INFRASTRUCTURE and BUILDINGS for MODERN SOCIETIES Contents

Cover

ANNUAL REPORT 2019/20 INFRASTRUCTURE AND BUILDINGS FOR MODERN SOCIETIES Contents

CONTENTS We want to contribute to the green transition Aarsleff and how we work 3 The year at a glance 34 The Aarsleff Group is taking The highest tower in responsibility and leading the Carlsberg City 35 the way when it comes to Management’s review 4 future-proofing the building The year in figures 5 Track renewal in Northern Jutland 36 and construction industry. Letter from the CEO 6 Tubular steel piles for railway bridge 37 Financial highlights and ratios Museum for the Icelandic sagas 38 for the Group 8 First, second and third phase 39 The year in brief 9 New museum 40 The future financial year 12 Contruction Corporate governance 41 Our business 14 Corporate governance 42 M The year in figures 252 Strategic focus areas 15 Internal control and risk An unusual but strong finan- Focus areas for the three segments 17 management in financial reporting 44 cial year with a record-high Pipe Technologies EBIT bottom line, a strong order Executive Management and Corporate social responsibility 19 intake and a high order M Board of Directors 46 162M 553 Commercial risk assessment 22 backlog. Shareholder information 50 Financial targets, capital structure Ground Engineering and dividend policy 24 Management’s statement 139M and auditor’s report 52 Business areas 26 Management’s statement 53 Construction 27 Independent auditor’s report 54 Pipe Technologies 30

Ground Engineering 32 The year at a glance Financial statements 58 In the middle of Copenhagen, Financial review 59 we are constructing the new Natural History Museum Consolidated financial statements 61 of Denmark in the existing Parent company financial statements 97 buildings and in a new under ground exhibition hall.

Companies in the Aarsleff Group 107

Aarsleff | Annual report 2019/20 2 Begin – Aarsleff and how we work

AARSLEFF AND HOW WE WORK

The Aarsleff Group constructs and maintains the infrastructure and building structures of society. We lay the foundations for a financial and sustainable development and create value for the society and our shareholders. We take responsibility, lead the way and contribute to the green transition which will future-proof the building and construction industry.

Market leader improve the efficiency of the direct Partnerships and sustainability The Aarsleff Group is a building con- production costs. We build long-term partnerships with One Company Clear profitability focus struction and civil engineering group customers and business partners to Focused portfolio management with an international scope and a One Company improve the efficiency of our services, Development of collaboration. market leading position in Denmark. The Group’s diverse range of business and we add value to our customers’ units are either independent compa- projects by early contractor involve- The Group comprises a portfolio of nies or departments. Each business ment. EXTERNAL PARTNERS independent, competitive compa- unit has different specialist skills, Efficient and well-structured nies, each with their own specialist and therefore they mainly sell their The Aarsleff Group assumes corpo- expertise, organised under Per services directly to our customers. rate social responsibility, leads the collaboration Aarsleff Holding A/S. As the largest Our specialist expertise includes har- way and contributes to the green THE CUSTOMER of these companies, Per Aarsleff A/S bour and marine construction, railway transition which will future-proof the Attractive price and has a significant role in coordinating work, tunnel work, ground engineer- building and construction industry. In reliability of delivery and managing the Group, since our ing work, district heating work, pipe a close working relationship with our ONE top management and the Group staff rehabilitation and the execution of customers and collaboration partners, Focus on the challenges ofCOMPANY the project functions are based in this company, technical contracts with subsequent we are working actively to find inno- THE OC TEAM together with the management of all operation and service. vative and sustainable solutions that Team spirit and performance Efficient project execution three segments: Construction, Pipe ensure value-creating processes and Technologies and Ground Engineer- Where synergies can be achieved, we products within building construction ing. focus on integrating the specialist and infrastructure. expertise of our business units across of agreements AARSLEFF Uncomplicated COMPANIES concepts Our ground engineering and trenchless the Group into turnkey solutions with pipe renewal activities are market- a high degree of in-house produc- leading and strongly internationalised tion. We optimise and improve the with a number of companies in Den- efficiency of our collaboration across mark and abroad. The activities have the Group by working according to a high degree of industrialisation, and specific principles expressed in our it is our goal to constantly reduce and One Company model.

Aarsleff | Annual report 2019/20 3 ManRev – Frontpage

In spite of the insecurity caused by the coronavirus pandemic, we have had a strong financial year with a record-high bottom line, a strong order intake and a high order backlog.

MANAGEMENT ’S REVIEW

The year in figures 5

Letter from the CEO 6

Financial highlights and ratios for the Group 8

The year in brief 9

The future financial year 12

Aarsleff | Annual report 2019/20 4 ManRev – The year in figures

THE YEAR IN FIGURES

Revenue Investments EBIT EBIT margin See The year in brief for more information about the financial performance 13,295M 469M 553M 4.2 % of the year and the order backlog. Revenue decreased by 1.2%. Organ- During the financial year, the usual EBIT was DKK 625 million before EBIT margin before goodwill impair- ic revenue decreased by 2.2%. In investments were made in the re- goodwill impairment. Construction ment was 4.7% and is above expec- Construction, revenue decreased placement of equipment. Investments delivered results in line with expecta- tations. The EBIT margin of the three primarily due to a slowdown in the of the year primarily took place in tions. Ground Engineering delivered segments was 2.8% for Construction, Icelandic market. In Pipe Technolo Ground Engineering with the acquisi- results above expectations due to a 7.5% for Pipe Technologies and 6.3% gies, the level of activity was high tion of Sør-Norsk Boring AS in July. high level of activity on most markets, for Ground Engineering. with major projects in Germany and resulting in high capacity utilisation. Sweden. In Ground Engineering, rev- Pipe Technologies achieved results enue increased due to a higher level above expectations driven by a high of activity in Germany and Poland as level of activity. well as the acquisition in Norway. 13,453 13,295 195 553 12,108 503 4.0% 4.2% 11,188 475 3.9% 3.7% 10,420 416 3.4% 46 63 380 20 62

572 442 388 378 406

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

Acquisition of companies Property, plant and equipment

Aarsleff | Annual report 2019/20 5 ManRev – CEO letter

WE ARE IN A GOOD POSITION

In spite of the insecurity caused by the coronavirus pandemic, we have had a strong financial year with a record-high bottom line, a strong order intake and a high order backlog.

The Aarsleff Group’s recent financial We began the financial year by in- year was characterised by a very high creasing our focus on the green tran- level of activity in all three segments, sition. Unfortunately, this was put on resulting in a record-high bottom line. hold when the coronavirus pandemic In recent years, harbour expansions struck in the spring. But we did not have taken up a great share of the forget the green transition, and we are order book, but now we see a high continuing our efforts with the recent level of activity on the large building launch of our ECO Center which is projects in Aarhus and Copenhagen the Aarsleff Group’s sustainability as well as on infrastructure projects initiative. in Sweden and Norway. Moreover, we are about to kick off the Fehmarnbelt Link project of which Aarsleff’s share Jesper Kristian Jacobsen amounts to DKK 3.7 billion in 2015 CEO prices.

Aarsleff | Annual report 2019/20 6 An unusual year sustainability. For this reason, the We are in a strong position It has truly been an unusual year. The Aarsleff Group is taking responsibility It is difficult to forecast the future, lockdown of Europe in mid-March and leading the way when it comes especially now, and even though we changed the entire world, and the to future-proofing the building and have not experienced it so far, the world in which we are operating. The construction industry. We must suc- derived effects of the coronavirus building and construction industry ceed with the green transition, and it pandemic may affect the Aarsleff has been relatively spared until now, requires that the entire value chain Group financially. But one thing is and at Aarsleff we have succeeded participates. certain: Thanks to our current and fu- in maintaining a relatively normal ture large, multi-annual projects; our production on the majority of our In line with our ambitions to strength- high and long-term order backlog as projects. Of course, this has resulted en our focus on sustainability, we well as our current financial situation, in some challenges along the way, but have recently established Aarsleff we are in a strong position. And we it has been important for us to retain ECO Center which is a centrally are looking forward to entering a new all our skilled employees, because we organised knowledge and compe- year. need them also after the crisis. tence centre. Aarsleff ECO Center will contribute to ensuring innovative, Our employees have shown that being sustainable initiatives and working agile, solution-oriented and creative is relationships across the Group to We want to contribute to the green transition. As a part of the Aarsleff Group’s DNA – in the benefit of society, customers and line of business, as a company and as citizens, we are good times but certainly also in bad. employees. committed to making an effort within sustainability. On that note, I would like to thank all For this reason, the Aarsleff Group is taking responsibility and our employees. Without their efforts We see digitalisation as an area to adapt to the new workday, we where we can contribute positively leading the way when it comes to future-proofing the building would not have made it so unaffected to sustainability. We are in the front and construction industry. We must succeed with the green through the corona crisis. line when it comes to implementing transition, and it requires that the entire value chain participates. digital tools, e.g. with increased use Focus on sustainability of Virtual Design and Construction We want to contribute to the green in our building and construction pro- Jesper Kristian Jacobsen transition. As a line of business, as jects with the purpose of optimising CEO a company and as citizens, we are productivity and reducing waste. committed to making an effort within

Aarsleff | Annual report 2019/20 7 ManRev – Financial highlights

FINANCIAL HIGHLIGHTS FOR THE GROUP

(DKK’000) 2019/20 2018/19 2017/18 2016/17 2015/16 2019/20 2018/19 2017/18 2016/17 2015/16

Income statement Financial ratios 1 Revenue 13,295,309 13,453,011 12,108,257 11,188,255 10,419,564 Gross margin, % 12.1 10.7 11.7 11.3 12.0 Of this, work performed abroad 4,301,441 4,196,739 3,519,902 3,221,833 2,843,331 Operating margin Operating profit (EBIT) 553,413 502,620 475,286 380,478 415,808 (EBIT-margin), % 4.2 3.7 3.9 3.4 4.0 Net financials -23,483 -29,887 -29,847 -16,557 -16,733 Profitmargin (pre-tax margin), % 4.0 3.5 3.7 3.3 3.8 Profit before tax 529,930 472,733 445,439 363,921 399,075 Return on invested capital Profit for the year 378,533 360,661 340,961 268,936 304,166 (ROIC), % 20.4 18.1 16.6 14.0 18.8 Return on invested capital (ROIC) after tax, % 14.5 13.8 12.7 10.3 14.3 Balance sheet Return on equity (ROE), % 11.8 12.1 12.2 10.3 12.7 Non-current assets 2,987,437 2,708,999 2,683,396 2,654,972 2,405,051 Equity ratio, % 38.5 38.1 36.9 38.4 38.3 Current assets 5,607,405 5,461,687 5,169,477 4,370,146 4,128,270 Earnings per share (EPS), DKK 18.79 17.76 16.68 13.16 14.84 Total assets 8,594,842 8,170,686 7,852,873 7,025,118 6,533,321 Share price at 30 September, DKK 267.50 222.00 243.00 185.00 159.00 Equity 3,310,819 3,114,466 2,899,042 2,695,173 2,503,431 Price/net asset value 1.51 1.45 1.70 1.40 1.29 Non-current liabilities 1,096,312 749,827 743,808 711,354 767,234 Dividend per share, DKK 6.50 5.50 5.00 4.00 4.00 Current liabilities 4,187,711 4,306,393 4,210,023 3,618,591 3,262,656 Number of employees 7,215 6,838 6,499 6,203 5,906 Total equity and liabilities 8,594,842 8,170,686 7,852,873 7,025,118 6,533,321 1 For a definition of financial ratios, see page 106.

Net interest-bearing deposits/debt (+/-) 579,548 399,260 31,055 -206,640 -60,560 Invested capital (IC) 2,730,180 2,706,432 2,857,238 2,880,712 2,554,769

Statement of cash flows Cash flow from operating activities 1,594,184 940,200 764,941 492,509 415,058 Cash flow from investing activities -668,906 -665,475 -392,894 -489,646 -766,734 Of which investment in property, plant and equipment, net -406,115 -378,102 -387,640 -442,176 -571,812 Cash flow from financing activities -317,062 -234,293 -120,051 -96,279 -76,927 Change in cash and cash equivalents for the year 608,216 40,432 251,996 -93,416 -428,603

Aarsleff | Annual report 2019/20 8 ManRev – The year in brief

THE YEAR IN BRIEF

Consolidated revenue came to DKK 13,295 million in the financial year 2019/20. EBIT came to DKK 625 million before the DKK 72 million goodwill impairment, corresponding to an EBIT margin of 4.7%.

Profit for the year Ground Engineering’s Danish operations, however, delivered results above expectations due to a high In the financial year 2019/20, consolidated revenue reported a revenue decline. In Pipe Technologies, level of activity on most markets, resulting in good Read more about our business areas and how amounted to DKK 13,295 million or 1.2% down on revenue increased by 11.5% primarily driven by a capacity utilisation. Pipe Technologies achieved the three segments have last financial year. Organic revenue decreased by higher level of activity in Germany and in Sweden results above expectations driven by a high level of contributed to a record-high 2.2%. Revenue of the Danish operations decreased where several large projects have been executed activity. bottom line. by 2.8%, while revenue of the foreign operations during the financial year. increased by 2.5%. Revenue decline is primarily Fourth quarter results attributable to Construction, where revenue de- The Group’s EBIT amounted to DKK 625 million Operating profit (EBIT) of the fourth quarter creased by 4.8% primarily due to a slowdown in the before goodwill impairment (EBIT margin: 4.7%) amounted to DKK 138 million (EBIT margin: 4.0%) market in Iceland as well as a lower level of activity compared to DKK 575/503* million (EBIT margin: compared to DKK 126 million (EBIT margin: 3.6%) in in the Aarsleff Rail Group. Ground Engineering gen- 4.3/3.7%) last financial year. EBIT after recognition the same period of last financial year. erated a 3.1% revenue increase, primarily owing to of goodwill impairment came to DKK 553 million increased activity in Germany and Poland as well as (EBIT margin: 4.2%). Construction delivered results Construction generated fourth quarter results in * Results adjusted for arbitration loss according to company an- the acquisition of Sør-Norsk Boring AS in Norway. in line with expectations. Ground Engineering line with expectations. As previously announced, nouncement of 16 January 2019.

Revenue EBIT (m) and EBIT margin Order backlog (m) 553 20,416 503 17,312 17,409

14,329

31% 32% 303 252

13,453M 13,295M 162 139 94 106 69% 68% 1,340 1,705 1,740 1,399 3.2% 2.8% 4.9% 7.5% 4.9% 6.3% 3.7% 4.2%

2018/19 2019/20 Construction Pipe Ground Aarsleff Construction Pipe Ground Aarsleff Technologies Engineering Technologies Engineering Denmark Abroad 2018/19 2019/20 2018/19 2019/20

Aarsleff | Annual report 2019/20 9 EBIT margin was affected by revenue recognition of large complex projects taking unsettled risks into consideration, resulting in a lower EBIT margin for this part of revenue. In the fourth quarter, there was an extraordinary write-down of DKK 12.6 million of the value of the existing office buildings of Wico- tec Kirkebjerg A/S as these are to be demolished in connection with the construction of new office facilities to be commenced in 2021.

Ground Engineering performed above expectations in the fourth quarter due to a high level of activity in Germany.

Pipe Technologies performed above expectations in the fourth quarter due to increased earnings in all main markets.

Impact of the coronavirus pandemic Overall, the Aarsleff Group has maintained almost normal operations during the financial year, and only a small number of units and activities have been challenged during the coronavirus pandemic.

Order backlog The company’s order backlog amounted to DKK 20,416 million compared to DKK 17,409 million at the beginning of the financial year. The order intake of the financial year amounted to DKK 16,302 million. As a joint venture member of the Femern Link Contractors, Aarsleff was informed in May that the construction of the Fehmarnbelt Link will commence on 1 January 2021. Back in 2016, Femern

Aarsleff | Årsrapport 2019/20 10 Link Contractors secured conditional contracts for the same period last financial year. The company’s years, and a total of 1,188 employees participated in three out of the four large tunnel contracts for the working capital came to a positive effect of DKK the last year of the programme. Fehmarnbelt Link. The contracts comprise estab- 596 million, mainly driven by a significant decrease lishment of portal structures, ramps, toll stations in receivables due to an increasing tendency that Change of Aarsleff’s Executive Management and bridges on the Danish and the German side outstanding balances are paid when due. During On 8 July 2020, Per Aarsleff Holding A/S an- as well as casting and immersion of the tunnel the fourth quarter of the financial year, a DKK 250 nounced the resignation of Lars M. Carlsen, deputy elements of the 18-kilometre-long immersed tunnel. million tax prepayment was made. Moreover, there CEO. Subsequently, the Executive Management The total contract value is EUR 3.4 billion of which was a payment of most of the VAT and A tax which consists of CEO Jesper Kristian Jacobsen, deputy Aarsleff’s share is EUR 0.5 billion, corresponding to was deferred in the spring due to the corona aid CEO Nicolai Schultz and Group CFO Mogens Vedel DKK 3.7 billion, which has been recognised in the packages. Hestbæk. order intake of the financial year as the contracts are now unconditional. (Amounts are stated in 2015 Consolidated interest-bearing liabilities less inter- prices). Also, during the financial year contracts est-bearing assets amounted to a net deposit of were signed with Nuuk City Development A/S for DKK 580 million against a net deposit of DKK 399 the construction of a new school in Nuuk at a value million at 30 September 2019. The improvement is of DKK 615 million and for the establishment of a primarily due to the positive effect from the working major data centre in Odense. capital and the operating profit. Net interest-bearing debt is negatively influenced by the effect of Balance sheet leases due to IFRS 16 by approx. DKK 363 million During the financial year, the usual investments as well as by the provision for fund holiday pay due were made in the replacement of equipment. Invest- to the new Danish Holiday Act by approx. DKK 300 ments of the year primarily took place in Ground million. On 1 January, the construction of the Engineering with the acquisition of Sør-Norsk Fehmarnbelt Link begins. Boring AS in July. Return on invested capital after tax (ROIC) came to 14.5% compared to 13.8% last financial year and In connection with the H1 interim financial report, complied with the financial target of minimum 12%. EUR 3.4 an impairment test relating to goodwill was performed. This resulted in a write-down of the value Employee share programme BILLION of Hansson & Knudsen A/S of DKK 72 million due In February 2020, the employees of the Danish part is the total contract value of the three to changed expectations for future earnings. of the Group were once again offered to participate contracts which are to be carried out by Femern Link Contractors over a period of in an employee share programme. This was the last eight years. Aarsleff’s share amounts to EUR Cash flows from operating activities amounted to year of the programme out of the planned three 0.5 billion, corresponding to DKK 3.7 billion DKK 1,594 million compared to DKK 940 million in (in 2015 prices).

Aarsleff | Annual report 2019/20 11 ManRev – The future financial year

THE FUTURE FINANCIAL YEAR

In the new financial year, a revenue growth of 5% is expected. EBIT is expected to amount to DKK 600 million compared to DKK 553 million last financial year. Overall, the activities are not expected to be significantly affected by the coronavirus pandemic, but additional lockdowns and restrictions may have a negative effect on some markets.

Construction expects an increase The building and construction market is still on operation and execution in is expected. This is primarily due to in revenue of 8% compared to last is still characterised by significant order to improve earnings. a lower level of activity in Sweden financial year, and an EBIT margin single opportunities, and Aarsleff’s compared to last financial year when of 3.6% corresponding to the level focus is on selection, including The Aarsleff Rail Group expects a very large pipe renewal project was of last financial year before goodwill especially capacity and risk manage- increasing revenue driven by a carried out in Norrköping. In Denmark impairment. Per Aarsleff A/S still has ment. In the future financial year, our higher level of activity in Norway and Norway, the markets are stable a very high order backlog. However, activities abroad will be very limited and Sweden. In Denmark, a stable with satisfactory earnings. the order backlog comprises several mainly comprising the completion of level of activity is expected but with very large projects which are to be the port expansion in Ystad as well as increasing activity within service and In Germany, a continued high level executed over a relatively long period, income from the activities related to maintenance. of activity is expected. As opposed such as the Fehmarnbelt Link and the PAA Project Finance A/S. to last financial year, no major single Greater Copenhagen Light Rail Ring Ístak hf. expects increasing revenue projects are expected. The newly 3. In the future financial year, there Wicotec Kirkebjerg A/S expects an driven by high activity in connection established production of non-circu- will be high activity on the four large increase in revenue driven by the with the construction of a new school lar GRP pipes has a good pipeline of building projects: Danske Bank’s new participation in the large One Com- in Nuuk. There is still a few, large projects, primarily in Germany, and an headquarters at Bernstorffsgade in pany building projects as well as the opportunities within building con- increasing level of activity is expect- Copenhagen, Lighthouse at Aarhus start-up of the new contract on main- struction, also in Greenland, and it is ed. There are also several opportu- Ø, the tallest residential tower in the tenance and service of buildings and expected that several major construc- nities in the Netherlands and in the Carlsberg City and the new Natu- technical installations for the Danish tion projects will be commenced in Nordic markets. ral History Museum of Denmark in State Railways together with Aarsleff the future years. Copenhagen. It is Group policy that Rail A/S. Efforts to improve earnings The expectations to the market in large, complex projects are recog- continue. Pipe Technologies expects revenue Russia are positive, however, the nised as income taking unsettled in line with last financial year and an low exchange rate on rubles affects risks into consideration, resulting in Hansson & Knudsen A/S expects EBIT margin of 5.5% compared with earnings. In Poland, the number of EU a lower EBIT margin for this share of a higher level of activity driven by sev- 7.5% last financial year. In the Nordic funded projects is declining, and the revenue in the future financial year. eral large ongoing projects. The focus markets, a small decrease in revenue prices are under increasing pressure.

Aarsleff | Annual report 2019/20 12 Ground Engineering expects revenue tions is still uncertain. However, it is 2020/21 2019/20 in line with 2019/20 and an EBIT an advantage that the raw materials Revenue growth margin of 6% compared with 6.3% last for production of reinforced concrete Construction 8.0% -4.8% financial year. piles mainly are sourced locally. Pipe Technologies 0.0% 11.5%

In Denmark, a lower level of activity In Poland, a continued high level Ground Engineering 0.0% 3.1% is expected within establishment of of activity is expected, however the The Aarsleff Group 5.0% -1.2% construction pits, and it is uncer- number of EU funded projects is tain how the market for reinforced declining, especially within railway The Aarsleff Group DKKm 14,010 DKKm 13,295 concrete piles will develop, especially electrification. in the last half of the financial year. EBIT margin

In Sweden, a small revenue decline is Investments Construction 3.6% 2.8% expected due to fewer major infra- Investments in property, plant and Pipe Technologies 5.5% 7.5% structure projects. In Norway, revenue equipment exclusive of leased assets will be increasing due to recognition are expected to amount to approx. Ground Engineering 6.0% 6.3% of the newly acquired company Sør- DKK 700 million compared to DKK The Aarsleff Group 4.3% 4.2% Norsk Boring AS for the first full year. 406 million last financial year. The The Aarsleff Group DKKm 600 DKKm 553 Generally, the market opportunities high investment level is partly driven in Norway are good, and the focus is by major investments in buildings of on strengthening Aarsleff’s market approx. DKK 200 million, comprising Investments in property, plant and equipment position. a new factory for ventilation ducts for E. Klink A/S and construction of new The Aarsleff Group DKKm 700 DKKm 406 The German pile driving market is ex- shared office facilities in Taastrup pected to continue the positive devel- for Wicotec Kirkebjerg A/S and Petri opment with a strong order backlog & Haugsted AS. In addition, major and a satisfactory number of tender investments to increase the instal- opportunities. The other activities in lation capacity in Pipe Technologies Germany are expected to continue at will be made, and in Aarsleff Rail A/S a stable level. a new track alignment vehicle will be purchased. In the UK, a significantly higher level of activity is expected, and tender opportunities are good, especially within the construction of logistics centres. The effect of Brexit on market condi-

Aarsleff | Annual report 2019/20 13 OurBus – Frontpage

The Aarsleff Group constructs and maintains the infrastructure and building structures of society. Based on the activities in our three segments, we lay the foundations for financial and sustainable development. OUR BUSINESS

Strategic focus areas 15 Focus areas for the three segments 17 Corporate social responsibility 19 Commercial risk assessment 22 Financial targets, capital structure and distribution policy 24

Aarsleff | Annual report 2019/20 14 OurBus – Strategic focus areas

STRATEGIC FOCUS AREAS

The Aarsleff Group wants to be a preferred and significant contracting group based in Denmark and with an international scope.

Pipe Technologies The Group has a clear profitability Denmark Focus areas Pipe Technologies focus, aiming to increase earn- el Europe The activities in the Group’s v ings through continuous efficiency le three segments are catego- l G improvements and secure project ia e rised according to the extent r Construction n t Ground Engineering e execution. to which they are single s Denmark r · Repetition u a · Single projects d projects, Denmark l projects or projects with fully n l · Invested capital I Large, single e · Early involvement We manage our portfolio of activities industrialised activities. v · Standardisation e · One Company and projects by establishing working Ground Engineering building projects l Segments: · Specialisation Northern Europe collaboration relationships that create synergy Construction · Same teams · Design and build between the individual business units Pipe Technologies Construction contractor · Continuous Ground Engineering projects, abroad of the Group. We have a common productivity · Flexible teams approach to management, culture, development Marine construction specialisation and improved efficien- Tunnels cy with a view to realising synergies. Service Building activities Rail activities From a general to an industrial level

The Aarsleff Group’s business model Technical contracts has three different activity levels: The general level with execution of large, el single One Company projects with A lev ctivity-focused flexible teams from project to project; the activity-focused level with a high potential for repetition, and finally the industrial level in Pipe Technologies and Ground Engineering with fully industrialised activities characterised by a high degree of invested capital.

Aarsleff | Annual report 2019/20 15 AARSLEFF’S GROUP THEMES

Sustainability Customer focus Profitability One Company Independent and sharp We want to contribute We want to secure high We ensure profitability The Aarsleff Group is organised in The Aarsleff Group is currently ex- to the green transition customer satisfaction through a focus independent, competitive divisions panding its operations by acquisitions of the construction based on strong skills, on strong project and companies each with their own or establishment of companies in business and to ensure focus on collabora- execution, efficiency specialist expertise. We refer to Denmark and abroad. The companies that our Group has a tion and high-quality and productivity with teamwork and collaboration across that we acquire are well-run and have common approach that supplies. digitalisation as an divisions as One Company, meaning specialist contracting skills. They brings benefits to our important supporting that we look for and exploit synergies. have a strong management and have clients, employees and element. The synergies develop when special- shown good results. society. ist contractors contribute expertise to reach the best solution. All companies are organised as independent entities and are compet- All large-scale projects are under- itive when executing One Company taken in collaboration between projects as well as own projects. We several divisions and companies of believe that this contributes to keep- the Aarsleff Group. This allows us to ing the individual entities sharp and One Company Job satisfaction Skills development utilise and share experience gained strong, creating the best foundation We work together ac- We want to be an We want a strong, through intercompany projects, and for mutual development. tively to strengthen the attractive workplace professional and opera- we focus on joint management be- Group’s One Company where a healthy and tions-driven culture for cause it creates value to the customer One point of entry collaboration in order safe working environ- our employees through in the form of flexible and efficient By drawing on the versatile con- to improve the competi- ment as well as trust lifelong learning and a processes – and not least, results of tracting expertise of the companies, tiveness within solution and corporate spirit are high level of expertise the highest quality. Aarsleff is able to undertake projects of complex projects top priorities. within project manage- of any scale as well as design and with a high degree of ment, methods, tools, build contracts with a high degree of in-house production. product development in-house production. This provides and collaboration. security for the client – financially as well as professionally.

Aarsleff | Annual report 2019/20 16 OurBus – Strategic focus areas segments

Construction STRATEGIC FOCUS AREAS FOR THE With a leading position in Denmark, we want to be the customer’s preferred choice on the market for THREE SEGMENTS building and construction – if possible, by means of early contractor involvement. We want to be known for efficient planning and secure management of The Aarsleff Group constructs and maintains the infrastructure and different contracting projects, and we create value building structures of society. We lay the foundations for a financial through synergies in all phases. Our One Company and sustainable development and create value for society and our collaboration is positioned as an attractive brand. shareholders. Our activities are divided among our three segments: We are front-runners in terms of technology and expertise, and we are capable of developing and Construction, Pipe Technologies and Ground Engineering. bringing new tools into play.

Pipe Technologies Segment contributions We want to be market leaders on the markets where we operate as well as the customers’ safe choice. In a close dialogue with our customers, we will regu- larly define their expectations for the best balance Construction Construction between price, quality, service and sustainability so that we always meet their expectations. 67% 45%

Ground Engineering Pipe Pipe We want to be a market leader in Denmark and Technologies Technologies have a leading position in our other markets. We Revenue EBIT are a strong and coherent international specialised 16% M 29% M segment meeting our high requirements to quality, 13,295 553 environment and health and safety. Our product and skills development takes place across units, allowing us to increase productivity, profitability Ground Ground and competitiveness. Engineering Engineering 17% 25%

Aarsleff | Annual report 2019/20 17 FOCUS AREAS FOR CONSTRUCTION FOCUS AREAS FOR PIPE TECHNOLOGIES FOCUS AREAS FOR GROUND ENGINEERING

One Company Efficiency improvements Specialised segment Strengthen our competitiveness continuously through Continue to industrialise and improve the Be a strong and coherent international specialised One Company working relationships by developing im- efficiency of the installation and produc- segment focusing on earnings, industrialisation and proved solutions, improved collaboration and increased tion processes. optimisation. efficiency in the execution phase. Cost reductions Productivity Project management skills Reduce costs in the value chain from Increase productivity and competitiveness by incorpo- Focus on project management skills in large, complex manufacturing to installation of standard rating shared standards concurrently with product and design and build contracts to ensure successful imple- products. method development. mentation while focusing on commercial management and risk management. Technological foundation Market development Focus on future-proofing the business Provide ground engineering expertise and methods in Employees area through current development of in- line with the market development to create technologi- Recruit, develop and retain employees in a market with stallation methods and products with the cal breadth and earnings potential. an increasing demand for the right skills. purpose of meeting customer expectations to price, quality and sustainability. Precast concrete piles

Project development Keep the main priority on supply and installation of Continue building up skills within project development Sales growth precast concrete piles on all markets. and early involvement. Increase growth on existing markets and increase growth internationally via third Exchange of qualifications Industrialisation party sales. Exchange experience, methods, resources and exper- Achieve efficiency improvements by means of repetition tise across countries to further develop our machinery, effects and efforts to integrate industrialisation into the LED system sale piling methods and technologies to optimise earnings. projects. Focus on selling Aarsleff’s unique LED concept, consisting of equipment and Business approach Digitalisation materials to third parties through direct Focus on a sustainable and more project-based Achieve improved efficiency by means of digitalisation, in- sale or in the form of license agreements. business approach and organisation in line with the cluding continued development of the Group’s VDC skills. development of the individual units.

Sustainability One Company Contribute to the green transition of the building and Expand One Company collaboration. construction industry.

Embedding of large-scale projects Embed large-scale projects in the top management.

Aarsleff | Annual report 2019/20 18 OurBus – Corporate social responsibility

CORPORATE SOCIAL RESPONSIBILITY

It is the Aarsleff Group’s goal that our CSR work clearly contributes to increasing the total value of our business activities. It is also important to provide a framework that inspires and motivates everyone in the organisation to achieve the goals.

In the Aarsleff Group, we wish to support and accelerate positive development opportunities and at the same time reduce – and if possible eliminate – the negative influence on our surroundings found in our value chain.

Taking corporate social responsibility and show- ing sustainable behaviour is not a choice – it is a matter of course, and it increases our awareness of responsibility in our company and in the rest of the value chain.

The transformation towards sustainability presents big challenges for companies, but it also presents big opportunities.

Our initiatives have resulted in project execution with less consumption of time, natural resources and energy, allowing us to continuously reduce the total CSR footprint of the projects, e.g. within material consumption, transportation, energy consumption and waste.

Aarsleff | Annual report 2019/20 19 Our CSR work is divided into five main areas, and over the year we have worked with a number of initiatives within sustainability in each of the five areas:

Environment and climate Employees Society around us External Equality and diversity business partners

Read more on page 18 Read more on page 24 Read more on page 29 Read more on page 34 Read more on page 39 of the CSR report of the CSR report of the CSR report of the CSR report of the CSR report

In 2019/20 we have… In 2019/20 we have… In 2019/20 we have… In 2019/20 we have… In 2019/20 we have…

• established Aarsleff ECO • updated our OHS strategy • launched Aarsleff Digital Challenge • laid the foundations for un- • based recruitments, promo- Center 2020 dertaking environmental re- tions and reorganisations on • completed our first occupa- porting of the entire Aarsleff our policy and guidelines for • participated actively in the tional health and safety week • dealt with the coronavirus pandemic Group in future equality and diversity chairmanship of one of the through a Group task force Danish government’s 13 • released the virtual computer • commenced the execution of • had several trainees and climate partnerships game Play Safe about occu- • completed a CSR information campaign Denmark’s biggest housing students of both genders pational health and safety in the Aarsleff Group. renovation project certified attached to the staff • commenced the construction conditions under the DGNB standard of an administration building • aimed at ensuring that both on our own energy piles • worked on knowledge shar- • reduced material consump- genders are represented in ing between the plant drivers tion and errors on major the field of qualified candi- • started a test period of using about risk minimisation. projects through systematic dates when recruiting. biodiesel instead of normal project coordination. diesel.

Aarsleff | Annual report 2019/20 20 Selected targets and results

2019/20 2018/19 2017/18 2016/17 2014/15 (baseline)

Acquisitions of the year, share of vehicles and equipment of the most energy-efficientclasses: Passenger cars (target: 100%)1 100% 100% 100% 97% 47% Vans (target: 100%) 90% 93% 98% 68% 29% Construction machines (target: increase the share) 92% 88% 83% 81% 2

Accidents (target: max. 5) 13.7 16.9 15.9 18.8 2 Absence due to accidents 11.9 12.1 12.6 9.3 2 Sickness absence (target: max. 2.5 %) 3.5% 3.0% 3.2% 3.1 % 2.3%

The 17 UN global goals Women in management roles 14.3% 10.7% 12.9% 12.7% 13.0% In the Aarsleff Group, we are committed to sup- Share of women among porting the UN Global Goals, and we have chosen 7 employees as a whole 11.0% 11.9% 10.3% 9.7% 12.0% Two statutory statements goals on which to focus our efforts. 1 Effective from 2018/19, the measuring method has been changed. The statement on Corporate 2 There is no comparable data due to changes in the Group’s corporate structure. social responsibility cf. We have organised our CSR goals and activities in section 99 a of the Danish For an elaboration of the data: see the CSR report’s section on Role and scope of the report on page 50 and Data definitions on page 52. a way that allows us to contribute to this important Financial Statements Act global agenda. and the statement of the A safe working environment is always our first priority, and our goal is to gender composition of the management cf. section 99 be the best in the business within occupational health and safety. When possible and appropriate, we incorporate the b of the Danish Financial Even though our total accident rate has decreased to 13.7, it is still considerably higher goals in our business activities. Statements Act can be found than our target of 5. This is unsatisfactory, and all managers and employees of the Aarsleff in our separate CSR report Group focus strongly on making improvements in this area. As mentioned in the CSR https://www.aarsleff.com/ report for the financial year, we are currently launching specific initiatives to reduce the csr20192020 number of accidents, and we will continue to focus on developing improved safety.

Aarsleff | Annual report 2019/20 21 OurBus – Commercial risk assessment

COMMERCIAL RISK ASSESSMENT

An integrated part of the Aarsleff group’s activities

High Commercial risk assessment is risk management. We have identified the most The diagram shows the probability that a risk significant risks, which primarily are connected to is materialised and the assessed financial effect if this takes place. the execution of our projects and categorised them in relation to probability and financial effect. 1 It is assessed that the joint venture risk 1 will increase due to commencement of the Fehmarnbelt Link project.

2 Risk of insufficient planning and execution of projects will be reduced due The Aarsleff Group’s activities involve numerous to increased integration of design and risks that may affect the operation and financial po- 5 planning. sition of the Group. We consider risks a natural and 3 Risk that inaccurate revenue recognition integrated part of our business activities. By means of projects will increase, as the Group is involved in several large building projects

of risk management we reduce identified risks to an Financial effect 4 acceptable level. where estimation errors may have a significant financial effect. The increased risk 3 must be recognised at tender submission. Group management has the overall responsibility for each individual risk and currently performs risk 4 Risk that changes in raw material prices, exchange rates etc. will increase due to assessments which are categorised in relation to increased uncertainty in the market result- probability and financial effect. 2 ing from the coronavirus pandemic.

5 Risk of cyberattacks will increase as a The diagram shows the most significant risks as consequence of increased digitalisation defined for the Aarsleff Group and how probability and automation of processes in the Group, and financial effect are assessed, compared to the Low and an increasing number of companies Low High previous financial year. Probability are hit by serious cyberattacks.

2019/20 2018/19

Aarsleff | Annual report 2019/20 22 Joint Risk of insufficient planning Risk of inaccurate Risk of changes Risk of venture risk and project execution revenue recognition in raw material cyberattacks prices, exchange rates etc.

Risk The Aarsleff Group often enters into A decisive parameter in the Aarsleff Group’s abili- The monthly measuring of progress After signing a contract with a The Aarsleff Group large-scale contracts together with ty to generate return is the ability to plan, manage is based on an estimate of how many customer, there is a risk that is often exposed to selected business partners with a and execute projects. This is a process that is costs are expected to be incurred exchange rates, raw material cyberattacks of different view to sharing the risk and adding continuously improved, as our base of experience up until project completion. The prices etc. will change, and types and strengths. skills during the project execution. is expanded. Within our specialist fields, we estimate is based on more objective this will change the Aarsleff The risk is increasing Throughout this process, business execute a number of routine jobs involving a high assessments of expected material Group’s earnings on the con- as a consequence of partners are carefully selected as the degree of repetition. One of the effects of repeti- consumption etc. as well as on more tract in question. increased digitalisation Aarsleff Group is exposed to signif- tion is the possibility to control and reduce errors subjective assessments of e.g. time and automation. icant risks if the business partners and risks. We work systematically to identify and consumption in consideration of the cannot handle the task. remove sources of error, and repetition allows us project manager’s experience with to monitor, control and inspect the work. similar projects.

The joint venture risk is reduced by A form of risk management is integration of Each month, a number of procedures To reduce the financial effect of Initiatives have been Risk mitigating actions thoroughly assessing the history, design and planning. Traditionally, a contractor and controls are carried out in con- exchange rate fluctuations, the taken to ensure that financial strength and professional does not become part of a project until a firm nection with measuring of progress individual projects are assessed the damage caused expertise of our business partners of consulting engineers has completed the towards completion of ongoing pro- with a view to a potential by potential attacks is before entering into a working design, and the tender phase is over. However, jects. The initiated controls ensure currency hedging. The devel- reduced as much as relationship. On the Fehmarn- there is a tendency to involve the contractor that the estimates are well-founded opment in raw material prices, possible, just as we are belt Link project, for example, the already when initiating the design. In some and substantiated while taking the e.g. steel prices, may have a taking current measures Aarsleff Group cooperates with large, instances, this form of collaboration leads to experience gained from the project significant financial effect. The to minimise the Group’s consolidated international business partnership contracts and in other instances and other similar projects into effect hereof is mitigated by exposure to potential partners. to design and construct contracts. An example account. Therefore, Management introducing price regulation attacks. of this is the construction of Lighthouse at assesses that the initiated controls mechanisms in the contract Aarhus Ø; here the Aarsleff Group has been reduce the risk to an acceptable with the customer, compensat- involved from an early stage and entered into level as it will not be possible to ing for fluctuations in the raw a contract for construction pit, foundation and eliminate this risk completely. material price, or by making building construction. fixed price contracts with the suppliers at an early stage.

Key risk Risk that the joint venture cannot Risk that planning and execution are insuffi- The measuring of the project Changes in exchange rates, Risk of lack of access to complete the project, imposing cient, so that the project does not generate the progress comprises a significant ele- raw material prices etc. may systems and data, and/ significant financial losses on the expected earnings. ment of estimate which may result in reduce the Aarsleff Group’s or that data are damaged Aarsleff Group. uncertainty relating to the financial earnings. or leaked. reporting of the project.

Aarsleff | Annual report 2019/20 23 OurBus – Financial targets

Overall, the markets for civil works and building FINANCIAL TARGETS, CAPITAL construction still bring opportunities of profitable growth. It is a basic principle for the Aarsleff Group’s STRUCTURE AND DISTRIBUTION POLICY development that earnings requirements take priority over growth. Continued efficiency improvements with consequent increased competitiveness must EBIT margin target The overall financial targets of the Group are an EBIT margin of 5% with significant make growth a consequence more than a target. financial resources and a high solvency ratio to mitigate risks. This will help provide Construction the shareholders with an attractive, long-term, direct return through allocation of Earnings surplus capital as dividend payments or in the form of share buyback programmes. Efficiency and productivity in all phases must contribute to continuous improvements of com- 4.5% petitiveness and earnings. Combinations of skills Growth and development by value-adding complementarity or by creating into turnkey solutions must increase margins and The growth and development of the Group will economies of scale by expanding the existing busi- earnings with the focus on efficiency in all phases. continue to take place through a combination of ness areas. organic growth and acquisitions of specialist exper- Sound financial resources tise and with the focus on profitability. In Construction, we are making the most of the cur- Aarsleff undertakes large-scale civil engineering Pipe Technologies rent market potential while considering our policy projects for which only consolidated companies Each individual business area must develop and of selective order intake. with sound financial resources are able to tender. improve or alternatively rethink its activity. This will Sound financial resources and thus a high credit 5.5% lead to organic growth. In the industrial segments Pipe Technologies and ranking allow Aarsleff to strategically position our- Ground Engineering, our growth target is between selves for long-term and continuous development of Acquisitions will mainly consist of specialist com- 5% and 10% per year with the focus on international the Group in connection with acquisition of compa- panies. Acquisitions must provide synergy – either growth. nies as well as internal business development.

Ground Engineering EBIT margin ROIC (after tax) Equity ratio 7.0 % APPROX. 5% AT LEAST 12% AT LEAST 35%

14.3% 14.5% 4.0% 4.2% 13.8% 38.3% 38.4% 38.1% 38.5% 3.9% 3.7% 12.7% 36.9% 3.4% 10.3%

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

Aarsleff | Annual report 2019/20 24 Aarsleff’s ambition to have sound financial resour ces entails an overall target to have an equity ratio of at least 35%.

Return on investment It is a target to provide return on invested capital of at least 12% per year after tax. However, realisation of the stated EBIT targets will imply a somewhat higher return on invested capital.

Dividend Achievement of the targeted rate of return involves financing of the expected growth by future earnings and generating liquidity for distribution of dividend assessed at 20-40% of the annual profit dependent on growth.

The decision as to the annual distribution of dividend is made on the basis of the company’s actual financial situation, comprising net interest-bearing debt, solvency ratio and outlook for the future financial year.

Dividend yield 20-40% 34.4%

30.8% 30.4% 29.8% 27.0%

2015/16 2016/17 2017/18 2018/19 2019/20

Aarsleff | Annual report 2019/20 25 BusArea – Frontpage

A year with a record-high bottom line thanks to all three segments. Also, we have a strong order intake and a high order backlog.

BUSINESS AREAS

Construction 27

Pipe Technologies 30

Ground Engineering 32

Aarsleff | Annual report 2019/20 26 BusArea – Construction

Revenue Segment results (EBIT) CONSTRUCTION 8,917M 252M

Revenue decreased by 4.8%. Organ- In Construction, profit for the year ic revenue decreased by 5%. The is in line with expectations. Results revenue decline was attributable to were positively affected by the har- a slowdown in the Icelandic market bour projects. The Group’s policy that as well as reduced activity in the large, complex, ongoing construction Aarsleff Rail Group. The level of projects are recognised as income activity remained high within harbour taking unsettled risks into considera- expansions, and the building activi- tion results in a lower EBIT margin on ties continue to increase. a significant part of revenue.

9,363 8,917 315 303 7,926 8,400 7,348 248 264 252

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

ROIC (after tax) EBIT margin 14.9% 2.8%

ROIC was above the 12% target. The The EBIT margin was 3.6% before the BUSINESS AREAS invested capital is decreasing, primar- DKK 72 million goodwill impairment. ily due to a positive development in The EBIT margin target for the seg- the working capital. ment is 4.5%. 3.8% 3.4% 18.1% 17.0% 17.5% 3.3% 3.2% 2.8% 14.0% 14.9%

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

Aarsleff || ÅrsrapportAnnual report 2019/20 2019/20 27 THE PAST YEAR IN CONSTRUCTION

Segment results (EBIT) before goodwill impairment came to DKK 324 million, corresponding to 3.6% of revenue. Revenue decreased to DKK 8.917 million, corresponding to 4.8%. Organic revenue decreased by 5%. Revenue of the Danish operations decreased by 0.4% to DKK 7,652 million, and revenue of the foreign operations decreased by 24.6% to DKK 1,265 million.

In Construction, profit for the year Generally, the projects are progress- The building activities in connection Hansson & Knudsen A/S generated before goodwill impairment was in ing as planned, and particularly the with the new office will be com- a small positive profit. The continued line with expectations. The year was harbour projects have contributed menced in 2021. intense price competition affected positively affected by the harbour positively to results. Activities related revenue and results. However, the projects, while the Group’s policy that to PAA Project Finance A/S achieved The Group’s railway activities con- order backlog is satisfactory, and in large, complex, ongoing construction significant results. The mobilisation solidated in the Aarsleff Rail Group the course of the year contracts on projects are recognised as income for the Fehmarnbelt Link project performed below expectations, and two large housing renovation projects taking unsettled risks into considera- has begun, and the initial work will the level of activity is lower than in in Odense were signed. tion results in a lower EBIT margin on primarily consist of the construction last financial year. The Danish activ- a significant part of revenue. of the tunnel factory in Rødby. ities performed in line with expecta- Ístak hf. performed below expec- tions, while the company Anker AB in tations. The level of activity was In Denmark, the level of activity has Wicotec Kirkebjerg A/S performed in Sweden was affected by the post- considerably lower compared to last only been affected by the coronavirus line with expectations but not satis- ponement of a number of projects. year due to the slowdown in building pandemic to a limited extent, and the factorily. The activity level remained The results of the company in Norway, activities in Iceland, and there is a se- different challenges have primarily high during the financial year, and Banedrift AS, remained unsatisfacto- vere price competition. The activities been handled on project level. the technical work on several of the ry, and there are ongoing measures to were only affected by the coronavirus large One Company building projects strengthen project execution e.g. in pandemic to a limited extent, and Per Aarsleff A/S reported results has begun. There is a special focus terms of a higher degree of involve- the focus has been on commencing above expectations. The level of on improving profitability in the ment of Aarsleff Rail in Denmark in the construction of the new school in activity remained high within harbour Jutland-based part of the business, the individual projects. In addition, Nuuk, Greenland without any major expansions, especially on the projects including which activities to focus on. the focus on exploiting the oppor- delays. in Ystad and Skagen. The building In the fourth quarter, there was an tunities in Norway and Sweden has activities continued to increase, and extraordinary write-down of DKK 12.6 resulted in contracts in both coun- Dan Jord A/S performed in line with several large projects in Copenha- million of the value of the existing tries, e.g. track work on the Nordland expectations, and there was a good gen and Aarhus are currently being office buildings as these are to be Line and renewal of the catenary line level of activity in the course of the executed. demolished in connection with the system on the Borås-Varberg stretch. year, comprising e.g. the new festival construction of new office facilities. site in Eskelunden in Aarhus and the

Aarsleff | Annual report 2019/20 28 project SPARK which will convert the permanently. Also, the project on the area around the hospital Marselisborg Terminal 3 expansion in Copenhagen Centre into a public city park with cli- Airport is carried out in early contrac- mate-friendly solutions for handling tor involvement. The preparation of See what we do at of excess rainwater. the project design and the construc- www.aarsleff.com/references tion pit work continue at present. Petri & Haugsted AS generated However, it is expected that a design very satisfactory results well above and build contract will be signed in expectations. The level of activity was 2021 at the earliest and that there will high due to the increasing demand for be a lower level of activity during the cable work and communication lines. contract’s first couple of years.

Entreprenørfirmaet Østergaard A/S In the financial year, Construction’s performed below expectations at the order intake amounted to DKK beginning of the financial year due to 11,900 million, and the order backlog a low level of activity during the coro- amounted to DKK 17,312 million at navirus pandemic in the spring. In the 30 September 2020 (30 September last part of the financial year, there 2019: DKK 14,329 million) of which was a positive development with an approx. DKK 6,750 million is expected increasing level of activity within the to be carried out in the financial year company’s No-Dig solutions. 2020/21.

VG Entreprenør A/S reported results In the new financial year, an above expectations. There was a high approximate 8% revenue growth level of activity, particularly on har- is expected and an EBIT margin of bour expansion projects carried out in 3.6%. The long-term expectations One Company collaboration with Per to revenue development will Aarsleff A/S. follow economic trends and market opportunities, and Aarsleff is involved in the devel- the EBIT margin target for the opment of several large building segment of 4.5% is unchanged. projects using the principles of early contractor involvement – this involves a large hotel project which have been stopped, and it is still un- known whether this is temporarily or

Aarsleff | Annual report 2019/20 29 BusArea – Pipe technologies

Revenue Segment results (EBIT) PIPE 2,150M 162M

Revenue increased by 11.5% primarily In Pipe Technologies, profit for the TECHNOLOGIES driven by a higher level of activity in year is very satisfactory. The year is Germany and in Sweden where sever- positively affected by several major al large projects have been executed. projects in Germany and Sweden.

2,150 162 1,815 1,929 1,520 1,372 94 85 60 39

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

ROIC (after tax) EBIT margin 19.8% 7.5 %

ROIC was significantly above the The realised EBIT margin is above 12% Group target. Pipe Technologies the long-term target for the segment is characterised by making large which was adjusted upwards from 5% investments in production plant for to 5.5%. manufacture of materials and mobile installation units. The invested capital has increased due to a higher level of activity.

19.8% 7.5%

12.9% 11.4% 4.7% 4.9% 3.9% 8.2% 2.9% 6.1%

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

Aarsleff | Årsrapport 2019/20 30 THE PAST YEAR IN PIPE TECHNOLOGIES

Segment results (EBIT) came to DKK 162 million or 7.5% of revenue. Revenue increased by 11.5% to DKK 2,150 million and is entirely organic growth. Revenue of the Danish operations increased by 14.8% to DKK 566 million, and revenue of the foreign operations increased by 10.3% to DKK 1,584 million. See how we renew sewers at www.vimeo.com/al- bum/4677228

In Pipe Technologies, profit for the year In Sweden, the level of activity has re- pressure as the number of EU funded was very satisfactory, and the realised turned to normal after a decline in the projects has declined. EBIT margin is above the long-term market last year. A large-scale project target for the segment. The year was in Norrköping contributed positively to Due to the coronavirus pandemic, it positively affected by several major both revenue and earnings. has still not been possible to intensify projects in Germany and Sweden which sales efforts relating to LED curing of was also one of the main reasons for In Norway, the activities were affected CIPP linings in the US together with the high growth in the financial year. by coronavirus restrictions for a short HammerHead Trenchless. period. But both revenue and earnings The German company performed above quickly returned to normal, and as a In the financial year, Pipe Technolo- expectations. The level of activity result of strong project execution, the gies’ order intake amounted to DKK remained high, and a couple of large profit for the year was above expec- 2,515 million, and the order backlog projects contributed positively to tations. However, the competition in amounted to DKK 1,705 million at both revenue and earnings. The new the market is increasing, resulting in 30 September 2020 (30 September initiative concerning the production a price pressure for some types of 2019: DKK 1,340 million) of which of non-circular GRP pipes in Germany projects. approx. DKK 1,075 million is expected progressed in line with expectations. to be carried out in the financial year In Russia, there is a high level of 2020/21. In Denmark, the level of activity re- activity again, and results are positive mained stable and was only affected but affected by the country’s lock- In the new financial year, revenue by the coronavirus pandemic to a limit- down during the coronavirus pandemic in line with 2019/20 is expected, ed extent. Also, the capacity utilisation as well as the low exchange rate on and an EBIT margin of 5.5%. The at Pipe Technologies’ factory in Hasse- rubles. long-term expectations to revenue lager was high. In addition, a number development are a 5% to 10% growth of strategically important framework In Poland, the level of activity was sat- per year, and the EBIT margin agreements were secured. isfactory, but results were affected by target for the segment is increased challenges in connection with a single to 5.5% against previously 5%. project. There is an increasing price

Aarsleff | Annual report 2019/20 31 BusArea – Ground engineering

GROUND Revenue Segment results (EBIT) 2,228M 139M ENGINEERING Revenue increased by 3.1%, primarily Profit for the year is significantly owing to increased activity in Germa- above expectations. Results are ny and Poland as well as the acqui- positively affected by a good level of sition of Sør-Norsk Boring AS. The activity in most markets, and in gen- revenue in Denmark decreased. eral there is a high capacity utilisation on the pile factories. 139 2,161 2,228 129 1,893 1,700 1,742 106 75 56

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

ROIC (after tax) EBIT margin 10.6 % 6.3 %

ROIC is close to the 12% target. Ground The EBIT margin continues its posi- Engineering is characterised by making tive development and is approaching large investments in production plant the 7% EBIT margin target for the for manufacture of precast reinforced segment. concrete piles and piling rigs for installation of piles. The invested capital was at the same level as last financial year. 14.4% 7.6% 6.3% 10.6% 8.9% 4.9% 4.0% 6.5% 3.2% 5.1%

2015/16 2016/17 2017/18 2018/19 2019/20 2015/16 2016/17 2017/18 2018/19 2019/20

Aarsleff | Årsrapport 2019/20 32 THE PAST YEAR IN GROUND ENGINEERING

Segment results (EBIT) came to DKK 139 million or 6.3% of revenue. Revenue increased to DKK 2,228 million, corresponding to 3.1%. Organic growth was -2.6%. Revenue of the Danish operations decreased by 28.0% to DKK 776 million, and revenue of the foreign operations increased by 34.1% to DKK 1,452 million.

In Ground Engineering, profit for the the industrial market for pile driving tunities are good, especially within ing will provide Aarsleff with special- year was significantly above expec- was under pressure due to the slow- construction of logistics centres. ist expertise within rock drilling and tations, and the realised EBIT margin down within residential buildings. energy drilling and combined with See what we do at www. continued the positive development In Poland, results were above expec- the Aarsleff Group’s expertise within aarsleff.com/references approaching the segment target. The The German pile company has seen tations. The level of activity was high, reinforced concrete piles, sheet pile year was positively influenced by a a positive development and delivered and the order backlog is satisfactory walls and drilled piles in large dimen- high level of activity in most mar- satisfactory results above expecta- comprising a number of projects with sions, this will strengthen the Group’s kets, and in general there was a good tions. The company was previously reinforced concrete piles. The work market position in Norway and in the capacity utilisation on the individual very dependent on onshore wind in Poland has only been affected by rest of Scandinavia. pile factories. projects, but due to the changed and the coronavirus pandemi