AF Gruppen ASA

Hello, and a warm welcome to the presentation of the second quarter for the AF Group. The theme today will be risk management, and it will be the interpreters who will present it. And we will have a session with questions and answers after the presentation for the upcoming meetings here at Hotel Continental. Before we get to the highlights of this quarter, I have to mention an event that took place after the end of the quarter on one of our projects, where one of our employees in one of our data companies, Fundamentering AS, was involved in a work accident and died. Our thoughts go to those left behind, those concerned, and our colleagues at work. It is a powerful reminder to us of the importance of safety work, and that everyone comes home safely from work on the first day. If we then go over to highlights in this quarter, we have had a significant turnover growth and good profitability, and the turnover is 8.2 billion. We have a result before tax of 426 million, which gives a result margin of 5.1%. Then we have a cash flow from sales in the quarter of 619 million and for the first half of the year of over 1.2 billion. And then we have a total order reserve on June 30th at 42 billion, and net revenue is 145 million. I started with the importance of safety work today, but if we look at the important goals this quarter, we had nine HN events in the second quarter, which gives a HN value in the quarter of 1.7. This is a step back after more than seven quarters where we have been in a positive trend in the safety sector. We are obviously not happy with this. The goal is zero and that everyone will come home safe and sound for the rest of the day. Let's move on to H2, where we additionally add events with medical treatment and those that lead to alternative work. It is up to 9.3 in this quarter, and we have accumulated up to 8.7 so far this year. Our goal here is to be below 5. On the other hand, it is good to see that our sick leave is now decreasing, and that it was at 4.1% in the second quarter. This is a step in the right direction, and we are pleased with the direction, even if we would like to see a sick leave of around 3%. If we look at the turnover and the results in the quarter, we see that the turnover has grown by over 15% from 7.1 to 8.2 billion, and the bottom line has continued from 356 to 426 million, and we have a relatively unchanged result margin of 5.1%. Moving on and looking at the return on invested capital, which is an important goal for us, we have 1.6 billion in revenue before tax and refunded interest rates, when we look at the 12 months in a row, against an average invested capital of 4.5 billion, which gives us a return on invested capital of 37 percent, which is well over the target of 20 percent. The cash flow was at a strong 619 million in the quarter and at 1.2 billion over that for the first half year, and we have outgoing liquid funds at over 1 billion. If we look further at the net and interest rate demand, it was 145 million in this quarter, and when we add up the drawback facilities we have at 3 billion, we have an available liquidity of over 3.8 billion, and we consider the financial position to be good. On the balance, there are few changes to greater significance. We have paid the exchange rate in the quarter, and the equity is at 3.1 billion, against a sum of equity. The balance is at 14 billion, which gives us an equity share of over 22%. These are difficult times, but it is still important to focus on the climate and environmental challenges we face. We can obviously affect climate trends, and we can obviously affect waste. It will therefore be important for us to continue to measure source sorting, and it is good to see that the health is at a stable, high level, at approximately 7, 80 and 95 percent for rehabilitation, construction and demolition. If we look at the amount of metal that we have sorted for recycling, it is over 41,000 tons per year, and our environmental parks have collected over 147,000 tons per year. The saving of the last two mentioned CO2 equivalents has contributed to tracking the society at over 52,000 tons of CO2 equivalents per year. Before we move on and look at the business areas, we can take the time to look at this beautiful picture of Senja, where one of our leading companies, Målsælv Maskin & Transport, is doing road improvement. Målsælv Maskin is in our construction business, and we can start with the construction first. We have had revenues of 1.5 billion, and a operating profit of 99 million, which gives a operating margin of 6.5%. In addition to the measuring machine, Konsolvo and AF Anlegg have delivered very good results in this quarter. Last mentioned AF Anlegg, we see the start of the VAV project. The big project is 9 billion, which we talked about earlier this year. In this picture, you can see that this is where the work has started. Eikon and Stenseth have had low results in this quarter, but it is good to see that both Målshalv and Stenseth have entered record high contracts in this quarter to a collected value of over 300 million. It is also good to see that AF Anlegg has been renewed a bit by Equinor, and we are set up for a five-year contract for civil workers up at Hammerfest. We have also, after the end of the quarter in the USA, been chosen as a total entrepreneur for a collaboration contract for Avinor to build a new airport up in Moherana. Our reserve for the second quarter is up from 7.2 in last year to over 12.1 billion now. If we look further at construction, there has been a strong growth from 2.1 to 2.9 billion, but the operating results have continued to be 82 million, which gives a operating margin of 2.8%, which is significantly lower than what we are used to for this business. Price development. are still being affected, but there are also cost increases and decreases in performance in the portfolio of AF New Buildings, which has meant that we have 10 additional losses in the quarter. In addition, AF Buildings Renewal, Strøm Gunnarsen and Fundamentering deliver weak results in this quarter. On the other hand, AF Fondverk, Haga Berg, AF Bygg Oslo, Bygg Østfold, Strøm Gunnarsen Vestfold and Åsane Byggmesterforretning deliver good results in this quarter. It is also good that Bygg Oslo has signed an agreement to build 300 apartments up on Rollsru Arena in Lørenskog, and that is a contract value of over 800 million. The annual reserve in Bygg is relatively unchanged, at an overhead of 13 billion. In Betongvast, the revenue is 1.2 billion, and the operating profit is 29, which gives a operating margin of 2.3%. There is still reason to promote good results in the quarter for Betongvast Oslo, Romerike, Rødsand, Trøndelag and Østfold. And it is more stable in Betongvast Boligbygg, where they delivered significantly weaker and is now up to zero, while the inland area, on the other hand, we have made deductions in the project portfolio in this quarter. Betong Mastrøsan has signed an agreement on the construction of a campus up in Kristiansund, which is a large contract for them with a value of well over 500 million. The order reserve for Betongmast is down from 6.9 billion to 6.2 billion in this quarter. The picture you see is the Fjellhamar school that Betongmast Romerike builds. It is Norway's largest school at the moment, with over 1,200 students. It is an exciting project that Betongmast Romerike is carrying out up at Fjellhamar. If we look further at ownership, they have had a good result in this quarter, driven by sales to the hotel and office building Karvesingen 7, which we have previously reported. Sales contracts have been introduced to a total of 64 homes in this quarter, and we have eight housing projects, with 917 units under production. and where the sales rate of these projects is at 83%. In the picture you can see Rolls-Royce Arena, which Bygg Oslo is going to run. We see a nice project that happens together with AF Eiendom, Partner and Bygg Oslo. Lab Eiendom has also started rehabilitating the 6th railway in Bergen in the second quarter. If we continue to look at Sweden, they have had turnover growth and increased from 1.6 billion in turnover to over 1.9 billion, and have a turnover of 75 million, which gives a turnover margin of 3.8%. Kanonaden, which is our construction company in Sweden, has a strong turnover growth and delivers good results. To the right you can see a picture from one of the judges' projects on Karlskurv wind power plant. Building wind power foundations is a good niche for them, and this project is a good example of that. Hørnesand Byggreturer continued to deliver very good results in this quarter, and that is our driving force in Sweden. The other units in Sweden delivered a set of higher revenues compared to the previous quarter, but the results were lower than expected. Both Betongmat Stockholm and HMB have signed contracts with Scandia Fastigheter and Torne Bostadsproduksjon on the construction of office and residential buildings in this quarter. The annual reserve is up from 7.9 to 8.4 billion. Moving on to the business area Energy and Environment, they deliver solid results in this quarter at 18 million, even though the turnover is at 255 million, which gives a strong operating margin of 7.2%. AFDKOM is a big contributor to this, and even though they had lower activity last year, we are very humble and proud that we are being contacted. For example, when Trettenbru went down, as you can see on the right in the picture, This is the unit that is involved in controlling and securing the Trettenbrug, and managing the E6 for traffic on Settelsalt, which hopefully will take place during the day. This shows a bit of the competence and the demand for these services. AF Energi has increased its profitability towards the same period last year, and has delivered a good result in the second quarter. As mentioned, the annual reserve has gone down to 686 million kroner in this quarter. Another business area that delivers high activity and great profitability is offshore. With revenues of just over 300 million, and a operating profit of 36 million, they have a operating margin of just under 12%. And it is AF Offshore Dekom that takes out oil platforms that have had good offshore campaigns out in the North Sea, and at the same time has had good operations in the reception system in VATS, which is the main driver behind this result. Aeron Moliere has had revenue growth compared to the summer quarter last year, but here the results are still under expectation. The annual reserve for offshore is per quarter, the start of the quarter, at 1.4 billion. If we look at the annual reserve, it is almost unchanged from the first quarter, at 42 billion. The largest business areas are construction, with an overhead of 13.1 billion kroner, followed by an investment of 12.1 billion kroner. Sweden has over 8.4 billion kroner, with a concrete mass of 6.2 billion kroner and an offshore of 1.5 billion kroner, which are the largest business areas that the oil reserves are divided into. 42 billion in order reserve, while we have signed several contracts after the end of the quarter, means that we have a strong and good order reserve. Now we will move on to today's theme part. We read daily about troubled times and the changes that are around us. And for us at AF, it is more important than ever to run good project management and good risk management. And that is why I want to talk about risk management at AF in this part of the topic. AF is rooted in a strong culture, and it is an important part of, and perhaps the main source of our competitiveness. It relies on good core values, that we organize well, and that we exercise good leadership. Today's business model consists of four cornerstones, and it is the sum of these that, among other things, makes AF unique. We say that this is our business model, it is our owner strategy, and internally we say that this is the main mountain in AF. One of the four cornerstones is active risk management. We operate active risk management within safety management, climate and environmental management, but in this presentation I will focus on commercial and operational risk management. It is based on four central principles. We seek risk that we can influence, and risk that we cannot influence, we should seek to avoid or secure. Treating risk should be an integrated part of all our business activities, and we should do it in a unified and structured way. It is important to bear in mind that when we talk about risk in AF, we are just as curious about the upsides and possibilities as we are about the downsides and challenges. And that's what's exciting. The controls are there, and that's what we call the outfall zone. And why do we operate with structured and business-based risk control in the AF? Well, the first and obvious thing is that it strengthens our skills to early identify and handle risk. But the other thing is that it is also a very good and perhaps unique arena for both learning and experience transfer. I myself, from when I was young at AF and above, have experienced the benefit of sharing experience with more experienced people, and the breadth of competence in the organization. It is about building culture, it is about building awareness, and at least creating a commerciality and ownership of our operations through the whole line. We have created a process where we regularly and quickly lift our gaze and look around us in an otherwise driven everyday life. It creates awareness, it creates a collective awareness of the priorities that lie ahead of us. If we take a helicopter look at this process, we have in practice a risk management model, where the risk is controlled from the bottom up. There are three pillars in this. There is risk management in projects, on port-to-follow and on overrun levels. And to be clear on that, the very foundation is risk management in projects and in supply stages. The ownership of the risk management is in line, and all leaders are involved. But our meetings and processes are tools, and the quality lies in preparation, competence and participation. The goal is not to eliminate risk, but to identify and handle it. We run this both on projects and on offers, but to draw up offers as an example here. The methodology is based on the Wisdom of the Crowds and the Successive Principle, and it has been developed in collaboration with Professor Sten Lichtenberg. It is important when we run these processes that we put together a group of people, or at least become the best when we have different speed, different competence, but obviously knowledge of the project and what we are talking about. Then we present the project and then we focus on the drivers or the factors that have the greatest room for improvement. This gives us a basis for telling about the risk profile of the project. Here illustrated with an S-curve and a tornado diagram. We use qualitative and quantitative assessments when we find it. This process is only a tool that will give the supply team more insight into the risk profile, which will give them a stronger decision support, and which will fix the cost and, eventually, the proposal in the project. Historically, we have seen that risk management has had a positive effect on our profitability, and it also creates a competitive advantage. But there is strong involvement from the management, and at AF we carry out more than 200 annual offers, more than 600 projects, or top 10, as we call them internally. We have more than 150 quarterly transfers, i.e. transfers at the company level, and it involves more than 1,000 AF employees over a year. The advantage is that it is created by the people who actively use this material, and that it is actually survived. The advantage is that it creates less variation. It is important to note that this is about giving our decision-makers the best conditions to understand the risks in the offers and projects, so that they can make good commercial assessments in everyday life. This requires continuous balance and improvement. both for new companies, but also for existing companies, where new generations of leaders and new employees come in. In addition, we will continue to strengthen the digitalization process, so that we can draw even more knowledge out of the enormous database we now have to drive project management within this business. At the same time, it is important to note that this is a tool and processes, and that is only that. It is the people who control this, and for us, this boils down to three words.

It is leadership, it is survival, and it is culture.

We will now sum up the quarter. As mentioned, we have had a solid growth of over 15% in the quarter, so we are up to 8.2 billion in revenue. The bottom line has continued, and we have a operating profit of 421 million, which gives a operating margin of 5.1%. We have had a strong cash flow from operations, which for the first half of the year is over 1.2 billion, against an operating result of 626 million. And we have a strong financial position. The order reserve is solid at 42 billion by the end of the quarter, and as I have mentioned, we have reported several orders after the quarter. This was what I was going to present in this presentation. I want to thank those who have been born digitally, and have a good Friday, and after every good weekend. And then we'll move on to questions and answers for the audience here.