Revenues for Q2 totalled NOK 6,568 million (NOK 5,863 million) and amounted to NOK 13,175 million (NOK 11,077 million) for the first half of the year. This corresponds to growth of 12% and 19% respectively, compared to the same period last year. Profit before tax were NOK 258 million (NOK 363 million) for Q2 and NOK 465 million (590 million) for the first half of the year. This resulted in a profit margin of 3.9% (6.2%) for Q2 and 3.5% (5.3%) for the first half of the year. AF Gruppen reported a historic high in terms of its order backlog, totalling NOK 34,155 million (NOK 23,085 million) at the end of the quarter. Despite the fact that most projects have been directly and indirectly affected as a result of the Covid-19 pandemic, AF Gruppen has managed to maintain relatively good operations throughout this period.
‘We have put behind us a demanding period of six months featuring high levels of activity, but we are not satisfied with the profitability for the quarter or half-year. Employees throughout the organisation have demonstrated tremendous capacity to adapt and have gone to great lengths and have worked hard to maintain production during the Covid-19 pandemic. Our order backlog is at a record high, and the profit potential is good in the active project portfolio. As in previous years we expect an increase in the profitability for the second half of the year,’ says AF Gruppen CEO Morten Grongstad.
AF Gruppen is in a strong financial position. Net operating cash flow was NOK 202 million (284 million) in Q2 2020 and NOK 701 million (NOK 542 million) for the first half of the year. As of 30 June 2020, AF Gruppen had net interest-bearing liabilities totalling NOK 49 million (NOK 753 million) and NOK 3,561 million in available liquidity. Earnings per share amounted to NOK 1.56 (NOK 2.54) during Q2, and NOK 2.79 (NOK 3.96) during the first half of the year.
AF imposes the same strict requirements on all its partners and suppliers as on its own employees. Figures from subcontractors are included in the injury statistics. The LTI rate for Q2 was 2.3 (0.6). The LTI rate for the first half of 2020 was 1.9 (1.3).
’Following the end of the quarter, we received a powerful reminder of the significance of thorough safety work when a workplace accident at one of our Swedish units resulted in a fatal outcome. Our goal is that no one be injured as a result of working on our projects, whether they are our own employee or the employee of one of our subcontractors. We are working to gain insight into the underlying causes of the accident in order to implement necessary measures and barriers in order to avoid the same thing happening again,’ says Grongstad.
AF works in a systematic and goal-oriented manner to avoid work-related absence. Our goal is overall sickness absence of less than 3.0%. Sickness absence in Q2 was 4.6% (3.2%), and for the first six months of 2020 it was 4.7% (3.5%). Sickness absence was somewhat higher than normal during this period due to the quarantine provisions and an increased proportion of employees who were at home in accordance with the authorities’ orders.
Following the end of the quarter, it was announced that EVP Amund Tøftum will be taking over as the new CEO effective 24 August.
‘AF Gruppen has always had a culture of developing its own leaders, and this applies to the executive management team too. Now that we have a leadership candidate in place with the format and potential that Amund offers, the conditions are right to hand on responsibility. Since we will soon be entering a new strategic period, I also believe the time is right for a change in leadership,’ says Grongstad.
‘I look forward to the opportunity to lead a company with so many talented employees. The company has been through a significant growth period and is now in the process of establishing itself as one of the major construction firms in the Nordics. AF will continue to be a forward-looking company where safety and profitability are at the core of everything we do,’ says Amund Tøftum, the incoming CEO of AF Gruppen.
Selected highlights from the quarter:
- AF Anlegg has several projects in the final phase that contributed overall to the unit’s good earnings for the quarter. The construction operation is currently commencing a number of major projects. The order backlog increased by 40% compared with the same quarter in 2019. The Bergtunnlar Lovö tunnel project in Stockholm will start during the second half of 2020.
- The revenues and profitability for the Building business area have declined compared with the same period last year, and performance in the portfolio of building units is variable. Given the uncertainty surrounding the impact of Covid-19, fewer residential property projects have started, while the competition for public construction projects is increasing. The building companies AF Bygg Oslo, Haga & Berg and AF Håndverk delivered very good results. Eiqon delivered a very poor result during the quarter due to losses and provisions for risk on several projects in its portfolio.
- Betonmast became a part of AF Gruppen on 31 October 2019. The unit has signed several new contracts during Q2, but there is great variation in the results of the various sub-units. Betonmast Romerike distinguished itself with strong earnings, while Betonmast Boligbygg, Betonmast Telemark and Betonmast Ringerike reported weak earnings. Betonmast Bergen was sold to Backe Gruppen during the quarter.
- In Property, sales were very good, amounting to 70 (80) residential units, of which AF’s share is 25 (37). Residential unit sales slowed down towards the end of the first quarter as a result of the spread of Covid-19, but have improved significantly during the second quarter. A total of 150 (242) apartments have been sold year to date, of which AF’s share was 53 (92). The sales ratio for commenced projects was 78%.
- Energy and Environment reported good environmental clean-up and demolition, and the environmental centres reported good profitability. AF Energi & Miljøteknikk has seen variable profitability in its project portfolio.
- The Sweden business area reported revenue growth of 15% compared to the same quarter in 2019. HMB and Kanonaden reported strong growth, while AF Bygg Göteborg and AF Bygg Syd reported a somewhat lower level of activity compared with the same period last year.
- The Offshore unit achieved an operating profit during the quarter. The outbreak of Covid-19 and the fall in oil prices has resulted in very challenging market conditions for the offshore business, but levels of activity are on the rise.