Continuing good order intake, but postponed projects in the third quarter still affecting financial results.
In the first three quarters of the year, the MT Højgaard Group was awarded new orders totalling DKK 5.5 billion, in line with the same period last year. The order intake does not include a joint venture collaboration entered into in the third quarter with Skanska for a Swedish bridge project in which MT Højgaard’s share amounts to DKK 0.5 billion, due to JV status. The order intake is reflected in an increased order portfolio, which stood at DKK 8.3 billion at the end of the quarter, up DKK 0.8 billion on the start of the year. In addition to the order book, the Group has conditional contracts worth DKK 2.2 billion.
Financial results affected by continuing delays to project start-ups
Third-quarter revenue was DKK 1.6 billion and YTD revenue DKK 4.7 billion, in line with last year, despite postponed project start-ups and greater activity in Greenland Contractors in 2015. The operating result for the quarter was a loss of DKK 4 million, so that the Group showed a total YTD loss of DKK 23 million.
The President and CEO Torben Biilmann states the following regarding the development:
- It is unfortunate that we have seen a negative development on a few standalone projects, but they have been addressed and corrective actions have been made.
- If the postponed project start-ups and the fact that there was greater activity in Greenland Contractors in 2015 are not taken into account, there was underlying organic growth during the period, driven mainly by the Group’s construction activities accompanied by good order intake and a healthy order book, all of which looks promising for the coming periods.
- Part of the reason for the delayed start-ups is that our customers now want to become involved in closer collaboration on these projects early on in the process and make use of our digital tools in order to create an accurate picture of the project before the start of construction. This process takes longer in some cases, because it also deviates from the more traditional way of tendering for projects. For example, we now make use of VDC and BIM tools already in the tendering phase, providing greater financial clarity for all parties from the moment a new project is evaluated and agreed.
Outlook for operating profit/(loss) before special items for 2016 lowered
Based on the order book at the end of the period, revenue for the fourth quarter of 2016 is still expected to be significantly higher than in the preceding quarters, particularly driven by planned handovers in the fourth quarter of construction projects developed in-house. The full-year revenue outlook of around DKK 6.8 billion is consequently reaffirmed. The contribution from high-margin revenue will however, be replaced in part by other revenue with a lower margin, thus affecting earnings.
Management has lowered the outlook for the full-year operating result before special items to around DKK 75 million compared with the previous outlook of around DKK 225 million. The lower outlook is based on year-to-date development, an updated estimate from construction projects developed in-house and postponed project development activities that are awaiting official approval. The Group sees good opportunities for progress in the coming years, so that the strategic framework target of an operating margin before special items of around 5% can be achieved again.
By their nature, projections of future financial performance involve risks and uncertainties that may cause actual performance to differ materially from that contained in the forward-looking statements.
The interim financial report is available here.