AF Gruppen — Interim / Quarterly Report 2017

Feb 16, 2018

February 16th 2018

Highlights

Strong growth and solid order backlog

• Revenues: NOK 4,296 million (2,892) in Q4 and NOK 13,704 million (11,876) in 2017.
• EBT: NOK 310 million (340) in Q4 and NOK 935 million (1,040) in 2017.
• EBT margin: 7.2 % (11.8 %) in Q4 and 6.8 % (8.8 %) in 2017.
• Strong order backlog: NOK 19,773 million (15,332)
• Solid financial position: Net interest bearing receivables of NOK 1,210 million (606)
• Dividend proposal for 1st half-year of NOK 5.00 (5.00) per share.

Safety

Lost-time injury frequency (LTIF)

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

Total recordable injury frequency (TRIF)

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

Reported unwanted incident frequency (RUIF)

Number of reported unwanted incidents per man-year.

Revenues

Q4 revenues by business area:

Revenues 2017: NOK 13,704 million (11,876)

Earnings before tax

• Good margins in all six business areas in Q4
• EBT Q4: NOK 310 million (340)
• EBT % Q4: 7.2 % (11.8 %)
• EBT 2017: NOK 935 million (1,040)
• EBT % 2017: 6.8 % (8.8 %)

Return on capital employed

12 month rolling average

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

Cash flow statement

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

Net interest bearing receivables

Net interest bearing receivables as of 31 December is NOK 1,210 million (606).

B l a a n c e s	h t e e
--------------------------------------	------------------

Equity ratio

Health and environment

Sick leave Source separation rate

A total of 85,906 (101,519) tonnes of waste has been sorted in the 4th Sick leave in Q4: 3.0 % quarter, and a total of 324,370 (507,198) tonnes has been sorted in 2017.

Civil Engineering

High activity level and strong growth

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

• AF Anlegg has started up several new projects in 2017. The unit has a high activity level in the 4th quarter.
• Målselv Maskin & Transport has good operational performance and deliver very good Q4 and 2017 results.
• A high activity level for Kanonaden Entreprenad. The unit delivers good results.
• Pålplintar has somewhat lower activity and delivers weak results.
• Order backlog: NOK 6,510 million (5,589)

Environment

Good operational performance

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

• Somewhat lower activity level for AF Decom compared to 2016, but good results both for the quarter as well as the full year.
• AF Härnösand Byggreturer has very good profitability in their projects and the unit delivers strong results.
• Seasonally lower activity level at the environmental facilities in Q4, but positive results.
• Construction work on the new environmental facility at Nes in Akershus is on schedule for the facility to open medio 2018.
• Order backlog: NOK 344 million (212)

Building

High activity level and good operational performance

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

• AF Bygg Oslo, LAB and the companies in Strøm Gundersen and MTH all deliver very good Q3 and 2017 results.
• Increasing activity in other units, but varying results both for Q4 and 2017.
• AF Bygg Prosjektpartner delivers very weak results. Market conditions in south-western Norway are demanding. The unit's projects are transferred to AF Anlegg as of January 1st 2018.
• Order backlog: NOK 11,100 (8,467)

Property

Good results in a wait-and-see market

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

• 90 (174) apartments were sold in Q4. AF's share is 36 (105). 285 (688) apartments were sold in 2017. AF's share was 111 (316).
• Five housing projects with 742 apartments in the production phase (AF's share 338). 86 % of the apartments in production are sold as per December 31st.
• Land and development rights in progress: 2,314 (2,054) residential units. AF's share is 982 (848)
• AF has 92,084 (107,310) m2 gross area of urban premises under development. AF's share is 45,273 (51,213).

Energy

Increasing activity and good results

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

• AF Energi & Miljøteknikk had an increasing activity level in Q4. Good operational performance for AF Energi & Miljøteknikk in ongoing projects and the unit delivers good Q3 and 2017 results.
• The market for energy services is improving and the orders are getting larger.
• The unit has a high volume of tender calculations and a solid order backlog.
• Order backlog: NOK 260 million (108)

Offshore

Lower activity level and varying results

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

• Good operational performance and good results for AF Offshore Decom both in Q4 and 2017. High activity level at Environmental Base Vats.
• Low activity level for AF Offshore AeronMollier in Q4 and the unit delivers weak Q4 and 2017 results.
• Strong competition in the market for removing offshore installations and few removal projects in 2018 and 2019.
• Order backlog: NOK 916 million (550)

Order situation

Solid order backlog

Order situation

Order backlog per business area

Organising for growth

Culture People Organising Management and expertise

AF Gruppen 1985 AF Gruppen 2018

We have never had more culture bearers than today

Record high employee satisfaction

• The survey shows that our employees find joy in their work and are proud to work at AF
• The possibility to use and develop one's competence is highlighted as an important factor for job satisfaction
• Leave due to illness at 3.0 % substantiates the survey results

Co-ownership

Co-ownership motivates

AF employees the second largest shareholder in AF Gruppen

We will increase the percentage of women

Increasing the percentage of women is part of our strategy

High attractiveness

• Growth means increased need for new employees
• 10 000 people applies for a job at AF Gruppen every year

*Attractive employer – top 5, Karrierebarometeret

Developing leaders is a top priority

Learning by doing

Management training program Step 1-6

Technological development

• • New technology will change the way we work
• •Change competence is key
• • Some manual processes will be completely or partly automated

• •Pepole will still be most important!

• Need for more skilled employees

• Have own skilled labour within the diciplines where we have a competitive edge
• We will develop the industry's best expertise

Management through a decentralised structure

We are organising for growth in Sweden

Sweden a separate business area

C i i l v e n g	E i t n r o n m e n v	B i l d i u n g	P t r o p e r y	E n e r g y	O f f h s o r e	S d w e e n
A F An leg g	A F De co m	A F By Os lo g g	A F E ien do m	A F En i & M i l j kn i k k te er g ø	A F O f fs ho De re co m	P å lp l in ta r
J R An leg g å M lse lv Ma k in & s Tr t an sp or	R im l M i l j k ( 5 0 % ) o øp ar Jø lse M i l j k øp n ar Ne M i l j k øp s ar	A F By fo lse g g rny e A F Ny by g g Øs A F By t fo l d g g S Gu trø de m n rse n ( / dø ) tre m L A B ( / dø ) tre m M T H ( / dø tre ) m	L A B E ien do m	Bo l ig i ( 5 0 % ) en er g	A F De O f fs ho U K co m re L t d M i l j ba Va ts ø se A F Ae Mo l l ier ro n	Ka de En tre d no na n p re na H är ös d By tu n an g g re re r A F By G ö te bo g g rg Sy A F By d g g A F Pr j k tu tve k l ing o e c

Summary

M N O K	Q 4 2 0 1 7	Q 4 2 0 1 6	2 0 1 7	2 0 1 6
I k t t n n e e r	4 2 9 6 ,	2 8 9 2 ,	1 3, 0 4 7	1 1, 8 6 7
E B I T	2 9 7	3 2 8	9 2 4	1, 0 3 4
E B T	3 1 0	3 4 0	9 3 5	1, 0 4 0
E B I T %	6 9 %	1 1. 3 %	6 7 %	8 7 %
% E B T	% 7. 2	% 1 1. 8	% 6 8	% 8 8

• Strong growth, good operational performance and good results
• Solid order backlog: NOK 19,773 million (15,332)
• Low absence due to illness and high job satisfaction among employees
• Strong cash flow and financial position
• Dividend proposal of NOK 5.00 (5.00) per share for 1st half- year 2018