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AF Gruppen — Interim / Quarterly Report 2014
Aug 22, 2014
3522_rns_2014-08-22_c8c24991-0928-4fde-9c68-a3c834e50409.pdf
Interim / Quarterly Report
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2nd quarter and 1st half of 2014
From the CEO
AF Gruppen is performing well in many areas and operations are generally good.
As expected, the activity level in offshore operations will be low for all of 2014, but offshore demolition contracts make up a good order backlog for 2015 and 2016. It is very satisfying that land-based operations have strengthened profit margins and provided organic growth of 8.7 % so far this year.
We continued to recruit 'likeable' associates, who thrive with our culture and who are concerned with creating value for AF Gruppen. This, combined with distinct risk management and organization for good operations will further strengthen our competitiveness going ahead. The basis for continued profitable growth is therefore good.
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 2Q and 1st half
- Revenues were NOK 2,567 million (2,709 million) in the 2nd quarter and NOK 4,862 million (5,084 million) in the 1st half of the year.
- Earnings before tax were NOK 153 million (129 million) in the 2nd quarter and NOK
245 million (220 million) in the 1st half of the year.
- Profit margin was 6.0 per cent (4.8 per cent) in the 2nd quarter and 5.0 per cent
- (4.3 per cent) in the 1st half of the year.
- Total order backlog was NOK 11,427 million (10,281 million).
- Net interest-bearing receivables were NOK 390 million (59 million) as at 30 June 2014.
Summary of 2Q and 1st half of 2014
| Key figures (NOK million) | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and other income | 2,567 | 2,709 | 4,862 | 5,084 | 10,127 |
| EBITDA | 172 | 155 | 282 | 272 | 679 |
| Earnings before finacial items and tax (EBIT) | 146 | 128 | 231 | 217 | 568 |
| Earnings before tax (EBT) | 153 | 129 | 245 | 220 | 580 |
| Result per share (NOK) | 1.24 | 1.04 | 2.05 | 1,94 | 5.26 |
| Diluted result per share (NOK) | 1.24 | 1.01 | 2.05 | 1,91 | 5.11 |
| EBITDA margin | 6.7 % | 5.7 % | 5.8 % | 5.3 % | 6.7 % |
| Operating profit margin (EBIT %) | 5.7 % | 4.7 % | 4.7 % | 4.3 % | 5.6 % |
| Pre-tax margin (EBT %) | 6.0 % | 4.8 % | 5.0 % | 4.3 % | 5.7 % |
| Return on capital employed (ROaCE)1) | 41.6 % | 28.1 % | 45.7 % | ||
| Cash flow from operating activities | 24 | 388 | -106 | 267 | 1,015 |
| Net interest-bearing receivables (debt) | 390 | 59 | 751 | ||
| Equity ratio | 22.7 % | 21.1 % | 25.5 % | ||
| Order backlog | 11,427 | 10,281 | 10,976 |
1) 12-month rolling average
Frya-Vinstra
Business areas
Civil Engineering
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 836 | 730 | 1,542 | 1,328 | 2,950 |
| EBIT | 52 | 66 | 108 | 92 | 253 |
| EBT | 53 | 69 | 113 | 99 | 265 |
| EBIT % | 6.2 % | 9.0 % | 7.0 % | 6.9 % | 8.6 % |
| EBT % | 6.4 % | 9.5 % | 7.4 % | 7.4 % | 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 836 million (730 million) and earnings before tax of NOK 53 million (69 million) in the 2nd quarter. Revenues totalled NOK 1,542 million (1,328 million) and earnings before tax totalled NOK 113 million (99 million) in the first half of the year.
AF Anlegg continued to a high level of activity and perform well operationally in the 2nd quarter. The unit is experiencing a large supply of new projects in the market, and there is a high volume of tender calculations.
Pålplintar reported weak results for the 2nd quarter. Major organisational adaptations have been made.
In April, AF Anlegg was selected as the contractor for the Preparatory Åsland Work contract by the Norwegian National Rail Administration. This contract concerns driving two access tunnels, each with a length of approximately 1 km, down towards the main track of the Follo Line. Various site preparation work will also be carried out at Åsland. The contract is valued at approximately NOK 250 million, excluding VAT. The work started at the turn of April/May, and the construction period will last for approximately 1 year.
The order backlog for Civil Engineering was NOK 4,015 million (4,450 million) as at 30 June 2014.
Skarfossdammen, Rjukan
Environment
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 158 | 155 | 313 | 264 | 684 |
| EBIT | 31 | 7 | 35 | 4 | 40 |
| EBT | 30 | 6 | 33 | 3 | 38 |
| EBIT % | 19.9 % | 4.2 % | 11.2 % | 1.5 % | 5.8 % |
| EBT % | 19.2 % | 4.0 % | 10.5 % | 1.3 % | 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 158 million (155 million) and earnings before tax of NOK 30 million (6 million) for the 2nd quarter. Revenues totalled NOK 313 million (264 million) and earnings before tax totalled NOK 33 million (3 million) in the 1st half of the year.
AF Decom AS reported a lower than expected level of activity for the quarter. 50 per cent of the shares in BA Gjenvinning AS were sold in June, and the impact on earnings was recognised this quarter.
Härnösand Byggreturer saw a good level of activity and delivered good results in the 2nd quarter.
AF Decom AB has reported weak results over a period of time, and organisational adaptations were made after the end of the quarter.
Rimol Miljøpark in Trondheim has been performing well. The level of activity at Jølsen Miljøpark in Skedsmo is increasing.
The order backlog for the Environment business area was NOK 194 million (266 million) as at 30 June 2014.
Grefsen Elementary School
Building
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 1,336 | 1,199 | 2,480 | 2,363 | 4,793 |
| EBIT | 70 | 42 | 101 | 68 | 169 |
| EBT | 69 | 37 | 98 | 61 | 160 |
| EBIT % | 5.2 % | 3.5 % | 4.1 % | 2.9 % | 3.5 % |
| EBT % | 5.2 % | 3.1 % | 4.0 % | 2.6 % | 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 the 2nd quarter, Building reported revenues of NOK 1,336 million (1,199 million) and earnings before tax of NOK 69 million (37 million). Revenues totalled NOK 2,480 million (NOK 2,363 million) and earnings before tax totalled NOK 98 million (NOK 61 million) in the 1st half of the year.
The building units in Oslo, AF Bygg Oslo and AF Byggfornyelse, both showed a positive trend in the 2nd quarter. AF Bygg Østfold had a high level of activity and performed, and it reported good results for the quarter. AF Bygg Sør experienced a low level of activity and delivered weak results. AF Bygg Rogaland has had a good level of activity during the quarter, but the results are not satisfactory. The level of activity at AF Bygg Göteborg is increasing, and the unit is delivering positive results. Strøm Gundersen and its subsidiaries have had a high level of activity and are reporting very good results in the 2nd quarter.
In April, Strøm Gundersen was selected by Union Eiendomsutvikling as the contractor for the construction of an office building at Union Brygge in Drammen. This contract is for the construction of an office building of approximately 10,600 m2, and it is valued at NOK 188 million, excluding VAT.
In April, Strøm Gundersen entered into a contract with Øvre Eiker Municipality for the construction of a nursing home at Hokksund in Buskerud. The new building will consist of three stories and a basement, with a total gross area of 6,550 m2, and the contract is valued at NOK 119 million, excluding VAT. Construction will start in May 2014 and is scheduled for completion in January 2016.
In June, AF Bygg Østfold was appointed by ASKO Norge AS as the turnkey contractor for the construction of the new refrigerated storage facility in connection with ASKO's existing facility in the Municipality of Vestby in Akershus. The new refrigerated storage facility will have a combined floor space of approximately 17,000 m2. The value of the contract is approximately NOK 322 million, excluding VAT. The work will start in August/September and the construction period will last approximately 30 months.
In June, Strøm Gundersen was appointed by Papirbredden Eiendom AS as the contractor for the construction of the Papirbredden 3 office building in Drammen. This contract is for the construction of 10,500 m2, of net lettable space, and it will contain offices and a parking basement. The contract is valued at NOK 153 million, excluding VAT. Construction will start in the autumn of 2014 and is scheduled for completion in July–October 2015.
AF Bygg Oslo was appointed by Hasle Linje 4 AS (Höegh Eiendom) as the turnkey contractor for the construction of an office building at Hasle in Oslo. The contract encompasses construction of an eight-storey office building with basement car parking. The total gross area for this project is approximately 15,800 m2. This contract has a value of NOK 294 million, excl. VAT. Construction started in the 2nd quarter of 2014, and completion is scheduled for the 2nd quarter of 2016.
The order backlog for the Building business area was NOK 4,882 million (4,034 million) as at 30 June 2014.
Hasle Linje
Property
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 7 | 8 | 16 | 26 | 60 |
| EBIT | 3 | 2 | 7 | 6 | 32 |
| EBT | 2 | - | 5 | 2 | 30 |
| EBIT % | - | - | - | - | - |
| EBT % | - | - | - | - | - |
The Property business area encompasses the development of residential housing units and commercial buildings for our own account in geographic areas where AF has access to its own contracting services. These development projects are organised as associated companies in the AF Group and are not included in the order backlog. The Swedish property development activities in Gothenburg have been part of the Property business area since 1 January 2014.
Property reported earnings before tax of NOK 2 million (0 million) for the 2nd quarter and NOK 5 million (2 million) for the 1st half of the year.
The residential housing market is still perceived as selective, but it is showing a positive trend. A decision was made to initiate the last part of construction stage 1 for the Krydderhagen project at Hasle in Oslo in the 2nd quarter as a result of good sales.
A total of 27 (12) apartments were sold in the 2nd quarter. AF's share of the apartments sold was 12 (7). A total of 50 (52) apartments were sold in the 1st half of the year, and AF's share was 23 (23).
Of the apartments sold in the 2nd quarter of 2014, 3 (3) were completed apartments. There were 0 (7) unsold completed apartments at the end of the quarter. AF owns land and development rights in progress, which are estimated to amount to 1,048 (938) residential units. AF has 14,643 (12,951) m2 of commercial property under development. The numbers refer to AF's share of the projects.
In May, the AF Group signed a letter of intent with Höegh Eiendom for cooperation and development of commercial sites on the grounds of Arcus's former production facility at Hasle in Oslo. Development of offices with a total gross area of 110,000 m2, 18,350 m2 of which has already been leased, on the sides is planned. The agreement implies the purchase of 50 per cent of the shares in a new project/principal company that will be spun off from Hasle Utvikling AS. 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.
Kirkeveien 17, Bærum
Energy
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 33 | 44 | 61 | 79 | 173 |
| EBIT | 2 | 3 | - | 5 | 11 |
| EBT | 3 | 3 | - | 5 | 12 |
| EBIT % | 5.6 % | 7.3 % | -0.6 % | 6.3 % | 6.5 % |
| EBT % | 7.8 % | 7.6 % | 0.4 % | 6.6 % | 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 2nd quarter were NOK 33 million (44 million) and earnings before tax were NOK 3 million (3 million). Revenues totalled NOK 61 million (79 million) and earnings before tax were NOK 0 million (5 million) in the 1st half of the year.
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 order intake for the quarter was exceptionally good (NOK 102 million), due in particular to the conversion of several such EPC contracts during the quarter 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 80 million in addition to the existing order backlog.
The order backlog for the Energy business area was NOK 125 million (108 million) as at 30 June 2014.
The Murchison platform
Offshore
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 238 | 590 | 511 | 972 | 1,480 |
| EBIT | -3 | 14 | -4 | 38 | 70 |
| EBT | -3 | 14 | -4 | 38 | 71 |
| EBIT % | -1.1 % | 2.4 % | -0.8 % | 3.9 % | 4.7 % |
| EBT % | -1.3 % | 2.4 % | -0.8 % | 4.0 % | 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 and AF Offshore Mandal, and projects related to the maintenance and modification of onshore facilities (V & M Landanlegg), as well as the associated company Miljøbase Vats.
Revenues in the 2nd quarter were NOK 238 million (590 million) and earnings before tax were NOK -3 million (14 million). Revenues totalled NOK 511 million (NOK 972 million) and earnings before tax totalled NOK -4 million (38 million) in the first half of the year.
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 2nd quarter. A low level of activity also entails a weak result for the quarter.
AF Offshore Aeron has an increasing level of activity, and the
results show improvement. The marine market for HVAC services is showing a positive trend.
AF Offshore Mollier reported a weak result for the quarter. AF Offshore Mandal reported good results for the 2nd quarter. AF Offshore Systems has had a weak 2nd quarter and 1st half year.
V & M Landanlegg performed well and delivered good results for the second quarter.
After the end of the quarter, AF Decom Offshore U.K. Limited, in a consortium with Heerema Marine Contractors Nederland SE (Heerema-AF Consortium), entered into a letter of intent with CNR, Canadian Natural Resources International (U.K.) Limited, for the removal of the Murchison platform in the North Sea. The letter of intent encompasses a major contract for engineering, preparation, removal and decommissioning (EPRD) of both decks and the steel foundations, with a total weight of more than 37,000 tonnes. The letter of intent presupposes commencement of the engineering work immediately after the contract is signed, while the offshore work will start early in 2016. The removal and decommissioning work will last until 2020. This contract will be important to the unit, but it will not generate significant revenue until the start of the offshore work in 2016.
The order backlog for Offshore was NOK 2,156 million* (1,389 million) as at 30 June 2014.
*also includes the letter of intent with CNR
AFG - Share price last 12 months
Financial information
Net operating cash flow was NOK 24 million (388 million) in the 2nd quarter of 2014. The AF Group had a cash flow from net investments of NOK 34 million (1 million) in the 2nd quarter. Cash flow before capital transactions and financing was NOK 58 million (389 million) in the 2nd quarter. Dividends of NOK 529 million (373 million) were distributed in the 2nd quarter. Cash flow from operations was NOK -106 million (267 million) in the 1st half of 2014. Cash flow before capital transactions and financing was NOK -35 million (230 million) for the 1st half of the year. Shares for NOK 242 million were issued in the 1st quarter of 2014 in connection with the Group's option programme.
The AF Group had net interest-bearing receivables of NOK 390 million (59 million) at the end of the 1st half year.
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 1,670 million as at 30 June 2014.
Total assets were NOK 5,291 million (NOK 4,731 million) as at 30 June 2014. The Group's equity totalled NOK 1,200 million (997 million). This corresponds to an equity ratio of 22.7 per cent (21.1 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 June 2014. This corresponds to a dividend-adjusted return of 15.1
| Name | No. shares | % share |
|---|---|---|
| OBOS Invest AS | 19 589 041 | 22.2 |
| Constructio AS | 11 879 266 | 13.5 |
| ØMF Invest AS | 11 174 378 | 12.7 |
| Aspelin Ramm Gruppen AS | 4 993 269 | 5.7 |
| ØMF Holding AS | 2 524 652 | 2.9 |
| 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 |
| Ten largest shareholders | 59 612 825 | 67.7 |
| Total other shareholders | 28 135 637 | 31.9 |
| Own shares | 340 197 | 0.4 |
| Total number of shares | 88 088 659 | 100.0 |
List of shareholders as at 30 June 2014:
LTI rate development
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.
A dividend of NOK 6.00 per share was distributed on 27 May 2014.
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.
Health, safety and the environment (HSE)
HSE has high priority at AF and is an integral part of the management at all levels. AF has a structured and uniform HSE system that encompasses all of the units and projects. The working environment shall be equally safe for all employees in our projects. The figures from AF's subcontractors are therefore included in the injury statistics.
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 or hazardous conditions, as well as investigating the most serious incidents or conditions. 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 LTI rate forms the basis for the measurement of safety work at AF. The LTI rate is defined as the number of injuries resulting in absence per million man-hours. A total of three injuries resulting in absence were registered in the 2nd quarter, all of them in Norway. This gives an LTI rate (lost-time injury rate) of 1.2 (0.8) for the 2nd quarter. The LTI-rate was 1.1 (1.5) for the first half of the year.
The registration of sickness absence forms the basis for the measurement of health work at AF. Sickness absence was 3.2 per cent (3.5 per cent) in the 2nd quarter. For the first half of the year sickness absebce was 3.5 per cent (4.0 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 in-
Sick leave development
Source separation rate
dicates how much of the waste from AF's operations is separated for the purpose of facilitating recycling. For the 2nd quarter, the result for building was 81 per cent (80 per cent), the result for renovation was 85 per cent (80 per cent) and the result for demolition was 94 per cent (94 per cent). For the first half of the year the result for building was 80 per cent (79 per cent), the result for renovation was 88 per cent (84 per cent), and the result for demolition was 94 per cent (95 per cent). These results are considered good, and they are well above the government requirement of a minimum of 60 per cent.
Organisation
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. Managers at AF should achieve results by setting a good example and building a culture in which orderly conduct is recognised, valued and lived up to by our employees.
The last employee satisfaction survey that was conducted in November 2013 shows that our employees are very happy, have a high degree of job satisfaction and are proud to work for AF. Our employees are good ambassadors for the recruitment of new personnel. We are experiencing an increasing and satisfactory influx of qualified employees.
The AF Group had a total of 2,931 (2,730) employees at the end of the 2nd quarter. Of these employees, 2,630 (2,511) were employed in Norway, 227 (163) in Sweden, 63 (45) in Lithuania, 0 (1) in Poland, 2 (4) in the UK, 6 (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. AF Gruppen 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.
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 June 2014, it was drawn NOK 192 million on this credit facility.
Market outlook
The outlook for our Norwegian markets is good, and growth is expected for the Swedish market.
The civil engineering market in Norway is influenced by political priorities and government funding. The current Government has stated that transport is one of the focus areas for the coming years, and the appropriation of NOK 22.7 billion for road purposes has been proposed in the revised national budget for 2014. This is an increase of approximately NOK 1.7 billion (8.1 per cent) over the budget for 2013. The analysis company Prognosesenteret estimates that the total civil engineering investments will increase by 12.4 per cent in 2015, with an additional 5.5 per cent in 2016. It is expected that the level of investment will be the highest in the Oslo region and in Western Norway. The Norwegian Public Roads Administration has advised that around 40 major projects will be advertised during the period from August 2014 to December 2015. 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 2.6 per cent from July 2013 to July of 2014. The prices in the Oslo region showed a slight increase, 0.4 per cent, while the prices in the Stavanger and Kristiansand region fell somewhat during the same period. The market for new residential housing has been through a challenging period. As a result of the weak sales performance for new residential housing during the last six months, Prognosesenteret expects 25,000 housing starts in 2014. This entails a decline of 18 per cent on a national basis. The decline is expected, however, to be of a short duration, and Prognosesenteret expects increasing growth in both 2015 and 2016.
After a relatively weak development in 2013, the Swedish central bank Riksbanken is expecting the gross national product to grow by 2.2 per cent in 2014 and 3.3 per cent in 2015. The Swedish Construction Federation is expecting growth of 10 per cent in 2014 and an additional 3 per cent in 2015 for investments in the building and civil engineering sector. Expectations of growth in the Swedish market, strengthens the foundation for AF's Swedish operations.
Overall, AF is positive about the long-term development in the Building, Environment and Property markets, and we are well-positioned for further growth.
There is great market potential for offshore demolition on
both the Norwegian and the British continental shelf. International regulations require that oil installations must be brought ashore after use for scrapping and recycling, and production on several fields along the coast production is coming to an end. In a report from the Norwegian Environment Agency, it is estimated that approximately 20 installations will be decommissioned during the period from 2015 to 2020. The number is significantly higher on the British continental shelf. Continued high oil prices and new technology has, however, increased the lifetime of many of the oil and gas fields, and this has postponed the expected time for demolition of many oil and gas installations.
Statistics Norway expects that the level of investment on the Norwegian continental shelf will decline to NOK 231.7 billion in 2014 to NOK 182.4 billion in 2015. This decline will be felt in particular in operations and field development, while a more moderate decline is suggested for the onshore facilities. Investment in the decommissioning and removal of oil installations is expected to increase by 7 per cent during the same period, from NOK 7.4 to 7.9 billion.
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 in Energy.
Oslo, 21 August 2014 Board of Directors of AF Gruppen ASA
For more detailed information, please contact: CEO Pål Egil Rønn [email protected] +47 909 57 713
CFO Sverre Hærem
[email protected] +47 952 45 167
Internet: www.afgruppen.com
Financial information
Condensed consolidated statement of comprehensive income
| NOK million, except for per share data | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Revenues and income | 2 567 | 2 709 | 4 862 | 5 084 | 10 127 |
| Subcontractors | -1 125 | -1 190 | -2 090 | -2 260 | -4 637 |
| Cost of materials | -522 | -550 | -878 | -927 | -1 366 |
| Payroll cost | -506 | -490 | -1 083 | -1 017 | -2 132 |
| Operating expenses ex. depreciation and impairment | -274 | -327 | -577 | -651 | -1 400 |
| Net gains (losses) and profit (loss) from associates | 32 | 4 | 47 | 41 | 87 |
| EBITDA | 172 | 155 | 282 | 272 | 679 |
| Depreciation and impairment of tangible fixed assets | -25 | -25 | -50 | -52 | -106 |
| Depreciation and impairment of intagible assets | -1 | -1 | -1 | -3 | -4 |
| Earnings before financial items and tax (EBIT) | 146 | 128 | 231 | 217 | 568 |
| Net financial items | 7 | 1 | 14 | 3 | 12 |
| Earnings before tax (EBT) | 153 | 129 | 245 | 220 | 580 |
| Income tax expense | -35 | -35 | -58 | -54 | -128 |
| Net income for the period | 119 | 94 | 187 | 165 | 453 |
| Attributable to: | |||||
| Shareholders of the parent | 108 | 85 | 174 | 158 | 429 |
| Non-controlling interests | 10 | 9 | 12 | 7 | 24 |
| Net income for the period | 119 | 94 | 187 | 165 | 453 |
| Earnings per share | 1,24 | 1,04 | 2,05 | 1,94 | 5,26 |
| Diluted earnings per share | 1,24 | 1,01 | 2,05 | 1,91 | 5,11 |
| Key Figures | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
| EBITDA margin | 6.7 % | 5.7 % | 5.8 % | 5.3 % | 6.7 % |
| Operating profit margin (EBIT %) | 5.7 % | 4.7 % | 4.7 % | 4.3 % | 5.6 % |
| Pre-tax margin (EBT %) | 6.0 % | 4.8 % | 5.0 % | 4.3 % | 5.7 % |
| Return on capital employed (ROCE) 1) | 41.6 % | 28.1 % | 45.7 % | ||
| Return on equity | 35.9 % | 22.1 % | 38.4 % | ||
| Equity ratio | 22.7 % | 21.1 % | 25.5 % | ||
| Net interest-bearing receivables 2) | 390 | 59 | 751 | ||
| Capital employed 3) | 1,470 | 1,140 | 1,414 | ||
| Order backlog | 11,427 | 10,281 | 10,976 |
1) Return on capital employed (ROCE) = Earnings before tax + interest expense / average capital employed
2) Net interest-bearing receivables = Interest-bearing receivables + cash and cash equivalents - interest-bearing debt
3) Capital employed = Equity + interest-bearing debt
Statement of comprehensive income
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Net income for the period | 119 | 94 | 187 | 165 | 453 |
| Net actuarial gains and losses | - | - | - | - | 3 |
| Currency translation differences | -2 | - | -7 | 8 | 19 |
| Other comprehensive income for the period | -2 | - | -7 | 8 | 22 |
| Total comprehensive income for the period | 117 | 94 | 179 | 174 | 475 |
| Attributable to: | |||||
| -Shareholders of the parent | 106 | 99 | 167 | 181 | 451 |
| -Non-controlling interests | 10 | -5 | 12 | -7 | 24 |
| Total comprehensive income for the period | 117 | 94 | 179 | 174 | 475 |
Equity
| Paid-in | Other | Retained | Attributable to share |
Non controlling |
||
|---|---|---|---|---|---|---|
| NOK million | capital | reserves | earnings | holders | interests | Total equity |
| Pr. 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 |
| Pr. 31.12.13 | 273 | 5 | 950 | 1,229 | 106 | 1,334 |
| Comprehensive income | - | -7 | 174 | 167 | 12 | 179 |
| Capital increase | 242 | - | - | 242 | - | 242 |
| Purchase of treasury shares | - | - | -28 | -28 | - | -28 |
| Sale of treasury shares | - | - | 9 | 9 | - | 9 |
| Dividend paid | -205 | - | -324 | -529 | -15 | -543 |
| Share-based remuneration | 6 | - | - | 6 | - | 7 |
| Trans. with. non-controlling inter. | - | - | -1 | -1 | 3 | 1 |
| Pr. 30.06.14 | 317 | -2 | 780 | 1,095 | 105 | 1,200 |
Consolidated balance sheet
| NOK million | 30.06.2014 | 30.06.2013 | 31.12.2013 |
|---|---|---|---|
| Tangible fixed assets | 351 | 380 | 397 |
| Intagible assets | 1,342 | 1,311 | 1,347 |
| Investment in associates | 282 | 219 | 272 |
| Deferred tax asset | 57 | 28 | 45 |
| Interest-bearing receivables | 56 | 49 | 59 |
| Pension plan and other financial assets | 13 | 8 | 12 |
| Total non-current assets | 2,101 | 1,995 | 2,131 |
| Inventories | 171 | 138 | 132 |
| Projects for own account | 89 | 120 | 97 |
| Trade receivables and other receivables | 2,325 | 2,316 | 2,093 |
| Interest-bearing receivables | 49 | 12 | 77 |
| Financial derivatives | - | 9 | 11 |
| Cash and cash equivalents | 555 | 141 | 695 |
| Total current assets | 3,189 | 2,736 | 3,105 |
| Total assets | 5,291 | 4,731 | 5,237 |
| Equity attributable to sharholders of the parent | 1,095 | 905 | 1,229 |
| Minority interests | 105 | 92 | 106 |
| Total equity | 1,200 | 997 | 1,334 |
| Long-term interest-bearing debt | 11 | 44 | 29 |
| Retirement benefit obligations | 2 | 5 | 2 |
| Provisions | 29 | 50 | 29 |
| Deferred tax | 425 | 524 | 422 |
| Total non-current liabilities | 467 | 622 | 483 |
| Short-term interest-bearing debt | 259 | 100 | 50 |
| Trade payables and other short term debt | 2,989 | 2,880 | 3,018 |
| Financial derivatives | 1 | - | 2 |
| Provisions | 139 | 117 | 149 |
| Tax payable | 236 | 16 | 200 |
| Total current liabilities | 3,623 | 3,112 | 3,419 |
| Total liabilities | 4,091 | 3,734 | 3,902 |
| Total equity and liabilities | 5,291 | 4,731 | 5,237 |
Consolidated cash flow statement
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| Earnings before financial items and tax (EBIT) | 146 | 128 | 231 | 217 | 568 |
| Depreciation, amortisation and impairment | 26 | 27 | 51 | 55 | 110 |
| Change in net working capital | -104 | 252 | -310 | 59 | 452 |
| Income taxes paid | -17 | -16 | -37 | -28 | -40 |
| Other adjustments | -27 | -3 | -41 | -35 | -75 |
| Cash flow from operating activities | 24 | 388 | -106 | 267 | 1,015 |
| Net investments | 34 | 1 | 71 | -38 | -107 |
| Cash flow before capital- and financing activities | 58 | 389 | -35 | 230 | 908 |
| Share issue | - | - | 242 | - | 53 |
| Transactions with minority | -14 | -1 | -14 | -1 | -31 |
| Sale of treasury shares | - | - | 9 | 4 | 7 |
| Purchase of treasury shares | -25 | - | -28 | -2 | -10 |
| Dividend paid | -529 | -373 | -529 | -379 | -384 |
| Cash flow from capital activities | -568 | -373 | -321 | -378 | -365 |
| Cash flow before financing activities | -510 | 16 | -356 | -148 | 543 |
| Cash effect from financial expenses | -2 | 2 | -4 | 5 | -9 |
| Cash flow before change in net interest-bearing debt | -511 | 18 | -360 | -143 | 534 |
| Net interest-bearing debt at beginning of period | -902 | -42 | -751 | -204 | -204 |
| Change in net-interest bearing debt without cash effekt | 1 | 1 | 1 | 2 | -14 |
| Change in net-interest bearing debt with cash effekt | 511 | -18 | 360 | 143 | -534 |
| Net interest-b. debt (receivables) at end of period | -390 | -59 | -390 | -59 | -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 | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 833 | 727 | 1,539 | 1,323 | 2,928 |
| Internal revenue and income | 3 | 3 | 3 | 5 | 22 |
| Total revenue and income | 836 | 730 | 1,542 | 1,328 | 2,950 |
| EBITDA | 65 | 79 | 135 | 119 | 309 |
| Earnings before financial items and tax (EBIT) | 52 | 66 | 108 | 92 | 253 |
| Earnings before tax (EBT) | 53 | 69 | 113 | 99 | 265 |
| EBITDA % | 7.8 % | 10.9 % | 8.8 % | 9.0 % | 10.5 % |
| EBIT % | 6.2 % | 9.0 % | 7.0 % | 6.9 % | 8.6 % |
| EBT % | 6.4 % | 9.5 % | 7.4 % | 7.4 % | 9.0 % |
| Assets | 1,530 | 1,211 | 1,664 | ||
| Order backlog | 4,015 | 4,450 | 4,604 |
Environment
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 154 | 147 | 306 | 249 | 662 |
| Internal revenue and income | 5 | 8 | 7 | 15 | 22 |
| Total revenue and income | 158 | 155 | 313 | 264 | 684 |
| EBITDA | 34 | 9 | 40 | 8 | 49 |
| Earnings before financial items and tax (EBIT) | 31 | 7 | 35 | 4 | 40 |
| Earnings before tax (EBT) | 30 | 6 | 33 | 3 | 38 |
| EBITDA % | 21.4 % | 5.6 % | 12.8 % | 3.2 % | 7.1 % |
| EBIT % | 19.9 % | 4.2 % | 11.2 % | 1.5 % | 5.8 % |
| EBT % | 19.2 % | 4.0 % | 10.5 % | 1.3 % | 5.5 % |
| Assets | 355 | 296 | 366 | ||
| Order backlog | 194 | 266 | 215 |
Building
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 1,335 | 1,198 | 2,478 | 2,361 | 4,792 |
| Internal revenue and income | 2 | 1 | 2 | 2 | 2 |
| Total revenue and income | 1,336 | 1,199 | 2,480 | 2,363 | 4,793 |
| EBITDA | 73 | 45 | 107 | 75 | 183 |
| Earnings before financial items and tax (EBIT) | 70 | 42 | 101 | 68 | 169 |
| Earnings before tax (EBT) | 69 | 37 | 98 | 61 | 160 |
| EBITDA % | 5.5 % | 3.8 % | 4.3 % | 3.2 % | 3.8 % |
| EBIT % | 5.2 % | 3.5 % | 4.1 % | 2.9 % | 3.5 % |
| EBT % | 5.2 % | 3.1 % | 4.0 % | 2.6 % | 3.3 % |
| Assets | 2,250 | 2,389 | 2,327 | ||
| Order backlog | 4,882 | 4,034 | 4,760 |
Property
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 7 | 8 | 16 | 26 | 60 |
| Internal revenue and income | - | - | - | - | - |
| Total revenue and income | 7 | 8 | 16 | 26 | 60 |
| EBITDA | 3 | 2 | 8 | 6 | 32 |
| Earnings before financial items and tax (EBIT) | 3 | 2 | 7 | 6 | 32 |
| Earnings before tax (EBT) | 2 | - | 5 | 2 | 30 |
| EBITDA % | - | - | - | - | - |
| EBIT % | - | - | - | - | - |
| EBT % | - | - | - | - | - |
| Assets | 420 | 352 | 351 | ||
| Order backlog | - | - | - |
Energy
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 33 | 44 | 61 | 79 | 172 |
| Internal revenue and income | - | - | - | - | 1 |
| Total revenue and income | 33 | 44 | 61 | 79 | 173 |
| EBITDA | 2 | 3 | - | 5 | 12 |
| Earnings before financial items and tax (EBIT) | 2 | 3 | - | 5 | 11 |
| Earnings before tax (EBT) | 3 | 3 | - | 5 | 12 |
| EBITDA % | 6.0 % | 7.6 % | -0.2 % | 6.6 % | 6.8 % |
| EBIT % | 5.6 % | 7.3 % | -0.6 % | 6.3 % | 6.5 % |
| EBT % | 7.8 % | 7.6 % | 0.4 % | 6.6 % | 6.8 % |
| Assets | 92 | 121 | 138 | ||
| Order backlog | 125 | 108 | 59 |
Offshore
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 234 | 585 | 505 | 955 | 1,448 |
| Internal revenue and income | 4 | 4 | 6 | 17 | 32 |
| Total revenue and income | 238 | 590 | 511 | 972 | 1,480 |
| EBITDA | - | 17 | 1 | 44 | 81 |
| Earnings before financial items and tax (EBIT) | -3 | 14 | -4 | 38 | 70 |
| Earnings before tax (EBT) | -3 | 14 | -4 | 38 | 71 |
| EBITDA % | -0.2 % | 2.9 % | 0.1 % | 4.5 % | 5.5 % |
| EBIT % | -1.1 % | 2.4 % | -0.8 % | 3.9 % | 4.7 % |
| EBT % | -1.3 % | 2.4 % | -0.8 % | 4.0 % | 4.8 % |
| Assets | 806 | 1,015 | 949 | ||
| Order backlog | 2,156 | 1,389 | 1,265 |
Other segments (Group)
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 10 | 8 | 19 | 16 | 30 |
| Internal revenue and income | 11 | -9 | 20 | 8 | 37 |
| Total revenue and income | 21 | -1 | 39 | 24 | 66 |
| EBITDA | 6 | 6 | 5 | 10 | 12 |
| Earnings before financial items and tax (EBIT) | 1 | 2 | -3 | 1 | -6 |
| Earnings before tax (EBT) | 9 | 5 | 13 | 7 | 7 |
| Assets | 1,012 | 843 | 1,194 | ||
| Order backlog | - | - | - |
Eliminations
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | -6 | - | -23 | - | -54 |
| Internal revenue and income | -23 | -7 | -37 | -48 | -115 |
| Total revenue and income | -30 | -7 | -60 | -48 | -168 |
| EBITDA | -1 | -2 | -1 | -4 | -14 |
| Earnings before financial items and tax (EBIT) | -1 | -2 | -1 | -4 | -14 |
| Earnings before tax (EBT) | -1 | -2 | -1 | -4 | -14 |
| Assets | -1 158 | -1 485 | -1 748 | ||
| Order backlog | 32 | - | 54 |
IFRIC 15
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | -32 | -10 | -40 | 75 | 89 |
| Internal revenue and income | - | - | - | - | - |
| Total revenue and income | -32 | -10 | -40 | 75 | 89 |
| EBITDA | -9 | -5 | -13 | 8 | 14 |
| Earnings before financial items and tax (EBIT) | -9 | -5 | -13 | 8 | 14 |
| Earnings before tax (EBT) | -9 | -5 | -13 | 8 | 14 |
| Assets | -17 | -10 | -4 | ||
| Order backlog | 24 | 33 | 19 |
Segment total
| NOK million | 2Q 14 | 2Q 13 | 1H 14 | 1H 13 | 2013 |
|---|---|---|---|---|---|
| External revenue and income | 2,567 | 2,709 | 4,862 | 5,084 | 10,127 |
| Internal revenue and income | - | - | - | - | - |
| Total revenue and income | 2,567 | 2,709 | 4,862 | 5,084 | 10,127 |
| EBITDA | 172 | 155 | 282 | 272 | 679 |
| Earnings before financial items and tax (EBIT) | 146 | 128 | 231 | 217 | 568 |
| Earnings before tax (EBT) | 153 | 129 | 245 | 220 | 580 |
| EBITDA % | 6.7 % | 5.7 % | 5.8 % | 5.3 % | 6.7 % |
| EBIT % | 5.7 % | 4.7 % | 4.7 % | 4.3 % | 5.6 % |
| EBT % | 6.0 % | 4.8 % | 5.0 % | 4.3 % | 5.7 % |
| Assets | 5,291 | 4,731 | 5,237 | ||
| Order backlog | 11,427 | 10,281 | 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 Q2 and the first half of the year 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 accounts for Q2 and the first half of the year 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
On 23 June 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 AS is under the Environment business area and will be recognised in the group accounts in accordance with the equity method of accounting.
| Amounts in MNOK | 50 % |
|---|---|
| Cash consideration | 14 |
| Unequal dividend claim | 1 |
| Total consideration | 15 |
| Fixed assets | - |
| Accounts receivables and other short-term receivables | 3 |
| Deferred tax | - |
| Accounts payable | -2 |
| Net identifiable assets and liabilities | 1 |
| Direct gain on sale of business | 14 |
| Latent gain on the remaining ownership interest of the business | 14 |
| Total gain from sale of business | 28 |
4. Accounting policies
The accounting policies applied to the accounts are consistent with those described in the annual report for 2013.
New and amended standards implemented by the Group
The AF Group has not implemented any new or amended standards in the 1st half of 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, but 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.
| Construction period | |||||
|---|---|---|---|---|---|
| Project | AFs construction value ex. VAT (NOK million) |
Housing units | Start up | 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 | 51 | Q2 2014 | Q1 2016 | 50 % |
Projects for own account - Property
Statement of the Board and CEO
On this day, the Board of Directors and the CEO have reviewed and approved the half-year financial statements and the unaudited abridged consolidated half-year accounts for the AF Group as at 30 June 2014 and for the 1st half of 2014 (Half-Year Report 2014).
The half-year financial statements have been prepared in accordance with IAS 34 – Interim Reporting, as approved by the EU, as well as supplementary Norwegian requirements in the Securities Trading Act.
It is confirmed to the best of our knowledge that:
• The amounts and disclosures in the accounts provide a true and fair view of the Company's and the Group's assets, liabilities, financial standing and results as a whole.
• The amounts and disclosures in the half-year report provide a true and fair overview of:
• the performance, results and standing of the Company and the Group,
• the key factors of risk and uncertainty that the AF Group will be facing in the next accounting period and
• significant transactions with related parties.
Oslo, 21 August 2014
Pål Egil Rønn Tore Thorstensen Mari Bromann Hege Bømark Peter Groth CEO Chairman of the Board
Daniel Kjørberg Siraj Kenneth Svendsen Pål Jacob Gjerp Arne Sveen
Employee Employee Employee representative representative representative
Company information
AF Gruppen ASA
Head office: Innspurten 15 0603 Oslo T +47 22 89 11 00 F +47 22 89 11 01
Postal address:
P.O. Box 6272 Etterstad 0603 Oslo
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:
| 22/08/2014 | Interim report 2nd quarter 2014 |
|---|---|
| 14/11/2014 | Interim report 3rd quarter 2014 |
The presentation of interim accounts for the 2nd quarter of 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