AF Gruppen — Interim / Quarterly Report 2014

Nov 14, 2014

3rd quarter 2014

From the CEO

It is satisfying to see that our units are performing well and delivering good results. Distinct leadership, motivated employees and solid risk management result in sound operations and a low injury rate. Now we want to increase focus on profitable growth, and will intensify the search for candidates who perform well and who share our culture and values.

AF has always been proud of its strenght and ability to perform complex tasks. The group's entreprenurial spirit has been characterised by the ability and will to think differently and to find better, more future-oriented ways to generate value.

Highlights Q3

• Revenues were NOK 2,343 million (2,534 million) in the 3rd quarter and NOK 7,205 million (7,619 million) year to date.
• Earnings before tax were NOK 164 million (148 million) in the 3rd quarter and NOK 408 million (367 million) year to date.
• Profit margin was 7.0 per cent (5.8 per cent) in the 3rd quarter and 5.7 per cent (4.8 per cent) year to date
• Net operating cash flow was NOK 210 million (218 million) in the 3rd quarter and NOK 104 million (486 million) year to date.

Revenues per quarter (NOK million)

Summary of Q3 2014

Key figures (NOK million)	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and other income	2,343	2,534	7,205	7,619	10,127
EBITDA	191	176	473	448	679
Earnings before finacial items and tax (EBIT)	164	150	394	367	568
Earnings before tax (EBT)	164	148	408	367	580
Result per share (NOK)	1.37	1.25	3.42	3.20	5.26
Diluted result per share (NOK)	1.37	1.21	3.42	3.11	5.11
EBITDA margin	8.2 %	6.9 %	6.6 %	5.9 %	6.7 %
Operating profit margin (EBIT %)	7.0 %	5.9 %	5.5 %	4.8 %	5.6 %
Pre-tax margin (EBT %)	7.0 %	5.8 %	5.7 %	4.8 %	5.7 %
Return on capital employed (ROaCE)1)	-	-	40.4 %	38.9 %	45.7 %
Cash flow from operating activities	210	218	104	486	1 015
Net interest-bearing debt (receivables)	-	-	39	-226	-751
Equity ratio	-	-	24.3 %	22.4 %	25.5 %
Order backlog	-	-	10,347	11,375	10,976

1) 12-month rolling average

Ryfast, Stavanger

Business areas

Civil Engineering

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	710	828	2,253	2,156	2,950
EBIT	49	82	158	174	253
EBT	51	82	164	181	265
EBIT %	7.0 %	9.9 %	7.0 %	8.1 %	8.6 %
EBT %	7.2 %	9.9 %	7.3 %	8.4 %	9.0 %

The Civil Engineering business area encompasses AF's civil engineering activities in Norway and Sweden.

Civil Engineering consists of two business units:

• AF Anlegg
• Pålplintar

Civil Engineering reported revenues of NOK 710 million (828 million) and earnings before tax of NOK 51 million (82 million) in the 3rd quarter. Revenues totalled NOK 2,253 million (NOK 2,156 million) and earnings before tax totalled NOK 164 million (NOK 181 million) year to date.

AF Anlegg performed well and showed good results in the 3rd quarter as well. There is a high level of activity in the E6 Frya–Vinstra and Nyhamna projects, among others. No major contracts have been signed during the quarter. The unit is experiencing a large supply of new projects in the market, and there is a high volume of tender calculations.

Pålplintar carried out major organisational adaptations and improved its results in the 3rd quarter.

The order backlog for Civil Engineering was NOK 3,493 million (5,175 million) as at 30 September 2014.

Sjursøya, Oslo

Environment

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	186	216	499	480	684
EBIT	5	15	41	19	40
EBT	4	15	37	18	38
EBIT %	2.9 %	7.1 %	8.1 %	4.1 %	5.8 %
EBT %	2.2 %	6.9 %	7.4 %	3.8 %	5.5 %

The Environment business area encompasses AF's services related to demolition and recycling services onshore.

The business area consists of the following business units:

• AF Decom AS
• AF Decom AB
• Härnösand Byggreturer AB

Environment reported revenues of NOK 186 million (216 million) and earnings before tax of NOK 4 million (15 million) for the 3rd quarter. Revenues totalled NOK 499 million (480 million) and earnings before tax totalled NOK 37 million (18 million) year to date.

AF Decom AS reported a somewhat lower than expected level of activity for the 3rd quarter. The unit reported satisfactory results for the quarter.

Härnösand Byggreturer performed well and delivered good results in the 3rd quarter as well.

AF Decom AB has reported weak results over a period of time. Major organisational adaptations were made during the 3rd quarter.

Rimol Miljøpark in Trondheim performed well and delivered good results in the 3rd quarter. The level of activity at Jølsen Miljøpark in Skedsmo is increasing.

AF Decom AS was awarded the contract to demolish the S-Block in the Government Quarter in the 3rd quarter. The work started in October and is scheduled for completion in the middle of February 2015.

The order backlog for the Environment business area was NOK 210 million (300 million) as at 30 September 2014.

Fred Olsens gate 11, Oslo

Building

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	1,242	1,246	3,722	3,609	4,793
EBIT	92	49	193	117	169
EBT	91	48	189	109	160
EBIT %	7.4 %	4.0 %	5.2 %	3.2 %	3.5 %
EBT %	7.3 %	3.9 %	5.1 %	3.0 %	3.3 %

The Building business area encompasses activities related to new building and renovation in Norway and Sweden.

The Building business area is divided into seven business units:

• AF Bygg Oslo
• AF Byggfornyelse
• AF Bygg Østfold
• AF Bygg Sør
• AF Bygg Göteborg
• AF Bygg Rogaland
• Strøm Gundersen

In addition, Building has activities in the subsidiaries Haga & Berg Entreprenør, Consolvo, Thorendal and AF Bygg Syd AB.

Building reported revenues of NOK 1,242 million (1,246 million) and earnings before tax of NOK 91 million (48 million) for the 3rd quarter. Revenues totalled NOK 3,722 million (3,609 million) and earnings before tax totalled NOK 189 million (109 million) as at the 3rd quarter.

AF Bygg Oslo, AF Bygg Østfold and the companies in Strøm Gundersen all performed well and delivered very good results in the 3rd quarter. AF Byggfornyelse showed a positive earnings trend in the 3rd quarter. AF Bygg Sør and AF Bygg Rogaland reported a low level of activity and poor results. The level of activity at AF Bygg Göteborg is increasing, and the unit delivered a good result for the quarter.

AF signed a contract with the owners of the rock protection company Fjerby AS to acquire 100 per cent of the shares in the company.

After the end of the quarter, AF Bygg Göteborg signed a contract with Älvstranden Utveckling AB to buy a serviced site for the construction of the commercial building Centrumhuset in the Sannegården district of Gothenburg. The new building will consist of six storeys, including a 5,000 m2 parking basement and will be built to meet the Silver standard under the Swedish environmental building certification system Miljöbyggnad Silver, with high energyefficiency and sustainability requirements. The contract, which is a turnkey contract in cooperation with a partner who is a client and property owner, is valued at approximately SEK 90 million excl. VAT. The construction work is scheduled to start during the first half of 2015.

AF Bygg Oslo has signed a contract with Spikkestadkvartalene Bolig KS for the construction of Spikkestadkvartalene stage 1. The project consists of an apartment building with a parking basement. There will be a total of 40 apartments, 27 of which will be serviced accommodation. The project will be carried out as a turnkey contract and has a total value of NOK 76 million, excl. VAT. The work is scheduled to start in January 2015, with completion in June 2016.

The order backlog for the Building business area was NOK 4,412 million (4,425 million) as at 30 September 2014.

Lillohagen, Oslo

Property

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	2	15	18	41	60
EBIT	-3	4	5	10	32
EBT	-4	2	-	5	30
EBIT %	-	-	-	-	-
EBT %	-	-	-	-	-

The Property business area encompasses the development of residential housing units and commercial buildings. The activities take place in geographic areas where we have our own production capacity. The Swedish property development activities in Gothenburg have been part of this area since 1 January 2014. These development projects are organised as associated companies in the AF Group and are not included in the order backlog.

Property reported earnings before tax of NOK -4 million (2 million) for the 3rd quarter and NOK 0 million (5 million) year to date. The 3rd quarter results were weak, and this is attributed primarily to the low number of housing project starts. After a weak start of the year both the sales rate and the price development for new buildings have improved. The few projects that have started up have proven to meet the market need well. Earnings improvement is expected in the future due to the launch of several new residential projects in the first half of 2015, as well as the planned sale of commercial projects that are close to completion.

The last housing project start was the last part of construction stage 1 for the Krydderhagen project at Hasle in Oslo, for which a launch decision was made in the 2nd quarter as a result of good sales.

A total of 41 (18) apartments were sold in the 3rd quarter, 27 of which were serviced apartments in the project at Spikkestad. This project will start up during January 2015. AF's share of the apartments sold was 15 (12). A total of 91 (70) apartments have been sold year to date, and AF's share was 38 (35).

Of the apartments sold in the 3rd quarter of 2014, 0 (2) were completed apartments. There were 0 (5) unsold completed apartments at the end of the quarter. AF owns land and development rights in progress, which are estimated to amount to 1,035 (1,103) residential units. AF has commercial property with a gross area of 71,468 (11,896) m2 under development. The numbers refer to AF's share of the projects.

The AF Group acquired 50 per cent of the interests in Hasle Linje Næring DA in the 3rd quarter. The company owns sites for which the development of offices with a total gross area of over 110,000 m2 , approximately 18,350 m2 of which has already been leased, is planned. A gross area of 18,350 m2 has already been leased. The acquisition values the properties at NOK 600 million.

Property and Building revenues that relate to the company's own projects are eliminated at the corporate level during the execution phase, and they are recognised in their entirety on handover.

Energy station, Hammerfest

Energy

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	38	39	99	118	173
EBIT	2	2	2	7	11
EBT	2	2	3	7	12
EBIT %	5.6 %	4.7 %	1.8 %	5.8 %	6.5 %
EBT %	6.6 %	5.1 %	2.8 %	6.1 %	6.8 %

The Energy business area encompasses AF's energy services for onshore activities.

The business area consists of a single business unit: • AF Energi & Miljøteknikk AS

Energy also has activities in Boligenergi AS, which is owned jointly with OBOS.

Revenues in the 3rd quarter were NOK 38 million (39 million) and earnings before tax were NOK 2 million (2 million). Revenues totalled NOK 99 million (118 million) and earnings before tax totalled NOK 3 million (NOK 7 million) as at the 3rd quarter.

AF Energi & Miljøteknikk posted lower than expected revenues, but reported satisfactory results for the quarter.

AF Energi & Miljøteknikk has several EPC contracts (energy savings contracts) in the analysis phase, and it is expected that they will be converted to projects to be executed. The energy savings contracts have had a very modest effect on the order backlog, since they do not include a contractual volume. It is expected that these contracts may possibly generate activity of approximately NOK 83 million in addition to the existing order backlog.

The order backlog for the Energy business area was NOK 106 million (88 million) as at 30 September 2014.

Offshore

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	167	255	678	1,227	1,480
EBIT	1	11	-3	49	70
EBT	-1	12	-5	50	71
EBIT %	0.8 %	4.2 %	-0.4 %	4.0 %	4.7 %
EBT %	-0.7 %	4.5 %	-0.8 %	4.1 %	4.8 %

The Offshore business area encompasses AF's services related to the removal, demolition and recycling of offshore installations. Offshore also includes new building, modification and maintenance work related to HVAC, cranes, modules and rig services. In addition, Offshore also has services related to the maintenance and modification of onshore facilities for the oil and gas industry.

The business area consists of three business units:

• AF Offshore Decom
• AF Offshore Aeron
• AF Offshore Mollier

Offshore also has activities in the subsidiaries AF Offshore Systems, AF Offshore Mandal and the Environmental Base at Vats, as well as projects related to the maintenance and modification of onshore facilities (V & M Landanlegg).

Revenues in the 3rd quarter were NOK 167 million (255 million) and earnings before tax were NOK -1 million (12 million). Revenues totalled NOK 678 million (1,277 million) and earnings before tax totalled NOK -5 million (50 million) year to date.

As communicated earlier, AF Offshore Decom has a low order backlog for 2014, and this is the main reason for the low level of activity in the 3rd quarter as well. A low level of activity also entails a weak result for the quarter.

AF Offshore Aeron has an increasing level of activity, but delivered weak results for the quarter.

AF Offshore Aeron's company in Shanghai has an increasing level of activity and is performing well. After the end of the quarter, AF Offshore Aeron also established a company in Singapore.

AF Offshore Mollier showed a positive earnings performance for the quarter. AF Offshore Mandal also reported good results for the 3rd quarter. AF Offshore Systems has experienced a weak 3rd quarter.

V & M Landanlegg performed well and delivered good results for the 3rd quarter.

The AF Group bought back the majority shareholding in Miljøbase Vats AS in the 3rd quarter. The total purchase price for the shares was NOK 136 million, which values the company's share capital at NOK 226 million. The acquisition was financed by the AF Group's cash reserves. After this, the AF Group owns 99.9 per cent of the shares in Miljøbase Vats AS.

AF Decom Offshore U.K. Limited, in a consortium with Heerema Marine Contractors Nederland SE (Heerema-AF Consortium), has entered into an agreement with CNR, Canadian Natural Resources International (U.K.) Limited, for the removal of the Murchison platform in the North Sea. The contract encompasses engineering, preparation, removal and decommissioning (EPRD) of both decks and the steel foundations, with a combined weight of more than 37,000 tonnes. The engineering work has started, while the offshore work will start early in 2016. The removal and decommissioning work will last until 2020. The value of the AF Group's share of the contract is NOK 700 million.

The order backlog for the Offshore business area was NOK 1,989 million (1,298 million) as at 30 September 2014.

Financial information

Net operating cash flow was NOK 210 million (218 million) in the 3rd quarter 2014. The AF Group had a cash flow from net investments of NOK -289 million (-59 million) in the 3rd quarter. The investments in Hasle Linje Næring and the Environmental Base at Vats totalled NOK -282 for the quarter. Cash flow before capital transactions and financing was NOK -78 million (159 million) in the 3rd quarter. Net operating cash flow was NOK 104 million (486 million) year to date. Cash flow before capital transactions and financing was NOK -113 million (-389 million) year to date. Shares for NOK 242 million were issued in the 1st quarter of 2014 in connection with the Group's option programme. Dividends of NOK 528 million (373 million) were distributed in the 2nd quarter.

The AF Group had net interest-bearing debt of NOK 39 million (-226 million) at the end of the 3rd quarter.

The AF Group has a three-year financing agreement with Danske Bank and Handelsbanken that expires in 2015. The company also has a small credit facility with DnB. The total financing limit is NOK 1,280 million. This gives available liquidity of NOK 1,241 million as at 30 September 2014.

Total assets were NOK 5,388 million (4,991 million) as at 30 September 2014. The Group's equity totalled NOK 1,308 million (1,119 million). This corresponds to an equity ratio of 24.3 per cent (22.4 per cent).

Share performance

The AF Group's shares are listed on the Oslo Stock Exchange's OB-match list and trade under the ticker symbol AFG. The shares are included in the Oslo Stock Exchange's benchmark index (OSEBX) and fund index (OSEFX). The AF Group has entered into a market-making agreement to promote the liquidity of the Company's shares.

The closing price for the AF share was NOK 72.00 on 30 September 2014. This corresponds to a dividendadjusted return of 15.1 per cent to date in 2014. The Oslo Stock Exchange's benchmark index showed a return of 12.6 per cent during the same period.

List of shareholders as at 30 September 2014

Name	No. shares	% share
OBOS Invest AS	19,589,041	22.2
ØMF Holding AS	13,699,030	15.6
Constructio AS	11,879,266	13.5
Aspelin Ramm Gruppen AS	4,993,269	5.7
LJM A/S	2,513,900	2.9
VITO Kongsvinger AS	2,461,676	2.8
Skogheim, Arne	1,723,870	2.0
Staavi, Bjørn	1,512,232	1.7
Moger Invest AS	1,240,541	1.4
Stenshagen Invest AS	1,123,074	1.3
Ten largest shareholders	60,735,899	68.9
Total other shareholders	26,992,760	30.6
Own shares	360,000	0.4
Total number of shares	88,088,659	100.0

LTI rate development

On 27 May 2014, a dividend of NOK 6.00 per share was distributed.

The General Meeting of the AF Group adopted a new option programme for all the employees of the AF Group on 15 May 2014. A total of 4,500,000 options will be offered over a period of three years. On 18 June this year, a total of 3,500,000 options were subscribed for by 1,383 employees. The options can be exercised in 2017, and the exercise price is NOK 74.25. The number of outstanding unexercised options in AF Gruppen ASA was 3,500,000 after this.

In October a total of 507 employees subscribed for a total of 996,245 shares in connection with the AF Group's share programme. The shares were subscribed for at a price of NOK 58.90 per share, which corresponds to a discount of 20 per cent in relation to the average market price during the subscription period. The Board of Directors resolved to sell 360,000 treasury shares in this connection. On 31 October, 636,245 new shares were issued. The new issue was adopted by the Board of Directors in accordance with the authorisation granted by the General Meeting of 15 May 2014. After completion of the new issue, the total number of shares is 88,724,904, which corresponds to share capital of NOK 4,436,245.

Health, safety and the environment (HSE)

HSE has high priority in the AF Group and is an integral part of the management at all levels. AF has a structured and uniform HSE system that encompasses all the projects. The working environment should be safe for everyone – including those who are employed by our subcontractors. The figures from the subcontractors are therefore included in the injury statistics.

The LTI rate is an important measurement parameter for safety work at AF. The LTI rate is defined as the number of injuries resulting in absence per million man-hours. A total of one injury resulting in absence was registered in the 3rd quarter. This gives an LTI rate (lost-time injury rate) of 0.4 (1.4) for the 3rd quarter. The LTI rate year to date is 1.0 (1.4).

The LTI rate has been reduced through systematic and longterm efforts. Significant resources are being invested to further improve our HSE efforts in order to be able to achieve our goal of an LTI rate of zero. Key to this work is AF's fundamental understanding and acceptance that all injuries have a cause and can, therefore, be avoided. Identifying risk and risk analysis are a key part of our preventive activities. Based on an assessment of the risks, physical and organisational barriers are established to reduce the risk of personal injury to a low and acceptable level.

In addition to risk assessments, being able to learn from our mistakes is also vital. AF has systematised this through reporting and responding to undesired incidents, as well as investigating the most serious incidents. The number of reports has increased steadily during the last 10 years, and we see a clear correlation between the increased reporting of undesired incidents and the decrease in injuries.

The registration of sickness absence forms the basis for the measurement of health work at AF. Sickness absence was 3.2 per cent (3.3 per cent) in the 3rd quarter. Sickness absence year to date is 3.4 per cent (3.8 per cent). Sickness absence at AF is low compared to that of comparable businesses, but AF is working to lower sickness absence even more. Our target is total sickness absence of less than 3.0 per cent, a level we believe represents a healthy situation without absence due to occupational illnesses/injuries. AF believes that it can achieve this target through systematic health work, which consists, for example, of ongoing risk analysis of exposure that is harmful to health, the establishment of physical and organisational barriers, and close follow-up of employees on sick leave.

Environmental work has high priority throughout the entire Group. AF would like to avoid environmental damage and minimise undesirable effects on the environment. Environmental work is an integral part of HSE work, and the tools used are therefore the same that are used otherwise in connection with HSE work.

Follow-up of the source separation rate parameter acts as an extra driving force for AF's environmental work. This parameter places the focus on an important environmental factor that AF has an opportunity to influence. The source separation rate indicates how much of the waste from AF's operations is separated for the purpose of facilitating recycling. For the 3rd quarter, the result for building was 82 per cent (79 per cent), the result for renovation was 75 per cent (72 per cent) and the result for demolition was 97 per cent (96 per cent). These results are considered good, and they are well above the government requirement of a minimum of 60 per cent. A total of 350,159 tonnes of waste were sorted to date in 2014, compared with 408,365 tonnes for all of 2013. In addition, AF has recycled 592,046 tonnes of asphalt and concrete to date in 2014.

Organisation

The AF Group is working continuously to build a uniform corporate culture. Motivated employees and a solid organisation are an important foundation for creating value. At AF we focus on building organisations with a robust composition of technical expertise and management at all levels. The resources are organised close to the production with project teams where the managers have an influential force.

AF invests a lot of time and resources in the development of employees through training in various positions in production and through development of the AF Academy. More than 80 per cent of the current managers have been recruited internally. We are experiencing an increasing and satisfactory influx of qualified employees, and our employees are good ambassadors for the recruitment of new personnel.

The AF Group had a total of 2,926 (2,786) employees at the end of the 3rd quarter. Of these employees, 2,622 (2,526) were employed in Norway, 220 (207) in Sweden, 72 (43) in Lithuania, 2 (4) in the UK, 7 (4) in China and 3 (2) in Germany.

Risk and risk management

The AF Group is exposed to risk of both an operational and financial nature. The AF Group wants to assume operational risk that the business units can influence and control. AF has developed risk management processes that are well adapted to our operations. Standardised, action-oriented risk management processes ensure comprehensive and coherent risk management in all parts of the organisation. The analysis of risk in the tender phase of projects enables the correct pricing and management of the risk that the AF Group assumes. AF limits exposure to risk that cannot be influenced.

Financial risk encompasses market risk, credit risk and liquidity risk. Market risk includes commodity price risk, foreign exchange risk and interest rate risk. The AF Group has limited exposure to foreign exchange risk, but as a major demolition and recycling operator, the group is exposed to fluctuations in steel prices. The AF Group aims to have low exposure to risks that cannot be influenced, and it uses hedging instruments to mitigate the risk associated with foreign exchange rates and steel prices. The liquidity risk is considered low. In 2012, the AF Group signed a three-year financing agreement with a credit limit of NOK 1,200 million. As at 30 September 2014, NOK 185 million had been drawn on this facility.

Market outlook

The civil engineering market in Norway is influenced by political priorities and government funding. The Government has stated that transport will be given a significant boost, and it has proposed an appropriation of NOK 26.8 billion for road purposes in the State Budget for 2015. This is an increase of approximately NOK 3 billion (12.4 per cent) compared with the budget for 2014. An appropriation of around NOK 8 billion has been proposed for major road projects. The Norwegian Public Roads Administration has advised that around 40 major projects (> NOK 100 million) will be advertised during the period up to December 2015. The analysis company Prognosesenteret estimates that the total civil engineering investments will increase by 9.2 per cent in 2015, and an additional 4.2 per cent in 2016. It is expected that the greatest growth will be in roads, railways and power and energy plants. A positive market outlook in the civil engineering structure provides a good foundation for further growth for AF's Civil Engineering business.

AF's activities in the Building, Property and Environment business areas are linked to the demand for new housing and non-residential buildings. This demand normally fluctuates according to the economic cycles and is influenced by the development of the Norwegian and global economy, including the labour market, income growth and interest rate levels.

Growth in the Norwegian economy, combined with an increasing population and relocation to cities, has contributed to high growth in the residential housing market in recent years. After a short-term fall in residential property prices in the autumn of 2013, the prices have risen steadily in 2014, and they are now at their highest level ever. The real estate brokerage industry's residential property price statistics showed a price increase of 3.4 per cent from the 3rd quarter 2013 to the 3rd quarter 2014. The prices in the Oslo region rose 4.5 per cent, while the prices in the Stavanger region fell somewhat during the same period. The market for new residential housing has been through a challenging period, and the sale of new residential housing showed a weak start to the year in 2014. According to the most recent forecast, Prognosesenteret is expecting 27,000 residential housing starts in 2014. This is an increase over the previous forecast, but it still represents a decline of 11 per cent on a national basis compared with 2013. Prognosesenteret expects increasing growth in both 2015 and 2016. Overall, AF is positive about the long-term development in the Building, Environment and Property markets, and we are well-positioned for further growth.

Uncertainty has marked the oil and gas industry recently. This is associated with lower oil prices and the fact that the largest oil companies have adjusted their investment estimates downwards. Statistics Norway expects that the level of investment on the Norwegian continental shelf will decline from NOK 227.3 billion in 2014 to NOK 185.3 billion in 2015. This decline will be felt in particular in operations and field development. While there is great market potential on both the Norwegian and British continental shelves for offshore demolition. Investments in the decommissioning and removal of oil installations on the Norwegian continental shelf are estimated to be NOK 8.1 billion in 2014. This is NOK 5.3 billion more than the costs incurred for 2013. This represents opportunities for growth in AF's oil installation removal operations.

The market for the delivery of energy services is growing, and it is influenced by the ever stricter requirements to reduce energy consumption imposed by the authorities and markets. The EU Building Directive requires that all new buildings should be "close to zero-energy buildings" by 2021, and an adaptation to this directive will entail an increasing need for energy conservation services. In Norway, the authorities have set ambitious energy goals, and extensive energy efficiency improvement for existing buildings is thus necessary. The maintenance lag for municipal buildings also entails that there is a significant renovation potential that gives opportunities for the existing operations. Through the range of services provided by AF Energy, we are wellpositioned to take part in further growth in this market.

After a relatively weak development in 2013 in Sweden, the central bank Riksbanken is expecting the gross national product to grow by 1.9 per cent in 2014, 2.7 per cent in 2015 and 3.3 per cent in 2016. The key rate in Sweden was recently lowered to 0 per cent, and Riksbanken does not expect the rate to be raised until 2016. This can simulate further growth. The forecasts from the Swedish Construction Federation indicate growth of 4 per cent for investments in the building and construction sector in 2015. Low interest rates and growth expectations in the Swedish building and construction market provide a good foundation for further growth in AF's Swedish operations.

Oslo, 13 November 2014 Board of Directors of AF Gruppen ASA

For more detailed information, please contact: CEO Pål Egil Rønn pal.egil.ronn@afgruppen.no +47 909 57 713

CFO Sverre Hærem sverre.herem@afgruppen.no +47 952 45 167

Internet: www.afgruppen.no

Financial information

Condensed consolidated statement of comprehensive income

NOK million, except per share data	3Q 14	3Q 13	YTD 14	YTD 13	2013
Revenues and income	2,343	2,534	7,205	7,619	10,127
Subcontractors	-1,096	-1,148	-3,186	-3,408	-4,637
Cost of materials	-271	-294	-1,149	-1,221	-1,366
Payroll cost	-541	-527	-1,624	-1,544	-2,132
Operating expenses ex. depreciation and impairment	-285	-392	-862	-1,043	-1,400
Net gains (losses) and profit (loss) from associates	42	3	89	45	87
EBITDA	191	176	473	448	679
Depreciation and impairment of tangible fixed assets	-27	-26	-77	-77	-106
Depreciation and impairment of intagible assets	-1	-	-2	-4	-4
Earnings before financial items and tax (EBIT)	164	150	394	367	568
Net financial items	-	-2	14	1	12
Earnings before tax (EBT)	164	148	408	367	580
Income tax expense	-29	-35	-88	-90	-128
Net income for the period	134	113	321	278	453
Attributable to:
Shareholders of the parent	119	102	294	260	429
Non-controlling interests	15	11	27	18	24
Net income for the period	134	113	321	278	453
Earnings per share	1.37	1.25	3.42	3.20	5.26
Diluted earnings per share	1.37	1.21	3.42	3.11	5.11
Key figures	3Q 14	3Q 13	YTD 14	YTD 13	2013
EBITDA margin	8.2 %	6.9 %	6.6 %	5.9 %	6.7 %
Operating profit margin (EBIT %)	7.0 %	5.9 %	5.5 %	4.8 %	5.6 %
Pre-tax margin (EBT %)	7.0 %	5.8 %	5.7 %	4.8 %	5.7 %
Return on capital employed (ROaCE)1)			40.4 %	38.9 %	45.7 %
Return on equity			36.2 %	31.4 %	38.4 %
Equity ratio			24.3 %	22.4 %	25.5 %
Net interest-bearing debt (receivables) 2)			39	-226	-751
Capital employed 3)			1,558	1,202	1,414
Order backlog			10,347	11,375	10,976

1) Return on capital employed (ROaCE) = Earnings before tax + interest expense / average capital employed

2) Net interest-bearing debt (receivables) = Interest-bearing debt - cash and cash equivalents - interest-bearing receivables

3) Capital employed = Equity + interest-bearing debt

Statement of comprehensive income

NOK million	3Q 14	3Q 13	YTD 3Q 14	YTD 3Q 13	2013
Net income for the period	134	113	321	278	453
Net actuarial gains and losses	-	-	-	-	3
Items that will not be reclassified to income statement in subsequent periods	-	-	-	-	3
Net cash flow hedges	-20	-	-20	-	-
Currency translation differences	-6	8	-13	17	19
Items that may be reclassified to income statement in subsequent periods	-26	8	-33	17	19
Other comprehensive income for the period	-26	8	-33	17	22
Total comprehensive income for the period	109	121	288	294	475
Attributable to:
-Shareholders of the parent	94	95	262	276	451
-Non-controlling interests	14	25	26	18	24
Total comprehensive income for the period	109	121	288	294	475

Equity

	Paid-in	Other	Retained	Attributable to	Non-control
NOK million	capital	reserves	earnings	shareholders	ling interests	Total equity
Per 31/12/12	244	-14	872	1,102	100	1,202
Comprehensive income	-	19	432	451	24	475
Capital increase	53	-	-	53	-	53
Purchase of treasury shares	-	-	-10	-10	-	-10
Sale of treasury shares	-	-	7	7	-	7
Dividend paid	-35	-	-332	-366	-17	-384
Share-based remuneration	12	-	-	12	-	12
Trans. with. non-controlling inter.	-	-	-19	-19	-2	-20
Per 31/12/13	273	5	950	1,229	106	1,334
Comprehensive income	-	-32	294	262	26	288
Capital increase	242	-	-	242	-	242
Purchase of treasury shares	-	-	-30	-30	-	-30
Sale of treasury shares	-	-	9	9	-	9
Dividend paid	-205	-	-324	-529	-16	-544
Share-based remuneration	8	-	-	8	-	8
Trans. with. non-controlling inter.	-	-	-2	-2	3	2
Per 30/09/14	318	-28	898	1,188	120	1,308

Consolidated balance sheet

NOK million	30/09/2014	30/09/2013	31/12/2013
Tangible fixed assets	927	384	397
Intagible assets	1,350	1,342	1,347
Investment in associates	386	233	272
Deferred tax asset	43	29	45
Interest-bearing receivables	68	54	59
Pension plan and other financial assets	13	8	12
Total non-current assets	2,787	2,050	2,131
Inventories	155	150	132
Projects for own account	94	154	97
Trade receivables and other receivables	2,210	2,370	2,093
Interest-bearing receivables	47	12	77
Financial derivatives	-	11	11
Cash and cash equivalents	95	244	695
Total current assets	2,601	2,941	3,105
Total assets	5,388	4,991	5,237
Equity attributable to sharholders of the parent	1,188	1,016	1,229
Minority interests	120	103	106
Total equity	1,308	1,119	1,334
Long-term interest-bearing debt	25	43	29
Retirement benefit obligations	2	5	2
Provisions	29	51	29
Deferred tax	392	469	422
Financial derivatives	42	-	-
Total non-current liabilities	490	568	483
Short-term interest-bearing debt	225	40	50
Trade payables and other short term debt	2,937	3,032	3,018
Financial derivatives	10	-	2
Provisions	138	125	149
Tax payable	280	107	200
Total current liabilities	3,589	3,304	3,419
Total liabilities	4,080	3,872	3,902
Total equity and liabilities	5,388	4,991	5,237

Consolidated cash flow statement

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
Earnings before financial items and tax (EBIT)	164	150	394	367	568
Depreciation, amortisation and impairment	28	26	79	81	110
Change in net working capital	61	48	-249	106	452
Income taxes paid	-1	-2	-39	-30	-40
Other adjustments	-41	-3	-82	-38	-75
Cash flow from operating activities	210	218	104	486	1,015
Net investments	-289	-59	-217	-97	-107
Cash flow before capital- and financing activities	-78	159	-113	389	908
Share issue	-	-	242	-	53
Transactions with minority	-	-	-15	-1	-31
Sale of treasury shares	-	-	9	4	7
Purchase of treasury shares	-1	-1	-30	-3	-10
Dividend paid	-	-1	-529	-380	-384
Cash flow from capital activities	-2	-3	-323	-381	-365
Cash flow before financing activities	-80	156	-436	8	543
Cash effect from financial expenses	-4	-2	-8	3	-9
Cash flow before change in net interest-bearing debt	-84	154	-444	11	534
Net interest-bearing debt at beginning of period	-390	-59	-751	-204	-204
Change in net-interest bearing debt without cash effekt	346	-13	346	-11	-14
Change in net-interest bearing debt with cash effekt	84	-154	444	-11	-534
Net interest-b. debt (receivables) at end of period	39	-226	39	-226	-751

Business areas

The AF Group's division into operating segments is consistent with the division of the business areas: Civil Engineering, Environment, Building, Property, Energy and Offshore.

Segment information is presented in accordance with the Group's accounting policies in accordance with IFRS with the exception of IFRIC 15 (Agreements for the Construction of Real Estate). This policy exception applies to the Building and Property segments in Norway. Income from projects for own account in these segments is recognised in accordance with IAS 11. This means that the recognition of income in these projects is the product of the physical degree of completion, the percentage sold and the expected contribution margin.

Segment information is presented in accordance with reporting to the Corporate Management Team and is consistent with the financial information utilised by the Company's senior decision-makers when evaluating developments and allocating resources. The effect of IFRIC 15 on the consolidated accounts is illustrated in a separate table in the segment information and a separate note.

Civil engineering

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	704	819	2,243	2,142	2,928
Internal revenue and income	6	9	10	14	22
Total revenue and income	710	828	2,253	2,156	2,950
EBITDA	63	95	198	214	309
Earnings before financial items and tax (EBIT)	49	82	158	174	253
Earnings before tax (EBT)	51	82	164	181	265
EBITDA %	8.8 %	11.4 %	8.8 %	9.9 %	10.5 %
EBIT %	7.0 %	9.9 %	7.0 %	8.1 %	8.6 %
EBT %	7.2 %	9.9 %	7.3 %	8.4 %	9.0 %
Assets			1,435	1,542	1,664
Order backlog			3,493	5,175	4,604

Environment

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	182	213	488	462	662
Internal revenue and income	4	4	11	18	22
Total revenue and income	186	216	499	480	684
EBITDA	8	18	48	26	49
Earnings before financial items and tax (EBIT)	5	15	41	19	40
Earnings before tax (EBT)	4	15	37	18	38
EBITDA %	4.2 %	8.3 %	9.6 %	5.5 %	7.1 %
EBIT %	2,9 %	7.1 %	8.1 %	4.1 %	5.8 %
EBT %	2.2 %	6.9 %	7.4 %	3.8 %	5.5 %
Assets			388	377	366
Order backlog			210	300	215

Building

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	1,241	1,246	3,720	3,608	4,792
Internal revenue and income	1	-	2	1	2
Total revenue and income	1,242	1,246	3,722	3,609	4,793
EBITDA	95	53	202	128	183
Earnings before financial items and tax (EBIT)	92	49	193	117	169
Earnings before tax (EBT)	91	48	189	109	160
EBITDA %	7.6 %	4.2 %	5.4 %	3.5 %	3.8 %
EBIT %	7.4 %	4.0 %	5.2 %	3.2 %	3.5 %
EBT %	7.3 %	3.9 %	5.1 %	3.0 %	3.3 %
Assets			2,320	2,474	2,327
Order backlog			4,412	4,425	4,760

Property

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	2	15	18	41	60
Internal revenue and income	-	-	-	-	-
Total revenue and income	2	15	18	41	60
EBITDA	-2	4	5	10	32
Earnings before financial items and tax (EBIT)	-3	4	5	10	32
Earnings before tax (EBT)	-4	2	-	5	30
EBITDA %	-	-	-	-	-
EBIT %	-	-	-	-	-
EBT %	-	-	-	-	-
Assets			570	371	351
Order backlog			-	-	-

Energy

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	38	39	99	118	172
Internal revenue and income	-	-	-	-	1
Total revenue and income	38	39	99	118	173
EBITDA	2	2	2	7	12
Earnings before financial items and tax (EBIT)	2	2	2	7	11
Earnings before tax (EBT)	2	2	3	7	12
EBITDA %	5.9 %	5.1 %	2.1 %	6.1 %	6.8 %
EBIT %	5.6 %	4.7 %	1.8 %	5.8 %	6.5 %
EBT %	6.6 %	5.1 %	2.8 %	6.1 %	6.8 %
Assets			102	108	138
Order backlog			106	88	59

Offshore

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	166	251	671	1,206	1,448
Internal revenue and income	1	4	7	21	32
Total revenue and income	167	255	678	1,227	1,480
EBITDA	5	14	6	58	81
Earnings before financial items and tax (EBIT)	1	11	-3	49	70
Earnings before tax (EBT)	-1	12	-5	50	71
EBITDA %	3.2 %	5.5 %	0.9 %	4.7 %	5.5 %
EBIT %	0.8 %	4.2 %	-0.4 %	4.0 %	4.7 %
EBT %	-0.7 %	4.5 %	-0.8 %	4.1 %	4.8 %
Assets			1,307	894	949
Order backlog			1,989	1,298	1,265

Other segments (Group)

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	9	7	28	23	30
Internal revenue and income	9	12	29	21	37
Total revenue and income	18	19	57	43	66
EBITDA	3	-1	8	9	12
Earnings before financial items and tax (EBIT)	-2	-6	-4	-5	-6
Earnings before tax (EBT)	3	-5	16	2	7
Assets			1,124	849	1,194
Order backlog			-	-	-

Eliminations

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	-21	-45	-45	-45	-54
Internal revenue and income	-21	-28	-58	-76	-115
Total revenue and income	-43	-73	-103	-121	-168
EBITDA	5	-6	4	-10	-14
Earnings before financial items and tax (EBIT)	5	-6	4	-10	-14
Earnings before tax (EBT)	5	-6	4	-10	-14
Assets			-1,854	-1,610	-1,748
Order backlog			99	45	54

IFRIC 15

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	21	-11	-18	65	89
Internal revenue and income	-	-	-	-	-
Total revenue and income	21	-11	-18	65	89
EBITDA	13	-3	-	5	14
Earnings before financial items and tax (EBIT)	13	-3	-	5	14
Earnings before tax (EBT)	13	-3	-	5	14
Assets			-4	-13	-4
Order backlog			37	43	19

Segment total

NOK million	3Q 14	3Q 13	YTD 14	YTD 13	2013
External revenue and income	2,343	2,534	7,205	7,619	10,127
Internal revenue and income	-	-	-	-	-
Total revenue and income	2,343	2,534	7,205	7,619	10,127
EBITDA	191	176	473	448	679
Earnings before financial items and tax (EBIT)	164	150	394	367	568
Earnings before tax (EBT)	164	148	408	367	580
EBITDA %	8.2 %	6.9 %	6.6 %	5.9 %	6.7 %
EBIT %	7.0 %	5.9 %	5.5 %	4.8 %	5.6 %
EBT %	7.0 %	5.8 %	5.7 %	4.8 %	5.7 %
Assets			5,388	4,991	5,237
Order backlog			10,347	11,375	10,976

Notes

1. General information

The AF Group is one of Norway's leading contracting and industrial groups. The AF Group is divided into six business areas: Civil Engineering, Environment, Building, Property, Energy and Offshore.

AF Gruppen ASA is a public limited company registered and domiciled in Norway. The head office is located at Innspurten 15, 0663 Oslo. AF is listed on the Oslo Stock Exchange's OB Match list under the ticker symbol AFG.

This summary of financial information for the 3rd quarter has not been audited.

2. Basis of preparation

The consolidated financial statements for the AF Group encompass AF Gruppen ASA and its subsidiaries, joint ventures and associated companies. The consolidated financial statements for the 3rd quarter have been prepared in accordance with IAS 34 Interim Accounts. The summary of the financial information presented in the quarterly accounts is intended to be read in conjunction with the annual report for 2013, which has been prepared in accordance with the International Financial Reporting Standards (IFRS).

As a result of rounding off, the numbers or percentages will not always add up to the total.

3. Changes in the Group's structure

BA Gjenvinning

In the 2nd quarter 2014, 50 per cent of the shares in the wholly owned subsidiary BA Gjenvinning AS were sold. As a result of this sale, BA Gjenvinning AS was reclassified from a subsidiary to a joint venture. BA Gjenvinning is part of the Environment business area and will be recognised in the accounts in accordance with the equity method of accounting after the sell-off.

Miljøbase Vats

On 9 September 2014, the AF Group entered into an agreement to acquire the remaining 60 per cent of the shares in Miljøbase Vats AS. The Environmental Base at Vats was previously recognised as an associated company in accordance with the equity method of accounting with a 40 per cent ownership interest. The acquisition of the Environmental Base at Vats resulted in a gain of NOK 22 million due to the fact that the assets and liabilities in the Environmental Base at Vats shall be recognised at fair value at the time of the acquisition. The Environmental Base at Vats is part of the Offshore business area.

Amounts in NOK million	100 %
Cash consideration (60 %)	136
- Cash and cash equivalents	-17
Net cash consideration	119
Market value of shares owned (40 %)	91
Total market value of shares excl. cash and cash equivalents	210
Property, plant and equipment 1)	580
Deferred tax	5
Long-term interest-bearing debt	-328
Financial derivatives	-25
Short-term interest-bearing debt	-16
Current non-interest-bearing debt	-6
Net identifiable assets and liabilities	210

1) Of which NOK 98 million in write-up (100%).

Fjerby

The AF Group acquired Fjerby AS on 15 September 2014. Fjerby and the associated company DS Entreprenør AS are engaged in rock and snow protection. The subsidiary Microtrenching AS has activities related to the sawing of narrow grooves in asphalt and other substrates where pipes for fibre optic cable are to be laid.

Amounts in NOK million	Fjerby
Cash consideration	20
- Cash and cash equivalents	-1
Net cash consideration	19
Property, plant and equipment	8
Current assets, excl. cash and cash equivalents	19
Interest-bearing debt	-8
Current non-interest-bearing debt	-10
Net identifiable assets and liabilities	8
Goodwill	11

The acquisition generated goodwill of NOK 11 million, which is related to the complementary competence. Fjerby will be part of the Building business area.

4. Accounting policies

The accounting policies applied to the accounts are consistent with those described in the annual report for 2013.

The AF Group has started to apply the rules in IAS 39 for hedge accounting upon entering into substantial contracts in a foreign currency (cash flow hedging). The effective portion of the change in the value of the hedging instrument is recognised temporarily under other comprehensive income for the component "other unrecognised equity" under equity. Gradually as the hedged income is recognised, the hedging instrument's change in value is reversed in other comprehensive income and recognised in the income statement.

New and amended standards implemented by the Group

The AF Group has not implemented any new or amended standards in 2014. IFRS 10, 11 and 13 were implemented early from the 1st quarter of 2013.

5. Estimates

The preparation of the interim accounts requires the use of assessments, estimates and assumptions that have an effect on the application of accounting principles and recognised figures related to assets and commitments, revenues and costs. The estimates are based on the management's best judgement and experience, and there is some uncertainty related to the concurrence of these estimates with the actual result. Estimates and their underlying assumptions are assessed on a continuous basis. Changes in accounting estimates are recognised for the period in which the estimate is changed and for future periods if these are affected by the change in estimate.

6. Transactions with related parties

The Group's related parties consist of associates, joint ventures, the Company's shareholders and members of the Board of Directors and Corporate Management Team. All business transactions with related parties are carried out at arm's length.

On 14 February 2014, the Board of Directors approved the redemption of all the outstanding options by means of a capital increase. This was in accordance with the authorisation from the General Meeting. A total of 5,755,679 options were exercised by 1,240 employees of the AF Group. The volume-weighted average redemption price for the options was NOK 41.97. Primary insiders in the AF Group purchased 447,701 shares in the AF Gruppen ASA in this connection.

7. IFRIC 15

Segment information is presented in accordance with the Group's accounting policies in accordance with IFRS with the exception of IFRIC 15 (Agreements for the Construction of Real Estate). The effect of IFRIC 15 on the consolidated accounts is illustrated in a separate table in the segment information. According to IFRIC 15, income from the sale of apartments and the associated proportion of contracting services shall not be entered until handover. The table below shows residential housing projects for our own account that are in the production phase. Contractor values have been included in those cases where group companies are the contractor.

Projects for own account - Property

Prosjekt	AFs construction value ex. VAT (NOK million)	Housing units	Start up	Construction period Completion	Ownership share AF
Lillohagen F/G	111	58	Q4 2012	Q3 2014	33 %
Kilen Panorama	51	20	Q1 2014	Q4 2014	40 %
Hasle Linje A1/A2/A3	245	94	Q2 2014	Q1 2016	50 %

Company information

AF Gruppen ASA

Head office: Innspurten 15 0603 Oslo Norway T +47 22 89 11 00 F +47 22 89 11 01

Postal address:

P.O. Box 6272 Etterstad 0603 Oslo Norway

Company's Board of Directors

Tore Thorstensen, Chairman of the Board Mari Broman Hege Bømark Daniel Kjørberg Siraj Peter Groth Kenneth Svendsen, elected by the employees Pål Jacob Gjerp, elected by the employees Arne Sveen, elected by the employees

Corporate Management

Pål Egil Rønn, CEO Sverre Hærem, CFO Arild Moe, EVP Civil Engineering and Environment Morten Grongstad, EVP Building Andreas Jul Røsjø, EVP Property and Energy Robert Haugen, EVP Offshore

Financial calendar

Presentation of interim accounts:

14/11/2014	Interim report 3rd quarter 2014
13/02/2015	Interim report 4th quarter 2014
13/05/2015	Interim report 1st quarter 2015
21/08/2015	Interim report 2nd quarter 2015
13/11/2015	Interim report 3rd quarter 2015

The presentation of interim accounts for the 3rd quarter 2014 will take place at Felix Konferansesenter, Bryggetorget 3, at 8:30 a.m.

For more information on the company, visit our web site at www.afgruppen.no

OPERATIONAL STRUCTURE

Johan Rognerud AF Arctic Pålplintar

AF Anlegg

Engineering Environment Building Property Energy Offshore

AF Decom BA Gjenvinning Rimol Miljøpark Jølsen Miljøpark AF Decom AB Härnösand Byggreturer

AF Byggfornyelse AF Bygg Østfold AF Bygg Sør

AF Bygg Rogaland Strøm Gundersen Consolvo Haga & Berg Entreprenør Thorendahl

AF Bygg Oslo

Boligenergi

AF Eiendom AF Energi & Miljøteknikk

AF Offshore Decom

AF Decom Offshore UK Ltd

Miljøbase Vats

AF Offshore Mollier

AF Offshore Mandal

AF Offshore Systems

AF Offshore Aeron

Aeron Energy Tech. Co

AF Offshore Aeron Pte. Ltd.

AF Bygg Göteborg AF Bygg Syd