Presentation 3rd quarter 2020
12 November 2020 Jimmy Bengtsson, CEO and Jørgen Wiese Porsmyr, CFO Occupational health and safety Our primary priority
Number of serious injuries Sickness absence The Veidekke house 12-month rolling, Veidekke employees, hired staff Veidekke employees Focus on culture and sub-contractors
25 5%
20 4%
15 3%
10 2%
5 1%
0 0%
Q3 15 Q3 16 Q3 17 Q3 18 Q3 19 Q3 20 Q3
Q3 15 Q3 16 Q3 17 Q3 18 Q3 19 Q3 20 Q3
2 © Veidekke Highlights 3rd quarter 2020
● Divestment of property development business completed, generating a NOK 1.1 billion book gain
● Proposed dividend of NOK 20/share from transaction and additional NOK 2,5/share for 2019
● Revenue increase in all three countries
● Continued operations generated a good result
● Good order intake in the quarter, but uncertainty related to market development continues
Veidekke has been commissioned to build a velodrome and a commercial building comprising a secondary school, preschool, offices and business premises in Asker municipality. 3 © Veidekke Financial key figures, continued operations Revenue and earnings 3rd quarter
3rd quarter: Revenue 3rd quarter: Pre-tax profit NOK billion NOK million
12 600
9 400
6 505 9.5 8.5 9.0 200 390 417 3
0 0 2018 2019 2020 2018 2019 2020
4 © Veidekke Good order book Shift away from private commercial buildings
Revenue and order intake Order book Order book per segment Converted into revenue next 12 mos. 12-month rolling, NOK billion NOK billion Percentage NOK billion 100 % 40 40 36
36 36 32 80 % 32 32 28 28 28 24 24 24 60 % 20 20 20 16 16 16 40 % 12 12 12
8 8 20 % 8
4 4 4
0 0 0 % 0 Sept-18 Sept-19 Sept-20 Sept-18 Sept-19 Sept-20 Sept-18 Sept-19 Sept-20 Sept-19 Dec-19 Sept-20
Revenue Order intake Construction Norway Sweden Residential buildings Public buildings Construction Norway Sweden Infrastructure Norway Denmark Commercial buildings Transport Infrastructure Norway Denmark Industry and energy Other civil engineering 5 The order book includes construction/civil engineering projects and road maintenance contracts Road maintenance contracts © Veidekke Sustainability and climate change Veidekke is leading the way
How the company impacts climate change How climate change impacts the company Climate accounting is required to understand Climate risk analysis is necessary to understand the impacts of our business on climate and our business development in light of climate change the environment.
● Veidekke will reduce greenhouse gas emissions ● Veidekke has initiated mapping of climate from its own operations by 50% by 2030 and change as a financial risk 90% by 2050 ● A pilot study conducted in 2019 for the Industrial ● Introduction of fossil-free construction sites, operation assessed physical climate risk and piloting reuse of concrete elements, extensive transition risk massive-wood production and electrification ● Veidekke is expanding the study to include of machinery assessing climate risk for the construction ● Transition to low-temperature asphalt, increased and civil engineering operations application of reused asphalt and biomass in ZEB Flexible Labs in Trondheim – a Zero Emission Building level COM, asphalt production which means that over a period of 60 years, CO2 emissions will be compensated by production of renewable energy from solar panels. Photo: m.herzog / visualis-images.com
6 © Veidekke Results Segments and group
Jørgen Wiese Porsmyr, CFO 3rd quarter 2020 Revenue, results and margin Group and segments
3rd quarter 2020 3rd quarter 2019
Amounts in NOK million Revenue Pre-tax profit Margin Revenue Pre-tax profit Margin
Construction Norway 3 381 118 3.5 % 3 337 112 3.4 % Infrastructure Norway 2 782 263 9.5 % 2 710 260 9.6 % Sweden 2 834 86 3.0 % 2 417 35 1.5 % Denmark/Hoffmann 635 47 7.4 % 563 37 6.5 % Other -99 -10 -74 -27 Group excl. Property development 9 534 505 5.3 % 8 952 417 4.7 % Group incl. Property development 9 832 1 170 9 392 494
Group incl. Property development, IFRS
Post-tax profit 1 536 Profit per share (NOK) 11.2
8 © Veidekke Construction Norway
3rd QUARTER 2020 REVENUE AND MARGIN PER QUARTER
NOK billion • Stable revenue; local variations 5 5% 3.9% 3.5% 4 4% • Up in Oslo and Bergen; down in Trondheim and Stavanger 4.2 3.6 3.6 3 3.3 3.4 3% • Profit and margin slightly up from last year 3.3% 3.4% • Improvement in units that previously have had weak results 2 2% 1 1% • Positive contribution from implemented restructuring measures 0.8% 0 0% • Negative impact from reduced revenue in some cities Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Revenue Margin (%)
• Good order intake in the quarter ORDER BOOK, ORDER INTAKE AND BOOK-TO-BILL (12M)
NOK billion • Segment shift since year-end 2019: Share of public buildings NOK billion increased by 16%, while share of commercial buildings 18 18 decreased by 26% 15 16.7 15 14.8 14.8 14.0 14.0 • Somewhat lower activity levels expected going forward 12 12 9 9
6 6
3 3 4.4 3.0 2.2 2.8 2.7 0 0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Sept- Sept- Sept- 18 19 20
Order book Order intake 12m revenue 12m order intake
9 © Veidekke Infrastructure Norway
3rd QUARTER 2020 REVENUE AND MARGIN PER QUARTER PRE-TAX PROFIT 3RD QUARTER
NOK billion NOK million 4 15% 245 • Stable turnover 240 9.5% 212 8.7% 202 • Increase in Civil engineering (33%) 3 10% 2 2.7 2.8 190 2.1 2.3 5% • Decline in Asphalt and Aggregates (-22%) 1 1.7 140 4.5% 0% 0 0.6% • Overall profit and margin on a par with last year -5% 90 -1 51 rd -12.2% -10% 40 • Civil engineering improved profitability; 3.1% margin for 3 quarter -2 14 -7 -3 -15% -10 • Asphalt production volume declined, but result was partially Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 2018 2019 2020 2018 2019 2020 offset by targeted measures Revenue Margin % Civil engineering Asphalt and Aggregates • Improvement initiatives continue ORDER BOOK, ORDER INTAKE AND BOOK-TO-BILL (12M)1) NOK billion • Civil engineering cost reductions largely implemented NOK billion 12 12 • Measures to improve profitability in Asphalt under implementation 9 9 • Road maintenance earnings show improvement initiatives are 8.5 8.7 7.7 7.8 taking effect 6 6 5.6
• Dual market situation 3 3 4.3 2.6 • Civil engineering has a good order book and good market, 0.8 0.6 0.8 0 0 with high activity Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Sept- Sept- Sept- 18 19 20
• Asphalt and aggregates affected by decline in asphalt volumes Order book Order intake 12m revenue 12m order intake
10 © Veidekke 1) Order book includes civil engineering projects and road maintenance contracts Sweden
3rd QUARTER 2020 REVENUE AND MARGIN PER QUARTER
NOK billion • 5% revenue increase in local currency 4 2.7% 3.0% 4% 2.4 3.2 • Up in Construction Skåne and Gothenburg 2 2.6 3.3 2.8 2% 1.5% 0 0% • Low activity in Construction Stockholm 1.1% • Increased profit and margin -2 -2% -4 -5.1% -4% • Improved profitability in Construction, but Stockholm remains weak. -6 -6% Quarterly margin of 2.9% Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 • Infrastructure improved profitability over last year. Revenue Margin (%) Quarterly margin of 3.2% ORDER BOOK, ORDER INTAKE AND BOOK-TO-BILL (12M) NOK billion NOK billion • Order book 15 15
• Small order book uptick in local currency 12 13.3 12.7 13.1 12 11.4 11.5 • Segment shift since year-end 2019: Commercial buildings 9 9 decreased by 15%; public buildings increased by 24% 6 6
3 3 3.6 1.8 2.9 2.6 2.7 0 0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Sept- Sept- Sept- 18 19 20
Order book Order intake 12m revenue 12m order intake
11 © Veidekke Denmark/Hoffmann
3rd QUARTER 2020 REVENUE AND MARGIN PER QUARTER
NOK million • Revenue is stable in local currency 1 200 11.2% 12%
1 000 10% • Profit and margin increase 7.4% 800 8% 6.6% 6.2% • Strong quarterly result 600 678 6% 626 653 635 563 • Portfolio profitability is good 400 5.0% 4% • Order book is stable in local currency 200 2% 0 0% • Several ongoing projects are nearing completion Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Revenue Margin (%) • Level of activity is expected to decline in 2021 due to a ORDER BOOK, ORDER INTAKE AND BOOK-TO-BILL (12M) weaker market and fewer new commercial building projects NOK billion NOK billion 6 6
3 3 2.9 2.9 2.6 2.2 2.0
0.2 0.4 1.2 0.9 0.3 0 0 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Sept- Sept- Sept- 18 19 20
Order book Order intake 12m revenue 12m order intake
12 © Veidekke Financial position
Balance sheet Amounts in NOK million 30 Sept. 2020 30 Sept. 2019 31 Dec. 2019 Fixed assets 6 391 7 715 6 542 Current assets 13 827 15 641 6 522 Assets held for sale - - 8 920 Assets 20 218 23 357 21 985 Equity 5 706 3 838 3 949 Long-term debt 2 781 6 126 5 184 Short-term debt 11 732 13 393 10 520 Liabilities held for sale - - 2 331 Equity and debt 20 218 23 357 21 985
Equity ratio 28 % 16 % 18 % Return on equity (12m) 31 % 28 % 20 % Net interest-bearing position 5 507 -4 860 -2 653
13 © Veidekke Change in net interest-bearing position so far this year
NOK million
Cash flow from Investments and Settlement of debt Net interest-bearing Net interest-bearing operating activities other financial items and shares position as at 31 Dec. 2019 position as at 30 Sept. 2020
Continued operations Property development 14 © Veidekke Attractive dividend over time Proposed dividend payment of NOK 22.50 per share in Q4
Aiming for high distribution rate Dividend and distribution rate • Veidekke aims to provide shareholders with a competitive return, through a combination of dividend and return 10 140%
on the share 120% 8 th • NOK 22.50 per share dividend to be paid in 4 quarter 100%
6 • Work ongoing to adapt capital structure 20/share NOK 80%
• Capital-efficient business models 60%
NOK per NOK share 4 Distribution rate Distribution • Secure bank financing 40% 2 • Ensure solvency to satisfy customer requirements 20% and mitigate risk - 0% 2012 2013 2014 2015 2016 2017 2018 2019 • Veidekke will maintain a high payout ratio Ordinary dividend Extraord. dividend Annual ordinary distribution rate
15 © Veidekke Closing comments
Jimmy Bengtsson, CEO Veidekke as a streamlined construction business Focused, with strong positions
Construction Infrastructure
20% 30% 21% 13% 3% 13%
Residential Commercial Public service buildings Transport Energy Asphalt and aggregates
Strong positions in Scandinavia's largest regions and growth centres
Percentages show Veidekke’s revenue over past 12 months per market segment
17 © Veidekke Veidekke as a streamlined construction business Main priorities
1 Increase profitability ● Organisation, priorities and strategies under assessment ● The 2022 margin target of >4% is maintained
2 Selective growth in our main markets ● Commercial and residential buildings in population centres ● Well-balanced infrastructure project types and sizes 3 Attractive dividends and optimised financial structure ● Aims to pay out a large share of post-tax profit as dividends ● Emphasis on balance sheet structure and return on capital
18 © Veidekke New restrictions create new challenges Continued uncertainty pertaining to market development
● Pandemic on the rise throughout Europe – including Scandinavia ● New, strict infection control measures stipulated ● Entry restrictions related to foreign labour can negatively affect progress in individual projects ● Surge in contagion increases uncertainty related to market development and demand in some segments
Facsimile from Veidekke’s 1st quarter 2020 presentation
19 © Veidekke Veidekke as a streamlined construction business Solid platform for boosting value creation % Reinforced Improvement Profitability targets High strategy and initiatives continue maintained yield target business model
20 © Veidekke VEDLEGG
•
• •
2 1 Business areas first nine months
First nine months 2020 First nine months 2019
Amounts in NOK million Revenue Profit Margin Revenue Profit Margin Construction Norway 10 562 377 3.6 % 10 286 352 3.4 % Infrastructure Norway 6 918 162 2.3 % 7 514 155 2.1 % Sweden 8 769 205 2.3 % 7 588 140 1.8 % Denmark 1 966 122 6.2 % 1 732 100 5.7 % Other/elimination -349 -122 -590 -69 Total group, excl. Property development 27 866 743 2.7 % 26 530 678 2.6 % Profit contribution Prop. dev. and capital gain 1 173 911 1 457 247 Total group incl. Property development 29 039 1 654 5.7 % 27 987 925 3.3 %
Group incl. Property development, IFRS
Post-tax profit 1 898 Earnings per share (NOK) 13.6
22 © Veidekke Order book per 30 September 2020
Amounts in NOK million Construction Norway Infrastructure Norway Sweden Denmark Total
Residential units 5 665 - 3 124 176 8 966
Private commercial buildings 3 342 - 4 185 1 946 9 472
Public service buildings 5 002 - 2 596 316 7 914
Transport - 3 580 1 056 - 4 636
Industry and energy - 809 667 - 1 476 Other civil engineering - 52 1 637 - 1 689
Road maintenance contracts* - 3 372 - - 3 372
Other 39 - - 166 205 Total group 14 048 7 813 13 265 2 604 37 730
*Assessed as the total order book of Veidekke's portfolio of road maintenance contracts in Norway
23 © Veidekke