MT Højgaard A/S interim report 1 st half PDF

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2.8. Stock Exchange Announcement No. 19, 2 MT Højgaard A/S interim report 1 st half 2 Enclosed please find the interim financial report from MT Højgaard A/S about the activities during 1 January 3 th June

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2.8. Stock Exchange Announcement No. 19, 2 MT Højgaard A/S interim report 1 st half 2 Enclosed please find the interim financial report from MT Højgaard A/S about the activities during 1 January 3 th June 2. For your information Monberg & Thorsen A/S owns 46% of the shares in MT Højgaard A/S. The announcement can also be viewed on This announcement is available in Danish and English. In case of doubt, the Danish version shall prevail. Yours faithfully MONBERG & THORSEN A/S Reg.No Knud Højgaards Vej 9 DK-286 Søborg MT Højgaard Group Interim financial report Second quarter 2 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 SUMMARY Summary Financial results for the second quarter of 2 Financial results for the first half of 2 Increasing order intake DKK 2.2 billion Continuing the good trend Revenue as expected DKK 1.6 billion Small decline during quarter Improved operating profit before special items DKK 72 million Impact of profitability in the business now being felt Strong order intake DKK 3.4 billion Reflecting the positive trend Stable revenue DKK 3.3 billion Deferred project start-up Operating profit before special items DKK 122 million Increased earnings based on healthy operations Improved operating margin before special items 4.5% Control of operations Stable operating margin before special items 3.8% Rising trend Outlook for 2 Revenue Around DKK 7 billion As a result of deferred project start-up and temporary extension of Greenland Contactors activities at Thule Air Base. Outlook previously DKK billion Operating profit before special items DKK million Previous outlook DKK million. The effect of revenue changes and temporary extension of Greenland Contractor s activities on the Thule Air Base Operating margin before special items Approximately 5% Previously 4-5% Special items Special items will be affected positively by approximately DKK 195 million if the opposing party s Robin Rigg appeal is unsuccessful Contact Torben Biilmann CEO Tel MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 CONSOLIDATED FINANCIAL HIGHLIGHTS Consolidated financial highlights Q2 Q2 YTD YTD Year Income statement Revenue 1,596 1,685 3,251 3,218 6,979 Gross profit Operating profit before special items Special items* EBIT Profit (loss) before tax Profit (loss) after tax Cash flows Cash flows from operating activities Purchase of property, plant and equipment Other investments, incl. investments in securities Cash flows from investing activities Cash flows from operating and investing activities Balance sheet Non-current assets 1,41 1,7 1,28 Current assets 2,347 2,663 2,618 Equity Non-current liabilities Current liabilities 2,216 2,329 2,395 Balance sheet total 3,388 3,81 3,646 Other information Order intake 2,171 1,816 3,43 2,63 5,892 Order book, end of period 6,637 6,957 6,458 Working capital Net interest-bearing deposit/debt (+/-) Invested capital, end of period Average number of employees 4,48 3,926 3,846 Financial ratios Gross margin (%) Operating margin before special items (%) EBIT margin (%) Pre-tax margin (%) Return on equity (ROE)(%) Equity ratio (%) *) Special items represent the impact on profit of legacy offshore disputes. The financial ratios have been calculated in accordance with Recommendations& Financial Ratios 2 published by the Danish Society of Financial Analysts. Financial ratios are defined in the 2 annual report. Working capital is defined as net working capital excluding sites for sale. 3 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 OPERATING REVIEW Operating review Turnaround successful The intake of good new orders combined with strong focus on operations has resulted in an improvement in the Group s operating profit. The work of translating the strategy to projects that match the Group s skills and intelligent solutions is increasing profitability in the order book and enabling the Group s companies to continue to improve the efficiency of their operations. There is a general improvement in macroeconomic development in Denmark, with a fair increase in investment activity, private consumption, employment and GDP. As a result, the market for construction and civil works projects is generally moving forward and good growth is expected during 2. The biggest rise is in construction, mainly characterised by the demand for buildings for the health sector, private housing, new head offices and the refurbishment of residential property. The MT Højgaard Group is one of the leading players in the construction and civil engineering industry in the Nordic countries. The Group s activities cover construction, civil works and services. CONSTRUC- TION CIVIL WORKS SERVICES The project development market is also growing as a result of the demand for projects among investors, especially housing projects around Copenhagen and Aarhus. At the same time, there are a growing number of projects up for tender in Public Private Partnerships (PPP) and Public Private Collaborations (PPC). The MT Højgaard company entered into contracts for several large projects, including the construction of a new ward building for Hospital South West Jutland, Åbyhøjgaarden and, in collaboration with DEAS, the PPC project Ny Skovbakkeskole for the Municipality of Odder. In the second quarter, Enemærke & Petersen won its largest project to date, a conditional contract worth DKK 75 million for the refurbishment of Stadionkvarteret. The project comprises a contracted first phase worth DKK 2 million, and an option for the remaining five phases. Another conditional award was the DKK 4 million contract for the refurbishment of Hjortegården. Both Enemærke & Petersen and the MT Højgaard company were also awarded several projects that have not yet been contracted. The challenge in the construction industry has moved from the intake of orders to the start-up of work. This is partly due to delays in approvals from customers, often primarily associated with the final financial agreement of the Danish National Building Fund but also general delays in areas like project development matters due to waiting for financing. The effect of a late start-up of production on new orders is also expected to mean a small reduction in revenue in the second half of 2 compared with the previous outlook. Work during the period centred on the construction of a head office for Nordea, the refurbishment of Rosenhøj and Langkærparken, the finishings to 17 metro stations on the new Cityring metro line, and a psychiatric hospital in Vejle. In addition, Egedalsvænge, Vapnagaard and Bestseller were handed over to satisfied customers. Construction The MT Højgaard Group develops, constructs and refurbishes private and public-sector buildings, primarily in Denmark, but also in Norway and the North Atlantic. The Group anticipates a general increase in the level of construction activity in Denmark in 2, both in the public and the private-sector markets, and in both new construction and refurbishment. There have been many projects up for tender in the first half of 2, and a growing number stress the importance of criteria that match the Group s strategy concerning early dialogue, lifecycle values and the use of digital tools. This is especially true in the health sector, where the Group occupies a central position in the construction of the new regional hospitals. In recent years, the market for electrical installations has been relatively flat after the big drop in activity levels during the financial crisis. The market is now experiencing marginal growth, driven by the major public projects and early signs of optimism in the private sector. Lindpro improved its market position as a result of the initiatives introduced for closer consultation with customers. The company delivered both a satisfactory operating result and satisfactory revenue. The modular construction market is growing, and Scandi Byg s position as market leader will ensure that the company participates in all relevant tenders. The level of activity was stable in the second quarter. Scandi Byg worked, among other things, on the Almen-Bolig+ 4th framework contract for the construction of a pool of nonprofit housing, and Ryhavnen in Aarhus, generating an operating result for the period that was in line with expectations. 4 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 OPERATING REVIEW In the North Atlantic market, especially in Greenland, activity in the private sector market is very low, whereas there is a stable, slightly growing public sector market. There is fierce competition for public tenders, so the MT Højgaard company has focused its resources on winning a conditional contract with the US company Silicor Materials to build a production plant in Iceland worth DKK 1.5 billion. The construction business in Norway reported lower second-quarter revenue, and a consequent weak operating result. Revenue Revenue and order book Construction 3k 4k 1k Revenue 3k 4k 1k Order book 6. Orderbook Overall, the construction companies in the MT Højgaard Group achieved a satisfactory operating result during the period, considering that the level of activity was slightly lower than expected. The reduced activity was mainly due to delays in customer approvals. The impact of delays is also expected to affect revenue in the second half of 2, but the operating result is expected to remain stable. intake for the quarter and for the year to date are lower than expected. In the first half of 2, the Group won a number of large civil works projects with a high degree of complexity, including the construction of a shell for a large hospital in Aalborg worth DKK 564 million, although this was not contracted until the third quarter of 2. The Group also signed a new framework agreement with DONG Energy and won a number of small bridge projects. In the period under review, the Group worked on the shells for the Nordea and Knud Højgaards Vej 7 head offices, construction work on a motorway bridge near Odense, and digestion tanks at Lynetten. Growth in steel bridges in the Nordic countries that match the Group s experience and strategy has meant that work on tendering has intensified, whereas the MT Højgaard company is still experiencing a low level of activity in offshore as a result of award procedures and the Group s risk policy. In the Maldives, the market for resorts is still expanding and the company has strengthened its position as a leading player in the market with an increasing market share. Both the level of activity and the result continued to improve in the Maldives. Seth is a jointly controlled entity with an ownership interest of 6% and is included in the income statement in Share of profit (loss) after tax of joint ventures. The company is enjoying a period of stable development following a period of low activity on the African projects funded by Danida. Revenue Revenue and order book Civil Works Order book Civil Works The MT Højgaard company builds roads, bridges and tunnels, extends harbours, constructs large treatment plants and installs foundations for offshore wind turbines. Projects are primarily undertaken in Denmark and Northern Europe, but the Group is also active in Greenland, the Maldives, Qatar, Portugal and parts of Africa k 4k 1k Revenue 3k 4k 1k Orderbook 5 25 The Danish civil works market is stable, with a high level of activity but periodic fluctuations due partly to delays in the Femern project and with continued intense price competition for the work from both Danish and foreign competitors. The MT Højgaard company is experiencing a fair increase in demand for shell contracts and solutions for climate change adaptation. However, the order book and order The level of activity was stable for civil works as a whole, although lower than in 2, and first-half operating profit was in line with expectations. 5 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 OPERATING REVIEW Services The Group provides services related to the construction, civil works and property markets. Ajos supplies equipment and consultancy services to the construction industry and is one of Denmark s largest companies hiring out specialist equipment. Lindpro provides services in the electrical area for construction projects and the subsequent operation. E&P service is an important provider of operation and maintenance of buildings. In addition, the MT Højgaard company offers services in connection with PPP and PPC projects. Greenland Contractors (67%-owned) is expected to continue its activities at Thule Air Base in Greenland after the US Air Force has indicated that it wants to extend its contract with Greenland Contractors under a new interim agreement effective from the previously agreed termination date of 3 September 2. The interim agreement is expected to be on changed conditions and will extend into 216. The effect of the agreement has been reflected in the Group s financial outlook for 2. Work under the existing contract is proceeding as planned and with a satisfactory result for the first half of 2. The rising level of activity in the construction and civil works markets means that an increasing number of service contracts are being put out to tender and that competition is intensifying. Both E&P service and Lindpro s service business recorded stable development in the first half. Ajos is experiencing generally positive development with growth in the construction activities that use Ajos products, which has resulted in increasing first-half revenue. Order intake and order book The second-quarter order intake was DKK 2.2 billion compared with DKK 1.8 billion in the second quarter of 2. The first-half order intake totalled DKK 3.4 billion compared with DKK 2.6 billion in the first half of 2. Like recent quarters, the order intake continued to be impacted by a number of projects that had been awarded but not contracted by the end of the quarter, including the largest individual project, the construction of a production plant in Iceland worth DKK 1.5 billion. At the end of the second quarter of 2, projects totalling DKK 3.4 billion had been awarded but not contracted compared with DKK.2 billion at the end of the second quarter of 2. Order book, beginning of period Order intake during period YTD 2 YTD 2 2 6,458 7,545 7,545 3,43 2,63 5,892 Production during period 3,251 3,218 6,979 Order book end of period 6,637 6,957 6,457 The order book totalled DKK 6.6 billion at 3 June 2, up DKK.2 billion on the start of 2. The order book includes a number of large orders extending over several years. Order intake and order book Revenue 6 Revenue and order book Services Order book k 4k 1k 3k 4k 1k Order intake Orderbook Revenue Orderbook Revenue and earnings The service companies recorded a satisfactory result in the first half of 2, driven by a stable level of activity. Second-quarter revenue was DKK 1.6 billion compared with DKK 1.7 billion in the second quarter of 2. Firsthalf revenue was DKK 3.3 billion compared with DKK 3.2 billion in the same period last year. First-half revenue was slightly lower than the Group expected for the peri- 6 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 OPERATING REVIEW od, partly due to the delays in contracting orders in recent quarters. Second-quarter operating profit before special items was DKK 72 million, up DKK 26 million on the same period last year. The operating margin before special items was 4.5% compared with 2.7% in the second quarter of 2. First-half operating profit before special items was DKK 122 million, a significant improvement of DKK 16 million on the same period last year, driven by the MT Højgaard Group s sustained focus on the quality of new orders and optimising production. 3. Revenue same period last year. This item was boosted by DKK 29 million by a gain on exercise of a currency option in the first quarter of the year. First-half income tax expense was DKK 31 million compared with DKK 2 million in the first half of 2. Cash flows and financial resources Cash flows from operating activities were an inflow of DKK million in the second quarter compared with DKK 16 million in the same period last year. Cash flows from investing activities were an outflow of DKK 6 million in the second quarter of 2 against an outflow of DKK 3 million in the same period last year. Cash flows were impacted by a decline in net work in progress, which resulted in a larger tie-up of funds. This was also reflected in changes in working capital Cash flows from operations First-half EBIT was DKK 122 million compared with a DKK 179 million loss for the same period in 2. Firsthalf 2 EBIT was eroded by special items amounting to an expense of DKK 195 million related to legacy offshore disputes. 125 Operating profit (loss) before special items 6% 5% - Cash flows from operating activities were an inflow of DKK 93 million in the first half of 2 compared with DKK 167 million in the same period last year. Cash flows for the period were impacted by the delayed start-up of production on new orders coinciding with the completion of several large projects % 3% 2% 1% Investing activities absorbed DKK 51 million in the first half of 2, primarily investments in property, plant and equipment, compared with an outflow of DKK 48 million in the same period in % -1% -2% The Group s financial resources totalled DKK.7 billion compared with DKK.8 billion at the start of the quarter. The Group s financial resources are satisfactory in view of the expected level of activity. Balance sheet First-half net finance items amounted to income of DKK 26 million compared with costs of DKK 1 million in the Inventories amounted to DKK 653 million at the end of June 2 compared with DKK 635 million at the end of 7 MT HØJGAARD GROUP INTERIM FINANCIAL REPORT SECOND QUARTER 2 OPERATING REVIEW 2, including sites for resale and construction projects developed in-house totalling DKK 578 million. Trade receivables were DKK 1,52 million at the end of June 2 compared with DKK 1,17 million at the end of 2. Construction contracts in progress amounted to a liability item of DKK 474 million net at the end of June 2 compared with a liability item of DKK 542 million at the end of 2. The decline primarily reflected the completion of a number of large projects. Trade payables amounted to DKK 747 million at the end of June 2 compared with DKK 887 million at the end of 2, reflecting the Group s level of activity in the second quarter of 2. Overall, the Group s working capital at the end of June 2 was lower than at the end of 2. The Group had negative working capital of DKK 47 million at the end of June 2 compared with negative working capital of DKK 51 million at the end of 2. The outlook for operating profit before special items is adjusted to DKK million against the previous outlook of DKK million, while the outlook for the operating margin before special items is adjusted to approximately 5%, as against the previous outlook of 4-5%. The management target of an operating margin of 5% by the end of 2 is expected to be reached. An operating margin of 5% is still expected for 216, including the effect of a possible extension of Greenland Contractors service contract in Thule. Any further outlook for future targets will be published in the 2 annual report. The interim financial report contains forward-looking statements, including the above projections of financial performance in 2 and 216, which, by their nature, involve risks and uncertainties that may cause actual performance to differ materially from that contained in the forward-looking statements. Working capital Legacy disputes In April 2, the Court of Appeal in London found in favour of the MT Højgaard Group, ruling that the Group was not liable for costs regarding the grouted connections on the Robin Rigg offshore project. In May, the opposing party sought permission to appeal the ruling. Subject to the appeal being unsuccessful, s
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