34 per cent growth and healthy results in the first quarter of 2019

Revenues for Q1 were NOK 5,214 million (NOK 3,883 million) and earnings before tax were NOK 226 million (194 million). This corresponds to a profit margin of 4.3% (5.0%). The company has a historically high order backlog of NOK 23,679 million (19,451) at the end of the quarter.

AF Gruppen is in a very strong financial position. Net operating cash flow was NOK 257 million (126) for Q1 2019. AF Gruppen acquired 70% of the shares of Swedish contractor HMB Holding in the quarter. The implementation of a new accounting standard (IFRS 16) from 1 January 2019 led to recognition of rental and leasing obligations of NOK 888 million, which is included in net interest bearing liabilities. The change has no impact on liquidity. As at 31 December 2019, AF Gruppen had net interest-bearing liabilities of NOK 189 million (-1,017 million). Earnings per share for the quarter totalled NOK 1.41 (NOK 1.33).

“We are pleased that we are continuing to deliver stable and good results even with strong growth in a highly competitive market. Profitable growth is essential in order to compete for the most interesting contracts, attract the best employees and reinforce an already healthy corporate culture. Although we are achieving strong revenue growth, good results and have a historically high order backlog, we must still intensify our work on safety,” says CEO Morten Grongstad of AF Gruppen.

AF imposes the same strict requirements on all its partners and suppliers as on its own employees. Figures from the subcontractors are included in the injury statistics. The LTI rate for the first quarter was 1.9 (1.3). For 2018, the LTI rate was 0.8 (1.1).

AF works systematically to avoid work-related absence. The goal is overall sickness absence of less than 3.0 per cent. Sickness absence in Q1 was 3.7% (3.5%), and for 2018 it was 3.3% (3.0%).

“The AF culture shall be characterised by clear core values, risk management and systematic work on health, safety and the environment. Safety is the first priority, and our goal is that no one should be injured when working in AF. We have therefore introduced the Safety Enhancement Program, which is a set of measures intended to strengthen our safety culture and raise the awareness of each and every employee,” Grongstad says.

Selected highlights from the quarter:

• The civil engineering market in Norway is characterised by a stable and high investment level, in particular in the public sector. AF Civil Engineering achieved organic revenue growth of 33% in the quarter, and increased the order backlog by 16% compared to the corresponding quarter in 2018.
• In building, activity levels were high and results were good for the quarter, and a good order backlog ensures that activity levels are expected to remain high for 2019.
• Good sales in property projects with a high completion ratio has resulted in AF Property delivering a healthy result in the quarter.
• Services that ensure better resource utilization of waste and energy are examples of how engineering competence and entrepreneurship in AF are being used to develop current and innovative solutions. Energy and Environment are reporting as one business area from the first quarter of 2019.
• The market for the removal and recycling of oil platforms is characterized by strong competition, and there are few removal contracts for execution in 2019. There was no activity at the environmental centre in Vats in the first quarter, but after the end of the quarter contracts come in to Vats, which ensure activity for the remainder of the season.
• Operations in Sweden achieved growth in revenue of 65%, mainly due to the acquisition of HMB that was completed in January. The Swedish construction market remains characterised by strong competition, and the residential market is somewhat more hesitant than in Norway. The market for environmental services is good in Sweden.