RECORD-BREAKING RESULTS FOR VEIDEKKE
After a year of new acquisitions, Veidekke can report record-breaking results. Turnover rose by 15 per cent to NOK 6.5 billion, giving a pre-tax profit of NOK 295.3 million. The profit margin for the Group was 4.6 per cent and the return on equity 20.4 per cent. Veidekke has once again reached its targets of a return on equity of 20 per cent and a profit margin at a level of 5 per cent. Earnings per share were 17.15 (16.52).
"1999 was a record year for us in a number of ways," says Veidekke's President and CEO Terje R. Venold. "Not only did we achieve a growth of 15 per cent in a declining market, we also increased our market shares in almost all our business areas. We have completed a year of nine acquisitions, and we have shown that all the new companies are contributing better results than anticipated."
Profit performance
50 per cent of Veidekke's growth in turnover derives from acquisitions and mergers. Its Building and Industry Divisions showed marked increases in turnover of 30 and 20 per cent respectively, while turnover for the Heavy Construction Division fell by 10 per cent.
Veidekke achieved a total turnover of NOK 6,487 million (NOK 5,645 million). The Group's operating profit was NOK 328.3 million (NOK 287.8 million) and net financial items stood at NOK -33 million (NOK -5.5 million) at the end of the year.
Breakthrough
1999 also saw a breakthrough in Veidekke's injury rate, that is the number of lost-time injuries per million man-hours. An injury rate of 9.4 for the Group put the figure below 10 for the first time. The injury rate for the Heavy Construction Division was particularly good at 3.4. The average rate for the industry is 25.
"An injury rate of less than 10 is a historic breakthrough", Mr. Venold explains. "We invest considerable resources in reducing accidents and absence at Veidekke, and last year's marked reduction in the injury rate has given us renewed inspiration to continue this important work. We cannot accept injuries, so our goal from now on will be to make Veidekke an injury-free workplace", he adds optimistically.
Record-full order books
Veidekke's order books show very satisfactory figures. At the end of 1999, the orders-on-hand for Building and Heavy Construction were NOK 3,210 million (NOK 2,682 million). This is an increase of 20 per cent. Not included in this figure is a development portfolio in the Property Division totalling NOK 4 billion over a five-year period and a portfolio worth NOK 2.3 billion connected with the take-over of Bøhler.
The Group's financial standing is very sound and Veidekke has maintained an equity ratio of 29.4 per cent as against 29.3 per cent in 1998.
The Board of Directors will propose a dividend of NOK 5.50 per share for 1999 at the Annual General Meeting in May.
BUSINESS AREAS
Building
The Building Division made several strategic acquisitions in 1999, thereby strengthening its position in new product areas and market areas and pushing its share of the market up from 8 to 12 per cent. The acquisition of Block Berge Bygg AS has given Veidekke a strong position in the Rogaland market in west Norway and, not least, access to know-how and production of concrete elements. By taking over Norske Stålbygg AS, the Building Division has gained considerable technical expertise in the design and erection of buildings using steel as the main structural component. The purchase of 70 per cent of the shares of Valdres Bygg AS in central Norway and Uni Bygg AS in the north has boosted the company's regional operations. An agreement has also been reached with Steen & Strøm to take over Bøhler Entreprenør when due diligence has been completed at the end of February.
The Building Division had a turnover of NOK 3,035 million in 1999, which corresponds to a growth of 30%. Its profit showed a healthy improvement from NOK 109.6 million in 1998 to NOK 131.4 million in 1999. The increase in the Division's market shares led to the record-high figure of NOK 2,272 million for orders-on-hand at the end of the year. This is 52 per cent higher than at the same time last year.
Heavy Construction
As expected, the level of activity for the Heavy Construction Division was lower in 1999 than in the previous year. This was due both to the completion and handing over of two major contracts, at Kårstø and Sture, and to a tighter heavy construction market. This Division had a turnover of NOK 2,008 million in 1999 (NOK 2,224 million) and a profit of NOK 93.9 million (NOK 88.1 million), which gave a profit margin of 4.7 per cent compared with 4.0 per cent in 1998.
Veidekke's operations in Sweden, Vecon, progressed as planned in 1999 and showed a turnover of NOK 136 million. Other international operations achieved a turnover of NOK 290 million (NOK 449 million). All factors taken into consideration, the Group is very satisfied with these results.
The generally weaker construction market in Norway affected this Division's order books, which totalled NOK 938 million at the end of the year, as against NOK 1,185 million a year earlier.
Industry
The Industry Division strengthened its market position in all the four business areas: asphalt, crushed stone and gravel, ready-mix concrete and recycling. Organisationally, Veidekke's wholly owned plant hire company Bautas is part of the Industry Division, but its turnover and profit have been split between Building and Heavy Construction as before.
The biggest strategic investment in this Division was the acquisition of the rental company Stavdal. Stavdal has an annual turnover of approximately NOK 550 million, 50 per cent of which derives from operations in Sweden. The merger between Bautas and Stavdal is therefore a good solution both product and market-wise.
In the course of 1998 and 1999, Veidekke's new business area, recycling, developed into an important entity in the Group. Veidekke has positioned itself in all the different links in the value chain, from demolition to the utilisation of building waste as a finished product.
The Division's turnover for 1999 was NOK 1,233 million (NOK 1,032 million). Turnover remained relatively stable for asphalt, crushed stone and gravel, but showed an increase for ready-mix concrete and recycling. The profit for the year was NOK 41.8 million (NOK 52.0 million), bringing the profit margin
down from 5.0 to 3.4 per cent. The profit figures for the Industry Division reflect the negative effect of high bitumen prices and weak margins in the export market for crushed stone and gravel.
Property
This Division is responsible for the development of residential and non-residential projects for Veidekke's own account. Turnover for 1999 was NOK 328 million (NOK 85 million), which gave a profit of NOK 29.7 million as against NOK 37.3 million in 1998. This profit can largely be attributed to sales of dwellings for Veidekke's own account and non-residential properties.
Veidekke purchased several building sites in 1999 for residential and non-residential development projects. The largest of these was the property belonging to the Norwegian Trade Fair Foundation at Skøyen in Oslo, which Veidekke purchased along with a large housing association in Oslo (OBOS).
At the end of the year, Veidekke had sites and development contracts covering a total of approximately 180,000 sq.m. for non-residential projects and 3,000 housing units.
Health, safety and environment
Health, safety and environment (HSE) are given top priority at Veidekke. Veidekke has always regarded concrete targets for injuries and absence as important. That is why 1999 was a breakthrough year for the company; the injury rate, the number of lost-time injuries per million man-hours, fell below 10 for the first time and ended up at 9.4. A year earlier, this figure was 11.9.
It is worthwhile focusing on safety and the Heavy Construction Division is a good example of this. In the course of 1999, this Division managed to reduce the injury rate in its operations from 8.1 to 3.7. Investments in safety will be intensified throughout the Group under the motto: "Veidekke - an injury-free workplace". This means that from 2000 onwards Veidekke will have a long-term goal of zero injuries.
Financial standing
Total investments in 1999 amounted to NOK 750 million (NOK 875 million). These investments can be broken down into NOK 342 million in expansion, NOK 201 million in maintenance of machinery and equipment and NOK 207 million in property purchases. Capital tied up in housing projects is NOK 228 million and in non-residential projects NOK 376 million. The risk attaching to these projects is deemed to be low.
Sales of fixed assets totalled NOK 318 million (NOK 225 million), of which NOK 244 million (NOK 228 million) derives from buildings and sites. Total assets for the Group stood at NOK 3,566 million (NOK 3,213 million). This increase must be viewed in the light of the growth in the company's turnover and its investments in expansion. Total equity capital rose from NOK 944 million to NOK 1,050 million, corresponding to an equity ratio of 29.4 per cent (29.3 per cent).
Shareholders and the stock market
At the end of 1999, Veidekke's shareholders numbered 3,353 (2,960). Its largest shareholders were Folketrygdfondet (12.3 per cent) and Storebrand (9.2 per cent). A total of 1,717 employees held shares in the company, giving them an ownership share of 16.8 per cent. In 1999, 4.3 million Veidekke shares were traded on the Oslo Stock Exchange. The price of Veidekke shares rose during the year from NOK 90 to 149, an increase of 65.5 per cent.
The Board of Directors will propose a dividend of NOK 5.50 per share for 1999 (NOK 5.00) at the Annual General Meeting on 3 May 2000.
For full report including tables, follow the enclosed link: