NCC presents new path forward and preliminary Q3 earnings charged with provisions and revaluations
Following a comprehensive analysis of NCC, the company is presenting a number of measures to improve profitability. The quarter was charged with provisions for claims and warranties, revaluation of development properties and impairment losses totaling SEK 1,565 M. Operating profit for the third quarter is estimated to amount to approximately negative SEK 1,108 M.
“Today NCC presents a new path forward. We are now lowering the risk level associated with the Group’s project portfolio and balance sheet, discontinuing certain unprofitable operations and focusing on NCC’s healthy core operations that can be found in all business areas and countries. With a new Executive Management Team in place, a consistent approach to risk management in projects and extensive measures to improve profitability to turnaround non-performing operations, we are creating a platform on which to build a strong future for NCC,” says Tomas Carlsson, CEO of NCC.
NCC has initiated extensive measures in all business areas to strengthen profitability. These measures include:
- Processes for the divestment and closure of unprofitable operations, such as divestment of the Road Services division in the Infrastructure business area and a number of smaller operations in the Industry business area and certain development properties in the Property Development business area.
- Turnaround plans for the civil engineering operations in Norway and the Building Nordics business area
- Strengthened organization with new recruitments to key positions, training initiatives and the development of control and follow-up processes to achieve a general improvement
- Enhanced process for risk assessment of projects
Earnings for Q3 were charged with:
- Revaluation in ongoing claims and warranties of approximately SEK 693 M
- Revaluation of certain development properties of SEK 365 M due to decisions to discontinue projects
- Impairment losses in the project portfolio as a result of a revaluation of approximately SEK 225 M
- Restructuring costs for discontinuation and restructuring of operations SEK 75 M
- Other revaluation of SEK 207 M
The measures that have now been decided will probably entail further restructuring costs of approximately SEK 200 M until the end of 2019.
The measures are expected to have a limited effect on employment within the Group. Certain local changes may be made. The company still has a recruitment need.
The assessment is that the market conditions remain favorable.
The Board of Directors has decided to limit the number of objectives for the Group in order to give greater clarity and focus on profitability ahead of volume. The approved objectives and the dividend policy remain unchanged and are as follows:
- Return on equity ≥20%
- Operating margin ≥4%
- Net indebtedness < 2.5 times EBITDA
- Dividend policy: The Group’s dividend policy is to distribute at least 40% of after-tax profit for the year.
The financial objectives for the business areas are unchanged. NCC also has a number of non-financial objectives that the company will continue to work toward as part of its efforts to generate long-term profitability.
“The demerger of NCC and Bonava in 2016 highlighted the need for increasing NCC’s profitability. The Board decided in October 2017 to replace NCC’s CEO. The reason was that the performance of the operations was too weak. The Board recruited an external CEO with a proven record of taking strong action and 20 years of experience in the construction industry – Tomas Carlsson – who was asked by the Board to perform a comprehensive review and to develop a robust action program, aiming at building long-term profitability. The result of this review is presented today and has the full support of the Board. The Board believes that we are now laying the foundation for future profitability at NCC,” says Tomas Billing, Chairman of NCC.
The preliminary earnings for NCC and for each business area are presented in the appendix.
The revaluations in addition to the current operations and the preliminary operating result were presented in a press release from NCC at 9:50 p.m. on October 15 in accordance with the EU Market Abuse Regulation (MAR).
A Capital Markets Meeting for representatives of the financial market and media will be held at 9:00 a.m. CET at the Scandic Anglais Hotel in Stockholm, Sweden. To follow the Capital Markets Meeting via webcast, visit ncc.group/cmd UK: +442030089806, SE: +46856619353, US: +18558315945.
For further information, please contact:
Anna Trane, Head of Corporate Media Relations, NCC, +46(0)708 84 74 69, firstname.lastname@example.org
Johan Bergman, Head of Investor Relations, NCC, +46(0)70 354 80 35, email@example.com
NCC’s media line: +46 8 585 519 00, E-mail: firstname.lastname@example.org, NCC’s Mediabank
This is the type of information that NCC is obligated to disclose pursuant to the EU Market Abuse Regulation. The information was issued for publication through the agency of the contact person set out above on October 16, 2018 at 7:10 a.m. CET.
About NCC. Our vision is to renew our industry and provide superior sustainable solutions.
NCC is one of the leading companies in construction, infrastructure and property development in the Nordic region, with sales of SEK 55 billion and 17,800 employees in 2017. The NCC share is listed on Nasdaq Stockholm.