AF Gruppen ASA

Hello, and a warm welcome to the quarterly presentation for the AF Group for the first quarter of 2021. This will now be held in a well-known style, entirely digitally, where we will answer questions in the end. Today's theme is via climate and environment, and will be presented in subtitles. If we first start with the highlights from the quarter. We have had a turnover in the quarter of 6.2 billion, and we have had a result before the tax on 245 million, which has given a result margin of 4%. The annual reserve is 33.8 billion, and we have a solid financial position. At AF, we start with safety and HMS first. Looking at the H1 value for the first quarter, we have had eight events that give us a value of 1.5, which is down from 1.6 last summer. That is far above our goal of H1 value 0. More positive is that our H2 value is moving in the right direction, and we are down to 7 for the first quarter before the company. Our goal for H2 value is to come below 5. If we look further away, we see that our sick leave rate is rising and is now up to 5.2%. We are not pleased when we historically see a connection in that low health care is positive for both well-being, the working environment and profitability. We must take into account that COVID-19 has contributed to this. We suggest that about 12% of health care is caused by COVID-19 on average for the company. If we look at the turnover and results in the quarter, the turnover is down by 6% from last year to 6.2 billion. The result before the tax is at a record high of 245 million. The margin has improved by over 23% or close to 1% to 4%. There are season variations in our business, and Q1 is often weaker than the other quarters. If we look at invested capital, it has more or less doubled since 2018 and until now, where it is at over 4.4 billion. But we have still managed to calculate a drop in invested capital of over 34%. If we look at the cash flows, the operating revenue of 264 million is 4.2% of the margin. We have had negative operating capital development in the quarter, which gives us a cash flow of 205 million. We still have 630 million in the book, and we will bring that over in the next slide. which shows net revenue demands and liquidity, and we have net revenue demands of 46 million, and included a draw facility of 3 billion, we have available liquidity of over 3.6 billion. Now we mean to give security to say that we are in a solid financial position. If we look at the balance, it is the same as last year. We have an equity capital of 3.5 billion, and an equity capital share of 27.5%. Now we will talk more about climate and environment later in this presentation. But as you can see from the results in this quarter, we have source sorted over 105,000 tons of waste, which is about the same level both when it comes to quantity and sorting rate as before. If we look at the recovery from the environmental parks, the recovery rate has gone down to 77%. The reason for this is that we have received a lot, but it has been unusually cold with a lot of frost this year, and that has caused less production and recovery than the previous year in this quarter. But that does not necessarily need to have anything to say for the rest of the year. Then we move on to the different VOs. Let's start with facilities. In this quarter, facilities have good activity and solid profitability with a operating margin of 6.4%. They are good at selecting projects and are good at operation and implementation, and this gives high performance over time. We can also say that about Målserv Maskin, which delivers very good results in this quarter. Eikon and Konsolvo have delivered under expectations in the first quarter, where they have variations in their portfolio and are affected by COVID-19. The outbreak of COVID-19, with inherent restrictions, has had an impact on all of our projects in AF, but the projects have been able to maintain good operation and production. If we look at the order reserve for facilities, it is large in relation to the turnover, and it is considered good. Bygg has a turnover of 1.8, which is a turnover decline in the quarter, and a much weaker result than expected, with 4.4%. The turnover is largely due to affected projects as a result of COVID-19, and we are therefore not at ease for that reason. There are several good underlying performance in the units and projects, and we can, for example, include Bygg Oslo, Bygg Østfold, Bygg Fornyelse, Strøm Gunnarsen and HTB in this context, with very good results. In response, we have new buildings that deliver below expectations in the quarter. The order reserve for buildings has increased from 9.8 billion and is now up to 12 billion, which is historically high for our building industry. In the quarter, Betongmast has invested 1.6 billion, with a operating margin of 2.2%. This is weaker results and well below the rest of the business in AF. This is due to major variations in the portfolio and the strength of the organization, something that will take time to improve. We will still recognize good performances in Betongmast, Romerike, Østfold and Oslo. Boligbygg delivers a quarter that is under expectation, and there are organizational changes and measures in place to improve profitability. In the Swedish business, it is more stable both in terms of activity and profitability. Likewise, the annual reserve is at a stable level of around 8 billion. Eiendom is in the quarter divided into two operating units to ensure increased local anchorage and focus. AF Eiendom has a view of Storoslo and Omegn, while Lab Eiendom looks at the Storbergen area. In the quarter, there has been a good sale with 120 sold homes in total, and we have four housing projects in production, with a total of 558 units. The development portfolio is almost unchanged, but with a significant 2,438 housing units. Energy and the environment have stable activity with a turnover of 250 million in the quarter and a better operating result of 4.4%. Both the riveting business and the environmental parks are doing well, and even if the cold weather has affected the last mentioned, as mentioned, there are good results. AF Energy and Miljøteknikk have varying profitability, but the team is forward-looking and has secured some fine projects. The oil reserve is strong for this company since it is a target stock and is now up to 700 million. Let's go further east and to our Swedish business, it delivers the stable profitability. As a conclusion last year, the cannonade delivers good results, and so does HNB and Hørnesand Building Retour. Project development has two housing projects and one school project in production. As you can see, it is very happy that the order reserve is up by nearly 30%, with 900 million, and is now right at the bottom of 4 billion, which promises well in the future. In offshore, it is significantly more profitable than responsible in the first quarter last year. Good operation in offshore DECOM and on WAZ is the main contribution in this way. Here, the harvest season is underway, and we are driving new platforms on tour across the border. For Aeron Molière, which is the second company in this WHO, there have been several project submissions and several orders that have not started projects. However, the unit delivers a weakly positive result in the quarter. After the end of the quarter, we have renewed the framework contact with Equinor for HVAC services at judge's installations at Norsk Sokkel. If we look at the total order reserve, it is 33.8 billion, and we have only had a marginally higher order reserve in Q2 last year. The order reserve is roughly divided into 12 billion for construction, 8 billion for concrete masonry and 7 billion for facilities. This is recognized as a solid order reserve. That was the summary of the quarter's numbers, and now we move on to the theme part. Today's theme is, as mentioned, via climate and environment. One of the four strategic initiatives from our corporate strategy that will continue until 2024. Before we start, on this picture you can see filter cakes that are produced at our environmental park in Nes. With our new technology, we manage to regain 80% and reduce the need for depot power. That is to say, the 20% that we cannot regain, the filter cakes, is a byproduct that we also have the ambition to regain in the future. And thus completely eliminate the need for this type of depot business. You might expect a green front with a picture of something green, but this is a part of our everyday life when it comes to climate and environment. It's dark, and it's profitable. Stay tuned. AF has a special responsibility where the challenges of society can be related to our business. FN's sustainability goals describe each day's challenges and needs, and our responsibility as a society is divided and linked to FN's sustainability goals by being the first to be a responsible actor and carry out our projects in a safe and sustainable way. All our business operations will follow ethical guidelines, laws and rules, and we will minimize negative impact on the climate and environment. The second is the further development of our service spectrum. AF will continue to develop and provide services that customers and society need and demand. We will carry out construction and construction projects with environmental certifications and energy-efficient solutions, and we will contribute to the construction and other infrastructure being built and modernized to use less energy and withstand future climate changes. Therefore, we identified climate and the environment as our own initiative in the AF's consensus strategy. There was a clear expectation from us, from the organization, from customers and from society that we have a clear direction when it comes to climate and environment. But we do it because we believe that it is profitable and that it will strengthen our competitiveness. Our goal is to reduce footprint and be a leading player in creating socially beneficial business opportunities. We have divided this into four different sub-measures, and I will now go on to the hard, simple sub-measure. At AF, we like to say that we have the best vision of every day, and that it stands as well today as it did 30 years ago. We clean from the past, and we build for the future. To meet new climate demands and focus on sustainable solutions is nothing new for us. We have done this for years, and we have seen that there can be profitable sales opportunities for this. I will show you some examples. The first example is AF Miljøbase VATS. Tomra supports used bottles, we support used oil platforms. Here we have, according to the establishment, made steel for recycling, corresponding to over 27 Eiffel Towers, and contributed to a climate saving of over 283,000 tons of CO2. A little more briefly, this corresponds to over 40% of annual emissions from all construction machinery in Norway, or close to 50% of all road traffic in Oslo. At AF, we look at waste as a resource. At AF's environmental parks, we have ten targets in the challenge around storage capacity, stones as a renewable resource, and problem masses. We have developed a technology that can clean and recover 80% of these. The remaining 20 will be used for filter cakes, as you saw on the front page. Only in 2020, AF's environmental parks have recovered over 500,000 tons of mass. This contributes to a reduction in alternative CO2 emissions of over 32,000 tons. Not least, this is with very good margins in AF's target stock. Vi har et eget VO inna energi og miljø som rydder fysisk fra fortiden rivevirksomheten vår, men som også sørger for energiløsninger, tjenester og kompetanse som er til det beste for kunden og miljøet. I årene fra 2010 til 2019 bidro AF Energi og Miljøteknik med en besparelse på over 140 gigawatt-timer gjennom ulike energieffektiviseringsprojekt. In this picture you can see the project Slemmestad Bridge. Here Kloak from VEAS will be picked up by an underwater management to heat up the buildings and ensure that there are snow-free roads. This is one of many examples of circular solutions that we work with these days. We must continue to increase the pressure on innovation and digitalization, as it is an important tool for us. For several years, AEF has invested in start-up companies in the early phase, and it may be the result of our participation in Spacemaker. The goal of these investments is to contribute to a smarter and more future-oriented supplier industry, which results in even greater operations and lower costs. We now have several investments in software or early stage companies, and some of these we believe will also make a difference directly in our emissions goals. The illustration you see here shows VIXEL's solution for digital implementation of project meetings. VIXEL is working with our partners in the development of our digital building models, or BIMs, either in Hammefest or as an international expert abroad. The goal is to maintain efficiency and resource use, while reducing our need for travel and our climate policy will be maintained. The example shown here and in the previous images is just a small example of the business opportunities in operations or investments that have been good for us and are a part of our daily lives. And in the future, we will continue to pursue and explore new opportunities. AF always has ten social responsibilities, and we are an important social factor. The global and local climate and environmental challenges concern us. Especially for existing businesses, we have set clear goals for 2030. We are going to halve our footprint on CO2, and we are going to halve the amount of waste from our buildings. But let us first set goals for footprint. The goal is to be quantified per business area, so that we actually make changes in operations and real environmental savings. This instead of reaching the goal of changing the service mix from, for example, facilities to buildings. A part of the work that will be done in the future is to further develop reporting and monitoring of climate gas emissions at project and national level, so that we can gain knowledge and that we actually prioritize the right measures. In the long run, AF will report and provide green turnover in relation to EU's taxonomy. An early review from EU's previous work showed that AF looks to have several services that contribute positively to the green shift and therefore can probably be reported as green turnover. Establishments solve major and important social tasks. But it is also where there is the greatest output, and where the possibilities are the greatest for reduction. A good picture of what benefits the projects can achieve is that early innovation is a challenge linked to mass production. Since we early in the project can track down a million cubic meters with a broken route, or that we avoid setting off with mass surplus that must be transported far afterwards, then there are enormous costs and environmental benefits to pay. But this requires close cooperation, good planning and dialogue, with different actors in the same value chain. This requires high environmental competence and good project management. We know there is limited access to resources. This means that the need for development of new and more effective solutions is forced. Therefore, as mentioned earlier, we have the goal of halving waste from our own business, Midtlese Gjenvinnet, by 2030. The goal here is to be quantified per business area, so that we carry out actual changes in operations. The waste hierarchy, as you can see in this picture, illustrates the need to treat waste as close to the top of this hierarchy as possible, so that we avoid unnecessary deposition, which is binding. In the AF, the projects are planned so that as little as possible waste will arise, and that we will be able to source it for recycling to the greatest extent possible. Our goal for source sorting is 80, which is well above the official requirement of 60, and last year we had a recycling rate of 86. Are we going to reach the goals we set ourselves, we are dependent on good climate and environmental management through this organization, from the top to the very end of our projects. Here, as elsewhere in AF, we seek risk that we can influence, and we seek to solve societal challenges with a potential for profitability. Robust organization, quality in our processes and efficient operation are important drivers here, both for our safety and profitability. A good example of good environmental management, where we have exploited our role and where our conscious role as both builders and entrepreneurs is this project, Firstikbakken 14, where AF Eiendom and Birk & Co. are builders and the AF Group has the enterprise. The project defined early big environmental ambitions and is a future built project. This means that the project will give 50% lower CO2 emissions in the construction period and in the lifetime. It is environmentally certified and we also use massive trees as main building material. It is also a paperless project and it has a fully digital display center where customers can make choices early in the process. This shows, and is a good example, that early involvement, new technology and good planning can give good savings for climate and the environment. In the strategy process, we have identified and considered a number of drivers to adapt the business to the surroundings around us. We are humble because we have a lot to learn and learn when it comes to climate and the environment. At the same time, we would like to conclude by summarizing with our climate policy. We have reported climate policy since 2010, and it is reported annually in accordance with the Greenhouse Gas Protocol standard. For 2020, it consists of two main components. The first is our own business, its energy consumption, with appropriate emissions, and is here at 48,000 tons. The other component is what our company does for society, as examples initially, where we recirculate in front of a mass, we tear and we sort metals, and so on, with relevant emissions savings compared to corresponding conventional production. Here at 70,000 tons. As we now see from the climate policy, the savings for society and customers from offshore energy and the environment, the direct emissions to collect business in AF in 2020, are increasing. In the future, we intend to extend the climate report to cover larger parts of our indirect emissions and savings, which is considered scope 3. Finally, it is important to point out that we at AEF are trying to find ways to solve the tasks, without changing the service mix, because we want to offer the solutions that society and our customers are asking for. In the same way as in safety, we will not reach a goal on our ambitious climate and environmental ambitions alone. We are completely dependent on working together with both customers and suppliers in the value chain. Developing good solutions is a common responsibility for the entire industry, and we are dependent on each other, and that we take responsibility together, that is the most important thing. If we then go back to the quarter and look at it summarized, we have had a turnover of 6.2 billion, and a operating margin of 4.2%. We have a strong financial position with available liquidity of 3.6 billion. We had a high order entry in the quarter and a collected order reserve of 33.8 billion. And that was what we had planned to say in this review. So then it's time for questions. If you have sent in any questions during presentation while I'm talking. And with me, in case it's hard to judge, is Sverre Harem, our CFO. If you can zoom in on the picture.

Yes, since some of you have more questions, we ask that you send them in now. The first question is from Simen Mortensen in DNB Markets, and it is of financial quality. The question is, construction costs, materials, are reported today by Statistisk Centralbyrå to have a high inflation, approximately 8.9% year-on-year. How long does it take before this affects you?

The way we generally deal with offers is through backing from subcontractors and suppliers. So it probably affects to varying degrees already now on some projects. But we mean through our risk management and our risk model that we will be able to handle it well.

In addition, we also have LPS, or rate and price increase mechanisms, in some of our contracts. And then we get compensated for that.

That was the only question that came in, so we can say thank you for today, and wish you all a good day.