Interim report - ÅF · 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

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


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 -


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


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 -


5.0 - 3.3 -


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)


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 -


10.0 - 5.9 -


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


~2,000


~2,500


~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


Energy and Power



Process Industry

Telecom and ICT

Defence


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


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


Energy and Power



Process Industry

Telecom and ICT

Defence


Other


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

Documents

Interim report - ÅF · 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