Fourth quarter 2018 REPORT FIRST QUARTER 2018 VEIDEKKE ASA 1. Veidekke to build Geely Innovation Centre in Gothenburg

Transcription

1 REPORT FIRST QUARTER 20 VEIDEKKE ASA 1 Fourth quarter 20 Illustration: Arkitektbyrån Design Veidekke to build Geely Innovation Centre in Gothenburg

2 2 REPORT FOURTH QUARTER 20 VEIDEKKE ASA Q4 AND FULL YEAR 20 HIGHLIGHTS Revenue totalled NOK 10.5 (8.7) billion for the quarter and NOK 35.6 (31.4) billion for the full year. Profit before tax amounted to NOK 341 (381) million for the quarter and NOK 591 (1,311) million for the full year. Earnings per share were NOK 2.3 (3.5) and NOK 4.0 (8.8) for the full year (IFRS). The order intake totalled NOK 9.2 billion, resulting in an order backlog of NOK 34.6 (32.6) billion at quarter end. A total of 200 residential units were sold during the quarter, of which Veidekke s share amounted to 161. At quarter-end 2,638 residential units were under construction, of which Veidekke is entitled to 2,116, whereof 419 were unsold at year end. Net interest-bearing debt was NOK 1,470 (764) million at the close of the fourth quarter of 20. REVENUE 1) NOK BILLION PRE-TAX PROFIT 1) NOK MILLION EARNINGS PER SHARE 1) NOK Q4 17 Q1 Q2 Q3 Q Q4 17 Q1 Q2 Q3 Q4 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0-0,5-1,0-1, Q4 17 Q1 Q2 Q3 Q4 1) Revenue and pre-tax profit in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See Note.

3 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 3 KEY FIGURES 1) Figures in NOK million Q4 20 Q ) 20 2) ) Revenue, segment Pre-tax profit, segment Segment Construction Segment Property Development Segment Industrial Segment Other Earnings per share, segment Profit margin, segment (%) Revenue, IFRS 3) EBITDA, IFRS Pre-tax profit, 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 on the IFRS accounts are specified in the text. 2) Pre-tax profit in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See Note. 3) In accordance with IFRS, revenue from residential sales in Norway is not recognised until a residential unit is taken over by the buyer. In segment reporting, revenue is recognised using the following formula: estimated final profit x sales ratio x stage of completion. 4) No dilutive effect. REVENUE 12-MONTH ROLLING 1) NOK BILLION PRE-TAX PROFIT 12-MONTH ROLLING 1) NOK MILLION EARNINGS PER SHARE 12-MONTH ROLLING 1) NOK Q4 17 Q1 Q2 Q3 Q4 0 Q4 17 Q1 Q2 Q3 Q4 0.0 Q4 17 Q1 Q2 Q3 Q4 1) Revenue and pre-tax profit in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See Note.

4 4 REPORT FOURTH QUARTER 20 VEIDEKKE ASA A WORD FROM THE GROUP CEO Veidekke boosted sales in the fourth quarter, but profits were somewhat weaker than last year. While nonresidential activity levels were satisfactory in all three countries, the low number of new residential building starts in earlier quarters resulted in somewhat lower production. The property development operation delivered a strong profit in the current market, thanks to ongoing residential sales and development gains on sales of residential and commercial projects. Looking at 20 as a whole, Veidekke achieved high growth, and the year-end order book is robust. Our annual result and profitability, however, were significantly weaker than we would like, and we have implemented a number of measures which we expect to have a clear positive impact on future results and profitability. Our market prospects are positive and our financial position is good, and we have great faith in the group s development going forward. This is further confirmed by the board s proposal to maintain a dividend of NOK 5.0 per share for the financial year 20. Two Veidekke employees died in workplace accidents on 20 November and 13 December 20. Safety has the highest priority for Veidekke, and we recognise that keeping our staff safe is a daily battle, fought at each individual workplace. These accidents and a general increase in the number of recorded injuries in 20 underline the need for a constant safety focus and intensified preventive efforts. Arne Giske, Group CEO

5 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 5 THE VEIDEKKE GROUP Veidekke achieved robust growth in the fourth quarter of 20, with revenues totalling NOK 10.5 billion, compared to NOK 8.7 billion in Q The increase is attributable to the Norwegian and Swedish building construction operations. The achieved growth was mainly organic, but also stems from business acquisitions in 20. The pre-tax profit for the quarter amounted to NOK 341 million, compared to NOK 381 million in Q ). In the property development operation, development gains from sales of both residential and commercial projects contributed to a satisfactory quarterly performance. The construction operations generated profits on a par with last year, although the profit margin was lower. The fourth quarter is generally a low season in the industrial operation, as reflected in the profit performance. The drop compared to last year is due to the inclusion of a NOK 70 million sale gain in the 2017 fourth-quarter results. The Q4 order intake of NOK 9.2 billion brought the order book to NOK 34.6 billion, up from NOK 33.8 billion at the end of Q3 and NOK 32.6 billion one year ago. Approximately NOK 23 billion of the order book will be converted into revenue during the course of Revenue increased by 13% in 20, to NOK 35.6 billion from NOK 31.4 billion in This growth was powered by the construction operation, with higher revenues being achieved in all three countries. In Norway, high activity levels in eastern Norway and Trøndelag County made a substantial contribution, while the Swedish operation benefited from acquisitions in the Gothenburg region. In Denmark, revenues were boosted by increased activity in the commercial buildings segment in Copenhagen. The property development operation suffered a fall in revenue in 20 due to lower residential sales and few building starts. The revenues of the industrial operation were on a par with The 20 pre-tax profit totalled NOK 591 million, compared to NOK 1,311 million in Profits were primarily impacted by project write-downs of NOK 550 million linked to the Norwegian civil engineering operation, which were recognised in Q2 20. The underlying profit for 20 excluding the write-downs totalled NOK 1,141 million. Reduced sales and fewer new residential building starts in Sweden negatively impacted the profits of the property development operation, while increased raw material prices and lower capacity utilisation resulted in a poor profit performance by the industrial operation. To improve profitability, Veidekke has reorganised its operational businesses, splitting the Norwegian construction operation into a building construction unit and a civil engineering unit, gathering the group s Scandinavian residential, commercial and project development activities under one executive vice president and making the industrial operation a separate business area under the direct supervision of the Group CEO. Moreover, measures have been implemented to reduce capital use and improve project risk management. Operational cash flow amounted to NOK 608 million in the fourth quarter. Net interest-bearing debt totalled NOK 1,470 million at the end of the fourth quarter, compared to NOK 764 million at year-end The increase is primarily attributable to weaker profitability, high investment in machinery and equipment, increased capital commitments in the property development operation and strategic acquisitions. The profit per share for 20 amounted to NOK 4.0 (IFRS). In view of the group s strong financial position, robust order book and positive market outlook, the board of directors has again proposed an ordinary dividend of NOK 5.0 per share for the 20 financial year. 1) Revenue and pre-tax profit in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See Note.

6 6 REPORT FOURTH QUARTER 20 VEIDEKKE ASA KEY FIGURES CONSTRUCTION OPERATIONS NOK million Q4 20 Q ) 20 1) ) Revenue Profit before tax Profit margin (%) Order backlog REVENUE 1) NOK BILLION PROFIT BEFORE TAX 1) NOK MILLION Q4 17 Q1 Q2 Building Construction Q3 Q4 Civil Engineering Q4 17 Q1 Q2 Building Construction Q3 Q4 Civil Engineering PROFIT MARGIN 1) PER CENT 5 ORDER BACKLOG NOK BILLION Q4 17 Q1 Q2 Q3 Q4 0 Q4 17 Q1 Q2 Q3 Q4 Building Construction Civil Engineering Total Building Construction Civil Engineering 1) Revenue and profit before tax in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See note.

7 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 7 CONSTRUCTION OPERATIONS Universitetsgata 7, Oslo.. Illustration: Cubo Arkitekter The construction operation reported revenue of NOK 8.6 billion in the fourth quarter, compared to NOK 7.4 billion last year. Higher revenues during the quarter are attributable to the Norwegian and Swedish operations. Year-on-year, revenues increased by 15%, to NOK 29.6 billion. Some of the achieved growth was organic and primarily arose in Norway, and some stems from business acquisitions in 20. The quarterly order intake of NOK 9.0 billion brought the order book to NOK 33.7 billion at year-end, up from NOK 32.8 billion in Q3 and NOK 31.6 billion in Q The order book was rebalanced in 20, with a greater share of non-residential projects and a corresponding reduction in residential developments. The Q4 pre-tax profit amounted to NOK 7 million, compared to NOK 198 million in Q The profit margin for the quarter totalled 2.2%, compared to 2.7% one year ago. The annual profit of NOK 219 million is significantly weaker than the 2017 result, and is primarily attributable to writedowns in the civil engineering operation in Q2.

8 8 REPORT FOURTH QUARTER 20 VEIDEKKE ASA Building Construction Norway NOK million Q4 20 Q ) 20 1) ) Revenue Profit before tax Profit margin % Order backlog ) Revenue and profit before tax in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See note. The Norwegian building construction operation generated revenues of NOK 3.6 billion in the fourth quarter, up 25% from the same quarter in The operations in eastern Norway and Trøndelag County contributed most to this growth, and helped boost revenues by 27% year-on-year, to NOK 13.1 billion. The Q4 pre-tax profit totalled NOK 109 million, compared to NOK 115 million in Q The profit margin was 3.0%, compared to 4.0% in the same quarter of last year. Low earnings on some projects reduced profitability compared to Q The full-year profit was NOK 443 million, up from NOK 378 million in This improvement is attributable to increased sales. Overall portfolio profitability was somewhat lower than last year, with a profit margin of 3.4%, compared to 3.7% in The fourth-quarter order intake amounted to NOK 4.0 billion. Major projects won in the fourth quarter: Universitetsgaten 7 in Oslo. Offices for Entra. Contract value NOK 625 million. Ulven, first phase of construction. Residential units in Oslo for OBOS. Contract value NOK 470 million. Stjørdal health centre for Stjørdal municipality. Contract value NOK 259 million. Holtermanns veg 1 in Trondheim. Office building for Entra. Contract value NOK 224 million. As at quarter-end, the building construction order book totalled NOK 14.2 billion, up from NOK 13.9 billion at the end of the third quarter and NOK 12.8 billion at year-end In November, Veidekke acquired 68% of the shares in Hande AS, a company specialising in office refurbishment and decoration in the Oslo region. Hande has 25 employees, and achieved revenues of NOK 160 million in 20. Civil Engineering Norway NOK million Q4 20 Q ) 20 1) ) Revenue Profit before tax Profit margin % Order backlog ) Revenue and profit before tax in the segment accounts for 2017 have been restated in accordance with the new revenue recognition standard IFRS 15, effective as of 1 January 20. See note. The Norwegian civil engineering operation achieved revenues of NOK 1.4 billion in the fourth quarter. Ongoing project activity was high, and revenues were % higher than in the same quarter last year. Overall, the Norwegian civil engineering operation generated NOK 4.4 billion in revenue in 20, a result that is on a par with The civil engineering operation produced a loss of NOK -25 million in Q4, compared to NOK -28 million in Q The profitability of the project portfolio is weak and is not providing adequate coverage of fixed costs. The result for 20 as a whole was NOK -584 million, including project writedowns of NOK 550 million effected in Q2. Organisational and profit-improvement measures have been implemented, and the strategy for the business area is being thoroughly reviewed. The fourth-quarter order intake amounted to NOK 1.1 billion. Major projects won in the quarter: Sørmarkfjellet wind park in Trøndelag County, for Sarepta Energi AS. Contract value NOK 261 million. Leirvika port for Hammerfest havn KF. Groundworks for a logistics centre at the polar base in Rypefjord. Contract value NOK 130 million. As at the end of Q4 20, the civil engineering order book was at NOK 5.1 billion, compared to NOK 5.4 billion at the end of Q3 and NOK 6.7 billion at year-end To ensure the profitability of future projects, the Norwegian civil engineering operation is taking a highly selective approach to participation in competitive tenders.

9 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 9 Construction Sweden NOK million Q4 20 Q At the end of Q4 20, the Swedish construction operation order book stood at NOK 11.9 billion, compared to NOK 10.7 billion at the end of both Q3 20 and Q Revenue Profit before tax Profit margin % Order backlog The Swedish construction operation recorded revenues of NOK 3.1 billion in the fourth quarter, up from NOK 2.7 billion in the same quarter of last year. Measured in local currency, this equates to revenue growth of 21%. This growth is primarily attributable to the acquisition of the Gothenburg-based construction business Billström Riemer Andersson AB in the second quarter of 20. Annual revenue totalled NOK 9.9 billion, compared to NOK 8.8 billion in 2017, with growth primarily occurring in the non-residential segment. Activity levels in the residential construction segment fell by 23%. The Q4 20 pre-tax profit amounted to NOK 68 million, up from NOK 61 million in the fourth quarter of last year. The profit margin of 2.2% was on par with The increase in profits is attributable to the non-residential segment, not least the business acquisition completed in the second quarter of the year. However, lower activity levels and weak profitability in certain residential projects had a considerable negative impact on the results for the quarter and for the year. The pre-tax profit for 20 totalled NOK 214 million, compared to NOK 170 million in 2017, and the profit margin improved to 2.2%, from 1.9% in Individually, the building construction and civil engineering operations achieved profit margins of 1.1% and 3.9%, respectively. The order intake for the fourth quarter was NOK 3.6 billion, up from NOK 3.1 billion in Q Major projects won in the fourth quarter: Geely Innovation Center, phases 2 5. Multifunctional building in Gothenburg housing offices, a car design centre and a hotel, for Geely Gothenburg Investment AB. Contract value NOK 1.2 billion. SKF HK, Gothenburg. Office building for SKF. Contract value NOK 265 million. Vitåfors mine. Development of mine in Gällivare for LKAB. Contract value NOK 196 million. Vindpark Bäckhammar. Foundation and roads for a wind park in Värmland County, for Eolusvind AB. Contract value NOK 177 million. Nyponrosen, Helsingborg. Residential care units for Magnolia. Contract value NOK 151 million. Construction Denmark NOK million Q4 20 Q Revenue Profit before tax Profit margin % Order backlog The Danish construction operation achieved revenues of NOK 520 million in the fourth quarter, compared to NOK 604 million in the corresponding quarter of last year. In local currency, the decline in revenue amounted to 5%. Fullyear sales totalled NOK 2,2 million, up from NOK 2,144 million in While activity levels were strong in the Copenhagen region, the Jutland operation suffered a drop in revenue compared to The fourth-quarter pre-tax profit was NOK 36 million, compared to NOK 50 million in Q The quarterly profit margin was 6.9%, compared to NOK 8.3% last year. The operation enjoys robust profitability, and the fall in profits compared to 2017 is primarily attributable to the completion of an own-account project that boosted profits in Q The profit for 20 as a whole was NOK 146 million, compared to NOK 137 million in The quarterly order intake of NOK 368 million brought the order book to NOK 2.5 billion at year-end, compared to NOK 2.7 billion at the end of Q3 20 and NOK 1.4 billion as at year-end No major contracts were entered into in the fourth quarter.

10 10 REPORT FOURTH QUARTER 20 VEIDEKKE ASA KEY FIGURES PROPERTY DEVELOPMENT OPERATIONS NOK million Q4 20 Q Revenue Profit before tax Capital invested PROFIT BEFORE TAX 1) NOK MILLION 200 RETURN ON INVESTED CAPITAL, 12-MONTH ROLLING 1) PER CENT Q4 17 Q1 Q2 Q3 Q4 0 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 Q2 Q3 Q4 KEY FIGURES RESIDENTIAL UNITS, VEIDEKKE S SHARE Q4 20 Q3 20 Q2 20 Q1 20 Q Number of units sold Norway Sweden 2) Denmark 3) Construction starts Norway Sweden Denmark 3) Number of units under construction Norway Sweden Denmark 3) Sales ratio, units under construction (%) Norway Sweden Denmark Number of units in land bank Norway Sweden ) The return on invested capital is adjusted for taxes in joint ventures and associates. 2) The sales totals for the first and second quarters of 20 have been corrected for cancelled pre-sales in discontinued projects. 3) One own-account project in Copenhagen with 115 units. The project is reported in the accounts under Construction Denmark.

11 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 11 PROPERTY DEVELOPMENT OPERATIONS Sølyst, Stavanger. The fourth-quarter sales of the property development operation totalled NOK 1.0 billion, up from NOK 863 million in Q In 20 as a whole, the property development business generated revenues of NOK 2.9 billion, compared to NOK 3.5 billion in The pre-tax profit amounted to NOK 162 million, compared to NOK 114 million in the corresponding quarter of last year. Profits are attributable both to ongoing residential production and to sales of residential and commercial projects in Norway and Sweden, which contributed development gains of NOK 91 million during the quarter. The profit for the year totalled NOK 388 million, compared to NOK 549 million in This drop in profits is attributable to lower residential sales and few new building starts in the Swedish operation. Veidekke sold 200 residential units in the fourth quarter, compared to 197 in the preceding quarter and 213 in the same period last year. Veidekke s share of sales during the quarter was 161 units. In total, 731 residential units valued at NOK 3.3 billion were sold in 20. Veidekke s share of these sales was 567 units. Activity levels in the Norwegian residential market are normal, but lower demand reduced residential construction activity in Sweden. The number of residential units under construction was 2,116 at quarter-end, down from 2,9 in the third quarter and 2,620 one year ago. The portfolio sales ratio was 80%. During the quarter, construction started on seven residential projects four in Norway and three in Sweden. As at the end of the fourth quarter, the group s land bank encompassed,600 potential residential units, with Veidekke s share amounting to 15,100 units. The book value of the land bank was NOK 3.8 billion. A market valuation of the plots in the land bank indicates an excess value above book value of approximately NOK 1 billion, primarily attributable to the Norwegian property development operation. Veidekke has built up a commercial property development operation in recent years to complement its residential development activities. The operation concentrates on offices, commercial premises in residential projects and logistics buildings. Important milestones were reached in Q4 20 with the realisation of projects in Norway and the establishment of Veidekke Kommersiellt AB in Sweden. The capital invested in the property development operations totalled NOK 4.7 billion as at 31 December 20. The return on invested capital for the preceding 12 months was 11.3%, compared to 17.6% last year.

12 12 REPORT FOURTH QUARTER 20 VEIDEKKE ASA Property Development Norway NOK million Q4 20 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. Fourth-quarter revenues totalled NOK 306 million, up from NOK 139 million in the fourth quarter of last year. The increase is due to the completion of several own-account projects, as well as project sales during the quarter. The pretax profit for Q4 amounted to NOK 71 million, compared to NOK 26 million in Q Residential production contributed approximately the same amount as last year, while the sale of two commercial projects generated a combined development gain of NOK 46 million. For 20 as a whole, revenues amounted to NOK 735 million, compared to NOK 610 million in The annual profit was NOK 163 million, up from NOK 146 million in While the residential production contribution was on a par with last year, profits in 20 were boosted by development gains from project sales. The Norwegian property development operation sold 89 residential units in the fourth quarter, compared to 115 in the preceding quarter and 124 in Q Veidekke s share of these sales was 52 units. Four new projects in Oslo, Lørenskog and Stavanger totalling 149 units were released for sale during the quarter. Overall, 437 residential units were sold in 20, including sales in jointly owned projects. In 2017, 493 residential units were sold. Residential production is stable, with 599 residential units under construction at quarter-end, compared to 576 at the end of the third quarter and 557 at the same time last year. Construction started on four projects, of which Veidekke s share amounts to 109 residential units, and 86 units were completed and delivered. The sales ratio for residential units under construction was 70% in Q4 20, compared to 80% in Q As at the end of Q4 20, the Norwegian operation s land bank encompassed 7,750 potential units, of which Veidekke s share amounted to 5,400 units. Only minor changes occurred in the land bank during the quarter. Veidekke s commercial property portfolio includes development projects relating to both offices and logistics buildings. Together with partners, Veidekke is involved in a 12,000 square metre commercial project that is currently under construction in Trondheim. The building, which will be ready in the second quarter of 2019, is already almost fully tenanted. The capital invested totalled NOK 3.1 billion as at 31 December 20, compared to NOK 3.2 billion one year ago. Adjusted for tax costs arising in associated and jointly controlled companies, the return on invested capital for the preceding 12 months was 8.6%. Property Development Sweden NOK million Q4 20 Q Revenue Profit before tax No. of units under construction 1) No. of units sold 1) ) Veidekke s share. The Swedish property development operation achieved revenues of NOK 719 million in the fourth quarter, compared to NOK 724 million in the same quarter of last year. The pre-tax profit rose to NOK 91 million, from NOK 88 million in Q Development gains from the sale of three residential projects contributed NOK 45 million to the quarterly profit. In 20, sales amounted to NOK 2.2 billion, compared to NOK 2.8 billion in The annual profit for 20 was NOK 225 million, compared to NOK 404 million in The fall in revenues and profits is attributable to lower sales and a decline in building starts. The Swedish property development operation sold 111 residential units in Q4, up from 81 units in Q3 and 86 units in Q Veidekke s share of sales during the quarter was 109 units. Eighty-five residential units in the small-house segment were released for pre-sale during the quarter. In 20 as a whole, 286 residential units were sold, with Veidekke s share amounting to 271 units. The drop from 645 residential units in 2017 is primarily due to weak sales in the Stockholm region. Throughout the year, Veidekke took steps to boost sales in individual projects, primarily in Stockholm. This helped increase demand for these projects. The financial effects of the market adaptations are reflected in the 20 profit.

13 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 13 As at year-end, there were 1,517 residential units under construction in Sweden, compared to 1,948 units last year. In the fourth quarter, construction started on three smaller projects totalling 76 residential units. At year-end, the sales ratio for residential units under construction was 84%, on a par with The Swedish property development operation s land bank encompasses 10,800 potential residential units, of which Veidekke s share amounts to 9,700 units. Only minor changes occurred in the land bank during the quarter. At the end of the fourth quarter, the capital invested amounted to NOK 1.6 billion, compared to NOK 0.9 billion one year ago. The return on invested capital over the preceding 12 months was 19.9%. During the quarter, Veidekke Bostad and STOS Fastigheter formed the company Veidekke Kommersiellt AB. The company will concentrate on commercial property development in the office and hotel segments, in major urban centres in Sweden. Nyegaardskvartalet. Illustrasjon: Spor Arkitekter

14 14 REPORT FOURTH QUARTER 20 VEIDEKKE ASA KEY FIGURES INDUSTRIAL NOK million Q4 20 Q ) Revenue Profit before tax Profit margin (%) Order backlog REVENUE NOK MILLION ASPHALT VOLUME, 12-MONTH ROLLING THOUSAND TONNES Q4 17 Q1 Q2 Q3 Q4 0 Q4 17 Q1 Q2 Q3 Q4 PROFIT AND MARGIN, 12-MONTH ROLLING NOK MILLION REVENUE BY BUSINESS AREA, LAST 12 MONTHS % % Total NOK 4.9 billion 67% 0 Q4 17 Q1 Q2 Q3 40 Q4 0 Profit Margin Asphalt Aggregates Road Maintenance 1) The profit for Q included a gain of NOK 70 million from sale of land.

15 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 15 INDUSTRIAL Hylllestad asphalt plant The industrial operation generated revenues of NOK 1.4 billion in Q4 20, compared to NOK 1.3 billion in Q The annual revenue total was NOK 4.9 billion, up from NOK 4.8 billion last year. The pre-tax loss for the fourth quarter totalled NOK -4 million, compared to a profit of NOK 87 million in the corresponding quarter of The 2017 result included a sales gain of NOK 70 million. The profit for 20 as a whole was NOK 40 million, compared to NOK 206 million in Year-on-year, the profit margin fell to 0.8%, from 4.3% in The decline in profitability is attributable to the asphalt operation. The asphalt operation boosted sales to NOK 911 million in Q4, up from NOK 756 million in Q A loss of NOK -7 million was made, compared to a profit of NOK 6 million in the fourth quarter of last year. The profit margin was -0,8%, compared to 0.8% one year ago. The annual profit totalled NOK 3 million, compared to NOK 133 million in The fall in profits is due to both a substantial increase in raw material prices and lower capacity utilisation than last year. While the business had anticipated higher volumes in 20 and made capacity investments on this basis, volumes remained stable. To strengthen the profitability of the asphalt operation, measures focused on sales, estimates, pricing and planning have been implemented. The road maintenance operation generated revenue of NOK 3 million in the fourth quarter, compared to NOK 405 million in the fourth quarter of last year. In Q4, a loss of NOK -8 million was made, compared to NOK -4 million in Q For 20 in total, the result was a loss of NOK -35 million, compared to NOK -66 million in The result for 2017 included allocations for losses on two contracts. Although the overall result of the business is weak, profitability in the newer contracts is good. The total project contribution from the portfolio does not, however, provide coverage of fixed costs. The aggregates operation achieved quarterly sales on a par with the corresponding quarter of last year. The pre-tax profit was NOK 11 million, compared to NOK 17 million in The operation is highly profitable, with a profit margin of 7.3% in the fourth quarter. On an annual basis, the profit for 20 was NOK 73 million, up from NOK 69 million in The profit margin for 20 was 12.5%.

16 16 REPORT FOURTH QUARTER 20 VEIDEKKE ASA OCCUPATIONAL HEALTH AND SAFETY Two Veidekke employees died in work-related accidents in 20, in November and December respectively. These accidents and a general increase in the number of recorded injuries in 20 underline the need for a constant safety focus and intensified preventive efforts. Veidekke established a safety committee in 20 to ensure that its safety measures are even more clearly communicated and effectively applied. The committee, which reports to the corporate management team, is mandated to lead Veidekke s safety improvement programme, including by prioritising, initiating, implementing and approving improvement projects and measures. It is chaired by the group s OHS director and composed of selected OHS and line managers. A total of 80 injuries were reported in the fourth quarter. This figure represents a drop from the preceding quarter and is on a par with the fourth quarter of last year (79). 20 as a whole saw an increase in both the number of serious injuries and the overall injury rate. The fourth-quarter LTI (lost time injury) rate was 4.5, compared to 5.2 in the preceding quarter and 4.2 in Q The sick leave rate was 4.1% in the fourth quarter, compared to 3.4% in the previous quarter and 4.0% in the fourth quarter of Veidekke seeks to prevent sick leave by providing training, physical exercise and facilitation aimed at enabling persons on sick leave to return to work more quickly. Veidekke s rate of sick leave is lower than the industry average. LTI RATE Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 Q2 Q3 Q4 LTI rate: Lost-time injuries per million hours worked, own employees. TOTAL NUMBER OF INJURIES Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 Q2 Q3 Q4 Number of injuries, own employees and subcontractors. SICKNESS ABSENCE SERIOUS INJURIES Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 Q2 Q3 Q4 Sickness absence, own employees, per cent. Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 Q2 Q3 Q4 Number of injuries, own employees and subcontractors.

17 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 17 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 fourth quarter was a loss of NOK 5 million, compared with a loss of NOK million for the third quarter of FINANCIAL SITUATION At the end of 20, net interest-bearing debt amounted to NOK 1,470 million, up from NOK 764 million at year-end The increase is linked to lower profits, increased investment in machinery and equipment, and increased capital commitments in the Swedish property development operation. In addition, Veidekke acquired businesses for a total of NOK 400 million in 20. Cash flow from operational activities totalled NOK 1,400 million in 20, including a positive liquidity effect of NOK 500 million from the settlement of two major legal disputes. By comparison, cash flow from operational activities totalled NOK 702 million in Veidekke has a sound financial capacity. The group has a NOK 3.6 billion borrowing facility with DNB. At quarter-end, unutilised borrowing capacity amounted to NOK 3.5 billion. Veidekke has also issued two bond loans: a NOK 600 million loan maturing in March 2025 and a NOK 1.0 billion loan maturing in May SHAREHOLDER INFORMATION Largest shareholders as at 31 December 20 Ownership share in % OBOS BBL.1% FOLKETRYGDFONDET 11.2% IF SKADEFORSÄKRING AB 5.9% HANDELSBANKEN NORDEN SELEKTIV 3.0% VERDIPAPIRFONDET DNB NORGE (IV) 2.3% DANSKE INVEST NORSKE INSTIT. II. 2.3% MUST INVEST AS 2.2% MP PENSJON 2.1% ODIN NORGE 1.9% VANGUARD GROUP 1.6% Foreign shareholders 23.5% Employees, total ownership 14.8% A total of 14.5 million Veidekke shares were traded in the fourth quarter 20. The share price ranged from NOK to NOK 99.00, and was NOK at 31 December 20. 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 fourth quarter of 20 beyond this. For a more detailed description of related party transactions, see Veidekke s 2017 Annual Report. 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, and systematic risk management in all parts of the business and during all project phases is of crucial importance. This encompasses matters from project selection and tender process and quality, to contract follow-up and project execution. Having the necessary expertise to ensure optimal assignment execution is key when deciding which projects to tender for. At the tender-preparation stage, risks are identified and assessed, and plans are made for managing risk during the execution phase. Certain forms of contract permit differing interpretations of contractual performance, giving room for disagreement between a contractor and the client regarding final payment. This applies particularly to transport infrastructure projects, in which the contractual sums are large. Although Veidekke seeks to reach agreement with clients through negotiations, some disputes do end up in the court system. As at the end of the fourth quarter, Veidekke was involved in two major disputes currently before the courts, of which a non-binding judgment has been pronounced in one. Two major disputes, including one concerning a transport infrastructure project, were resolved by settlement in 20. The residential market is sensitive to cyclical fluctuations, and earnings in Property Development are closely related to new project building starts. 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, a decline in residential sales may delay residential projects. At year-end 20 the sales ratio for residential units under construction was 80%. Veidekke s financial risks are primarily 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 2017 Annual Report.

18 REPORT FOURTH QUARTER 20 VEIDEKKE ASA MARKET OUTLOOK PRODUCTION IN CONSTRUCTION AND CIVIL ENGINEERING Current prices, NOK billion: ) ) Growth NORWAY SWEDEN DENMARK 20 2) Growth ) Growth ) Growth ) ) Growth 20 2) Growth ) Growth ) Growth ) ) Growth 20 2) Growth ) Growth ) Growth Apartments and small houses Commercial buildings Public buildings Civil engineering Total contracting production 58 24% 7% -17 % -9% 94 23% -9 % -11% 8 % 34 22% 12% 6% 0% 51 7% 1% -9 % -3% 45 23% -2 % 0% 9 % 30 5% 7% 10% 10% 26-4% -9% 8 % 16% 31 11% 11 % 1% -1 % 16-1% 3% 7% 15% 81 8% 7% 5 % 0% 79 4% 7 % 7% 7 % 50-5% 0% 3% 8% % 3% -4 % -1% % 0 % -1% 6 % 130 4% 5% 6% 7% 1) Source: Statistics Norway, Statistics Sweden, Statistics Denmark 2) Veidekke s forecasts NORWAY Production in the Norwegian construction and civil engineering market has flattened out following several years of strong growth. The exception is the civil engineering market, in which growth remains strong. Demand for new residential units stabilised in 20 after suffering a marked drop in Overall, new residential unit sales in Norway are now at normal levels, but remain significantly lower than in the peak year The economic prospects for 2019 are positive, with strong economic growth and a strong employment market. In the residential segment, we expect demand to remain positive in 2019, albeit not at 2016/2017 levels, due to somewhat fewer moves to major cities and increased interest rates. While growth in the market for non-residential buildings is forecast to slow down, the decline in production of commercial buildings is largely expected to be compensated for by increased construction of public buildings in the health and care sector. SWEDEN Lower production is expected in the Swedish construction and civil engineering market going forward. As few new residential projects started up in 20, due to both lower demand for new residential units and higher construction costs, residential production will be reduced going forward. New residential unit sales stabilised in the second half of 20, albeit at a far lower level than in previous years. Compared to the end of 20, residential sales and residential building starts are forecast to increase somewhat in While production is expected to be on a par with 20 levels in the commercial buildings segment, continued production growth is anticipated in the civil engineering market. DENMARK Production in the Danish construction and civil engineering market has picked up considerably in recent years, with the strongest growth being recorded in the apartment sector. The non-residential market is forecast to continue growing in Flatter, and possibly falling, demand for new residential units is expected to keep residential production level on a par with 20.

19 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 19 Oslo, 6 February 2019 The Board of Directors of Veidekke ASA Martin Mæland Chair Hans von Uthmann Gro Bakstad Ingalill Berglund Daniel Kjørberg Siraj Ingolv Høyland Inge Ramsdal Odd Andre Olsen Arve Fludal Arne Giske Group CEO

20 20 REPORT FOURTH QUARTER 20 VEIDEKKE ASA INCOME STATEMENT Figures in NOK million Q4 20 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 Pre-tax profit Income tax expense Post-tax profit Of which non-controlling interests Earnings per share (NOK) 1) ) No dilutive effect. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Figures in NOK million Q4 20 Q Post-tax profit 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 FOURTH QUARTER 20 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 FOURTH QUARTER 20 VEIDEKKE ASA STATEMENT OF CASH FLOWS Figures in NOK million Q4 20 Q Pre-tax profit 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 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 FOURTH QUARTER 20 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 FOURTH QUARTER 20 VEIDEKKE ASA BUSINESS SEGMENTS Figures in NOK million Q4 20 Q CONSTRUCTION (specification page 27) Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (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 Pre-tax profit (EBT) Total assets, segment INDUSTRIAL Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment OTHER OPERATIONS 1) Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) ) Other operations include the Group s central unassigned costs and net financial items, plus Veidekke s involvement in public-private partnerships (PPP).

25 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 25 Figures in NOK million Q4 20 Q GROUP ELIMINATIONS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) TOTAL VEIDEKKE GROUP SEGMENT ACCOUNTS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets

26 26 REPORT FOURTH QUARTER 20 VEIDEKKE ASA RECONCILIATION OF SEGMENT ACCOUNTS AND FINANCIAL ACCOUNTS Figures in NOK million Q4 20 Q TOTAL VEIDEKKE GROUP SEGMENT ACCOUNTS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment IFRS 15 ADJUSTMENTS, DEVELOPMENT OF RESIDENTIAL 1) 2) UNITS IN NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment ) Under IFRS, income and earnings from completed residential units in Norway are not recognised until the date on which a unit is delivered to the buyer. In the internal monitoring of residential projects, the reporting occurs on a percentage of completion basis, meaning that revenue and expenses are recognised based on the following formula: estimated final outcome x stage of completion x sales ratio. 2) See also Note 2 Accounting policies. Figures in NOK million Q4 20 Q TOTAL VEIDEKKE GROUP FINANCIAL ACCOUNTS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment

27 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 27 CONSTRUCTION OPERATIONS BY COUNTRY Figures in NOK million Q4 20 Q BUILDING CONSTRUCTION NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) CIVIL ENGINEERING NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) TOTAL CONSTRUCTION NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment

28 28 REPORT FOURTH QUARTER 20 VEIDEKKE ASA CONSTRUCTION OPERATIONS BY COUNTRY, CONTINUED Figures in NOK million Q3 20 Q CONSTRUCTION SWEDEN Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment CONSTRUCTION DENMARK Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment TOTAL CONSTRUCTION OPERATIONS Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (EBT) Total assets, segment

29 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 29 PROPERTY DEVELOPMENT BY COUNTRY Figures in NOK million Q4 20 Q PROPERTY DEVELOPMENT NORWAY Revenue Operating expenses Share of net income from joint ventures Depreciation/impairment Operating profit (EBIT) Net financial items Pre-tax profit (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 Pre-tax profit (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 Pre-tax profit (EBT) Total assets, segment

30 30 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 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 15 Change in principle for measuring options, non-controlling interests (144) Equity at 1 January Equity at 1 January Profit for the year Other comprehensive income IFRS 2 share-based transactions employees Additions, aquisitions of operations, non-controlling interests Transactions, non-controlling interests Dividend Equity at 31 December Equity at 1 January Profit for the year Other comprehensive income IFRS 2 share-based transactions employees Additions, aquisitions of operations, non-controlling interests Transactions, non-controlling interests Dividend Equity at 31 December ) 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. There have been no purchases of own shares in 20.

31 REPORT FOURTH QUARTER 20 VEIDEKKE ASA 31