Interim report - ÅF · 2016 numbers have not been adjusted with regard to changes in organisation...
Transcript of Interim report - ÅF · 2016 numbers have not been adjusted with regard to changes in organisation...
Interim report
JONAS GUSTAVSSON, CEOSTEFAN JOHANSSON, CFO
FEBRUARY 7, 2019
JANUARY – DECEMBER 2018
Agenda
— Business overview
— Market and highlights
— Financials
— Divisional performance
— Strategy execution
— Platform acquisition
— Summary
Net Sales: 3 957 (3 500) SEK M
EBITA*: 357 (344) SEK M
EBITA-margin*: 9.0 (9.8) %
Net Sales: 13 975 (12 658) SEK M
EBITA*: 1 268 (1 117) SEK M
EBITA-margin*: 9.1 (8.8) %
JAN – DEC, 2018
Strong growth and stable profit
+13%
OCT- DEC, 2018
+14%
*excluding items affecting comparability
+4%
+10%
— Strong growth
— Stable profit and margin
— Overall continued good demand
— Strategy implementation according to plan
— Focus on finalizing the acquisition of Pöyry
We’re an engineering and design company
Infrastructure 41%
Industry 31%
Digital Solutions 17%
Energy 11%
Divisions
Numbers represent 2018
11,000Employees
14 BSEKNet Sales 2018
100Activity in more than 100 countries
90%Net Sales in the Nordic Region
Moving businesses and society forward
Infrastructure 20%
Real Estate 19%
Energy and Power 14%
Automotive & Vehicle 13%
Life Science, Food & Pharma 8%
Manufacturing Industry 7%
Process Industry 6%
Telecom and ICT 6%
Defence 4%
Other 3%
IndustrySegments
30%Public Sector
70%Private Sector
Numbers represent 2018
- AB Volvo
- AstraZeneca
- Avinor
- Ericsson
- FMV
- GE
- Scania
- Trafikverket
- Vattenfall
- Volvo Cars
Strong customer base
ÅF’s ten largest customers 2018
Our solutions respond to global trends
SMART CITIES AND INFRASTRUCTURE
FUTUREMOBILITY
INDUSTRIAL DIGITALIZATION
CHANGING ENERGYMARKETS
Market development Q4
— The general market trend and demand remained good
— The demand in the industrial sector for digitalization,
electrification and automation remains strong.
— The need for investments in infrastructure in the Nordics
and Switzerland continues to drive demand in both
commercial and public buildings and road & rail, as well as
in niche areas such as architecture and design.
— The energy market is in transformation with stable
demand in the Nordic region. Also stable demand on the
global energy market, however our international energy
business is affected by the changes we are currently
making.
— The market for digitalization services continues to be good
in all sectors
HIGHLIGHTS
Projects Q4— Swedavia renewed its trust in ÅF for the continued expansion of Arlanda Airport, with a
contract value of approximately SEK 55 million.
— New order within Buildings concerning Dronning Ingrids Hage in Oslo, a health care facility,
with an estimated value of approximately SEK 15 million.
— ÅF delivered both initial concept studies and series-ready designs for various vehicle systems,
such as a new concept for a battery system, to automotive clients in Sweden, Brazil, China
and the US.
— ÅF has received several orders for automated production lines to Volvo Cars in both
Olofström and Torslanda. Also extension of the flexible research and development project
where ÅF supports Volvo Cars
— Within energy ÅF was awarded a hydropower framework agreement, several wind power
assignments in the Nordic markets and multiple extensions of nuclear power assignments in
its core markets.
— Within transmission grid stability, ÅF was awarded an assignment by a Swedish operator
regarding cloud-based cable analysis to predict errors in the grid.
— Several orders in hydropower, including contract engineering services for a unit in Laos,
consulting services for a hydropower plant in Bosnia-Herzegovina and a thermal power plant
in Serbia.
— Continued orders for digital services in the defence sector in existing framework agreements
with the Swedish Defence Materiel Administration (FMV).
— Several orders within telecommunication from leading operators in Sweden.
Acquisitions 2018Q1, 2018 ~ 150 SEK M
Gottlieb Paludan Architects
Arcad Architects
Q2, 2018 ~ 205 SEK M
Facilia
Effekt
Samtanke
Konsultbolag1
Mometo
SEGMENT
Architecture & Design
Architecture & Design
Nuclear decommissioning
Buildings
Digital Solutions
Digital Solutions
Digital Solutions
BASED IN
Q3, 2018 ~ 85 SEK M
LBP
Profil-Bau Industrial
Buildings
Industrial engineering
Q4, 2018 ~ 150 SEK M
P.A.P
IFEC Ingegneria
Energy
Energy/Infrastructure
Net sales: 3 957 (3 500) SEK M
Total growth: 13.0 (11.6)%
Organic growth: 8.2 (2.8)%
Adjusted/underlying organic growth: 8.2 (5.0)%
- Overall good demand
- Good growth in the Infrastructure Division and Digital Solutions Division and improved growth rate in Industry Division
- Focus on realising the planned acquisition of Pöyry
Growth in Q4
Q4, 2018
COMMENTS
NET SALES, SEK M
excl. items affecting comparability
EBITA increased to 357 SEK M (344)
EBITA margin 9.0 (9.8)%
- Stable profitability
- Energy division influenced the earnings negatively
- Items affecting comparability totalled 25 SEK M
and concern transaction costs for the ongoing
acquisition of Pöyry
Improved profitability
Q4, 2018 EBITA, SEK M
excl. items affecting comparability
COMMENTS
SEK M Comments
Net Debt as of Dec 31, 2017 2 631
Cash flow from operating activities -874
Capex 121
Acquisitions and Earn Outs 374 11 acquisitions
Dividend 387 5,00 SEK/share
Buyback of shares 177
Purchase of shares in Pöyry PLC 657
Other -19
Net Debt as of Dec 31, 2018 3 455
Net Debt/EBITDA rolling 12 months 2.5
Cash flow and Net debtCASH FLOW FROM OPERATIONS GENERATED SEK M 358 (337) IN Q4 AND 874 (624) YTD 2018
Q4, 2018
Infrastructure division— Good growth and stable profitability
— The level of investment in road & rail remains strong, and the
buildings segment with focus on sustainable solutions is developing
well
— Society has a great need for modern, new buildings in the
healthcare and education sectors, and also to modernise existing
buildings
— Order from Swedavia for continued expansion of Arlanda Airport
and buildings project in Oslo for a health care facility
Oct – Dec 2018
Oct – Dec 2017
Jan – Dec 2018
Jan – Dec 2017
Net sales, SEK M 1 665 1 454 5 935 5 110
EBITA, SEK M 184 168 638 515
EBITA % 11.1 11.6 10.8 10.1
Average FTEs 4 605 4 120 4 426 3 969
Total growth, % 14.5 - 16.1 -
of which organic growth, %
10.3 - 11.8 -
of which adjusted/ underlying organicgrowth, %
9.9 - 10.6 -
Comparing numbers for growth 2017 are not available due to the fact that 2016 numbers have not been adjusted with regard to changes in organisation
Q4 2018
Industry division— Stable profit and slightly higher growth than in the previous quarters of
the year
— Demand from industry for the division’s projects and services remains
high
— Concept studies and series-ready designs for vehicle systems to
automotive clients in Sweden, Brazil, China and the US. Several orders
for automated production lines to Volvo Cars in both Olofström and
Torslanda
Comparing numbers for growth 2017 are not available due to the fact that 2016 numbers have not been adjusted with regard to changes in organisation
Oct – Dec 2018
Oct – Dec 2017
Jan – Dec 2018
Jan – Dec 2017
Net sales, SEK M 1 271 1 194 4 503 4 371
EBITA, SEK M 112 120 383 387
EBITA % 8.8 10.1 8.5 8.9
Average FTEs 3 241 3 159 3 146 3 097
Total growth, % 6.5 - 3.0 -
of which organic growth, %
4.8 - 1.4 -
of which adjusted/underlying organicgrowth, %
5.9 - 1.4 -
Q4 2018
Energy division— A stable profit and growth on the Nordic market, but the international
operations remains challenging and are affected by the ongoing
restructuring in the division.
— The energy market is in transformation with stable demand in the Nordic
region as well as the global energy market
— Hydropower framework agreement, several wind power assignments in the
Nordics and multiple extensions of nuclear power assignments in its core
markets. Also new orders in Laos and Eastern Europe
— Acquisition of P.A.P – energy specialist based in Denmark and IFEC
Ingegneria in Switzerland, experts in environmental consulting and energy
efficiency
Comparing numbers for growth 2017 are not available due to the fact that 2016 numbers have not been adjusted with regard to changes in organisation
Oct – Dec 2018
Oct – Dec 2017
Jan – Dec 2018
Jan – Dec 2017
Net sales, SEK M 438 387 1 552 1 467
EBITA, SEK M 13 30 69 88
EBITA % 3.0 7.7 4.4 6.0
Average FTEs 1 045 986 986 1 015
Total growth, % 13.3 - 5.8 -
of which organic growth, %
5.0 - 3.3 -
of which adjusted/underlying organicgrowth, %
1.7 - 1.0 -
Q4 2018
Digital Solutions division— Strong growth and good profitability
— The market for digitalization services continues to be good in all sectors
— ÅF entered a partnership contract with Ericsson, combining our deep
knowledge of industry and digitalisation with Ericsson’s telecommunications
expertise.
— Continued orders in existing framework agreements with the Swedish
Defence Materiel Administration (FMV)
Comparing numbers for growth 2017 are not available due to the fact that 2016 numbers have not been adjusted with regard to changes in organisation
Oct – Dec 2018
Oct – Dec 2017
Jan – Dec 2018
Jan – Dec 2017
Net sales, SEK M 679 565 2 360 2 046
EBITA, SEK M 72 58 236 199
EBITA % 10.6 10.2 10.0 9.7
Average FTEs 1 391 1 162 1 315 1 112
Total growth, % 20.1 - 15.3 -
of which organic growth, %
10.0 - 5.9 -
of which adjusted/underlying organicgrowth, %
11.2 - 6.2 -
Development divisions, Q4
Division Infrastructure Industry Energy Digital Solutions
Share of net sales 41% 31% 11% 17%
Total growth 14.5% 6.5% 13.3% 20.1%
of which organicgrowth
10.3% 4.8% 5.0% 10.0%
of which adjusted/underlying organic growth
9.9% 5.9% 1.7% 11.2%
EBITA margin 11.1% 8.8% 3.0% 10.6%
Strengthen our positionWHO WE ARE
OUR VISION
OUR VALUES OUR MISSION
Providing leading solutionsfor generations to come
ÅF – Making Future
WE ARE
BraveDevotedTeam Players
We create sustainable engineering and design solutions
HOW WE WIN
GROWTH DRIVERS OUR STRATEGY
Smart infrastructureand cities
Future mobility
Industrial digitalization
Changingenergymarkets
GROWTH
International expansion into leading positions
VALUE CREATION
Business model shift to deliver higher value
OPERATIONS
Operational excellence
PEOPLE
Best in class people practices
Attractive workplace
1. Ikea
2. Volvo Cars
3. Google
4. ÅF
We are one of Sweden’s most popular employers among young professionals and scientific researchers. Our ambition is to attract, develop and retain the best talents in the world, wherever we meet them.
YOUNG PROFESSIONALS SCIENTIFIC RESEARCHERS
1. ÅF
— ABB
— Astra Zeneca
Strategy execution
International expansion into leading positions
GROWTH
Geographical expansion in core countries
International growth in selected niches
Expansion in international investment projects
Business model shift to deliver higher value
VALUE CREATION
Increase share of projects and solutions
Cross ÅF solutions to meet global growth drivers
Invest in and develop conceptsand selected products
Optimisation of professional services
Operationalexcellence
OPERATIONS
Simplified and focused organisation
Adjusted financial steering
Optimised pricing and sourcing
Ethical commitment
Best in classpeople practices
PEOPLE
Leadership development
People engagement and development
Employer branding
Recruitment and onboarding
Diversity and inclusion
Joining forces with Pöyry
Why platform acquisition?
— Market consolidation
— Strengthened structure for international
growth in selected niches
— Size and scale important to support
clients with their increasingly challenging
projects
— Increasing opportunities for employees
in order to attract the best
— ÅF ready to take the next step with
ambitions to be No. 1 – Aiming for leading
position
Expected clearance from
competition authorities and offer closing
Transaction summary
• Can we talk about one transaction in three steps? W&C/HS to review
• December 10 ÅF announced a public tender offer for all outstanding
shares in Pöyry. Offer price is EUR 10.20 per share in cash, valuing Pöyry
at EUR 611m1
• The transaction is estimated to generate annual cost synergies of
approximately SEK 180m
• The cash tender offer will initially be financed by 100% debt. Thereafter,
equity of SEK 4bn is expected to be issued in a directed issue and a rights
issue
• The combined company’s President and CEO will be Jonas Gustavsson
and the head office will be located in Stockholm. The combined company
is intended to operate under the united brand ÅF Pöyry
— Following the tender offer, ÅF’s shares continue to be listed on
Nasdaq Stockholm
• Completion of the transaction is subject to, among other things, approval
from relevant authorities and 90% acceptance from the shareholders in
Pöyry
Offer acceptance period start
ÅF EGM Directed issue to certain major
shareholders of Pöyry
Rights issue to ÅF’s shareholders
December 20 2018
January 16 2019
Q1 2019
H1 2019
Q1 2019
Preliminary transaction timeline
1) Based on 59.9m outstanding shares
Offer period expires
February 15 2019
Pöyry – ready for a new journey
• Turnaround and re-positioning materialized - cost reductions and efficiency gains
• Organic sales growth 2018 Jan-Sep 8%
• Increase in order stock with solid margins
• Strong cash generation and positive outlook
Milestones
20182018 2016-2017
• Martin à Porta appointed CEO
• Strategic plan set out moving towards an ‘intrapreneurial’ culture, empowerment, client centric focus and improved efficiency
• High transparency with state of art ERP system
• Steady reduction of loss making units/ increase of “champions”
2013-2015 2010-2012
• Exit of Infra-business in Eastern Europe as well as reduction of exposure to international Infra-markets
• Re-establish ways of working, initiation of ERP-project
• Intro of consistent risk & project management guidelines
• Challenging market environment with transformation in pulp and paper industry
• Difficult years due to several projects originating from former Urban business Group
Financial development 2010-2018
Sales and Adj. EBIT margin1
2010-2018 Sep LTMMEUR
682
796 775
651
571 575530 522
553
0,9%2,5%
-2,4%
2,1%
-0,8%
1,6% 1,1%
5,0%7,2%
2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM
Pöyry was established in 1958 by Jaakko Pöyryand is known for being one of the world’s biggest independent forest industry consulting and engineering companies.
History
1) Adjusted for non-recurring items (mainly related to gains from dispute settlements and arbitrations). Please see Appendix for further details on the non-recurring items
“Being close to customers, employing talented people and executing projects perfectly has been our formula for success”
– Dr. Jaakko Pöyry, Founder, 1924-2006
Committed cost synergies of >180 MSEK and substantial revenue synergies
Main part of cost synergies executed 2019, with some tail into 2020.
• System optimization - IT/IS
• Optimization of administration functions and de-listing of Pöyry
• Consolidation of large country structure (back-end, office…)
• Footprint consolidation (global small offices)
• Operational synergies (MGM-delayering and Sales force synergies)
• Facility footprint optimization
• Win of projects based on competence, size and footprint – all divisions
• Cross-sales, Finland-Sweden - all divisions and capabilities
• Focused growth in Forrest, Mining, Petrochemicals & Bio economy – size and scale
• Growth of infrastructure business in Finland – maximize leverage from strong Swedish platform and competencies
• Win of infrastructure projects Switzerland and leverage Europe-business
• Digitalization projects and service in Finland and across all divisions
COST SYNERGIES REVENUE SYNERGIES
Execution abilities for future success✓ Strong combined management
team is planned to consist of individuals from both ÅF and Pöyry
✓ Increased opportunities for competence development and international careers for our employees
✓ Strengthening of the shareholder base with new major owners with a long-term industrial perspective
✓ Plan for new organizational structure exists
Forming a leading European engineering, design and consultancy company
Cultural fit✓ Joint Nordic industrial heritage
and culture
✓ High-performance organizations with strong entrepreneurial spirit
Financial profile✓ Significant synergy potential
✓ Compelling financial profile
Strategic fit ✓ By joining forces, ÅF and Pöyry
intend to create a robust platform driving international growth
✓ Strengthened offering in current business areas and deepened knowledge in complementary areas implying a stronger joint customer offering
✓ Capacity and capabilities to take on larger and more complex projects
Industrial logic✓ Creates strong and sizable
platform – necessary in a consolidating industry
ÅF Pöyry will be a leading Nordic based engineering, design and consultancy company
Source: Annual reports1) Translated into SEK using average 2017 EUR/SEK exchange rate of 9.63262) Translated into SEK using average 2017 DKK/SEK exchange rate of 1.29493) Translated into SEK using average 2017 NOK/SEK exchange rate of 1.0330
Top 5 Nordic based consulting and engineering companies by net sales FY2017 (SEKm)
17,68916,887
13,908
7,966
4,777
12
32
Management Consulting
Process Industries
Building on the strengths of both organizations
Malin Frenning
Infrastructure
Nicholas Oksanen
Proposed divisions in ÅF Pöyry
Energy
Richard Pinnock
Industrial and Digital Solutions
Approx. estimated net sales Sep 2018
LTM2,3
Approx. FTEs Jan-Sep 20184
~SEK 7,300m(~37% of sales)
~5,700
~SEK 2,900m(~15% of sales)
~2,000
~SEK 3,000m(~15% of sales)
~2,500
~SEK 5,900m(~30% of sales)
~3,900
~SEK 700m(~4% of sales)
~400
The integration process has not commenced, it is conditional upon the completion of the offer
1) ÅF estimate of the combined company. The aggregate of estimated net sales per division has not been adjusted for group-wide eliminations and unallocated items (i.e. the aggregate is somewhat higher than the estimated total net sales of the combined company of SEK 19.2bn
2) Financials in EUR translated into SEK using EUR/SEK exchange rate as of September 30, 2018: 10.3090 (from ECB)3) Average FTE employees January 1, 2018 to September 30, 2018
Robert Larsson Martin à Porta
Proposed divisions
and division head
Nordic base with strengthened international presence
NordicsÅF: ~8,800Pöyry: ~1,930
Other EuropeÅF: ~860Pöyry: ~1,565
South AmericaÅF: ~70Pöyry: ~380
North AmericaÅF: 0Pöyry: ~160
AsiaÅF: ~120Pöyry: ~595
OtherÅF: ~15Pöyry: ~1
Number of FTEs1
ÅF presence
Pöyry presence
ÅF and Pöyry presence
Pöyry
Sale
s s
plit
2017
1) FTE employees at the end of 2017 for Pöyry and employees at the end of September 2018 for ÅF2) ÅF’s sales in the Nordics includes some sales in the Baltics
75%
9%
7%
9%Sweden
Norway
Switzerland
Othercountries
37%
35%
15%
4%8%
1%Nordics
Other Europe
Asia
North America
South America
Other
ÅF
75%
7%
10%
4% 4%Nordics
Switzerland
Other Europe
Asia
Other
Combined
2
ÅF PÖYRY will have a broad and balanced portfolio
19%
17%
14%13%
9%
7%
6%
4%
3%
8%Infrastructure
Real Estate
Automotive & Vehicle
Energy and Power
Manufacturing Industry
Life Science, Food & Pharma
Process Industry
Telecom and ICT
Defence
Other
21%
13%
10%
17%
6%
5%
14%
3%2%
3%6% Infrastructure
Real Estate
Automotive & Vehicle
Energy and Power
Manufacturing Industry
Life Science, Food & Pharma
Process Industry
Telecom and ICT
Defence
Management Consulting
Other
ÅFNet sales
Sep 2018 LTM
ÅF PöyryNet sales
Sep 2018 LTM1,2
1) ÅF estimate of the combined company2) EUR/SEK: 10.3090 (ECB September 30, 2018)
Strengthened Nordic base and international footprint
9,900Average FTEs
13.5 BSEKNet Sales
90%Net Sales in the Nordics
9%Net Sales in Europe outside the Nordics
33Country presence
ÅFSep 2018 LTM
ÅF PöyrySep 2018 LTM1,2
~14,500
~19.2 BSEK
~75%Ssgg
~18%
~50
1) ÅF estimate of the combined company2) EUR/SEK: 10.3090 (ECB September 30, 2018)
The combined company ÅF PÖYRY
75%Net Sales in the Nordic Region
18%Net Sales in Europe outside Nordics
50Country presence
16%Fixed price projects
50%Project delivery
34%Service delivery
21%
13%
10%
17%
6%
5%
14%
3%2%
3%6% Infrastructure
Real Estate
Automotive & Vehicle
Energy and Power
Manufacturing Industry
Life Science, Food & Pharma
Process Industry
Telecom and ICT
Defence
Management Consulting
Other
1) ÅF estimate of the combined company2) EUR/SEK: 10.3090 (ECB September 30, 2018)
ÅF PöyryNet sales
Sep 2018 LTM1,2
ÅF PöyrySep 2018 LTM1,2
Summary
Net Sales: 3 957 (3 500) SEK M
EBITA*: 357 (344) SEK M
EBITA-margin*: 9.0 (9.8)%
Net Sales: 13 975 (12 658) SEK M
EBITA*: 1 268 (1 117) SEK M
EBITA-margin*: 9.1 (8.8)%
OCT-DEC, 2018
JAN–DEC, 2018— Strong growth
— Stable profit and margin
— Overall continued good demand
— Strategy implementation according to plan
— Focus on finalizing the acquisition of Pöyry*excluding items affecting comparability