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AF Gruppen — Interim / Quarterly Report 2014
Feb 13, 2015
3522_rns_2015-02-13_6204e602-ff91-4d9e-ab5e-22dbb59bf9b5.pdf
Interim / Quarterly Report
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4th quarter and preliminary results for 2014
From the CEO
We are proud that our employees once again have set new records, headed up by Building and Civil Engineering. Land-based operations have seen good growth and have provided a strong result. Profitable growth is a core value of AF Gruppen, and in recent quarters we have stepped up the search for growth opportunities. We emphasize our core values and a culture of performance by both organic growth and in the search for potential target companies. With this, the 2014 results are history, and we will continue to focus on implementing projects with good organization and safe operations.
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 Q4
- • Revenues were NOK 2,730 million (2,508) in the 4th quarter and NOK 9,935 million (10,127 million) for the full year 2014.
- • Earnings before tax were NOK 216 million (213 million) in the 4th quarter and NOK 625 million (580 million) for the full year 2014.
- • Profit margin was 7.9 per cent (8.5 per cent) in the 4th quarter and 6.3 per cent (5.7 per cent) for the full year 2014.
- • Net operating cash flow was minus NOK 18 million (529 million) in the 4th quarter and NOK 86 million (1,015 million) for the full year 2014.
- • Total order backlog was NOK 9,429 million (10,976 million) as at 31 December 2014.
- • The Board of Directors'dividend proposal for the 2014 financial year is NOK 5.00 (6.00) pershare.
Summary of Q4 2014 and preliminary results for 2014
| Key figures (NOK million) | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and other income | 2,730 | 2,508 | 9,935 | 10,127 |
| EBITDA | 279 | 231 | 752 | 679 |
| Earnings before finacial items and tax (EBIT) | 241 | 202 | 635 | 568 |
| Earnings before tax (EBT) | 216 | 213 | 625 | 580 |
| Result pershare (NOK) | 1.69 | 2.07 | 5.11 | 5.26 |
| Diluted result pershare (NOK) | 1.68 | 2.00 | 5.09 | 5.11 |
| EBITDA margin | 10.2 % | 9.2 % | 7.6 % | 6.7 % |
| Operating profit margin (EBIT %) | 8.8 % | 8.0 % | 6.4 % | 5.6 % |
| Pre-tax margin (EBT %) | 7.9 % | 8.5 % | 6.3 % | 5.7 % |
| Return on capital employed (ROaCE)1) | - | - | 38.7 % | 45.7 % |
| Cash flow from operating activities | -18 | 529 | 86 | 1,015 |
| Net interest-bearing debt (receivables) | - | - | 95 | -751 |
| Equity ratio | - | - | 27.6 % | 25.5 % |
| Order backlog | - | - | 9,429 | 10,976 |
1) 12-month rolling average
Follobane project, Åsland
Business areas
Civil Engineering
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 919 | 794 | 3,172 | 2,950 |
| EBIT | 128 | 79 | 286 | 253 |
| EBT | 124 | 84 | 288 | 265 |
| EBIT % | 13.9 % | 9.9 % | 9.0 % | 8.6 % |
| EBT % | 13.5 % | 10.6 % | 9.1 % | 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 919 million (794 million) and earnings before tax of NOK 124 million (84 million) in the 4th quarter. Revenues were NOK 3,172 million (2,950 million) and earnings before tax were NOK 288 million (265 million) for the full year 2014.
AF Anlegg performed well and reported very good results for the 4th quarter. Throughout all of 2014 there has been a high level of activity in the major civil engineering projects, and they have performed well operationally. The scope of several projects has become greater than the original contract sum. 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, which carried out major operational and organisational adaptations in 2014, reported positive results for the 4th quarter.
After the end of the quarter, AF Anlegg entered into a contract with Statkraft for building and construction work in connection with the Ringedalen Power Plant. The contract is for a concrete dam and intake, approximately 2 km long underground rock tunnel and power station. The plant is located in the Municipality of Odda in Hordaland. The contract is valued at approximately NOK 130 million, excluding VAT. After a planning period, work will begin in the spring of 2015. The project is scheduled for completion by the end of 2017.
The order backlog for Civil Engineering was NOK 2,913 million (4,604 million) as at 31 December 2014.
Härnösand Byggreturer, Sweden
Environment
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 210 | 204 | 709 | 684 |
| EBIT | 1 | 21 | 41 | 40 |
| EBT | 2 | 19 | 39 | 38 |
| EBIT % | 0.4 % | 10.1 % | 5.8 % | 5.8 % |
| EBT % | 0.9 % | 9.4 % | 5.5 % | 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 210 million (204 million) and earnings before tax of NOK 2 million (19 million) for the 4th quarter. Revenues totalled NOK 709 million (684 million) and earnings before tax were NOK 39 million (38 million) for the full year 2014.
AF Decom AS reported a high level of activity in the 4th quarter. The unit reported satisfactory results for the quarter.
Härnösand Byggreturer performed well and delivered good results in the 4th quarter as well.
Substantial write-downs have been made in the project portfolio of AF Decom AB, which reported very weak results for the 4th quarter. The organisational and operational adaptations that have been made are expected to have a positive effect in 2015.
Rimol Miljøpark in Trondheim performed well and delivered good results in the 4th quarter. Jølsen Miljøpark in Skedsmo has an increasing level of activity and is reporting positive results.
In December, AF Decom AS was awarded the contract to demolish the cellulose plant at Tofte. The demolition work will start in August and is scheduled for completion by the end of April 2016.
The order backlog for the Environment business area was NOK 175 million (215 million) as at 31 December 2014.
Sørenga stages 7 and 8, Oslo
Building
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 1,450 | 1,184 | 5,172 | 4,793 |
| EBIT | 123 | 52 | 315 | 169 |
| EBT | 122 | 51 | 311 | 160 |
| EBIT % | 8.5 % | 4.4 % | 6.1 % | 3.5 % |
| EBT % | 8.4 % | 4.3 % | 6.0 % | 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 and subsidiaries
- • AF Bygg Rogaland
- • Strøm Gundersen and subsidiaries
Building reported revenues of NOK 1,450 million (1,184 million) and earnings before tax of NOK 122 million (51 million) for the 4th quarter. Revenues were NOK 5,172 million (4,793 million) and earnings before tax were NOK 311 million (160 million) for the full year 2014.
AF Bygg Oslo, AF Bygg Østfold, AF Bygg Göteborg and the companiesin Strøm Gundersen all performed well and delivered very good results in the 4th quarter. AF Byggfornyelse, AF Bygg Sør and AF Bygg Rogaland reported weaker than expected results for the 4th quarter.
AF Bygg Oslo has entered into an agreement with Sørenga Utvikling for the construction of stages 7 and 8 at Sørenga. The project consists of site preparation and foundation work, as well as 124 apartments over two buildings. The project will be carried out as a turnkey contract with a total value of NOK 448 million, excluding VAT. The site preparation and piling work started in the autumn and scheduled completed is in the 1st quarter of 2017.
In October, 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, with high energy-efficiency 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.
The order backlog for the Building business area was NOK 4,138 million (4,760 million) as at 31 December 2014.
In December, AF signed a letter of intent with LAB AS to acquire 70 per cent of the shares in the company. The acquisition includes the subsidiaries LAB Entreprenør AS, Åsane Byggmesterforretning AS and Fundamentering AS, as well asthe propertiesin LAB Eiendom AS. The expected revenues for 2014 from the operations of LAB AS are approximately NOK 1.7 billion.
The agreed purchase price for 70 per cent of the shares in LAB AS is estimated to be approximately NOK 700 million. Settlement is expected to consist of shares in AF Gruppen ASA and cash. The transaction is subject to due diligence and approval by the Board of Directors. It is expected that the transaction will be carried out in the first quarter of 2015.
Kilen Panorama, Sandefjord
Property
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 3 | 19 | 21 | 60 |
| EBIT | 14 | 22 | 19 | 32 |
| EBT | 13 | 25 | 13 | 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. 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 13 million (25 million) for the 4th quarter and NOK 13 million (30 million) for the full year 2014. Sales have been good for housing project starts during the period.
A total of 12 (29) apartments were sold in the 4th quarter. AF's share of the apartments sold was 6 (10). A total of 103 (99) apartments were sold in 2014, and AF'sshare was 44 (45).
Of the apartments sold in the 4th quarter of 2014, 0 (2) were completed apartments. There were 5 (3) unsold completed apartments at the end of the quarter. AF owns land and development rights in progress, which are estimated to amount to 1,052 (1,082) residential units. AF has commercial property with a gross area of 71,322 (9,051) m2 under development. The numbers refer to AF's share of the projects.
The residential housing market is showing a positive trend, particularly in the Greater Oslo Area, where AF hasthe greatest exposure. AF is planning to launch seven residential housing projects in the first half of 2015 with a total of 300 apartments. It is expected that this will improve the future results. In addition, two major commercial projects will be completed in 2015 and ready for sale.
AF signed a cooperation agreement with Miliarium (Adolfsen-Gruppen) in October for the development of a residential housing project in the centre of Sandefjord. The development of 130-180 residential units and some commercial space is expected. The AF Group and Miliarium will each have 50 per cent in the project / owner company. AF has previously built 185 apartments in Kilen, most recently 20 apartments in Kilen Panorama, which were handed over in December.
In Property and Building, the recognition of revenues related to the company's own projects is eliminated at the corporate level during the execution phase, and they are recognised in their entirety on handover.
Energy center, Bergen
Energy
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 42 | 55 | 141 | 173 |
| EBIT | 1 | 4 | 3 | 11 |
| EBT | - | 5 | 3 | 12 |
| EBIT % | 2.8 % | 8.0 % | 2.1 % | 6.5 % |
| EBT % | 0.7 % | 8.3 % | 2.2 % | 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 4th quarter were NOK 42 million (55 million) and earnings before tax were NOK 0 million (5 million). Revenuestotalled NOK 141 million (173 million) and earnings before tax were NOK 3 million (12 million) for the full year 2014.
Due to the delayed start of certain EPC projects, AF Energi & Miljøteknikk reported lower than expected revenues for the 4th quarter. The results for the quarter and full year are below expectation.
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 60 million in addition to the existing order backlog.
The order backlog for the Energy business area was NOK 85 million (59 million) as at 31 December 2014.
B11 platform, German continental shelf
Offshore
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 172 | 253 | 850 | 1,480 |
| EBIT | -19 | 21 | -22 | 70 |
| EBT | -40 | 21 | -45 | 71 |
| EBIT % | -11.3 % | 8.3 % | -2.6 % | 4.7 % |
| EBT % | -23.5 % | 8.1 % | -5.3 % | 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 six business units:
- • AF Offshore Decom and subsidiaries
- • AF Offshore Aeron
- • AF Offshore Mollier
- • AF Offshore Mandal
- • AF Offshore Systems
- • Environmental Base at Vats
Offshore also has activities related to the maintenance and modification of onshore facilities (V & M Landanlegg).
Revenues in the 4th quarter were NOK 172 million (253 million) and earnings before tax were minus NOK 40 million (21 million). Revenues totalled NOK 850 million (1,480 million) and earnings before tax were minus NOK 45 million (71 million) for the full year 2014.
The total revenues and earnings in the business area are marked by a low level of activity in AF Offshore Decom and a challenging oil services market in 2014.
As communicated earlier, AF Offshore Decom has not had any major demolition jobs in 2014. This is the main cause of the low level of activity in the 4th quarter and full year. The low level of activity has entailed a negative result. The company has a good order backlog.
AF Offshore Decom's offshore campaign for riser platform B-11 started in week no. 7 this year. The contract, which AF disclosed to the stock exchange in 2012, is valued at approximately NOK 500 million.
AF Offshore Aeron has an increasing level of activity. AF Offshore Aeron's company in Shanghai has an increasing level of activity and is performing well. In the 4th quarter, AF Offshore Aeron also established a company in Singapore. AFOffshore Molliersaw a lowerlevel of activity and reported a weakerthan expected resultforthe quarter. AFOffshore Mandal reported good results for the 4th quarter as well, while AF Offshore Systemssaw a weak quarter and full year 2014. V & M Landanlegg performed well and delivered good results for the 4th quarter as well.
AF Decom Offshore U.K. Limited, in a consortium with Heerema Marine Contractors Nederland SE (Heerema-AF Consortium), entered into an agreement with CNR, Canadian Natural Resources International (U.K.) in the 4th quarter. 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.
Higher financial expenses in Offshore for the quarter are attributed primarily to the financing of the Environmental Base at Vats and the associated value adjustment of interest rate hedging. The order backlog for the Offshore business area wasNOK 1,918 million (1,265 million) as at 31December 2014.
AFG - Share price last 12 months
Financial information
Net operating cash flow was minus NOK 18 million (529 million) in the 4th quarter 2014. The large variationsin cash flow from operations are in line with expectations for our project portfolio. The AF Group had a cash flow from net investments of minus NOK 32 million (minus 10 million) in the 4th quarter. Cash flow before capital transactions and financing was minus NOK 50 million (519 million) in the 4th quarter. Cash flow from operations was NOK 86 million (1,015 million) for the full year 2014. Cash flow before capital transactions and financing was minus NOK 164 million (908 million) for the full year 2014. Shares for NOK 37 million were issued in the 4th quarter in connection with the Group's option programme. The total amount issued in connection with the Group's option programme was NOK 279 million for the full year 2014. Dividends of NOK 529 million (373 million) were distributed in 2014.
The AF Group had net interest-bearing debt of NOK 95 million (minus 751 million) at the end of the 4th quarter.
The AF Group has a total financing framework of NOK 1,480 million. This consists of a one-year rolling credit facility with Danske Bank, which was increased from NOK 600 million to NOK 800 million in the 4th quarter. The company also has a NOK 80 million credit facility with DnB. In addition, the AF Group has a three-year NOK 600 million credit facility with Danske Bank and Handelsbanken that expires in June 2015.
The available liquidity stood at NOK 1,385 million as at 31 December 2014.
Total assets were NOK 5,428 million (5,237 million) as at 31 December 2014. The Group's equity totalled NOK 1,499 million (1,334 million). This corresponds to an equity ratio of 27.6 per cent (25.5 per cent).
Share performance
The AF Group'sshares are listed on theOslo 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).
| Name | No. shares | % share |
|---|---|---|
| OBOS BBL AS | 19,589,041 | 22.1 |
| ØMF Holding AS | 13,699,030 | 15.4 |
| Constructio AS | 13,043,962 | 14.7 |
| Aspelin Ramm Gruppen AS | 4,993,269 | 5.6 |
| LJM A/S | 2,513,900 | 2.8 |
| VITO Kongsvinger AS | 2,461,676 | 2.8 |
| Skogheim, Arne | 1,723,870 | 1.9 |
| Staavi, Bjørn | 1,515,452 | 1.7 |
| Moger Invest AS | 1,240,541 | 1.4 |
| Stenshagen Invest AS | 1,093,074 | 1.2 |
| Ten largest shareholders | 61,873,815 | 69.7 |
| Total other shareholders | 26,801,089 | 30.2 |
| Own shares | 50,000 | 0.1 |
| Total number of shares | 88,724,904 | 100.0 |
List of shareholders as at 31 December 2014
The closing price for the AF share was NOK 79.00 on 31 December 2014. This corresponds to a dividend-adjusted return of 25.5 per cent in 2014. The Oslo Stock Exchange's benchmark index showed a return of 5.0 per cent during the same period.
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, adjusted for employees who have left company, 3,437,357 as at 31 December 2014.
In October a total of 507 employees subscribed for a total of 996,245 shares in connection with the AF Group's share programme.ThesharesweresubscribedforatapriceofNOK58.90 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 ofsharesis 88,724,904, which correspondsto share capital of NOK 4,436,245.
The liquidity of the AF share has improved throughout 2014. A total of 7,101,787 (2,558,506) shares were traded on the stock exchange in 2014, and the average number of shares traded per trading day was 28,407 (10,275). Due to the improved liquidity, the company no longer requires a marketmaking agreement. This agreement was therefore terminated in 2014 effective February 2015.
The Board of Directors will propose a dividend of NOK 5.00 per share for the 2014 financial year to the General Meeting
LTI rate development
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 three injuries resulting in absence were registered in the 4th quarter. This gives an LTI rate (lost-time injury rate) of 1.3 (0.9) for the 4th quarter. The LTI rate for the full year 2014 year was 1.1 (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. For the 4th quarter, sickness absence was 3.7 per cent (3.5 per cent) . Sickness ab-
Sick leave development
Source separation rate
sence for the full year 2014 was 3.5 per cent (3.7 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 4th quarter, the result for building was 84 per cent (84 per cent), the result for renovation was 75 per cent (86 per cent) and the result for demolition was 96 per cent (96 per cent). For 2014, the result for building was 82 per cent (81 per cent), the result for renovation was 82 per cent (80 per cent), and the result for demolition was 96 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 479,135 tonnes of waste were sorted for the full year 2014, compared with 408,365 tonnes for the full year 2013. In addition, AF hasrecycled 707,941 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. AF is 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 2,797 (2,708) employees at the end of the 4th quarter. Of these employees, 2,530 (2,462) were employed in Norway, 201 (215) in Sweden, 56 (22) in Lithuania, 0 (3) 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 AF 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. Liquidity risk is considered low. The AF Group has a total financing framework of NOK 1,480 million. As at 31 December 2014, NOK 193 million had been drawn on this facility.
Market outlook
The civil engineering market in Norway is influenced by political priorities and government funding. NOK 26.8 billion has been appropriated for road purposesin the State Budget for 2015, and the Government has stated that transport will be given a significant boost. The appropriation for 2015 represents 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 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.
It is expected that Norges Bank's decision to lower the key rate in December 2014, combined with banks being willing to lend, may result in higher prices in the residential housing market. Prognosesenteret expects housing prices to rise around 4 per cent in 2015. However, there is reason to assume that there may be significant regional differences, where the demand for residential housing close to the central business district will contribute to the greatest growth. Residential housing construction, measured by the number ofstart permits, is also expected to grow 1 per cent and 6 per cent in 2015 and 2016, respectively. The greatest growth is expected to be in Oslo and Vest Agder.
The Swedish residential housing market showed strong growth in 2014, and a continued positive trend is expected in the coming year. The Swedish Construction Federation forecasts growth of 5 per cent in residential housing investmentsin 2015.Overall, AF is positive about the long-term development in the Building, Environment and Property markets, and we are well-positioned for further growth.
High oil prices and new technology have contributed earlier to a longer lifetime for many of the oil and gas fields. This has postponed the expected time for the demolition of many oil and gas installations. At the start of 2015, the price of oil has
fallen sharply over a short period of time, and the investment estimates for the Norwegian continental shelf for 2015 have been adjusted sharply downwards. This entails uncertainty related to the market outlook, particularly for AF's HVAC and crane operations. At the same time, lower oil prices means that the profitability of several oil fields in the North Sea is under pressure, and the oil companies must evaluate whether the production should continue. A report from Oil and Gas UK estimatesthat over 100 platforms and approximately 250 other structures (topsides) on the British continental shelf will be removed during the period prior to 2023. In addition, there are also installations that are to be removed from the Norwegian continental shelf. This represents opportunities for AF's offshore activities related to the demolition and removal of decommissioned installations.
The market outlook for the Energy business area is good, and it is influenced by the ever stricter requirements to reduce energy consumption imposed by the authorities and markets. In Norway, the authorities have set ambitious energy goals, and extensive energy efficiency improvement for existing buildings is hence necessary.
Energy savings contracts in municipalities and public enterprises have become an increasingly interesting market area since the contract terms have been standardised. There has been a significant increase in the number of advertised energy savings contracts, and this growth is expected to continue. A corresponding standard for energy savings contracts is also gaining a foothold with private property owners. Through the range of services provided by AF Energy, we are well-positioned to take part in further growth in this market.
The development of the Swedish economy is influenced by the eurozone, and the key rate in Sweden has been lowered to record-low levels in 2014. The central bank Riksbanken is expecting gross national product growth of 2.6 per cent in 2015. The forecasts from the Swedish Construction Federation indicate growth of 4-5 per cent for building and construction investments in Sweden 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, 12 February 2015
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.no
Condensed consolidated statement of comprehensive income
| NOK million, except per share data | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Revenues and income | 2,730 | 2,508 | 9,935 | 10,127 |
| Subcontractors | -1,312 | -1,229 | -4,498 | -4,637 |
| Cost of materials | -318 | -145 | -1,468 | -1,366 |
| Payroll cost | -614 | -588 | -2,238 | -2,132 |
| Operating expenses ex. depreciation and impairment | -254 | -357 | -1,116 | -1,400 |
| Net gains(losses) and profit (loss) from associates | 46 | 42 | 136 | 87 |
| EBITDA | 279 | 231 | 752 | 679 |
| Depreciation and impairment of tangible fixed assets | -37 | -29 | -114 | -106 |
| Depreciation and impairment of intagible assets | -1 | - | -3 | -4 |
| Earnings before financial items and tax (EBIT) | 241 | 202 | 635 | 568 |
| Net financial items | -24 | 11 | -10 | 12 |
| Earnings before tax (EBT) | 216 | 213 | 625 | 580 |
| Income tax expense | -54 | -38 | -142 | -128 |
| Net income for the period | 162 | 175 | 483 | 453 |
| Attributable to: | ||||
| Shareholders of the parent | 148 | 169 | 442 | 429 |
| Non-controlling interests | 14 | 6 | 41 | 24 |
| Net income for the period | 162 | 175 | 483 | 453 |
| Earnings per share | 1.69 | 2.07 | 5.11 | 5.26 |
| Diluted earnings pershare | 1.68 | 2.00 | 5.09 | 5.11 |
| Key figures | 4Q 14 | 4Q 13 | 2014 | 2013 |
| EBITDA margin | 10.2 % | 9.2 % | 7.6 % | 6.7 % |
| Operating profit margin (EBIT %) | 8.8 % | 8.0 % | 6.4 % | 5.6 % |
| Pre-tax margin (EBT %) | 7.9 % | 8.5 % | 6.3 % | 5.7 % |
| Return on capital employed (ROaCE)1) | 38.7 % | 45.7 % | ||
| Return on equity | 34.3 % | 38.4 % | ||
| Equity ratio | 27.6 % | 25.5 % | ||
| Net interest-bearing debt (receivables) 2) | 95 | -751 | ||
| Capital employed3) | 1,814 | 1,414 | ||
| Order backlog | 9,429 | 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 | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Net income for the period | 162 | 175 | 483 | 453 |
| Net actuarial gains and losses | 1 | 3 | 1 | 3 |
| Items that will not be reclassified to income statement in subsequent periods | 1 | 3 | 1 | 3 |
| Net cash flow hedges | -54 | - | -74 | - |
| Currency translation differences | 18 | 2 | 4 | 19 |
| Items that may be reclassified to income statement in subsequent periods | -36 | 2 | -69 | 19 |
| Other comprehensive income for the period | -35 | 5 | -68 | 22 |
| Total comprehensive income for the period | 127 | 180 | 415 | 475 |
| Attributable to: | ||||
| -Shareholders of the parent | 112 | 174 | 374 | 451 |
| -Non-controlling interests | 15 | 6 | 41 | 24 |
| Total comprehensive income for the period | 127 | 180 | 415 | 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 | - | -69 | 442 | 374 | 41 | 415 |
| Capital increase | 279 | - | - | 279 | - | 279 |
| Purchase of treasury shares | - | - | -33 | -33 | - | -33 |
| Sale of treasury shares | - | - | 35 | 35 | - | 35 |
| Dividend paid | -205 | - | -324 | -529 | -16 | -544 |
| Share-based remuneration | 9 | - | - | 9 | - | 9 |
| Trans. with. non-controlling inter. | - | - | -2 | -2 | 6 | 4 |
| Per 31/12/14 | 357 | -64 | 1,069 | 1,362 | 137 | 1,499 |
Consolidated balance sheet
| NOK million | 31/12/2014 | 31/12/2013 |
|---|---|---|
| Tangible fixed assets | 992 | 397 |
| Intagible assets | 1,358 | 1,347 |
| Investment in associates | 406 | 272 |
| Deferred tax asset | 66 | 45 |
| Interest-bearing receivables | 77 | 59 |
| Pension plan and other financial assets | 8 | 12 |
| Total non-current assets | 2,907 | 2,131 |
| Inventories | 124 | 132 |
| Projects for own account | 108 | 97 |
| Trade receivables and other receivables | 2,129 | 2,093 |
| Interest-bearing receivables | 52 | 77 |
| Financial derivatives | 17 | 11 |
| Cash and cash equivalents | 91 | 695 |
| Total current assets | 2,522 | 3,105 |
| Total assets | 5,428 | 5,237 |
| Equity attributable to sharholders of the parent | 1,362 | 1,229 |
| Minority interests | 137 | 106 |
| Total equity | 1,499 | 1,334 |
| Long-term interest-bearing debt | 63 | 29 |
| Retirement benefit obligations | 1 | 2 |
| Provisions | 13 | 29 |
| Deferred tax | 249 | 422 |
| Financial derivatives | 78 | - |
| Total non-current liabilities | 404 | 483 |
| Short-term interest-bearing debt | 252 | 50 |
| Trade payables and other short term debt | 2,743 | 3,018 |
| Financial derivatives | 55 | 2 |
| Provisions | 153 | 149 |
| Tax payable | 322 | 200 |
| Total current liabilities | 3,525 | 3,419 |
| Total liabilities | 3,929 | 3,902 |
| Total equity and liabilities | 5,428 | 5,237 |
Consolidated cash flow statement
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| Earnings before financial items and tax (EBIT) | 241 | 202 | 635 | 568 |
| Depreciation, amortisation and impairment | 38 | 29 | 117 | 110 |
| Change in net working capital | -88 | 345 | -337 | 452 |
| Income taxes paid | -163 | -10 | -201 | -40 |
| Other adjustments | -46 | -37 | -128 | -75 |
| Cash flow from operating activities | -18 | 529 | 86 | 1,015 |
| Net investments | -32 | -10 | -250 | -107 |
| Cash flow before capital- and financing activities | -50 | 519 | -164 | 908 |
| Share issue | 37 | 53 | 279 | 53 |
| Transactions with minority | 2 | -30 | -12 | -31 |
| Sale of treasury shares | 26 | 3 | 35 | 7 |
| Purchase of treasury shares | -4 | -7 | -33 | -10 |
| Dividend paid | - | -3 | -529 | -384 |
| Cash flow from capital activities | 63 | 15 | -260 | -365 |
| Cash flow before financing activities | 12 | 535 | -424 | 543 |
| Cash effect from financial expenses | -12 | -12 | -20 | -9 |
| Cash flow before change in net interest-bearing debt | 1 | 522 | -443 | 534 |
| Net interest-bearing debt at beginning of period | 39 | -226 | -751 | -204 |
| Change in net-interest bearing debt without cash effekt | 56 | -3 | 402 | -14 |
| Change in net-interest bearing debt with cash effekt | -1 | -522 | 443 | -534 |
| Net interest-b. debt (receivables) at end of period | 95 | -751 | 95 | -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 | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 917 | 786 | 3,160 | 2,928 |
| Internal revenue and income | 2 | 8 | 12 | 22 |
| Total revenue and income | 919 | 794 | 3,172 | 2,950 |
| EBITDA | 141 | 95 | 339 | 309 |
| Earnings before financial items and tax (EBIT) | 128 | 79 | 286 | 253 |
| Earnings before tax (EBT) | 124 | 84 | 288 | 265 |
| EBITDA % | 15.3 % | 12.0 % | 10.7 % | 10.5 % |
| EBIT % | 13.9 % | 9.9 % | 9.0 % | 8.6 % |
| EBT % | 13.5 % | 10.6 % | 9.1 % | 9.0 % |
| Assets | 1,246 | 1,664 | ||
| Order backlog | 2,913 | 4,604 |
Environment
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 204 | 200 | 692 | 662 |
| Internal revenue and income | 6 | 4 | 17 | 22 |
| Total revenue and income | 210 | 204 | 709 | 684 |
| EBITDA | 3 | 22 | 51 | 49 |
| Earnings before financial items and tax (EBIT) | 1 | 21 | 41 | 40 |
| Earnings before tax (EBT) | 2 | 19 | 39 | 38 |
| EBITDA % | 1.4 % | 11.0 % | 7.2 % | 7.1 % |
| EBIT % | 0.4 % | 10.1 % | 5.8 % | 5.8 % |
| EBT % | 0.9 % | 9.4 % | 5.5 % | 5.5 % |
| Assets | 348 | 366 | ||
| Order backlog | 175 | 215 |
Building
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 1,450 | 1,184 | 5,169 | 4,792 |
| Internal revenue and income | 1 | - | 3 | 2 |
| Total revenue and income | 1,450 | 1,184 | 5,172 | 4,793 |
| EBITDA | 130 | 56 | 332 | 183 |
| Earnings before financial items and tax (EBIT) | 123 | 52 | 315 | 169 |
| Earnings before tax (EBT) | 122 | 51 | 311 | 160 |
| EBITDA % | 8.9 % | 4.7 % | 6.4 % | 3.8 % |
| EBIT % | 8.5 % | 4.4 % | 6.1 % | 3.5 % |
| EBT % | 8.4 % | 4.3 % | 6.0 % | 3.3 % |
| Assets | 2,206 | 2,327 | ||
| Order backlog | 4,138 | 4,760 |
Property
| NOK million 4Q 14 4Q 13 2014 2013 External revenue and income 3 19 21 60 Internal revenue and income - - - Total revenue and income 3 19 21 60 EBITDA 14 22 19 32 Earnings before financial items and tax (EBIT) 14 22 19 32 Earnings before tax (EBT) 13 25 13 30 EBITDA % - - - - EBIT % - - - - EBT % - - - - Assets 622 351 Order backlog - - |
|||
|---|---|---|---|
Energy
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 42 | 54 | 141 | 172 |
| Internal revenue and income | - | - | - | 1 |
| Total revenue and income | 42 | 55 | 141 | 173 |
| EBITDA | 1 | 5 | 3 | 12 |
| Earnings before financial items and tax (EBIT) | 1 | 4 | 3 | 11 |
| Earnings before tax (EBT) | - | 5 | 3 | 12 |
| EBITDA % | 3.1 % | 8.3 % | 2.4 % | 6.8 % |
| EBIT % | 2.8 % | 8.0 % | 2.1 % | 6.5 % |
| EBT % | 0.7 % | 8.3 % | 2.2 % | 6.8 % |
| Assets | 115 | 138 | ||
| Order backlog | 85 | 59 |
Offshore
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 169 | 242 | 840 | 1,448 |
| Internal revenue and income | 3 | 11 | 10 | 32 |
| Total revenue and income | 172 | 253 | 850 | 1,480 |
| EBITDA | -9 | 23 | -4 | 81 |
| Earnings before financial items and tax (EBIT) | -19 | 21 | -22 | 70 |
| Earnings before tax (EBT) | -40 | 21 | -45 | 71 |
| EBITDA % | -5.4 % | 9.2 % | -0.4 % | 5.5 % |
| EBIT % | -11.3 % | 8.3 % | -2.6 % | 4.7 % |
| EBT % | -23.5 % | 8.1 % | -5.3 % | 4.8 % |
| Assets | 1,390 | 949 | ||
| Order backlog | 1,918 | 1,265 |
Other segments (Group)
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 10 | 7 | 38 | 30 |
| Internal revenue and income | 11 | 16 | 40 | 37 |
| Total revenue and income | 21 | 23 | 78 | 66 |
| EBITDA | 8 | 3 | 17 | 12 |
| Earnings before financial items and tax (EBIT) | 3 | -1 | -2 | -6 |
| Earnings before tax (EBT) | 5 | 5 | 21 | 7 |
| Assets | 1,038 | 1,194 | ||
| Order backlog | - | - |
Eliminations
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | -67 | -9 | -111 | -54 |
| Internal revenue and income | -23 | -39 | -81 | -115 |
| Total revenue and income | -90 | -47 | -193 | -168 |
| EBITDA | -9 | -5 | -5 | -14 |
| Earnings before financial items and tax (EBIT) | -9 | -5 | -5 | -14 |
| Earnings before tax (EBT) | -9 | -5 | -5 | -14 |
| Assets | -1,531 | -1,748 | ||
| Order backlog | 166 | 54 |
IFRIC 15
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 3 | 24 | -15 | 89 |
| Internal revenue and income | - | - | - | - |
| Total revenue and income | 3 | 24 | -15 | 89 |
| EBITDA | -1 | 9 | -1 | 14 |
| Earnings before financial items and tax (EBIT) | -1 | 9 | -1 | 14 |
| Earnings before tax (EBT) | -1 | 9 | -1 | 14 |
| Assets | -5 | -4 | ||
| Order backlog | 35 | 19 |
Segment total
| NOK million | 4Q 14 | 4Q 13 | 2014 | 2013 |
|---|---|---|---|---|
| External revenue and income | 2,730 | 2,508 | 9,935 | 10,127 |
| Internal revenue and income | - | - | - | - |
| Total revenue and income | 2,730 | 2,508 | 9,935 | 10,127 |
| EBITDA | 279 | 231 | 752 | 679 |
| Earnings before financial items and tax (EBIT) | 241 | 202 | 635 | 568 |
| Earnings before tax (EBT) | 216 | 213 | 625 | 580 |
| EBITDA % | 10.2 % | 9.2 % | 7.6 % | 6.7 % |
| EBIT % | 8.8 % | 8.0 % | 6.4 % | 5.6 % |
| EBT % | 7.9 % | 8.5 % | 6.3 % | 5.7 % |
| Assets | 5,428 | 5,237 | ||
| Order backlog | 9,429 | 10,976 |
Notes
1. General information
The AF Group is one of Norway'sleading 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 islocated at Innspurten 15, 0663 Oslo. AF is listed on the Oslo Stock Exchange's OB Match list under the tickersymbol AFG.
This summary of financial information for the 4th quarter and 2014 has not been audited.
2. Basis of preparation
The consolidated financialstatementsfor the AF Group encompass AF Gruppen ASA and itssubsidiaries, joint ventures and associated companies. The consolidated financialstatementsfor the 4th quarter have been prepared in accordance with IAS 34 Interim Accounts. The summary of the financial information presented in the quarterly accountsisintended 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 of 2014, 50 per cent of the sharesin the wholly owned subsidiary BA Gjenvinning AS were sold. As a result of thissale, BA Gjenvinning AS wasreclassified 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.
Environmental Base at Vats
On 9 September 2014, the AF Group entered into an agreement to acquire the remaining 60 per cent of the sharesin 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 Vatsresulted in a gain of NOK 22 million due to the fact that the assets and liabilitiesin the Environmental Base at Vatsshall be recognised at fair value at the time of the acquisition. The Environmental Base at Vatsis 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 ofshares 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 activitiesrelated to the sawing of narrow groovesin asphalt and othersubstrates 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 isrelated 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 hasstarted in 2014 to apply the rulesin IAS 39 for hedge accounting upon entering into substantial contractsin a foreign currency (cash flow hedging). The effective portion of the change in the value of the hedging instrument isrecognised 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 standardsin 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'srelated parties consist of associates, joint ventures, the Company'sshareholders 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 wasin 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 insidersin the AF Group purchased 447,701 sharesin the AF Gruppen ASA in this connection.
In October a total of 507 employeessubscribed for a total of 996,245 sharesin connection with the AF Group'sshare programme. The shares were subscribed for at a price of NOK 58.90 pershare, which correspondsto a discount of 20 per cent in relation to the average market price during the subscription period. Primary insiderssubscribed for 31,940 shares.
7. IFRIC 15
Segment information is presented in accordance with the AF Group's accounting policiesin accordance with IFRS with the exception of IFRIC 15 (Agreementsfor the Construction of Real Estate). The effect of IFRIC 15 on the consolidated accountsisillustrated in a separate table in the segment information. According to IFRIC 15, income from the sale of apartments and the associated proportion of contracting servicesshall 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 AndreasJul Røsjø, EVP Property and Energy Robert Haugen, EVP Offshore
Financial calendar
| Presentation of interim accounts: |
|---|
| ----------------------------------- |
| 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 4th quarter will take place atHotel Continental, Stortingsgata 24-26, 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 Bygg Oslo AF Byggfornyelse
AF Bygg Østfold AF Bygg Sør
AF Bygg Rogaland Strøm Gundersen
Consolvo
Haga & Berg Entreprenør
Thorendahl
AF Bygg Göteborg
AF Bygg Syd
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.