NCC-Group: Interim report January-September 2000

NCC-GROUP: Interim report January-September 2000 The Group's income after net financial items for January-September amounted to SEK 1,539 m. (910). Income includes SEK 912 m. deriving from the repayment of surplus funds from SPP. Excluding non recurring items, earnings amounted to SEK 627 m. (709). On a rolling 12-month basis, income after net financial items amounted to SEK 1,880 m., compared with SEK 1,251 m. for full-year 1999. Excluding non recurring items, earnings amounted to SEK 968 m. (1,050). Earnings per share for the January-September period amounted to SEK 9.80 (6.10). Excluding non recurring items, earnings amounted to SEK 3.90 (4.80) per share. The NCC's Group's organizational structure is being changed to increase the focus on growth areas, such as telecom and service. The agreement with Ericsson regarding the build-out of the information structure of tomorrow, for 3G among other applications, will help to secure solid growth for NCC Telecom in the future. The acquisition of Riebers & Sons' Roads business area will make NCC the clear leader in the Nordic market for asphalt and crushed products and will also provide a boost to the Group's rapidly expanding operations in Poland and the Baltic countries. The go-ahead for construction of the first stage of the A2 highway project represents a breakthrough for NCC in Poland and for BOT-financed infrastructure projects in Eastern Europe. The projects provide NCC with construction work totaling SEK 2.7 billion. "Adjusted for non recurring items, earnings for January - September amounted to SEK 627 m., which is lower than in the year-earlier period. To a large extent, the earnings dip was due to a reduction in civil engineering investments and a weaker market for asphalt products," says Jan Sjöqvist, President and Chief Executive Officer of the NCC Group, commenting on the interim report for the period ended September 30, 2000. "Other parts of the Group are showing a favorable business trend. Earnings from real estate development have improved sharply. Since we expect strong growth in the telecom and service sectors, among others, NCC is currently implementing a comprehensive change in its Group structure. The aim is to enable the Group to capitalize on the opportunities arising from, for example, the fast-growing broadband market and the build-out of the third generation of mobile telephony networks. The new NCC Telecom, which commenced operations as early as October 1, experienced a flying start through a partnership agreement with Ericsson. It is estimated that the business area's order volume will be at least SEK 10 billion over a five-year period," says Jan Sjöqvist. "The A2 highway project is the largest single contract in NCC´s history and represents a breakthrough for us in the Polish market. It is also a so-called BOT project, which means that it is a privately financed infrastructure-project solution in which we participate with financing, construction work and operation of the highway," says Jan Sjöqvist. Orders received Orders received by the NCC Group's construction operations (the Civil Engineering, Housing, Building and Industry business areas) during the January - September 2000 period amounted to SEK 29,535 m. This was a 17- percent increase compared with the SEK 25,341 m. reported in the year- earlier period. On a rolling 12-month basis, orders received amounted to SEK 40,354 m., compared with SEK 36,160 m. for full-year 1999. Net sales Consolidated net sales amounted to SEK 27,211 m. (26,440), up 3 percent. On a rolling 12-month basis, net sales amounted to SEK 38,231 m., compared with SEK 37,460 m. for full-year 1999. Earnings Income after net financial items amounted to SEK 1,539 m. (910), which included repayments of surplus funds from SPP in an amount of SEK 912 m. The comparative figure for the preceding year includes combined capital gains of SEK 201 m. from the sale of Neptun Maritime and the BPA share- holding. Excluding non recurring items, income amounted to SEK 627 m. (709). The earnings decline was due mainly to a reduction in civil engineering investments and a weaker market for asphalt products. NCC Industry reported lower earnings for January - September 2000 compared with the year-earlier period, which was due primarily to the third quarter. Improved earnings are expected during the fourth quarter, compared with Q4 1999.The slight decline in NCC Civil Engineering's earnings was mainly attributable to a market downturn in Denmark and Norway. Volumes and profitability related to Swedish operations remained unchanged. The earnings trends in Denmark and Norway are expected to remain negative during the fourth quarter. NCC Real Estate's earnings trend was favorable and income from NCC Building improved. On a rolling 12-month basis, income after financial items amounted to SEK 1,880 m., compared with SEK 1,251 m. for full-year 1999. Excluding non recurring items, rolling 12-month earnings amounted to SEK 968 m., compared with SEK 1,050 m. for full-year 1999. Earnings per share Earnings after full tax amounted to SEK 1,054 (661), which corresponds to SEK 9.80 (6.10) per share. Excluding non recurring items, earnings after full tax amounted to SEK 416 m. (516), or SEK 3.90 (4.80) per share. On a rolling 12-month basis, earnings per share amounted to SEK 11.40, compared with SEK 7.70 for full-year 1999. Excluding non recurring items, rolling 12-month earnings per share amounted to SEK 5.50, compared with SEK 6.40 for full-year 1999. Profitability The return on capital employed on a rolling 12-month basis was 13 percent, compared with 10 percent for full-year 1999. Excluding non recurring items, the rolling 12-month return on capital employed was 8 percent, half a percentage point lower than in full-year 1999. The return on shareholders' equity on a rolling 12-month basis was 13 percent, compared with 9 percent for full-year 1999. Excluding non recurring items, the rolling 12-month return on shareholders' equity was 6 percent, compared with 7 percent for full-year 1999. Investments The Group's gross investments in real estate amounted to SEK 3,617 m. (2,159), of which real estate development projects accounted for SEK 3,228 m. (1,978). Cash flow Cash flow, before financing, was positive in an amount of SEK 217 m. (neg: 2,150). Cash flow during the current year is being affected by improved liquidity from projects conducted within contracting operations and investments in proprietary housing construction and real estate development. The acquisition of Superfos was included in the figure for the year-earlier period. Financing and liquidity On September 30, 2000, NCC's net indebtedness (interest-bearing liabilities less liquid assets less interest-bearing receivables) amounted to SEK 6,350 m. (6,238). On December 31, 1999, NCC's net indebtedness totaled SEK 5,296. The increase was mainly due to higher investments in proprietary housing construction. On September 30, 2000, the average interest rate for the borrowing portfolio was 5.4 percent (5.3), excluding pension liabilities. On the same date, the average period of fixed in- terest was 1.7 years (2.1). Equity/assets and debt/equity ratios The equity/assets ratio was 29 percent (32). The decrease was mainly attributable to the extra dividend of SEK 7 per share approved by the Annual General Meeting in March. The background to this was that NCC reduced its equity/assets ratio target from 35 to 30 percent at the beginning of 2000. The debt/equity ratio (net indebtedness divided by shareholders' equity including minority interests) on September 30, 2000 was a multiple of 0.7, compared with 0.5 at year-end. The debt/equity ratio is expected to increase during the fourth quarter, due to the Rieber acquisition. Personnel The average number of employees in the NCC Group during the period was 24 563 (23,108). CONSTRUCTION MARKET The Nordic construction market is expected to grow slightly in the next few years, although the trend will vary from country to country and sector to sector. The Swedish and Finnish markets are expected to grow by 5 - 6 percent in 2000 and 2001, while Denmark will show an opposite trend. A slight recovery has occurred in Norway, although increased interest rates are expected to inhibit growth in the construction market in 2001. The largest upswing is expected in the housing market, particularly in Sweden and Finland, where demand is strong. However, a slower growth rate has been noted in Finland during the autumn. Some growth is expected in the "Other buildings" segment (offices, retail premises, hospitals) in 2000 and 2001, while the roadwork and civil engineering market is stagnating or declining in most Nordic markets. The Danish civil engineering market has declined by more than 30 percent since 1998 and the Norwegian market by 20 percent. In Sweden, NCC's largest individual market, the largest increases are expected in the housing segment, particularly in the Stockholm region, where demand for new housing is considerable. However, the growth rate is being inhibited somewhat by a shortage of land approved for development and by Sweden's utility value principle, which makes it unprofitable for private real estate companies to build and manage residential buildings. In the Swedish civil engineering market, a continued decline is expected in public sector investments in infrastructure, at the same time as no decisions regarding private funding of major projects have been made. On the other hand, private investments in the energy and telecom sectors are increasing, a trend that is generating considerable construction volumes. Construction investments in the telecom sector rose by 30 percent during the first half of 2000. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/11/01/20001101BIT00620/bit0001.doc http://www.bit.se/bitonline/2000/11/01/20001101BIT00620/bit0002.pdf