401 | 1 248 |
| Additions | 2 | 77 | 402 | 122 |
| Impairment | - | - | - | - |
| Currency translation differences | -35 | -29 | 4 | 31 |
| Disposals | - | - | - | - |
| Carrying amount at end of period | 1 774 | 1 449 | 1 807 | 1 401 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 | 2017 |
|---|---|---|---|---|
| Units under construction | 551 | 584 | 459 | 661 |
| Completed units for sale | 42 | 41 | 67 | 44 |
| Residential sites for development | 4 826 | 3 258 | 3 776 | 3 214 |
| Non-residental projects | 3 | 28 | 7 | 22 |
| Total residential and non-residential projects | 5 421 | 3 910 | 4 309 | 3 941 |
| Joint-venture residential projects | 1 254 | 1 252 | 1 214 | 1 260 |
| Units under construction1) | 2 214 | 2 514 | 2 116 | 2 620 |
| Sale rate, units under construction1) | 84% | 84% | 80% | 83% |
| Unsold, completed units1) | 23 | 14 | 30 | 20 |
1) Including Veidekke`s share in joint ventures.
There were no acquisitions or sales of operations in the first quarter of 2019.
There were no significant changes relating to financial risk or the group's use of financial instruments during the period. Further details can be found in the 2018 Annual Report.
A dividend of NOK 5.0 per share, totalling NOK 669 million, for the 2018 financial year was approved by the Annual General Meeting on 8 May 2019 and will be recognised in the accounts in Q2 2019.
On 28 October 2015 Veidekke signed a five-year loan agreement with DNB ASA, with a credit limit of NOK 3.6 billion. The loan matures on 2 November 2020. At 31 March 2019, unutilised borrowing facilities amounted to NOK 1.5 billion.
The following covenants are contained in the loan agreement with DNB Bank ASA:
Net interest-bearing debt is defined as the group's current and non-current interest-bearing liabilities minus the group's cash and cash equivalents and interest-bearing receivables.
EBITDA is the group's operating profit plus depreciation and impairment.
Share of own projects is the value of started, unsold residential units and commercial buildings in projects implemented under the control of the borrower or another group company, and is calculated based on the expected sales price, albeit no less than cost price.
No events have occurred after the reporting date that would have any significant effect on the submitted accounts.
Revenue from sales of completed residential projects in Sweden and Denmark are recognised in the financial accounts on an ongoing basis in accordance with the final forecast, completion ratio and sales ratio. In the case of Norwegian residential projects, revenue is only recognised at the time residential units are delivered to purchasers. The differential treatment is due to differences in the legislation of the three countries.
In Veidekke's internal follow-up of residential projects, measurement is undertaken in tandem with rolling revenue recognition. Accordingly, income and profits are recognised in the accounts in line with the final forecast, sales ratio and completion ratio of each project. This principle is also followed in segment reporting.
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| REVENUE Accumulated revenue from non-delivered projects at start of period |
282 | 365 | 365 |
| + Revenue from non-delivered projects during the period | 200 | 119 | 497 |
| - Revenue from delivered projects during the period | - | -34 | -580 |
| Net IFRS 15 adjustments to revenues | 200 | 85 | -83 |
| Accumulated revenue from non-delivered projects at end of period | 482 | 450 | 282 |
| Figures in NOK million | Q1 2019 | Q1 2018 | 2018 |
|---|---|---|---|
| PRE-TAX PROFIT Accumulated pre-tax profit from non-delivered projects at start of period |
163 | 174 | 174 |
| + Pre-tax profit from non-delivered projects during the period | 93 | 74 | 296 |
| - Pre-tax profit from delivered projects during the period | - | -18 | -306 |
| Net IFRS 15 adjustments to pre-tax profit | 93 | 55 | -10 |
| Accumulated pre-tax profit from non-delivered projects at end of period |
256 | 229 | 163 |
At 31 March 2019, revenues of NOK 482 million and pre-tax profit of NOK 256 million had accrued on sold residential units under construction in Norway. These amounts are recognised as revenue in the segment reporting, but are not recognised under IFRS until the homes are handed over. A significant portion of Veidekke's Norwegian property development operations take place in joint ventures and thus does not generate revenue in the company's consolidated accounts. The profit from joint ventures is recognised on a post-tax basis in the income statement.
| At 31.03.2019 | At 31.03.2018 | |||||
|---|---|---|---|---|---|---|
| Figures in NOK million | Average invested capital |
Pre-tax profit | Financial costs1) | Taxes in joint ventures |
Return | Return |
| Norway | 3 317 | 175 | 71 | 38 | 8.6% | 8.2% |
| Sweden | 1 406 | 203 | 8 | - | 15.0% | 36.3% |
| Denmark | 68 | -5 | - | - | -7.3% | -5.8% |
| Total | 4 791 | 373 | 79 | 38 | 10.2% | 14.6% |
The statement has been prepared on the basis of the segment accounts.
1) The item "financial costs" is the year's accrued interest expenses. Interest expenses are classified in the comprehensive income statement under both financial costs and cost of materials (operating expenses).
Veidekke generally reports its financial results in line with International Financial Reporting Standards (IFRS). In addition, the following alternative performance measures are also reported:
This key figure expresses the group's financial position and is determined on the basis of the group's capitalised interest-bearing debt on the date of calculation, less bank deposits and interestbearing receivables, both current and non-current. This key figure is also included in the calculation of covenants in the loan agreement.
The order backlog provides an indication of future activity in the group's construction operations. The order backlog is defined as contracted and signed contracts on the measurement date. This key figure also includes road maintenance contracts in Industrial's Road Maintenance unit, but only those parts of the contracts that will be executed during the next 18 months.
Capital invested is defined as the sum of book equity and net interest-bearing debt and is an expression of the capital tied up in property development operations.
Property Development's performance is measured by return on invested capital, calculated using the following formula:
Pre-tax profit + interest expenses + tax in joint ventures
(Opening balance invested capital
The figures used in the formula are taken from the segment reporting. Interest expenses include all expensed interest expenses, both those classified as interest expenses and those classified as cost of materials (operating expenses) in the accounts. The calculation is adjusted to take account of the fact that the profit reported by joint ventures has already been taxed.
Sales rate indicates the risk that units under construction will not be sold and is calculated using the following formula:
Sales value of signed contracts for sold residential units
Total sales value of all projects under construction
For projects carried out in associates or joint ventures, only Veidekke's share of the project is included.
This figure is the number of units under construction that has not been sold on the reporting date.
The site portfolio provides an expression of possible future activity in the various markets in Property Development. The site portfolio consists of sites owned by Veidekke on the measurement date, sites for which there is a binding contract for transfer in the future, and signed options here it is expected that Veidekke will exercise the option. How many units the sites can be converted into is calculated as a best estimate.
| Implementation | |||
|---|---|---|---|
| Figures in NOK million | 31.12.2018 | of IFRS 16 | 01.01.2019 |
| ASSETS | |||
| Land and buildings | 646 | 747 | 1 393 |
| Plant and machinery | 2 694 | 198 | 2 892 |
| Other assets | 3 898 | - | 3 898 |
| Total non-current assets | 7 238 | 945 | 8 183 |
| Current assets | 11 597 | - | 11 597 |
| Total current assets | 11 597 | - | 11 597 |
| Total assets | 18 835 | 945 | 19 780 |
| EQUITY AND LIABILITIES | |||
| EQUITY | 3 983 | - | 3 983 |
| Pensions and deferred tax liabilities | 846 | - | 846 |
| Bond debts and debt to credit institutions | 1 848 | - | 1 848 |
| Other non-current liabilities | 414 | 685 | 1 099 |
| Total non-current liabilities | 3 108 | 685 | 3 793 |
| Bond debts and debt to credit institutions | 36 | - | 36 |
| Trade payables and warranty provisions | 6 989 | - | 6 989 |
| Public duties and taxes payable | 867 | - | 867 |
| Other current liabilities and contract liabilities | 3 853 | 260 | 4 113 |
| Total current liabilities | 11 744 | 260 | 12 004 |
| Total equity and liabilities | 18 835 | 945 | 19 780 |
| Previous standard | New standard | ||
|---|---|---|---|
| Implementation | |||
| Figures in NOK million | Q1 2019 | of IFRS 16 | Q1 2019 |
| GROUP | |||
| Revenue | 8 330 | - | 8 330 |
| Operating expenses | -8 296 | 64 | -8 232 |
| Share of net income from associates and joint ventures | 3 | - | 3 |
| Operationg profit before depreciation (EBITDA) | 37 | 64 | 102 |
| Depreciation | -154 | -60 | -214 |
| Operating profit (EBIT) | -116 | 4 | -112 |
| Financial income | 25 | - | 25 |
| Finanskostnader | -18 | -8 | -26 |
| Pre-tax profit | -110 | -3 | -113 |
| Previous standard | New standard | ||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
Q1 2019 |
| GROUP | |||
| Revenue | 8 531 | - | 8 531 |
| Operating expenses | -8 447 | 64 | -8 383 |
| Share of net income from associates and joint ventures | 47 | 47 | |
| Depreciation and amortisations | -154 | -60 | -214 |
| Opertating profit (EBIT) | -24 | 4 | -20 |
| Net financial items | 7 | -8 | -1 |
| Pre-tax profit (EBT) | -17 | -3 | -21 |
| Previous standard | New standard | ||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
Q1 2019 |
| CONSTRUCTION NORWAY | |||
| Revenue | 4 533 | - | 4 533 |
| Operating expenses | -4 383 | 25 | -4 358 |
| Share of net income from associates and joint ventures | - | - | - |
| Depreciation and amortisations | -69 | -23 | -92 |
| Opertating profit (EBIT) | 81 | 2 | 82 |
| Net financial items | 6 | -4 | 2 |
| Pre-tax profit (EBT) | 86 | -2 | 85 |
| Previous standard | New standard | ||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
Q1 2019 |
| CONSTRUCTION SWEDEN | |||
| Revenue | 2 409 | - | 2 409 |
| Operating expenses | -2 371 | 15 | -2 356 |
| Share of net income from associates and joint ventures | 3 | - | 3 |
| Depreciation and amortisations | -8 | -15 | -23 |
| Opertating profit (EBIT) | 32 | - | 33 |
| Net financial items | 2 | -1 | 1 |
| Pre-tax profit (EBT) | 34 | - | 33 |
| Previous standard | New standard | ||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
Q1 2019 |
| CONSTRUCTION DENMARK | |||
| Revenue | 569 | - | 569 |
| Operating expenses | -537 | 4 | -533 |
|---|---|---|---|
| Share of net income from associates and joint ventures | - | - | - |
| Depreciation and amortisations | -2 | -4 | -6 |
| Opertating profit (EBIT) | 30 | - | 30 |
| Net financial items | 1 | - | 1 |
| Pre-tax profit (EBT) | 30 | - | 30 |
| Previous standard | New standard | ||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
Q1 2019 |
| INDUSTRIAL | |||
| Revenue | 615 | - | 615 |
| Operating expenses | -758 | 10 | -748 |
| Share of net income from associates and joint ventures | - | - | - |
| Depreciation and amortisations | -54 | -10 | -64 |
| Opertating profit (EBIT) | -198 | 1 | -197 |
| Net financial items | -3 | -1 | -5 |
| Pre-tax profit (EBT) | -202 | -1 | -202 |
| Previous standard | New standard Q1 2019 |
||
|---|---|---|---|
| Figures in NOK million | 1Q 2019 | Implementation of IFRS 16 |
|
| OTHER OPERATIONS | |||
| Revenue | - | - | - |
| Operating expenses | -30 | 10 | -20 |
| Share of net income from associates and joint ventures | 5 | - | 5 |
| Depreciation and amortisations | -5 | -9 | -14 |
| Opertating profit (EBIT) | -29 | 1 | -28 |
| Net financial items | 12 | -1 | 11 |
| Pre-tax profit (EBT) | -17 | -1 | -18 |
| STATEMENT OF CASH FLOWS | Previous standard Implementation |
New standard | ||
|---|---|---|---|---|
| Figures in NOK million | 1Q 2019 | of IFRS 16 | Q1 2019 | |
| Pre-tax profit | -110 | -3 | -113 | |
| Tax paid | -46 | -46 | ||
| Depreciation/impairment | 154 | 60 | 214 | |
| Other operational items | -1 784 | 8 | -1 777 | |
| Cash flow from operating activities | -1 786 | 64 | -1 722 | |
| Acquisition/disposal of property, plant and equipment | -111 | -10 | -120 | |
| Other investing activities | -29 | -29 | ||
| Change in interest-bearing receivables | 12 | 12 | ||
| Cash flow from investing activities | -127 | -10 | -137 | |
| Change in interest-bearing liabilities | 1 943 | 1 943 | ||
| Change other non-current liabilities | -10 | -47 | -57 | |
| Other financial items | -32 | -8 | -40 | |
| Cash flow from financing activities | 1 901 | -55 | 1 846 | |
| Change in cash and cash equivalents | -12 | 0 | -12 | |
| Cash and cash equivalents, start of period | 197 | 197 | ||
| Exchange rate adjustment foreign cash balances | -3 | -3 | ||
| Cash and cash equivalents, end of period | 182 | 182 |
Veidekke ASA
Postboks 505 Skøyen 0214 Oslo
Telephone: +47 21 05 50 00 Website: http://veidekke.com/en E-mail: [email protected]
Business registration number: 917103801 Founded: 1936 Head office: Skabos vei 4, Skøyen, 0278 Oslo
The Company's articles of association and corporate governance policy are available at: veidekke.com/en/corporate-governance
Martin Mæland (Chair) Gro Bakstad Hans von Uthmann Ingalill Berglund Ingolv Høyland Daniel Kjørberg Siraj Odd Andre Olsen, employee representative Inge Ramsdal, employee representative Arve Fludal, employee representative
| Arne Giske | Group CEO |
|---|---|
| Hans Olav Sørlie | Executive Vice President, responsible for building construction operations in Norway |
| Øivind Larsen | Executive Vice President, responsible for civil engineering operations in Norway |
| Jimmy Bengtsson | Executive Vice President, responsible for construction operations in Sweden, |
| and corporate procurement. Country manager Sweden | |
| Jørgen Wiese Porsmyr | Executive Vice President, responsible for residential, commercial and project development in |
| Scandinavia and for construction operations in Denmark | |
| Terje Larsen | CFO and Executive Vice President, responsible for Accounting & Finance, IT, Strategy and Legal |
| Anne Thorbjørnsen | Interim Executive Vice President, responsible for HR and HSE |
| Lars Erik Lund | Executive Vice President, responsibe for Communications and Public Affairs |
Financial Director Jørgen G. Michelet Telephone: +47 917 43 856 E-mail: [email protected]
Financial calendar: Second quarter: 15 August 2019 Third quarter: 14 November 2019
Veidekke is one of Scandinavia's largest construction and property development companies. The company undertakes all types of building construction and civil engineering contracts, maintains public roads and produces aspahlt and aggregates. The company is characterised by involvement and local knowledge. Turnover is NOK 36 billion, and half of the 8,600 employees own shares in the company. Veidekke is listed on the Oslo Stock Exchange and has always posted a profit since it was founded in 1936.
Veidekke – local presence, Scandinavian strength.
veidekke.com/en
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