Veidekke ASA Annual and sustainability report 2020 CONTENTS 3 Targets 32 ANNUAL FINANCIAL STATEMENT 4 Key figures VEIDEKKE GROUP 5 This is Veidekke 32 Income statement group 6 Business areas 34 Statement of financial position group 14 Letter to shareholders 36 Statement of changes in equity group 16 Climate risk – TCFD 38 Statement of cash flows group 18 Board of directors of Veidekke ASA 40 NOTES VEIDEKKE GROUP 20 Corporate management of Veidekke ASA 114 ANNUAL FINANCIAL STATEMENT 22 THE BOARD OF DIRECTORS’ REPORT VEIDEKKE ASA 22 Highlights group 114 Income statement Veidekke ASA 23 Operations in 2020 115 Statement of financial position Veidekke ASA 23 Veidekke Construction Norway 116 Statement of cash flows Veidekke ASA 23 Veidekke Infrastructure Norway 117 NOTES VEIDEKKE ASA 24 V eidekke Sweden 24 V eidekke Denmark/Hoffmann 126 CORPORATE GOVERNANCE 25 Other operations 134 AUDITOR’S REPORT 25 Strategic objectives 138 SHAREHOLDER INFORMATION 25 Organisation 143 SUSTAINABILITY REPORT 26 Occupational health and safety 144 Sustainability at Veidekke 26 External environment 151 Health and safety 28 Corporate governance 156 Climate impact 28 Executive remuneration and benefits 166 Expertise 28 Shareholder and stock exchance matters 174 Compliance 28 Financial situation and capital structure 178 Key metrics – sustainability 28 Risk and uncertainties 179 GRI index 30 Market 186 ARTICLES OF ASSOCIATION 30 Events after the balance sheet date VEIDEKKE ASA 30 The parent company Veidekke ASA 187 VEIDEKKE’S HISTORY Cover image: Work for Statnett in the Smestad–Sogn cable tunnel in Oslo. TARGETS TARGET 2022 STATUS 2020 PROFIT MARGIN >4.0 % 3.0 % DIVIDEND POLICY >50 % 100 % SERIOUS INJURIES 0 3 SUSTAINABILITY Veidekke is focused on eliminating serious Veidekke is working to reduce the climate injuries, and gives OHS targets equal status footprint of its own operations and the to financial targets (see page 151). industry as a whole (see page 156). Veidekke is promoting greater diversity Veidekke complies with applicable standards and equal opportunities in a traditionally in the context of employment and generally, male-dominated industry (see page 166). and promotes compliance in the construction and civil engineering industry (see page 174). 3 KEY FIGURES1) Figures in NOK million 2020 2019 2018 Continued operations Revenue 38 140 36 569 32 525 Pre-tax profit 1 134 596 203 Veidekke Construction in Norway 532 387 443 Veidekke Infrastructure in Norway 244 168 -543 Veidekke in Sweden 303 -25 214 Veidekke in Denmark/Hoffmann 200 169 146 Other -145 -104 -57 Profit margin 3.0 % 1.6 % 0.6 % Profit per share (NOK) 5.8 3.0 4.0 Revenue, IFRS 38 140 36 569 33 974 EBITDA, IFRS 2 122 1 468 74 0 Pre-tax profit, IFRS 1 202 582 195 Total order book 37 460 36 704 34 640 LTI rate 4.4 4.5 4.5 Sickness absence 5.1 % 3.7 % 3.9 % Group overall2) Pre-tax profit 2 043 941 591 Profit per share IFRS (NOK) 15.6 6.8 4.0 Net interest bearing position 3 078 -2 653 1 470 Cash-flow from operations 2 350 1 503 1 400 Return on equity over past 12 months 40 % 20 % 31 % 1) The comments in the report relate to figures taken from the segment accounts for all operations. Comments on the IFRS accounts are specified in the text. 2) Group overall comprises continued operations and discontinued operations. 4 THIS IS VEIDEKKE Veidekke is one of Scandinavia‘s largest construction Since its formation in 1936, Veidekke has put people companies, with 8,100 employees and operations in all at the heart of its activities. All the group’s operations Figures in NOK million 2020 2019 2018 major growth regions in Norway, Sweden and Denmark. emphasise participatory, trust-based cooperation, with The group is headquartered in Oslo. The Veidekke share is Veidekke seeking to make maximal use of the knowledge Continued operations listed on the Oslo Stock Exchange. and insights of all involved parties. Project planning and Revenue 38 140 36 569 32 525 execution occur in close consultation with employees, Pre-tax profit 1 134 596 203 Following the sale of its property development operation clients and suppliers to facilitate added client value, Veidekke Construction in Norway 532 387 443 in 2020, Veidekke is now a streamlined construction stronger market position and profitability. Veidekke believes Veidekke Infrastructure in Norway 244 168 -543 company with strong positions in the Scandinavian markets that its employees should also benefit from the group’s Veidekke in Sweden 303 -25 214 and a robust financial position. The group delivers on value creation through share ownership. Half of all Veidekke Veidekke in Denmark/Hoffmann 200 169 146 its promises to clients through major construction and staff own shares in the company. Other -145 -104 -57 infrastructure projects around Scandinavia. The company assists customers with the development, construction Veidekke has adopted ambitious climate goals and is Profit margin 3.0 % 1.6 % 0.6 % and maintenance of various types of buildings and supporting the green shift to a climate-neutral society. The Profit per share (NOK) 5.8 3.0 4.0 infrastructure, as well as the production of asphalt construction and civil engineering industry accounts for a Revenue, IFRS 38 140 36 569 33 974 and aggregates. In respect of shareholders, Veidekke large proportion of global energy consumption and related EBITDA, IFRS 2 122 1 468 74 0 emphasizes paying an attractive dividend. greenhouse gas emissions. In its capacity as a major Pre-tax profit, IFRS 1 202 582 195 industry stakeholder, Veidekke is working to reduce the Total order book 37 460 36 704 34 640 Veidekke’s business philosophy and work methodology centre climate footprint of both its own operations and the industry LTI rate 4.4 4.5 4.5 on value-generating cooperation with clients, suppliers and as a whole. The group aims to reduce its greenhouse gas Sickness absence 5.1 % 3.7 % 3.9 % employees. No two construction and civil engineering projects emissions by 50% by 2030 and 90% by 2050. are alike, and every project involves extensive individual 2) Group overall adjustment. Veidekke gives priority to making optimal use Veidekke aims to be the most attractive employer in Pre-tax profit 2 043 941 591 of available project resources to ensure efficient project the Scandinavian construction and civil engineering Profit per share IFRS (NOK) 15.6 6.8 4.0 execution, high productivity and strong client satisfaction. industry. The industry is labour-intensive, and expertise Net interest bearing position 3 078 -2 653 1 470 is the key driver of value-creation and differentiation. Cash-flow from operations 2 350 1 503 1 400 Engaging with clients at an early stage of project develop- Veidekke is a knowledge enterprise with construction and Return on equity over past 12 months 40 % 20 % 31 % ment allows Veidekke to help find the solutions which best civil engineering expertise, and its primary resources are match the client’s requirements and expectations. Ongoing its employees and their knowledge. Veidekke recruits both consultation throughout the execution phase helps identify recent graduates and experienced staff, trains its own specific needs and allows necessary adjustments to be skilled manual workers and gives high priority to providing made without causing delays. Veidekke wants the projects staff with ongoing skills-development opportunities. it develops and executes to be useful and beneficial to all users, and seeks to integrate societal and environmental considerations into its work. REVENUE 1) PRE-TAX PROFIT 1) ORDER BACKLOG 38.1 1.1 37.5 NOK BILLION NOK BILLION NOK BILLION 1) Segment accounts continued operations. 5 KEY FIGURES CONSTRUCTION NORWAY NOK million 2020 2019 2018 Revenue 14 638 14 464 13 070 Pre-tax profit 532 387 443 Profit margin 3.6% 2.7% 3.4% Order book 13 358 14 762 14 223 REVENUE AND PROFIT MARGIN CONTRACTS NOK MILLION AND PER CENT NOK MILLION 15 000 5 15 000 12 000 4 12 000 9 000 3 9 000 6 000 2 6 000 13 070 14 464 14 638 14 223 14 762 13 358 3 000 1 3 000 0 0 0 2018 2019 2020 2018 2019 2020 Revenue Margin ORDER BOOK BY MARKET SEGMENT PER CENT Residential buildings 35% Commercial buildings 27% 2 900 13.4 billion 38% Public buildings employees Veidekke total: 8 100 6 CONSTRUCTION NORWAY Veidekke has built Torvbråten school for Asker municipality. Photo: Hundven-Clements Photography Veidekke’s Norwegian construction operation is the from sketches to the completed product. This is the country’s largest, with a total market share of 10%, and reason for the decision made by Veidekke’s construction aims to be clients’ first choice in the categories apartment operation in Oslo in the summer of 2019 to introduce buildings, office buildings, schools and health facilities. fossil-free construction sites – a major step towards more Many of Veidekke’s clients are repeat customers. sustainable construction activity. Other measures the company is adopting to reduce its climate footprint include To meet the expectations of clients, authorities, employees increased use of wood and low-carbon cement, as well and investors, the construction operation has decided as refurbishment and reuse. The company is delivering to specialise in particular product categories and to buildings in accordance with certification schemes like concentrate its activities in and around Norway’s major BREEAM and the Nordic Swan Ecolabel. Read more on cities. This has the added benefit of reducing project risk pages 159-161. and boosting profitability. Veidekke’s construction operation trains its own skilled By linking its standardised processes with the specialist manual workers in key areas, and provides apprenticeships expertise required for each building type, the construction at many of its sites around Norway.