REPORT FIRST QUARTER 2018 VEIDEKKE ASA 1. First quarter Illustration: Schmidt, Hammer Lassen, DK. VIA (House of Oslo), Oslo

Transcription

1 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 1 First quarter 2018 Illustration: Schmidt, Hammer Lassen, DK VIA (House of Oslo), Oslo

2 2 REPORT FIRST QUARTER 2018 VEIDEKKE ASA HIGHLIGHTS OF THE FIRST QUARTER OF 2018 Revenue was NOK 7.1 (6.5) billion. Profit before tax was NOK -11 (47) million. The order intake amounted to NOK 6.7 billion, which gave an order backlog of NOK 31.9 (27.4) billion at the end of the quarter. A total of 152 residential units were sold. Veidekke s share amounted to 125 units. There were 3,086 residential units under construction at the close of the quarter, of which Veidekke s share was 2,514. Net interest-bearing debt was NOK 1.6 (1.0) billion at the close of the first quarter of REVENUE 1) NOK BILLION PROFIT BEFORE TAX 1) NOK MILLION EARNINGS PER SHARE 1) NOK , ,0 2,5 2,0 1, ,0 0,5 0, Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q1 18-0,5 Q1 Q2 Q3 Q4 Q1 18 1) Revenue and profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January See note 18.

3 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 3 KEY FIGURES 1) Figures in NOK million Q Q1 20 2) 20 2) Revenue, segment Profit before tax, segment Segment Construction Segment Property Development Segment Industrial Segment Other Earnings per share, segment Profit margin, segment (%) Revenue, IFRS 3) EBITDA, IFRS Profit before tax, IFRS Earnings per share, IFRS (NOK) 4) Net interest-bearing debt Total order backlog ) The comments in the report relate to figures taken from the segment accounts. Comments to the IFRS accounts are specified in the text. 2) Profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January See note 18. 3) According to IFRS, revenue from residential sales in Norway is not recognised until the residential unit is taken over by the buyer. In segment reporting, revenue is recognised using the formula: estimated final profit x sales ratio x stage of completion. 4) No dilutive effect. REVENUE 12-MONTH ROLLING 1) NOK BILLION PROFIT BEFORE TAX 12-MONTH ROLLING 1) NOK MILLION EARNINGS PER SHARE 12-MONTH ROLLING 1) NOK Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q1 18 1) Revenue and profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January The accounts for have not been restated. See note 18.

4 4 REPORT FIRST QUARTER 2018 VEIDEKKE ASA A WORD FROM THE PRESIDENT AND CEO We have put a first quarter behind us in which the construction operations performed well, with especially good progress in Norway. Both the revenue and profit increased due to the high level of activity in the building construction operations in Eastern Norway. The Swedish construction operations improved profitability in the non-residential building segment, and both the earnings and margin are stronger than last year. In Denmark, we maintained good profitability and strengthened our order backlog. The market for new residential units has declined substantially in both Norway and Sweden over the past quarters. In Norway, the residential market is showing signs of improvement, while the market in Sweden is still weak. Residential buyers in both countries are spending significantly more time on the buying process than before, and this is contributing to lower sales and a later start-up of new projects, which will in turn provide lower residential production and impact revenue and earnings. The first quarter is low season for our industrial operations. The volume of the asphalt operations grew last year, which means higher capacity costs. This year s tendering rounds are now resolved, and Veidekke has done well with asphalt contracts, maintaining our market shares. Arne Giske, President and CEO During the last quarter, Veidekke acquired Grande Entreprenør AS in Trøndelag, and agreed to acquire Billström Riemer Andersson AB (BRA) in Gothenburg. With these acquisitions, we have consolidated our position in important markets.

5 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 5 VEIDEKKE GROUP Revenue in the first quarter amounted to NOK 7.1 billion, compared with NOK 6.5 billion in the same quarter last year. Revenue was higher in Construction, while there was a decline in Property Development. The result for the first quarter was a loss of NOK 11 million, compared with a profit of NOK 47 1) million in the same quarter of 20. The decline in profit was attributed to the Property Development and Industrial business areas. Lower residential sales in the property development operations in recent quarters have resulted in the start of fewer new projects and lower earnings. In the industrial operations, higher capacity costs prior to the annual production season resulted in lower earnings. Earnings were higher in the Construction business area, primarily in the Norwegian building construction operations. The order intake for the quarter amounted to NOK 6.7 billion. The order backlog was NOK 31.9 billion at the end of the first quarter, compared with NOK 32.6 billion at the end of the year and NOK 27.4 billion in the first quarter of 20. Net interest-bearing debt at the end of the quarter was NOK 1.6 billion, compared with NOK 0.8 billion at the end of the year. Cash flow is normally weak in the first quarter as a result of the low level of activity in the industrial operations and parts of the civil engineering operations, as well as investments in capital equipment. 1) Revenue and profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January See note 18.

6 6 REPORT FIRST QUARTER 2018 VEIDEKKE ASA KEY FIGURES CONSTRUCTION OPERATIONS NOK million Q Q1 20 1) 20 1) Revenue Profit before tax Profit margin (%) Order backlog REVENUE 1) NOK BILLION PROFIT BEFORE TAX 1) NOK MILLION Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q1 18 REVENUE AND MARGIN, 12-MONTH ROLLING 1) NOK BILLION ORDER BACKLOG AND ORDER INTAKE NOK BILLION Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q Revenue Margin Order backlog Order intake 1) Revenue and profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January The accounts for have not been restated. See note 18.

7 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 7 CONSTRUCTION OPERATIONS The construction operations reported revenue of NOK 6.5 billion in the first quarter, up from NOK 5.8 billion in the previous year. There was growth in Norway and Sweden, with the greatest growth in the Norwegian operations. Profit before tax was NOK 158 million, compared with NOK 112 million for the same period in 20. The profit margin for the quarter increased to 2.4% from 1.9 % one year ago. The order intake was NOK 6.6 billion for the quarter. The order backlog was NOK 31.0 billion at the end of the quarter, which was on par with the previous quarter and up % from the first quarter of 20.

8 8 REPORT FIRST QUARTER 2018 VEIDEKKE ASA Construction Norway NOK million Q Q1 20 1) 20 1) Revenue Profit before tax Profit margin % Order backlog ) Revenue and profit before tax in the segment accounts for 20 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January See note 18. The Norwegian construction operations reported revenue of NOK 4.0 billion for the first quarter of 2018, an increase of % compared with the corresponding period last year. The increase was primarily attributed to the building construction operations in Eastern Norway. Profit before tax for the quarter was NOK 104 million, up from NOK 67 million for the first quarter last year. The earnings improvement was attributed to the building construction operations and is linked to the operations in Eastern Norway and Southwestern Norway. The profit margin for the quarter was 2.6%, compared with 1.9% for the first quarter of 20. The order intake for the quarter amounted to NOK 4.1 billion, and consisted primarily of building construction projects in the private and public non-residential building segments, as well as individual residential projects. Major projects awarded in the first quarter: Ruseløkkveien 26 (House of Oslo) for Storebrand Eiendom AS and Aspelin Ramm Eiendom AS. Demolition of the existing buildings and construction of a new commercial building. The contract value is over NOK 1 billion. Levre School for the Municipality of Bærum. Contract value of NOK 236 million. BBP-Expo and Midtbygg, office building for Linstow AS and Flesland Holding AS at Flesland in Bergen. Contract value of NOK 220 million. Vollebekk BT 2 in Oslo. Apartments for OBOS Nye Hjem AS. Contract value of NOK 155 million. Nesbukta in Asker. Town houses for Nesbukta 6 AS. Contract value of NOK 102 million. At the end of the first quarter, the order backlog for the operations totalled NOK 19.5 billion, which was unchanged from the previous quarter, but an increase from NOK 15.6 billion at the end of the first quarter of 20. The order coverage for the operations is good overall, but there are regional variations. The acquisition of 80% of the shares of Grande Entreprenør AS was completed effective as of the middle of February. The company has 200 employees and reported revenue of NOK 530 million for 20. The acquisition added NOK 300 million to the order backlog in the first quarter. After the end of the quarter, Veidekke has signed a letter of intent to acquire 68% of the shares of the Oslo based company Hande AS. The company is engaged in rehabilitation and conversion of office buildings. The company has 25 employees and reported revenue of NOK 210 million in 20. It is expected that the final acquisition agreement will be signed in the third quarter. Construction Sweden NOK million Q Q Revenue Profit before tax Profit margin % Order backlog The Swedish construction operations reported revenue of NOK 2.0 billion for the first quarter, compared with NOK 1.9 billion for the same period in 20. The revenue growth was attributed to the civil engineering operations. Profit before tax increased to NOK 28 million, from NOK 19 million for the corresponding period last year. The profit margin was 1.4%, compared with 1.0% for the previous year. The earnings improvement is attributed to increased profitability in projects in the non-residential building segment. The order intake for the quarter amounted to NOK 1.6 billion, compared with NOK 3.4 billion for the corresponding quarter last year. Major projects awarded in the first quarter: Kråktorpet Wind Park in Sundsvall for Eolus Vind AB. Contract value of NOK 214 million. Central Park. Residential units in Lund for Veidekke Bostad AB. Contract value of NOK 160 million. OBH Ringhals. Groundworks for the cooling plant in the power station for Vattenfall. Contract value of NOK 159 million.

9 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 9 Kämpetorpshallarna. Sports halls for the City of Stockholm. Contract value of NOK 119 million. Nylandsbergen Wind Park in Sundsvall for Eolus Vind AB. Contract value of NOK 97 million. Selma Centrumshus. Commercial building in Gothenburg for Förvaltnings AB GöteborgsLokaler. Contract value of NOK 95 million. Major contracts awarded in the first quarter: Amager Centret. Shopping Centre in Copenhagen for Danske Shopping Centre. Contract value of NOK 512 million. DHI. New offices for DHI in Hørsholm. Contract value of NOK 128 million million. At the end of the first quarter, the order backlog was NOK 9.7 billion, compared with NOK 10.7 billion at the end of the year and NOK 9.3 billion one year ago. During the quarter, Veidekke agreed to acquire 90.1% of the shares in Billström Riemer Andersson AB (BRA) in Gothenburg. The company has 200 employees and reported revenue of SEK 1.4 billion in 20. The agreement is subject to approval by the Swedish competition authorities, and such approval was granted after the end of the quarter. Construction Denmark NOK million Q Q Revenue Profit before tax Profit margin % Order backlog The Danish construction operations reported revenue of NOK 505 million for the first quarter of 2018, which is on par with the first quarter of 20. There was a high level of activity in the building construction operations in the Copenhagen area, while the level of activity in Jutland was low. Profit before tax was NOK 26 million, which is on par with the first quarter of 20. The profitability of the project portfolio is good, and the profit margin was 5.2%, compared with 5.3% one year ago. The order intake for the quarter was NOK 902 million, compared with NOK 732 million for the first quarter of 20. The order backlog at the end of the quarter was NOK 1.7 billion, compared with NOK 1.4 billion at the end of the year and NOK 1.5 billion at the end of the first quarter of 20. Measured in the local currency, the increase was 12% over the corresponding period last year and 30% from the end of the year.

10 10 REPORT FIRST QUARTER 2018 VEIDEKKE ASA KEY FIGURES PROPERTY DEVELOPMENT OPERATIONS NOK million Q Q Revenue Profit before tax Capital invested PROFIT BEFORE TAX 1) NOK MILLION 200 RETURN ON INVESTED CAPITAL, 12-MONTH ROLLING 1) PER CENT Q1 Q2 Q3 Q4 Q Q1 16 Q2 16 Q3 16 Q4 16 Q1 Q2 Q3 Q4 Q1 18 KEY FIGURES RESIDENTIAL UNITS, VEIDEKKE S SHARE Q Q4 20 Q3 20 Q2 20 Q Number of units sold Norway Sweden Denmark 2) Construction starts Norway Sweden Denmark 2) Number of units under construction Norway Sweden Denmark 2) Sales ratio, units under construction (%) Norway Sweden Denmark Land bank Norway Sweden ) The return on invested capital is adjusted for taxes in joint ventures and associates. 2) One own-account project in Copenhagen with 115 units. The project is reported in the accounts under Construction Denmark.

11 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 11 PROPERTY DEVELOPMENT OPERATIONS Veidekke sold fewer residential units in the first quarter than in the previous quarter and the corresponding quarter last year. Veidekke s Swedish property development operations felt the greatest impact of the weaker residential market, and the largest decline in sales was in the Stockholm area. There were 2,514 residential units under construction at the end of the quarter, which was a decline from 2,620 units at the end of the year. The sales ratio of the portfolio was high at 84%. At the end of the first quarter, the Group had a land bank that could yield 18,700 residential units, of which Veidekke s share was 15,250 units. Capital invested in property development operations totalled NOK 4.7 billion as at the first quarter. The return on invested capital was 14.6% for the last twelve months. Revenue from the property development operations was NOK 633 million for the quarter, compared with NOK 725 million for the first quarter of 20. Profit before tax was NOK 72 million, compared with NOK 135 million for the same quarter last year. The greatest decline in profit was in the Swedish operations.

12 12 REPORT FIRST QUARTER 2018 VEIDEKKE ASA Property Development Norway Property Development Sweden NOK million Q Q NOK million Q Q Revenue Profit before tax No. of units under construction 1) No. of units sold 1) ) A significant portion of Veidekke s Norwegian property development operations takes place in joint ventures. The figures in the table illustrate Veidekke s share. The Norwegian property development operations sold a total of 93 residential units during the quarter, and Veidekke s share was 67 units. This represents a decline from the previous quarter and the first quarter of 20. In the first quarter of 2018, three projects were released for sale with a total of 75 units, two of which were in Oslo and one in Trondheim. Revenue totalled NOK 153 million, compared with NOK 96 million for the first quarter of last year. Revenue growth since the first quarter last year is attributed to more projects being carried out for our own account. Profit before tax was NOK 27 million, compared with NOK 38 million for the first quarter of 20. The decline in profit is attributed to fewer residential units under construction and a lower sales ratio for units under construction than one year ago. A total of 534 residential units were under construction at the end of the quarter, compared with 557 units at the end of the year and 601 units at the same time last year. One project in Sandnes with 18 units started construction this quarter. The sales ratio for residential units under construction was 82%, compared with 89% for the previous year. In Trondheim, Veidekke has a 12,000 square metre commercial project under construction with a partner. At the end of the quarter, the Norwegian operations had a total land bank that can yield approximately 7,950 residential units, of which Veidekke s share was 5,600 units. Veidekke acquired a site at Lilleby in Trondheim that can yield approximately 200 residential units. The invested capital amounted to NOK 3.3 billion at the end of the quarter, compared with NOK 2.6 billion at the end of the first quarter of 20. The return on invested capital was 8.2% for the last twelve months, adjusted for taxes in associates and joint ventures. Revenue Profit before tax No. of units under construction 1) No. of units sold 1) ) Veidekke s share. The Swedish property development operations sold a total of 59 residential units in the first quarter, and Veidekke s share was 56 units. This was a decline from 80 residential units sold in the previous quarter and 211 residential units sold in the first quarter last year. A project with 36 residential units in Kungsbacka south of Gothenburg was released for sale during the quarter. Revenue in the first quarter was NOK 480 million, compared with NOK 629 million in the first quarter one year ago. The profit before tax was NOK 45 million, compared with NOK 97 million for the previous year. The profit consists of the contribution from residential units under construction. Both the decline in revenue and profit last year is attributed to a lower sales ratio for units under construction and fewer starts than one year ago. At the end of the quarter, 1,905 residential units were under construction, compared with 1,948 units at the end of the year and 1,677 units at the end of the first quarter of 20. The sales ratio for residential units under construction was 85%, compared with 91% one year ago. There were no construction starts in the quarter. The Swedish property development operations have a land bank that can yield 10,750 residential units, and Veidekke s share is 9,650 residential units, divided among approximately 100 projects. Three land acquisitions were made, which can yield a total of 900 residential units. All the sites are located in Stockholm, one of which also includes 23,000 square metres of office space. The invested capital totalled NOK 1.3 billion at the end of the first quarter. The return on invested capital was 36.1% for the last twelve months.

13 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 13 NYEGAARDSKVARTALET, OSLO Illustrasjon: Semrén Månsson SELMA STAD, GOTHENBURG AMAGER CENTRET, COPENHAGEN

14 14 REPORT FIRST QUARTER 2018 VEIDEKKE ASA KEY FIGURES INDUSTRIAL NOK million Q Q Revenue Profit before tax Profit margin (%) Order backlog REVENUE NOK MILLION PROFIT BEFORE TAX NOK MILLION Q1 Q2 Q3 Q4 Q Q1 Q2 Q3 Q4 Q1 18 PROFIT AND MARGIN, 12-MONTH ROLLING NOK BILLION REVENUE BY BUSINESS AREA, LAST 12 MONTHS % % Total NOK 4.8 billion 64% 0 Q1 Q2 Q3 Q4 Q Profit Margin Asphalt Aggregates Road Maintenance

15 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 15 INDUSTRIAL Revenue in the first quarter amounted to NOK 475 million, which is on par with the previous year. The first quarter is low season for asphalt operations, while the level of activity in Road Maintenance is high during this period. The result before tax was a loss of NOK 2 million, compared with a loss of NOK 183 million for the first quarter of 20. The result of the asphalt operations was a loss of NOK 197 million, compared with a loss of NOK 165 million for the first quarter of 20. The decline in profit from the first quarter last year is attributed to a combination of higher capacity costs related to increased maintenance and depreciation, and a lower contribution from asphalt jobs. This year s tendering round for the Norwegian Public Roads Administration has ended, and Veidekke was awarded 46% of the contract volumes. This is on par with last year and represents 1.1 million tonnes of asphalt. The result from Road Maintenance was a loss of NOK 5 million, compared with a loss of NOK 6 million for the first quarter of 20. The result is still marked by low profitability in several projects, but new contracts are performing according to plan. The project portfolio consisted of 21 operating contracts at the end of the quarter. Veidekke had the lowest price for three maintenance contracts that were opened in the first quarter, two of which are a continuation of existing contracts. The contracts have not been signed and therefore have not been included in the order backlog at the end of the first quarter. Three contracts will be completed in September The result from Aggregates was a loss of NOK 16 million, compared with a loss of NOK 11 million for the corresponding quarter of 20. Higher maintenance costs and somewhat lower revenue contributed to a lower result than the previous year.

16 16 REPORT FIRST QUARTER 2018 VEIDEKKE ASA OCCUPATIONAL HEALTH AND SAFETY Veidekke focuses on good OHS work, and OHS is thus an important and integral part of the company s day-to-day operations. A good safety culture is of decisive importance in order to achieve a good level of safety. Awareness campaigns and risk prevention are given priority so that Veidekke can achieve its long-term goal of zero injuries and an annual reduction of 20% in the total number of injuries. The establishment of systems and processes to share experience after serious incidents will become a priority area in the future. The number of injuries in the first quarter was 84. This was an increase from 79 in the previous quarter, but a decline from 87 in the first quarter of 20. Three serious injuries were reported in the quarter, compared with one injury in the previous quarter and two injuries in the first quarter one year ago. The LTI rate for the first quarter was 4.6, up from 4.2 in both the previous quarter and the first quarter of 20. Sickness absence for the quarter was 4.5%, which was up from 4.0% for the previous quarter and on par with the first quarter of 20. Long-term sickness absence is primarily related to musculoskeletal disorders resulting from strain injuries. The prevention of sickness absence encompasses, among other things, training in the use of equipment, preventive training and adaptation so that those who are on sick leave can return to work faster. Sickness absence at Veidekke is lower than the average rate for the industry. LTI RATE Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 Q2 Q3 Q4 Q1 18 LTI rate: Lost-time injuries per million hours worked, own employees. TOTAL NUMBER OF INJURIES Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 Q2 Q3 Q4 Q1 18 Number of injuries, own employees and subcontractors. SICKNESS ABSENCE SERIOUS INJURIES Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 Q2 Q3 Q4 Q1 18 Sickness absence, own employees, per cent. Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 Q2 Q3 Q4 Q1 18 Number of injuries, own employees and subcontractors.

17 REPORT FIRST QUARTER 2018 VEIDEKKE ASA OTHER OPERATIONS Other operations consist of unallocated costs associated with the Group s corporate administration and financial management, the Group s ownership role in Public Private Partnerships (PPP) and the elimination of intra-group profits. The result for the first quarter was a loss of NOK 25 million, compared with a loss of NOK 18 million for the first quarter of 20. The decline in profit from last year was due to the increased elimination of intra-group profits. FINANCIAL SITUATION Net interest-bearing debt at the end of the quarter was NOK 1.6 billion, compared with NOK 764 million at the end of the year. Cash flow is normally weak in the first quarter as a result of the low level of activity in the industrial operations and parts of the civil engineering operations, as well as investments in works equipment. Cash flow from operational activities was negative NOK 567 million, compared with negative NOK 784 at the same time last year. Low season for the industrial operations, investments in capital equipment, acquisition of businesses and payments for the acquisition of land contributed to the negative cash flow for the quarter. Veidekke s financial position is regarded as good, and the Group has good financial capacity. The Group has a long-term borrowing facility of NOK 3.6 billion with DNB. At the end of the quarter, unused borrowing facilities amounted to NOK 2.7 billion. Veidekke issued a NOK 600 million bond loan in the first quarter that matures in March Veidekke has previously issued a bond loan of NOK 750 million that matures in June SHAREHOLDER INFORMATION Largest shareholders at 31 March 2018 Ownership share in % OBOS BBL 18.1 FOLKETRYGDFONDET 11.4 IF SKADEFORSÄKRING AB 6.9 HANDELSBANKEN NORDEN SELEKTIV/FONDER 2.9 VERDIPAPIRFONDET DNB NORGE (IV) 2.5 MUST INVEST AS 2.2 DANSKE INVEST NORSKE INSTIT. II 2.1 MK PENSJON PK 2.0 ODIN NORGE 1.6 JP MORGAN CHASE BANK, N.A., LONDON, NOM. 1.4 Foreign shareholders 20.7 Employees, total ownership 15.0 A total of 10.6 million Veidekke shares were traded in the first quarter The share price ranged from NOK to NOK 80.50, and was NOK at 31 March RELATED PARTY TRANSACTIONS Veidekke has ongoing transactions with related parties during the course of its ordinary operations, including contracts for the development of specific projects. There were no significant related party transactions in the first quarter of 2018 beyond this. RISKS Veidekke s operations are largely based on the execution of individual projects. The projects vary greatly in terms of complexity, size, duration and risk, meaning that systematic risk management in all parts of the business is of crucial importance. Veidekke analyses and assesses risk at the tendering stage, and risk is followed up closely throughout the execution phase. Correct expertise is a critical success factor, both to obtain projects and to ensure good operational efficiency and project execution. To ensure that the Group has sound and updated knowledge, Veidekke invests significant resources in skills development for employees through its internal courses and training programmes and continuously works on recruitment throughout the Group. Transport infrastructure projects are challenging and allow different interpretations of what constitutes proper fulfilment of the contract. As a result, disagreement may arise about the final settlement between the contractor and the contracting client. At the end of the quarter, Veidekke had several unresolved final settlements related to transport infrastructure projects. Outstanding claims after deductions for recognised provisions and uncertain project revenues were in the range of NOK 300 million as at 31 March The outcome of the individual disputes, positive or negative, may have an effect on the profit. The residential market is sensitive to cyclical fluctuations, and earnings in Property Development are closely related to new project start-ups. To reduce the risk associated with unsold projects, Veidekke will not, as a general principle, initiate new residential projects until a sales ratio of 50% has been achieved. Consequently, slow residential sales may delay residential projects. At 31 March 2018 the sales ratio for residential units under construction was 84%. Veidekke is primarily exposed to financial risks related to trade receivables and interest-bearing liabilities. These risks are classified as credit, market and liquidity risks. For a more detailed description of the company s financial risk, see note 28 in Veidekke s 20 Annual Report.

18 18 REPORT FIRST QUARTER 2018 VEIDEKKE ASA MARKET OUTLOOK PRODUCTION IN CONSTRUCTION AND CIVIL ENGINEERING (current prices): NORWAY SWEDEN DENMARK 20 1) NOK bn 20 1) Growth ) Growth ) Growth 20 1) NOK bn 20 1) Growth ) Growth ) Growth 20 1) NOK bn 20 1) Growth ) Growth ) Growth Homes % -2% -12% 195 % 3 % -12% 97 % 13% 8% Commercial buildings 69 9% 6% -4% 85 5% 9 % 3% 30 8% 10% 10% Public buildings 36-1% -4% 6% 50 16% 9 % 5% 28-1% -1% 7% Civil engineering 79 5% 9% 4% 83 4% 6 % 4% 49-5% 0% 3% Total construction and civil engineering 340 9% 2% -5% % 5 % -3% 204 7% 7% 7% 1) Source: Statistics Norway, Statistics Sweden, Statistics Denmark 2) Veidekke s forecasts NORWAY SWEDEN DENMARK A decline in the investments in the Norwegian construction and civil engineering market is expected from the second half of 2018 to the end of A weaker residential market has entailed a lower sales volume for new residential units and fewer new project starts. Therefore a decline in residential investments in 2018 and 2019 is expected. Commercial building starts were high in 20, and a correction is also expected in this market, with declining production in the second half of 2018 and The greatest decline is expected in the Oslo area, which has experienced the strongest growth in recent years. The positive performance of the civil engineering market is expected to continue in 2019, with transport infrastructure as the most important driver. Declining growth is expected in the Swedish building construction and civil engineering market in 2018, and a decline in the investments is expected from A weakened residential market has contributed to significantly lower sales of new residential units, particularly in the Stockholm area. A lower demand for new residential units will result in fewer starts in the future, and a decline in residential production is expected from 2019, with the greatest correction in the Stockholm area. In the other building construction segments and in the civil engineering market, the outlook is for continued positive growth in both demand and production to the end of It appears as if the Danish building construction and civil engineering market will show the strongest growth in Scandinavia in 2018 and 2019, primarily driven by investments in the building construction segment. The greatest growth is expected in residential construction in 2018, while the greatest growth is expected in commercial buildings in The market for public buildings and civil engineering is expected to be weak, but with some growth to the end of 2019.

19 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 19 Oslo, 2 May 2018 The Board of Directors of Veidekke ASA Martin Mæland Chair Per Otto Dyb Gro Bakstad Ingalill Berglund Ann-Christin Andersen Deputy chair Hans von Uthmann Ingolv Høyland Inge Ramsdal Odd Andre Olsen Arve Fludal Arne Giske President and CEO

20 20 REPORT FIRST QUARTER 2018 VEIDEKKE ASA INCOME STATEMENT Figures in NOK million Q Q Revenue Operating expenses Share of net income from joint ventures Operating profit before depreciation (EBITDA) Impairment of non-current assets Depreciation Operating profit (EBIT) Financial income Financial costs Profit before tax Income tax expense Profit after tax Of which non-controlling interests Earnings per share (NOK) 1) ) No dillutive effect. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Figures in NOK million Q Q Profit after tax Revaluation of pensions Net items that will not be reclassified subsequently to profit or loss Currency translation differences Fair value adjustment of financial assets Net items that may be reclassified subsequently to profit or loss Total comprehensive income of which non-controlling interests

21 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 21 STATEMENT OF FINANCIAL POSITION Figures in NOK million ASSETS Non-current assets Goodwill Other intangible assets Deferred tax assets Land and buildings Plant and machinery Investments in joint ventures Financial assets Total non-current assets Current assets Residential projects Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Other equity Non-controlling interests Total equity Non-current liabilities Pensions and deferred tax liabilities Bonds Amounts due to credit institutions Other non-current liabilities Total non-current liabilities Current liabilities Certificate debt and debt to credit institutions Bonds Trade payables and warranty provisions Public duties and taxes payable Other current liabilities Total current liabilities Total equity and liabilities

22 22 REPORT FIRST QUARTER 2018 VEIDEKKE ASA STATEMENT OF CASH FLOWS Figures in NOK million Q Q Profit before tax Tax paid Depreciation/impairment Other operational items Cash flow from operating activities Acquisition/disposal of property, plant and equipment Other investing activities Change in interest-bearing receivables Cash flow from investing activities Change in interest-bearing liabilities Dividend paid Change other non-current liabilities 18-3 Other financial items Cash flow from financing activities Change in cash and cash equivalents Cash and cash equivalents, start of period Exchange rate adjustment foreign cash balances Cash and cash equivalents, end of period

23 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 23 NET INTEREST-BEARING POSITION Figures in NOK million Cash and cash equivalents Interest-bearing assets (long-term) Interest-bearing liabilities Net interest-bearing position Change in net interest-bearing position (from 1 Jan) OTHER KEY FIGURES Figures in NOK million Order backlog (NOK million) Equity ratio (%) Number of employees

24 24 REPORT FIRST QUARTER 2018 VEIDEKKE ASA BUSINESS SEGMENTS Figures in NOK million Q Q CONSTRUCTION (specification page 27) Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment PROPERTY (specification page 28) Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment INDUSTRIAL Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment OTHER OPERATIONS 1) Revenue 1 Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) ) Other operations include the Group s central unassigned costs and net financial items, plus Veidekke s PPP role (Public-Private Partnership).

25 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 25 Figures in NOK million Q Q GROUP ELIMINATIONS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment - - Operating profit (EBIT) Net financial items Profit before tax (EBT) TOTAL VEIDEKKE GROUP SEGMENT ACCOUNTS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment

26 26 REPORT FIRST QUARTER 2018 VEIDEKKE ASA RECONCILIATION OF SEGMENT ACCOUNTS AND FINANCIAL ACCOUNTS Figures in NOK million Q Q TOTAL VEIDEKKE GROUP SEGMENT ACCOUNTS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment ) 2) IFRS, DEVELOPMENT OF RESIDENTIAL UNITS IN NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment ) Under IFRS, income and earnings from completed residential units in Norway are not recognised until the date on which the apartment is delivered to the buyer. In the internal monitoring of residential projects, the reporting is on a percentage of completion basis, which means that revenue and expenses are recognised by reference to the project s estimated final outcome x stage of completion x sales ratio. 2) See also the accompanying notes, item 2 Accounting policies. Figures in NOK million Q Q TOTAL VEIDEKKE GROUP Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment

27 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 27 CONSTRUCTION OPERATIONS BY COUNTRY Figures in NOK million Q Q CONSTRUCTION NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment CONSTRUCTION SWEDEN Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment CONSTRUCTION DENMARK Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment TOTAL CONSTRUCTION Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment

28 28 REPORT FIRST QUARTER 2018 VEIDEKKE ASA PROPERTY DEVELOPMENT BY COUNTRY Figures in NOK million Q Q PROPERTY DEVELOPMENT NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment PROPERTY DEVELOPMENT SWEDEN Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment TOTAL PROPERTY DEVELOPMENT Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Profit before tax (EBT) Total assets, segment

29 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 29 STATEMENT OF CHANGES IN EQUITY EQUITY HOLDERS OF VEIDEKKE ASA MINORITY Figures in NOK million Share capital Other paid-in capital 1) Reevaluation of pensions Currency translation differences Other retained earnings Fair value adjustment 2) Total Noncontrolling interests Total Equity at 31 December Restatement in accordance with IFRS Equity at 1 January Profit for the period Other comprehensive income Equity at 31 march Equity at 1 January Profit for the year Other comprehensive income IFRS 2 - share-based transactions employees Transactions, non-controlling interests Options, non-controlling interests Additions, aquisitions of operations, non-controlling interests 9 9 Dividend Equity at 31 December Equity at 1 January Profit for the period Other comprehensive income Options, non-controlling interests Additions, aquisitions of operations, non-controlling interests 7 7 Dividend - - Equity at 31 March ) Paid-in capital over and above nominal value of shares. 2) Change in fair value of available-for-sale shares and hedging instruments that qualify for hedge accounting.

30 30 REPORT FIRST QUARTER 2018 VEIDEKKE ASA NOTE 1. GENERAL INFORMATION Veidekke is a Scandinavian construction and property development company headquartered in Oslo. The consolidated accounts for Q include Veidekke ASA and its subsidiaries and the Group s investments in associates and joint ventures. At the end of Q1 2018, the Group comprised essentially the same entities as described in the 20 annual report. Details of business combinations in 20 can be found in note 8.The interim financial statements are unaudited. NOTE 2. ACCOUNTING POLICIES The Group presents its financial reports in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The quarterly accounts have been prepared in accordance with IAS 34 Interim Financial Reporting and are in line with the Stock Exchange Rules.The quarterly accounts have been prepared using the same accounting policies as in the annual accounts for 20, with the exception of the implementation of the new revenue recognition standard IFRS 15. IFRS 15 Revenue from contracts with customers On 1 January 2018, Veidekke implemented the new revenue recognition standard IFRS 15. The new standard is relevant to Veidekke s recognition of revenue from own-account residential projects as well as change orders and supplementary work in construction projects. For other revenue the new standard will not cause changes compared with the previous principles. The 20 annual accounts have been restated in accordance with the new standard. Residential projects in property development operations In the financial statement, Veidekke has, in accordance with the previous standard IAS 11, recognised revenue from residential projects on the date of contractual delivery to the purchaser (IFRIC 15). In accordance with the new standard, revenue from residential projects in Sweden and Denmark will be recognised on an ongoing basis in line with estimated final profit, stage of completion and sales ratio, while the revenue recognition principles applicable to residential projects in Norway remain unchanged. The different revenue recognition approaches in the different countries are due to variations in national legislation governing residential construction and sales. Veidekke will contine to report revenue from residential projects on a percentage-of-completion basis in its segment accounts. This is deemed to best reflect the Group s value creation in the property segment, and ensures consistency with Veidekke s internal reporting. Veidekke s segment accounts for residential projects will thus be unaffected by the new revenue recognition standard. Going forward, any difference between the financial and segment accounts will be due solely to the Norwegian property development operations. Implementation of the new standard has added NOK 475 million to Veidekke s equity as at 1 January 20. The revised financial statements for 20 show an increase of NOK 198 million in the company s pre-tax profit compared to the accounts issued under the previous standard. Change orders and supplementary work in construction operations Under the previous standard, revenue related to unresolved claims in construction projects was recognised based on the likely outcome of the claim against the customer. The new standard contains more stringent requirements concerning recognition of such revenue: it may only be recognised when it is deemed highly probable that it will not be reversed later. The new standard will primarily affect revenue recognition in projects where the contract may result in different interpretations of contractual scope and calculation of compensation. Such situations will mainly arise in the civil engineering segment. Projects with material unresolved claims against customers as at year-end 20 have been revalued in accordance with the new standard. The effect is a reduction of NOK 220 million in Veidekke s equity as at 1 January 20. The revised pre-tax profit for 20 is NOK 130 million lower than in the accounts issued pursuant to the previous standard.

31 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 31 The accounting of change orders and supplementary work in construction projects is identical in the segment reporting and in the financial statements, and both sets of accounts for 20 have been restated. See note 18 for revised accounting. The interim financial statements do not include all the disclosures in a full annual report and should therefore be read in connection with the Group s 20 annual report, which is available on veidekke.com/en. NOTE 3. SEGMENT REPORTING The Group consists of three segments: Construction, Property Development and Industrial. The segment results for Q are presented in the table on page 24. NOTE 4. ESTIMATES Construction and property development projects represent a large part of Veidekke s operations. Accounting for project activities is largely based on estimates. Significant judgements used in applying the Group s accounting policies and the main sources of estimate uncertainty at the end of Q are unchanged from those in the 20 annual report. NOTE 5. OPERATIONS WITH SIGNIFICANT SEASONAL FLUCTUATIONS The Group s asphalt and aggregates operations, which are reported under the Industrial business area, are subject to seasonal fluctuations as a result of climatic conditions. Most of the production takes place between May and October, and the majority of the revenues from operations accrue during these months. However, expenses related to administrative staff, maintenance of production equipment and depreciation are spread over the full year. This means that there will normally be significant fluctuations in the quarterly accounts for Veidekke s industrial operations. Figures in NOK million 12-month rolling at month rolling at ) 20 2) INDUSTRIAL 1) Revenue Profit before tax GROUP 1) Revenue Profit before tax ) The figures are taken from the segment accounts. 2) The figures for 2016 have not been restated in accordance with IFRS 15.