Year 2000 - a strategic milestone for Veidekke
Our cash flow is satisfactory, but our performance is marred by a loss on the Rainbow Hotel Opera building project and a shortfall in earnings on our plant hire operations. The result was also affected by costs connected with starting up in Stockholm, weak markets for asphalt and heavy construction, and the fact that we have had a considerable increase in amortisation of goodwill, says Veidekkes President & CEO Terje R.Venold.
Our stronger market position and an increase of 82% in our order books compared with last year give us a good starting point for a marked improvement in profits, says Mr. Venold.
Veidekke showed a result before depreciation and financial costs (cash flow) of NOK 650 million (577 million). Profit before taxation was NOK 185.0 million (NOK 295.3 million). Turnover was NOK 8,005 million compared to 6,486.8 million in 1999.
The Group achieved a profit margin of 2.3 per cent (4.6 per cent), a return on equity of 10.2 per cent (20.4 per cent) and earnings per share of NOK 4.79 (NOK 8.41). The Board of Directors has decided to pay a dividend of NOK 2.- per share, (NOK 2.75), which is a dividend ratio of 42 per cent. Veidekke's policy is a dividend ratio of between 30 and 40 per cent.
Neither the Board nor the management is satisfied with these results, Mr. Venold points out. But we believe that the steps we have taken will soon bring about an improvement in our profit figures, says Veidekkes President & CEO.
Both the quantity and quality of Veidekkes orders-on-hand at the end of the year are regarded as highly satisfactory. The order books for Regional and Heavy Construction excluding Industry, show a total of NOK 5,833 million, NOK 1,357 of which represents orders for Veidekkes Danish operation, H. Hoffmann & Sønner A/S. All in all, this is an increase of no less than 82 per cent, which mainly can be ascribed to the acquisitions made during the year. In addition, the Property Division has considerable property in reserve for residential and non-residential development projects for Veidekkes own account, which represents an earnings' potential in the years to come.
At the same time, we are working actively to achieve greater customer integration in our projects. In this way, we are widening the scope of our operations instead of being a traditional contractor, Veidekke will partner customers in meeting their overall requirements in building, heavy construction and property development, says Terje R. Venold.
Veidekkes most important investments in 2000 were the acquisition of Danish construction company H. Hoffmann & Sønner A/S, the purchase of housing developers Selmer Bostäder in Stockholm from Skanska, and the establishment of building and construction activities in the Stockholm region. Veidekke also strengthened its market positions in Norway, both geographically and product-wise.
We now have a stronger position as a company and have thus reinforced our basis for further growth, says Mr Venold. In our new position as a Scandinavian contractor, we will participate actively and with renewed vigour in the further restructuring of the Nordic market, he explains.
Veidekkes contracting operations were strengthened by the acquisition of Bøhler Entreprenør and Bøhler Vedlikehold in Oslo, 70 per cent of UNI-Bygg in Harstad, 85 per cent of Br. Reme A/S in Kristiansand and 70 per cent of Valdresbygg A.S. Veidekke is now the leading building contractor in Norway. Two strategic purchases were made in heavy construction: Trafikk & Anlegg in Skien and 80 per cent of the shares in Bj. Kynningsrud AS foundations division. In the Industry Division, plant hire operations were expanded through the purchase of Stavdal and its merger with Bautas, which became effective on 1 January 2000. In the course of the year, Veidekke sold its ready-mix concrete operations and outsourced the management of its IT systems, in keeping with the companys wish to concentrate its efforts on core business areas. In February this year, Bautas purchased the plant hire company Brubak, previously owned by AF-Gruppen, including a five year delivery contract.
Veidekke had a total turnover for 2000 of NOK 8,005 million (NOK 6,487 million). This is an increase of 23 per cent from the year before. Most of this increase is a result of the acquisitions and start-ups that were effected during the year. The Industry Division showed a growth in turnover of 45 per cent, which was mainly due to its purchase of Stavdal. The Regional Construction Division increased its turnover by 19 per cent. In the Heavy Construction Division, turnover fell by 9 per cent, but without the new acquisitions this would have been 20 per cent. Hoffmann in Denmark contributed NOK 540 million to turnover for the fourth quarter.
Pre-tax profit for the Group was NOK 185.0 million (NOK 295.3 million), giving a profit margin of 2.3 per cent (4.6 per cent). As mentioned above, the decline in profit can largely be ascribed to the writedown of a turnkey project in the Regional Construction Division and a weak result for Bautas in the Industry Division. The Property Division showed a profit of NOK 30.3 million (NOK 29.7 million).
The Groups operating profit amounted to NOK 263.9 million (NOK 328.3 million) after amortisation of goodwill at NOK 65.6 million (NOK 31.7 million). Net financial items were NOK -78.9 million (NOK -33.0 million). The increase in goodwill and financial expenses is the result of substantial investment in company acquisitions in 2000.
The profit after taxes and minority shares was NOK 120.6 million (NOK 195.4 million). Earnings per share were NOK 4.79 (NOK 8.41), cash flow per share was NOK 20.13 (NOK 19.15) and return on equity 10.2 per cent (NOK 20.4 per cent).
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