AF Gruppen — Earnings Release 2016

Nov 15, 2016

November 15th 2016

Q3 2016 AF Gruppen ASA

Highlights

Good operational performance is the foundation for a good 3rd quarter

• All six business areas performs well
• Offshore campaign lead to high activity and a good result for Offshore
• Increase in turnover and good overall margins in AF
• Revenues: NOK 3,108 million (2,865) in Q3 vs. NOK 8,984 million (8,889) year-to-date.
• EBT: NOK 265 million (225) in Q3 vs. NOK 700 million (622) year-to-date.
• EBT margin: 8.5 % (7.8 %) in Q3 vs. 7.8 % (7.0 %) year-to-date.
• Solid financial position: Net interest bearing receivables of NOK 473 million (301)
• Dividend for 2nd half-year of NOK 3.00 (3.00) 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:

Revenues YTD: NOK 8,984 million (8,889)

Earnings before tax

• Very good margins in Q3 and year-to-date
• EBT Q3: NOK 265 million (225)
• EBT % Q3: 8.5 % (7.8 %)
• EBT 2016 YTD: NOK 700 million (622)
• EBT % YTD: 7.8 % (7.0 %)

Return on capital employed

12 month rolling average

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

Cash flow statement

N O K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
E B I T	2 7 0	2 3 5	7 0 6	6 3 1
D i i i i d i i t t t t e p r e c a o n s, a m o r z a o n a n m p a r m e n	7 4	5 1	1 3 8	1 0 9
C h i k i i l t t a n g e n n e o r n g c a p a w	-1 9 5	1 0 3	2 8 5 -	4 8 4
O h d j / i d t t t t e r a u s m e n s a x e s p a	2 5	8 2 -	7 1 -	2 0 2 -
C f f i h l t a s o r o m o p e r a o n s w	1 7 4	3 0 7	5 1 6	1, 0 2 3
N i t t t e n v e s m e n s	0	5 1 -	2 7 -	1 2
C f f h l i l i i i t t t a s o r o m c a p a a c e s w v	-9	1 0 4 -	5 9 0 -	5 9 4 -
I i d d h i i b i d b t t t t t n e r e s p a a n c a n g e n n e r e s e a r n g e	-2 6	4 9 -	9 -	3 0 9 -
( ) N d i i h d h i l t t e e c r e a s e n c r e a s e n c a s a n c a s e q a e n s u v	1 3 9	1 0 3	1 0 9 -	1 3 0
N h d h i l b i i f i d t t t e c a s a n c a s e q u v a e n s a e g n n n g o p e r o	2 1 1	1 1 8	4 5 9	9 1
C h i h d h i l i h h f f t t t t a n g e n c a s a n c a s e q a e n s o c a s e e c u v w u	9	1 -	9	2 -
N h d h i l d f i d t t e c a s a n c a s e q u v a e n s e n o p e r o	3 5 9	2 2 0	3 5 9	2 2 0

Net interest bearing receivables

Net interest bearing receivables as of 30 September is NOK 473 million (301).

Balance sheet

N O K i l l i m o n	3 0. 0 9. 1 6	3 0. 0 9. 1 5	3 1. 1 2. 1 5
N t t o n- c u r r e n a s s e s	3, 8 0 9	3, 8 3 3	3, 8 9 5
C C h t t u r r e n a s s e s, e x. a s	2, 4 0 9	2, 4 6 5	1, 8 8 9
C h d h i l t a s a n c a s e q a e n s u v	3 9 5	2 2 0	4 9 5
T l t t o a a s s e s	5 6, 7 7	5 6, 0 8	6, 2 4 3
E i t q u y	1, 8 2 4	1, 6 9 9	1, 8 2 0
L d b t t o n g e r m e	7 1 7	6 3 5	7 1 4
S h d b t t t o r e r m e	4, 0 3 7	4, 1 7 5	3, 1 0 7
T l i d d b t t t o a e q u y a n e	6, 5 7 7	6, 5 0 8	6, 2 4 3

Equity ratio

Sick leave Source separation rate

A total of 191,608 (70,761) tonnes of waste has been sorted in the 3rd quarter, and a total of 405,679 (251,390) tonnes has been sorted year-todate.

Civil Engineering

Good performance and solid margins

O N K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e v e n u e s	8 4 2	9 0 3	2, 6 2 3	2, 6 5 5
E B I T	8 6	8 3	2 6 8	1 8 7
E B T	8 6	8 4	2 7 8	1 8 5
E B I T %	1 0. 2 %	9. 2 %	1 0. 2 %	7. 1 %
E B T %	1 0. 2 %	9. 3 %	1 0. 6 %	7. 0 %

• Good performance and very good results for AF Anlegg and Målselv Maskin & Transport in the 3rd quarter.
• Pålplintar delivers weak results in the 3rd quarter. Organisational changes have been carried out.
• The civil engineering market in Norway is doing well. There is a large supply of new projects in the market, and there is a very high volume of tender calculations.
• Order backlog: NOK 2,697 million (3,637)

Environment

Increasing activity

O N K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e v e n u e s	1 8 9	1 6 7	5 5 7	2 6 5
E B I T	1 0	1 2	3 2	3 5
E B T	1 0	1 3	3 2	3 6
E B I T %	2 % 5.	% 7. 5	8 % 5.	6. % 7
E B T %	1 % 5.	6 % 7.	% 5. 7	6. 8 %

• High activity level and satisfactory results for AF Decom in Q3.
• Härnösand Byggreturer has a good activity level and delivers good Q3 results.
• High activity level and good operational performance at Rimol Miljøpark in Q3.
• Order backlog: NOK 202 million (185)

Building

Good operational performance

N O K i l l i m o n	Q 3 2 0 1 6	Q 5 3 2 0 1	Y T D 2 0 1 6	Y T D 5 2 0 1
R e e n e s v u	1, 5 4 2	1, 6 5 6	4, 8 5 2	4, 7 8 0
E B I T	1 2 3	1 3 1	3 2 9	3 5 1
E B T	1 2 5	1 3 4	3 3 8	3 5 3
E B I T %	8. 0 %	7. 9 %	6. 8 %	7. 3 %
E B T %	8. 1 %	8. 1 %	7. 0 %	7. 4 %

• AF Bygg Oslo, LAB and the companies in Strøm Gundersen all deliver very good results in the 3rd quarter.
• AF Bygg Østfold and AF Bygg Sverige delivers satisfactory Q3 results.
• Other units experience regional differences in activity level and results.
• Order backlog: NOK 7,274 (6,457)

Property

Very good home sales

O N K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e v e n u e s	1 5	8	3 8	2 0
E B I T	8	8	3 4	1 5
E B T	4	5	2 2	7
E B I T %	1. 0 % 5	9 3. % 5	8 9. 2 %	2. 9 % 7
E B T %	2 6. 4 %	9. 8 % 5	9. 0 % 5	3 3. 3 %

291 (98) apartments were sold in Q3. AF's share is 117 (40).

• Seven housing projects with 779 apartments in the production phase (AF's share 322).
• Property has 211 apartments in the sales phase (AF's share 84).
• Land and development rights in progress: 2,244 (2,192) residential units. AF's share is 956 (991)
• AF has 107,310 (122,717) m2 gross area of urban premises under development. AF's share is 51,213 (59,272).

Energy

Lower activity, good operational performance

N O K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e v e n u e s	3 7	7 0	1 1 9	1 6 8
E B I T	4	6	1 0	1 3
E B T	4	7	8	1 4
E B I T %	1 1. 5 %	9. 0 %	8. 6 %	7. 9 %
E B T %	1 1. 0 %	1 0. 2 %	7. 0 %	8. 4 %

• Low activity level for AF Energi & Miljøteknikk, but the unit is performing well and Q3 results are good.
• Stable demand for energy services. The unit has a high volume of tender calculations.
• The unit has a large part of its project portfolio in the analysis and engineering phase.
• Order backlog: NOK 115 million (117)

Offshore

N O K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e v e n u e s	4 1 1	1 2 5	8 0 3	9 8 8
E B I T	6 5	1 5	9 8	8 3
E B T	6 0	-	8 1	6 8
E B I T %	1 5. 7 %	1 1. 8 %	1 2. 2 %	8. 4 %
E B T %	1 4. 7 %	0. 0 %	1 0. 1 %	6. 9 %

• Very high tender activity and many tenders out for AF Offshore Decom. The Murchison offshore campaign which started in June produced a high activity level and good results for Q3.
• Challenging market conditions for AF Offshore AeronMollier, but the unit still delivers positive results for Q3 and year-to-date.
• A goodwill write-down of NOK 40 million has been carried out in the 3rd quarter.
• Order backlog: NOK 626 million (1,132)

Order backlog

Stable order backlog

Order backlog

Order backlog per business area

Primary strategies

Organic and structural growth

We will achieve profitable growth of NOK 8 billion, generating value for our shareholders and opportunities for our employees.

Customers and suppliers

We will work to ensure that our customers and suppliers select us as their preferred partner.

Innovation and originality We will increase our competitiveness through entrepreneurship.

Leadership capacity and specialist expertise We will attract and develop the industry's best leadership and specialist expertise.

Organic and structural growth

AF Gruppen will grow in large Norwegian and Swedish urban centres between now and 2020, with Oslo, Bergen, Gothenburg and Stockholm selected as specific target areas

Norwegian cities Swedish cities

Further develop real estate and new build positions, ROT (Repairs, Conversion, Extension) portfolio, as well as infrastructure position in and surrounding cities.

Further develop environment position through the development of networks and logistics for environmental parks.

Prepare for multi-deliveries in real estate, building, construction, energy and environment.

Develop new build position through development of existing companies and acquisitions.

Establish positions within ROT, construction, environment and energy through acquisitions. Establish departments within existing entities in Stockholm.

Organic and structural growth

AF will grow through the organic development of its large-scale project operations and regional acquisitions

Growth in nationwide and mobile project operations

Strengthen special assignments within demolition and recycling.

Prepare for mobility in conjunction with special building assignments.

Increase market share in the growing municipal EPC market.

Increase presence through purchases of small, regional construction and niche operators.

Seek growth in associated industries, markets, geographic regions and value chain links.

Win more large-scale projects through strategic collaboration, increased competence within new contracting forms, and new financing solutions.

Organic and structural growth

AF will secure a stronger position in the offshore market through organic and structural growth.

Increase project focus and range of services within HVAC

Establish project based services in border area of existing core business in markets with different cycles than offshore decommissioning

Customers and suppliers

We will work to ensure that our customers and suppliers select us as their preferred partner.

Identify our most important customers and partners.

Cooperation with customers and suppliers will create value for all parties.

Work with a long-term perspective to establish and maintain good relationships and gain trust.

Innovation and originality

AF will increase our competitiveness through entrepreneurship.

Innovation Originality

Identify and implement productivity improvements in our existing operations.

Stimulate the organisation to

identify new and innovative solutions.

Increase the utilisation of digital tools and associated working processes.

Identify and invest in new business opportunities.

Establish structures and incentives promoting innovation.

Allocate resources for execution.

Leadership capacity and specialist expertise

In 2020 AF will be the industry's preferred employer.

Leadership

We will create the industry's best expertise leaders through our leadership development programme, internal recruitment and by increasing the percentage of women in AF

Prepare for the mobility of resources across lines of business.

Ongoing evaluations of managers and management groups, proactively make changes wherever necessary.

Specialist

Secure access to developing the expertise we require.

Ensure that specialist expertise is utilised across lines of business throughout the group and contributes to increased competitiveness.

Ensure that our most talented employees remain with the company.

Social responsibility

AF Gruppen is a values-based company which through its competence and resources shall be an active social developer

AF Gruppen shall be the leading company in the construction industry within safety, ethics and the environment

AF Gruppen has an uncompromising attitude towards safety and ethics.

AF Gruppen shall through its environmental competence offer solutions that meets todays and tomorrows environmental challenges.

AF Gruppen's competence and resources shall create value for its owners, employees and for the society.

AF Gruppen strengthens focus on Sweden

As a part of its focus on Sweden, AF has signed a letter of intent with Kanonaden Entreprenad AB to acquire 70 per cent of the shares in the company.

The company in brief:

• Swedish construction company founded in 1983
• Head office in Nässjö, Jönköping County
• Operational in southern Sweden, inc. Stockholm and Gothenburg
• Performs assignments in groundworks, water/wastewater, concrete work, district heating, cabling, wind power and roadworks.
• Turnover 2015: SEK 654 million
• 170 employees

Summary

N O K i l l i m o n	Q 3 2 0 1 6	Q 3 2 0 1 5	Y T D 2 0 1 6	Y T D 2 0 1 5
R e e n e s v u	3, 1 0 8	2, 8 6 5	8, 9 8 4	8, 8 8 9
E B I T	2 7 0	2 3 5	7 0 6	6 3 1
E B T	2 6 5	2 2 5	0 0 7	6 2 2
E B I T %	8. % 7	8. 2 %	9 % 7.	1 % 7.
E B T %	8. % 5	8 % 7.	8 % 7.	0 % 7.

• Good operational performance in all business areas
• Strong financial position which enables dividend payment and acquisitions. Net interest bearing receivables of NOK 473 million (301)
• A clear and ambitious strategy lays the foundation for further growth towards 2020

Thank you for your attention!

Nytt Nasjonalmuseum, Oslo

Q4 2016: February 14th 2017