AF Gruppen ASA

A warm welcome to the presentation of the third quarter for the AF Group. The theme today is rehabilitation and what we do within the market segment. It will be presented to the board of directors, Eirik Vrold. After the presentation, we will have plenty of time with questions and answers to those who have met here at Continental today. If we take a look at the quarter, we have had a quarter with strong growth and varying profitability. The turnover in this quarter was 7.5 billion, and we had a result before tax of 263 million, which gives a result margin of 3.5%. The cash flow from the current year to this year is about 1.5 billion, and we have a total annual reserve per 30 September at 39.7 billion. Net interest rates are at 254 million, and the board has received an exchange rate for the second half of 2022 at 4 kroner per share. At AF, we will put safety first, and it is about everyone coming home safely from our projects on the first day. In this quarter, we have had five incidents that have led to either casualty or serious personal injuries, and that has given a H1 value of 0.9. And we include sub-entrepreneurs in our numbers. If we add to the injuries that have led to medical treatment or alternative work, we get the Tu-value, and that was in this quarter at 8. We have had a small progress in the health care system, which is at 4%, and the health care system so far this year is at 4.5%. If we look at the numbers in this quarter, we have had a growth of a little over 18 percent, which is up to 7.5 billion in turnover in the quarter. The result before the tax has gone down from 344 million to 263 million in this quarter, which gives a result that time from 5.4 percent to 3.5 percent in this quarter. And that is a profitability that we collectively are not satisfied with. If we look at another important goal in the AF, which is the reduction of invested capital, we have had results before the tax and refunded interest rates in the last four quarters at just over 1.5 billion, while we have an average invested capital of just over 4.4 billion, which gives a reduction of invested capital of 35%. That is well over our goal of 20%. If we look at the cash flow, the cash flow has drifted to 272 million in this quarter and just below 1.5 billion this year. We have liquid funds emerging at just over 1 billion. You can see the billion higher in this picture, and we have to take into account the interest-bearing demands and rental obligations on machines and home rental obligations, so we have a net interest-bearing demand of 254 million. In addition to our pulling facilities, the AF Group has an available liquidity of just over 3.9 billion, and thus we are in a solid financial position. When the company grows, the balance is followed, and it has grown to 14.6 billion. We have a capital of just over 3.2 billion, which gives a capital share of 22.4%. And as mentioned earlier, the board has allocated an exchange rate of 4 kroner for the second half of 2022. Our industry and the AF Group have a climate and environmental footprint that we are responsible for minimizing. We measure, among other things, the level of source sorting, and so far this year we have sorted over 213,000 tons of waste. The sorting rate is approximately 88, 89 and 95 percent for construction, rehabilitation and demolition, and that is well above the authority requirement of 60 percent. We have also sorted metals for recycling and demolition over 50,000 tons so far this year, and our environmental parks have received and treated masses over 245,000 tons. And just for the two last mentioned, it has been able to contribute to over 109,000 tonnes of CO2-equivalents so far this year. We will take a look at the different business areas and how the status is there. We start with facilities that have a solid order reserve and a good result in this quarter. Income is at an overhead of 1.4 billion, and a operating result of 92 million in a operating margin of 6.3%. Målsjøl Maskin & Transport continues to deliver very good results. In this quarter, KonSolvo, which you can see, has a fine project with surface treatment at Drammensbrua, which you can see here to the right, and has delivered very good results. AF Anlegg delivers good results, and so does Stensett & RS, which is our last incoming company in the AF Group. Eikon had high activity in the quarter, but delivered poor results. I am happy that AF Anlegg has been the total entrepreneur for the contract for the collaboration in Mo Irana for Avinor. We have only included the collaboration phase in the order reserve, and this is a large project with a cost frame of 3.3 billion. After the end of the quarter, AFA Anlegg has been appointed as an entrepreneur for the construction of a new water treatment plant in Puseby with samspill. The annual reserve for the plant is up from 7.6 to 11.8 billion in this quarter. Moving on to our construction business, it has had strong growth from 2 billion last year to 2.6 billion this year, with a operating profit of 100 million, giving it a operating margin of 3.8%. There has been high activity, but also great variation in profitability in our construction business. AFBIG Oslo, which, among other things, takes the Lokus-Ensjø project, as you can see here, has delivered very good results in the quarter. This is also Strøm Gunnarsen, Vestfold and Haga Berg. Then we also have Some have delivered weakly in this quarter, such as Bygg Fornyelse, Strøm Gunnarsen, Bygg Østfold, Labb and our foundation business, Fas. It is exciting to see that Bygg Østfold has been chosen as a total entrepreneur in collaboration to build a new cleaning facility in Fredrikstad. The annual reserve is for construction down from 14.5 billion, down to 11.8 billion. If we look further at Betongmast, we have the corresponding results from last year. Income ended at 1.2 billion, with a operating result of 37, giving it a operating margin of 3%. There is still variation in the units, but it is worth emphasizing that Betongmast Romerike delivers very good results. Likewise, Betongmast Oslo, which has delivered Gullhaug Torg, which you see in the picture here in this quarter, delivers well, and so does Østfold, Asker & Bærum and Trøndelag. On the inland and in residential buildings, we continue to deliver weak results in this quarter. The reserve for concrete is down from 7 to 5.3 billion in this quarter. Most of you have probably read in the media about the development in the housing market. We have had a closed sale in this quarter. We have seven housing projects with all 793 units under production, and the sales rate is 83%. We have a development portfolio of over 1,500 units and over 62,000 BTA. The project that has sold best in this quarter is Rolls-Royce Arena, as you can see in the picture. If we go over the grain, we have had a demanding quarter in Sweden. We have revenues and growth from 1.3 billion to 1.7 billion, but we have a operating result of minus 35 million. The main driver behind this is that we have adjusted project estimates in the units that were previously included in Betongmast Sverige. It is also important to emphasize that there have been very good performances in Sweden this quarter. Kanonaden and Hørnesand building tours continue to deliver very well. HNB also has good operations and good results in this quarter. It is good that they have got a job at the end of the quarter by building 151 new homes down in Vesterås at a total value of around 0.5 billion. The oil reserves in Sweden are at 8 billion. Then over to the business area that delivers well and very well in this quarter. Energy and environment have revenues of 261 million and a operating result of 21 million, which gives a operating margin of 8.2%. AFD.com delivers very good results in this quarter, despite lower activity than last year. You may have noticed the need to track energy and the interest in good savings when it comes to electricity and other things. It is in the middle of the nuclear area for AF Energy, and we are happy that the activity is increasing and that they deliver significantly higher results than last year. The oil reserve in this business area is up, and it is at 688 million at the beginning of this quarter. If we look at our offshore business, we deliver very well in this quarter. There is a growth from 200 million to 380 million in this quarter, with a turnover of 51 million. This gives a turnover margin in the quarter of a strong 13.4% and a hit per year of 12%. That is our offshore IV business with AF Offshore Dekom, which is the driver behind it, which delivers good production, both on offshore campaigns out in the North Sea, on good operation in VATS, but also on large marine operations right outside the facility in VATS, as you can see in the picture here, where the last weeks have been lifted Up 25,000 tons in the Køløv ship and moved it into land on Christmas, which is an unofficial world record in large moves on Christmas. Moving on to the second unit in our offshore business, Aeron Molière. They have had revenue growth compared to the summer quarter last year, but the result is still under expectation. In this quarter, Offshore Dekom has submitted a project to remove 10 platforms in the Netherlands. The annual reserve is 1.9 billion for offshore. If we then look at the total order reserve, it is still at a very high level of 39.7 billion. What may have been noticeable is that the facility is slightly past construction, with 11.8 and the builder also 11.8, and then follows Sweden at 8 and Betongmast at 5.3. These are the big drivers in the order reserve. And we mean that we have a solid order reserve in the times that we are now facing. Then we have come to the theme part before today, and it will be presented to Eirik Vrold.

I will introduce myself briefly, while Knut Tornes is here. Eirik Frohlet and I are responsible for parts of the construction business and energy and environment. Today I will talk about the rehabilitation segment. Let's start with this picture, which shows Briskeby fire station, which Torendal is just about to rehabilitate. In this competition for Oslo Municipality, Torndal was not the cheapest, but was assigned tasks based on competence and commitment. This is a trend we see, that our customers choose execution based on other criteria than just price. The fire station, which is now top-modern, is rehabilitated in accordance with antiquarian principles, where facades and internal surfaces are preserved, even though all technical installations are in line with the needs of fire stations today. This project has had a large environmental focus and has also been completely exhaustive. That is to say, zero diesel, gasoline, exhaust from neither cars, equipment or machines. The fire station is an example of a project with a strong environmental profile, where the main building from 1963 is totally rehabilitated to become a top modern fire station with better indoor climate, lower energy consumption, and access to renewable energy on the roof of solar panels. This is the type of projects and competences I will tell you more about today. AF consists of a number of specialized companies in rehabilitation, reconstruction and construction. In rehabilitation, reconstruction and construction is what I call the root segment. The segment is developing steadily, and the market is perceived as predictable. The companies within this segment carry out rehabilitation and maintenance, and are a complete provider of many craft services. They carry out reconstructions according to antiquarian principles, and are specialists in recreating buildings to their original appearance. The competences include shopping centers, schools, hospitals, restaurants, culture and business buildings. In addition, we have specialized in the modernization of bathrooms in larger restaurants. Upgrading energy solutions will always be a natural part of a project when it comes to rehabilitation. AF therefore also implements enterprises and certification processes that give our customers security and good incentives to choose energy efficient solutions. The root segment is in rapid development and has taken large steps towards what is possible through innovation and technology development in recent years. Nevertheless, there is nothing that beats good professional competence. Good craftsmanship carried out by skilled professionals in their niche gives the best end results. Solid cutting-edge competence and good collaboration with customers and suppliers makes us able to take on complex projects in all sizes. A little about why we think the market for rehabilitation and reconstruction is exciting. A basic principle in AF is that projects that are sustainable for climate and the environment should also be economically sustainable. Therefore, the rehabilitation activity is an essential part of AF's business. Rehabilitation projects are socially beneficial when older buildings are transformed into modern and energy-efficient buildings, according to current standards. This contributes to social benefits and creates value for the owner and us as entrepreneurs. Rehabilitation of existing building mass is also the most sustainable way to secure buildings for the future. We have the necessary competence to prioritize effective logistics and the reduction of material waste. In addition, we can help customers make the right environmentally friendly material and design choices. This market, the root market, is largely driven by the increase in the number of existing buildings and changes in the age of these. Both of these drivers are moving slowly. This is what contributes to the root market being stable and normally not fluctuating so much from year to year. As I come back to, we see that climate and environmental projects are increasingly more in demand. Something that we believe will have a positive impact on the activity in the future. Here is a picture from the press house in Oslo. Here are two townhouses from the late 18th century put together and given new content. The church has been used for antiquarian rehabilitation of external facades, rehabilitation of roof tiles, as well as extensive internal rehabilitation of these exposed tile tiles. By environmentally friendly rehabilitation, the cultural and historical values of a building should be taken into account. A clear technical challenge with this is to meet the need for sustainable and energy-efficient solutions, and at the same time respect the value of the building. We assume enterprises that not only include construction and rehabilitation subjects, but also technical subjects. We can therefore guarantee that the technical function and energy savings are taken into account in such an approach. Rehabilitation creates value for a building owner through increased area development, higher rent value and lower energy costs. In addition to this, research shows that potential environmental benefits are great when rehabilitating or upgrading existing buildings. Buildings consist of over 80% of the climate gas emissions from our industry. The impact factors in our projects are essential to reduce emissions. Climate and gas emissions, which are reduced by rehabilitation and reuse of existing buildings, are mainly linked to these building materials and elements. This also applies to transport, but also to reduce the scope of building volume and the exchange of materials with relevant amount of waste. According to Sintef, rehabilitation can halve the environmental impact compared to building a new building. In the picture, we see a proud project organization outside of Igognito Street 33 in the center. Here, Bygg Fornyelse has carried out a total rehabilitation of the building, as you can see in the picture, for new users and new businesses across all floors, including the use of the basement floor. Climate and environmental projects are increasingly in demand, and this will probably have a positive impact on the activity in the coming time. This is not a national or Norwegian phenomenon, but in line with a European transition process led by the EU. The downside is that the EU, and then also Norway, has committed to a goal of at least 40% reduction of climate gas emissions by 2030. The European Green Deal is a package of political initiatives that aims to put the EU on the road to a green transition towards the final goal of becoming climate neutral by 2050. Renovation and energy efficiency of buildings is central through the EU Renovation Wave. In short, the EU Renovation Wave looks at renovating both public and private buildings as a central initiative to drive energy efficiency down in the sector and to achieve climate goals. Given the labor-intensive nature of our sector, the EU believes that rehabilitation will also play a decisive role in the future European economic development. The EU's goal is to double the annual rate of rehabilitation over the next ten years. By then, 1-1.5% of the European building market will be renovated annually. In order to fulfil the goals in the Paris Agreement, I believe that this approach should not only be doubled, but tripled. The feedback to the EU Renovation Deal is mostly positive, but it requires more elaboration. Many would like more, some would like less. Regardless, we have the competence and capacity to meet such a change. As I mentioned, the retail market is largely driven by the number of buildings and the age of these. These change slowly, and this means that we actually see a stable market from year to year. The available and high level of construction costs with expensive materials will of course have a dampening effect on the demand for retail. But you can see now that the material prices are flattening out and are also going down. We experience higher interest rates, but we also expect that record high electricity prices will lead to increased demand after energy efficiency measures, which again contributes to growth in the grid market. As I mentioned, stricter climate demands will probably also lead to increased focus on preserving and reusing the existing mass of buildings we have. Such rebuilds will also give growth in this market. Given the large proportion of the existing building mass in Norway, the prognosis center estimates that this market we operate in will increase by 1% next year and 2.6% in 2024. In addition to this, it is also assumed that the EU Green Deal will have more effect, since Norway has not only linked itself to the European goal of reducing climate gas emissions, but has a stated goal of being a pioneer country in this context. Here we see a picture of the commune garden in Sandvika. This is AEF's largest rehabilitation project so far, with almost 1 billion kroner in revenue. This will be a Bream Outstanding building, carried out by Strøm Gundersen. The fact that we are getting better and better at such projects, makes us well prepared to meet the demands of the future authorities and customers. Briefly about what we are thinking about in the future. We will continue to be the preferred employer and carry out targeted competence development because we are part of the team. This makes it possible to be robustly organised with good management capacity. We know this is an important success factor for us. We will exercise our curiosity to understand and solve customer needs and create new socially beneficial business opportunities through good climate and environmental management. I will end with a comment to Bildar. Now in November, we will start a comprehensive work with preparations for the new Viking Museum at Bygdøy. The new museum will consist of two parts. today's Viking ship house and a new addition. From the building renovation, long experience and expertise that will ensure that this museum has a solid foundation for the preservation of Viking ships, which is actually part of our common world heritage. We look forward to this very much. Thank you.

Thank you for that, Eirik. Then we will summarize the quarter. We have had a quarter with strong growth of over 18%, which has given a turnover of 7.5 billion, but with a turnover of 271 million and a margin of 3.6%. We have had a strong cash flow from DRIFTA, and we have a solid order reserve of 39.7 billion. We are in a strong financial position. Styret has an exchange rate of 4 kroner per share for the second half of the year. Together with the exchange rate for the first half of the year, we will have paid an exchange rate of over 1.1 billion kroner this year. Before I go into landing, I would like to say that we have a quarter with strong growth and varying results, but also many strong performance. And in the future, we will continue to strengthen the strength of what we believe in. And that is to choose the right projects. It is robust organization. It is good risk management. We must be active in our operations and our professions. We must take care of our money. Last but not least, we must take care of each other so that everyone comes home safely. With that, I would like to thank you for following us digitally. I wish you a good Friday and a good weekend when that time comes. For those of you in the audience, we will now move on to a question and answer session.