Veidekke ASA: Increased profitability and improved capital utilisation to reinforce Scandinavian position by 2022

Veidekke ASA: Increased profitability and improved capital utilisation to reinforce Scandinavian position by 2022

09.05.2019 - 06:01

Veidekke ASA (Oslo Stock Exchange: VEI) is conducting a capital markets update today where concrete targets for profitability, capital efficiency and safety will be presented. Veidekke’s overarching objective is to restore a business with strong profitability in the property development, building construction, civil engineering and industrial operations. The implemented measures are intended to bolster Veidekke’s position in key markets, boost profitability and enable Veidekke to continue to offer shareholders an attractive dividend in the years ahead.

“Following a period of strong growth in most of our operations, Veidekke will now give priority to improving results, rather than further expansion. Various profit-enhancing measures have already been implemented. In combination with other improvement projects, we expect these measures to impact positively on profitability across the group. Our primary aim until 2020 is to increase profitability, and thereafter to further lift performance in the period to 2022,” says group CEO Arne Giske.

The specific financial targets presented in the capital markets update are:

  • Increase profit margin to above 4.5% by 2022
  • Annual revenue growth estimated at 3%–5% in the period to 2022
  • Halving the total investment level in 2019 to NOK 500–600 million
  • Reduce capital employed by NOK 2–3 billion compared to current level

“At the same time as improving margins, we will cut tied-up capital by reducing fixed and current assets and accelerating the turnover rate of the property development business. Together with improved results, this will help increase returns and ensure that we can continue to offer shareholders an attractive dividend in the years ahead,” continues Arne Giske.

Several Veidekke units have solid results, but in recent years, profitability has declined in parts of the operation. During the capital markets update, Veidekke will present several business-level measures to boost results.

Following several years of strong residential sales growth and good results, the property development operation has reported a weakening residential market, with fewer sales and building starts, particularly in the Stockholm region.

  • In Sweden, Veidekke’s short-term priority is to sell residential units under construction while simultaneously developing selected projects for sale and adjusting activity and cost levels on an ongoing basis.
  • Exploit the strong market in Norway by maintaining a high level of project starts and transactions.

The building construction operation will adopt a stronger focus on major cities and population centres:

  • Building construction Norway will change from being a generalist builder to a product specialist in the residential, office buildings and schools segments.
    • Raise the margin level in general, and complete the special improvement programme for residential construction projects in the Stockholm region
    • Strengthen Hoffmann’s position as a leading developer and construction company for commercial buildings in Denmark

The civil engineering operation in Norway has adopted new priorities to boost profits and reduce risk:

  • Stricter project selection
  • Significant reduction in tied-up capital
  • Strengthened management team and staff expertise

The industrial operation aims to regain profitability by 2020, through special measures targeting the asphalt and road maintenance operations.

  • The turnaround project concentrating on the road maintenance operation is producing promising results
  • Improved capital utilisation and an improved pricing strategy will help boost the profitability of the asphalt operation

“Veidekke has around 8,500 employees, half of whom are also shareholders in the company. Together, we are custodians of a proud heritage going back to 1936. With the measures presented today, the group’s foundation for efficient operation and increasing value creation in Scandinavia will be reinforced for many years to come,” concludes group CEO Arne Giske.

Presentation and webcast

The capital markets update and the Q1 2019 results will be presented at Veidekke’s head office at Skabos vei 4, Skøyen, Oslo, at 08:30 today. A live webcast will be available on www.veidekke.com, and it will be possible to submit questions online.

For press photos, see www.flickr.com/photos/veidekke , for more information, contact:
Group CEO Arne Giske, tel. +47 905 89 526

CFO Jørgen G. Michelet, tel. +47 917 43 856

Executive Vice President Communications and Public Affairs Lars Erik Lund, tel. +47 413 31 369

This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.

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Veidekke is one of Scandinavia's largest construction and property development companies. The company undertakes all types of building construction and civil engineering contracts, develops residential projects, maintains roads, and produces asphalt and aggregates. The company is known for its involvement and local knowledge. Its annual turnover is NOK 36 billion, and half of its 8,500 employees own shares in the company. Veidekke is listed on the Oslo Stock Exchange and has always posted a profit since it was founded in 1936.