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AF Gruppen

Quarterly Report • Nov 9, 2018

3522_rns_2018-11-09_65adfec5-2f00-40b3-acf9-55d61dd89cfe.pdf

Quarterly Report

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Highlights

Solid result and strong growth

  • Revenues: NOK 4,536 million (3,399) in Q3 vs. NOK 13,111 million (9,408) year-to-date.
  • EBT: NOK 313 million (232) in Q3 vs. NOK 764 million (625) year-to-date.
  • EBT margin: 6.9 % (6.8 %) in Q3 vs. 5.8 % (6.6 %) year-to-date.
  • Strong order backlog: NOK 18,920 million (20,183)
  • Solid financial position: Net interest bearing receivables of NOK 680 million (1,068)
  • Dividend for 2nd half-year of NOK 3.50 (3.50) per share approved

Safety

Lost-time injury frequency (LTIF)

Number lost-time injuries per million hours worked. Measuring of LTIF also includes injuries by subcontractor employees.

Total recordable injury frequency (TRIF)

Number of lost-time injuries, injuries involving substitute work and medical treatment injuries per million hours worked. Measuring of TRIF also includes injuries by subcontractor employees.

Reported unwanted incident frequency (RUIF)

Number of reported unwanted incidents per man-year.

Revenues

Q3 revenues by business area:

Earnings before tax

  • A very good 3rd quarter
  • EBT Q3: NOK 313 million (232)
  • EBT YTD: NOK 764 million (625)
  • EBT % Q3: 6.9 % (6.8 %)
  • EBT % YTD: 5.8 % (6.6 %)

*AF's target is to achieve a return on capital employed above 20 %.

Cash flow statement

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Net interest bearing receivables

Net interest bearing receivables as of 30 September is NOK 680 million (1,068).

Equity ratio

Health and environment

Sick leave Source separation rate

A total of 200,128 (238,465) tonnes of waste has been sorted in 2018

High activity level

O
N
K
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7.
  • AF Anlegg had a high activity level in Q3. Strong growth leads to lower results.
  • Målselv Maskin & Transport delivers good Q3 results.
  • AF Anlegg entered into a final agreement with Nye Veier after quarter-end for the E39 Kristiansand vest - Mandal øst contract. Total contract value is NOK 4,700 million excl. VAT.
  • Order backlog: NOK 4,619 million (6,913)

Environment

High activity level and improved profitability

N
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7
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0
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%		 4.
4
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5
%		 4.
9
%
  • High activity level for AF Decom in Q3. The unit has good operational performance and improved profitability in Q3.
  • High activity level at Rimol Miljøpark and Jølsen Miljøpark in Q3. Both facilities deliver good results.
  • The new environmental facility at Nes near Oslo is completed. The facility has received its first masses for cleaning and is ready for production.
  • Order backlog: NOK 212 million (316)

Building

Solid results

N
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%

AF Bygg Oslo, MTH and AF Nybygg all deliver very good Q3 results.

  • AF Byggfornyelse, LAB, EIQON and Strøm Gundersen all have a high activity levels in Q3 and deliver good results.
  • After quarter-end, LAB AS signed a final agreement to buy 70 % of the shares in Helgesen Tekniske Bygg AS (HTB).
  • LAB Entreprenør was awarded a contract at Haukeland university hospital (BUS2) after quarter-end. Contract value is MNOK 339 excl. VAT.
  • Order backlog: NOK 10,273 (9,657)

Property

Results affected by development sale

N
O
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3
2
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%
E
B
I
T		 % % % %
E
B
T
%		 % % % %
  • Earnings were boosted by the sale of a commercial property at Hasle in Oslo.
  • 65 (17) apartments were sold in Q3. AF's share is 25 (7).
  • Six residential projects with 926 apartments in the production phase (AF's share 364). 72 % of the apartments in production are sold as per September 30th.
  • Land and development rights in progress: 1,878 (2,321) residential units. AF's share is 782 (944)
  • AF has 53,683 (92,084) m2 gross area of urban premises under development. AF's share is 26,264 (45,273).

Energy

Good activity level, weak results

N
O
K
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3
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%
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  • Good activity level for AF Energi & Miljøteknikk in Q3, but the unit delivers weak results.
  • Projects in renewable energy and the operations in the Baltic States delivered results below expectation, while EPC and service projects delivered satisfactory results.
  • Order backlog: NOK 275 million (345)

Sweden

High activity level

M
N
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Kanonaden Entreprenad delivers good Q3 results. Pålplintar delivers weak results.

  • High activity level and very good profitability at AF Härnösand Byggreturer. The unit delivers very good quarterly results.
  • AF Bygg Göteborg delivers results somewhat below expectations, while AF Bygg Syd delivers good quarterly results.
  • Entered into LOI after quarter-end to buy 70% of HMB Holding AB. The company had revenues of SEK 1.3 billion and an operating margin of 7.7 % in 2017.
  • Order backlog: NOK 1,510 million (1,502).

Offshore

Lower activity level, increasing order backlog

N
O
K
i
l
l
i
m
o
n		 Q
3
2
0
1
8		 Q
3
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%
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%
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%		 6.
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  • As expected, AF Offshore Decom has a lower activity level, and the unit delivers weak results. The unit has won several projects lately, but these will not generate activity until 2019 and later.
  • No activity at Environmental Base Vats.
  • Demanding market conditions for AF AeronMollier. The unit has a stable activity level, but delivers weak Q3 results.
  • Order backlog: NOK 1,510 million (883)

Order backlog

Q1 Q2 Q3 Q4

Order backlog

Order backlog per business area

Strong growth and high order backlog in Civil Engineering

Strategy 2016 - 2020

National Construction Contractor

  • Mobile construction organization focusing on complex projects across the country
  • Increased activity in the Greater-Oslo area, Northern Norway and Western Norway also provides a need for a strong regional presence
  • Ventures:
  • Road construction
  • Tunnel: New Construction and maintenance
  • Power and Energy
  • Oil and gas plants

A wide product range within AF's construction business

Turnover to date in 2018

R
d
o
a		 4
5		 %
I
d
t
n
u
s
r
y		 1
3		 %
R
h
b
e
a
Ve
i		 1
1		 %
Ind
ust
ri
R
i
l
a
Re
ha
b		 8 %
Ba
ne
G
d
k
r
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u
n
w
o
r
Gr
rb.
un
na		 8 %
VA
/
W
t
t
t
a
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w
a
s
e
w
a
e
r
Kra
ft		 5 %
P
o
e
r
Olj
e &
w
ga
ss		 4 %
An
net
O
i
l
&
g
a
s		 2 %
O
t
h
e
r		 4 %
  • Goal of a balanced portfolio
  • Large and small projects
  • Various customers
  • Across disciplines and

markets

Diversified Project Portfolio

Vamma Power Station Contract value: NOK 360 mCustomer: ECO / Hafslund

Follo lineTotal contract value : NOK 1,700 m Kunde: AGJV / Bane NOR

Ørland Air Base Total contract value: NOK 1,100 m Customer: NDEA

Tunnel rehab in Rauma/SunnmøreTotal contract value: NOK 925 millionCustomer: Norwegian Public Roads Administration

Civil Services Melkøya and Kårstø Total contract value: NOK 410 mCustomer: Equinor

Bekkelaget treatment plant Contract value: NOK 525 mCustomer: Oslo Municipality (VAV)

New National MuseumTotal contract value NOK 1,000 m Customer: Statsbygg

Kvalaberg Workshop Halls Contract value 200 million NOKCustomer: Bane NOR eiendom

Large and wide growth

  • The Civil Engineering market is healthy and growing
  • Many customers
  • High activity in many areas
  • Several competitors, including foreign
  • New forms of contract and collaboration also offer opportunities
  • Good possibilities for choosing the right projects

The market is changing

Large projects part of AF's history since 1986

Nyhamna, NOK 750 m E18 Tvedestrand-Arendal, NOK 3,200 m E39 Kristiansand–Mandal, NOK 4700 m

E18 Tvedestrand – Arendal

About the project

  • Contract value 3.2 billion NOK
  • 30 months construction Time
  • 23 km motorway, 4 double tunnels, 30 constructions
  • 10 million m3 mass relocation

Status now:

  • Good cooperation with Nye Veie and suppliers
  • Good progress
  • High production, 1.2 billion so far this year
  • Our safety work needs to be improved

E39 Kristiansand west – Mandal east

About the project

  • Contract value 4.7 billion NOK
  • 47 months construction time. (November 2018 - October 2022)
  • 19 km motorway, 16 bridges, 5 double tunnels, 3 twointersections
  • 5 million m3 mass relocation

Status:

  • •Object lesson phase conducted; contract signed
  • •Mobilization in progress; start date mid November
  • •Useful experience from E18 Tvedestrand-Arendal

Threats and opportunities in the construction market

Basic Risk Analysis changed

  • •Interaction
  • •Regulation
  • •Engineering
  • •Productivity
  • •Amounts

Risk management

Customer and supplier focus

Relations with advisor and subcontractor

Skills and training

Modern machinery and equipment

Large own production

Digitalisation

Competitive dialogue

  • Demanding ground conditions
  • Customer wished for the contractor's proposed solution
  • AF won the contract based on proprietary technical solution
  • Interaction and dialogue characterized the project throughout the whole development phase and building period

  • Satisfied customer, successful solution, profitable project

  • Contract value 230 million NOK, excl. VAT

  • Customer: Southern Region of the Norwegian Public Roads Administration
  • Consultant Norconsult
  • 640 meter road including culvert of 385 meters
  • Turnkey contract NS 8407
  • Construction Time: 2.5 years

Summary

N
O
K
i
l
l
i
m
o
n		 Q
3
2
0
1
8		 Q
3
2
0
1
7		 Y
T
D
2
0
1
8		 Y
T
D
2
0
1
7
R
e
v
e
n
u
e
s		 4,
3
6
5		 3,
3
9
9		 1
3,
1
1
1		 9,
4
0
8
E
B
I
T		 3
1
5		 2
3
0		 7
5
6		 6
2
6
E
B
T		 3
1
3		 2
3
2		 7
6
4		 6
2
5
E
B
I
T
%		 7.
0
%		 6.
8
%		 5.
8
%		 6.
7
%
%
E
B
T		 %
6.
9		 %
6.
8		 %
5.
8		 %
6.
6
  • Solid results
  • Strong revenue growth
  • Positive development in LTI rate
  • Strong financial position supports both structural growth and dividends

Thank you for your attention!

Q4 2018: February 15th 2019

Construction City, Oslo

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