Presentation at SEB Enskilda, Copenhagen, 11. January 2007
The leading residential developer in NorwayLars Nilsen, CEO BWG ASA and Ole Feet, CEO Block Watne AS
AgendaOperation
Opportunities
Key drivers
Company overview
Financials
Market & Market position
// BWG presentation // // 3 //
#1 residential developer in Norway
Constructs and sells multi- and single unit houses under the “Block Watne” brand name
Focuses on standardised and affordable quality housing in the outskirts of cities and pressure areas
No downtown areas or vacation homes
Cost effective high speed construction model
Has built more than 84 000 houses in Norway
600 employees; incl. 400 carpenters
Revenue NOK 1.5 billion/ EBIT margin 14 % (05)
OSE listed March 2006/ Market cap NOK 1.7 billion
Company overview:Block Watne in brief
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Outskirts of the larger cities in south of Norway – the most populated areas
Rich
Low end/Special need
Affordable quality
housing
Highend
Private individuals buying the house/ apartment as their primary home
Company overview:Focus on volume markets
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RestructuringRestructuring
Downscalingand outsourcingDownscalingand outsourcing
Company overview:Building a solid platform for profitable growth
Listing on Oslo Stock ExchangeListing on Oslo Stock Exchange
1998 2006
Further streamliningFurther streamlining
Proven performanceProven performance
Standardisation of processes, construction and material efficiency
Standardisation of processes, construction and material efficiency
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Investors:20 largest shareholders per 1 January 2007
CEO Lars Nilsen holds 50.13 % through Lani Industrier, Lani Development, Lagulise
Total number owned by top 20: 82.40 %
Total number of shares: 45 000 000
19 % of total shareholders are international
Stock value per 1 January 2007: NOK 1 700 million
Shareholder % totalLani Industrier AS 44.91%Lani Development AS 5.00%Pareto Aksje Norge 4.38%Vital Forsikring ASA 3.32%Morgan Stanley & Co (NOM) 3.18%Bank of New York, Br (USA) 2.57%Bank of New York, Br (CYM) 1.97%Pareto Aktiv 1.93%Verdipapirfond Odin Norden 1.91%AG Invest AS 1.91%
0.76%UBS AG, London Br (NOM)
1.02%Nordea Bank Denmark (NOM)
0.87%SEB (NOM)
0.86%Commerzbank AG (NOM)
1.14%Citybank Intl. Plc (NOM)
0.69%JPMorgan Chase Bank (NOM)
0.74%Bank of New York, Br (NOM)
1.70%DnB NOR Norge1.74%Verdipapirfond Odin Norge1.79%GMO Foreign Small Co
% totalShareholder
AgendaOperation
Opportunities
Key drivers
Company overview
FinancialsMarket & Market position
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Financials:EBIT development
Block Watne AS: EBIT MNOK / % margin
0
50
100
150
200
250
1998 1999 2000 2001 2002 2003 2004 20050 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
16 %
18 %
Figures for Block Watne AS (NGAAP)
BWG ASA: EBIT MNOK / % margin
IFRS (2004, 2005 pro forma)
0
50
100
150
200
250
2004 2005 Q3 20060 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
16 %
// BWG presentation // // 9 //
Total % Margin % GrowthRevenue 1 083 MNOK (1.1%) Y/YEBIT 157 MNOK 14.5% 9.1% Y/YEBT 135 MNOK 12.4% 6.1% Y/YOrder backlog 980 MNOK 14.4% Y/YNew orders per 31.12.2006 1 686 MNOK 11.5% Y/Y
Financials:Strong growth in margins
Key figures per 30.09.2006:
Gross margin development:
2003 2004 2005 per Q3-06Gross margin 40.3% 39.9% 40.0% 41.4%
Cash flow +/- earnings
Dividend policy: 50 - 70 % of net earnings
AgendaOperation
Opportunities
Key drivers
Company overview
Financials
Market & Market position
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Source: Prognosesenteret
Market position:A key player in a fragmented Norwegian market
Market share2005 2004 Company 2005 Ownership
1 1 Mesterhus 6.4 % Umbrella organisation2 2 Nordbohus 4.7 % Umbrella organisation3 5 Block Watne 3.9 % BWG OSE-listed 17 March 20064 6 Norgeshus 3.8 % Umbrella organisation5 8 Blink Gruppen 3.4 % Umbrella organisation6 9 Byggholt Gruppen 3.0 % Division of JM AB7 7 Skanska Bolig 2.7 % Division of Skanska AB8 4 Byggmann Gruppen 2.5 % Umbrella organisation9 3 Veidekke Eiendom 2.3 % Division of Veidekke ASA
10 n.a. Øster Hus Gruppen 2.0 % Privately owned
Sum 10 largest 34.7 %
Rank
// BWG presentation // // 12 //
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
P
2006
P
2007
E
2007
E
2008
E
2008
E
Block Watne areasApartmentsMulti unit housesDetached houses
Norwegian residential housing starts 1999 – 2008E
Block Watne’skey market segments
Source: Prognosesenteret
Market position:Stable market combined with large volumes
City centre apartments
AgendaOperation Opportunities
Key drivers
Company overview
Financials
Market & Market position
// BWG presentation // // 14 //
SalesSales
Lean organisation: Identical organisation model for all district offices
21 local district offices, HQ in Oslo Current organisation model
3 Operational Managers3 Controllers3 Operational Managers3 Controllers
21 District offices (550 employees)21 District offices (550 employees)
Headquarters (50 employees)Headquarters
(50 employees)
District managerDistrict
manager
Project managerProject
managerBuilding managerBuilding manager
CarpentersCarpenters
District office organisation
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Acquisition andproject outliningAcquisition andproject outlining
Sale and marketing of projectsSale and marketing of projects ConstructionConstruction
1. Residential project development
4. Construction for professional / corporate clients
2. Property sale with commitment to build a Block Watne house
3. Residential construction for individual customers
Project categories
Operation:Four project categories
Acquisition andsale of propertyAcquisition andsale of property
Sale and marketing of projectsSale and marketing of projects
SaleSale
ConstructionConstruction
ConstructionConstruction
SaleSale ConstructionConstruction
Residential projects 87%Property sale 5%Residential indiv. 6%Prof. Clients 2%
Share of revenues per 30.09.06
// BWG presentation // // 16 //
Operation: Residential projects - the whole value chain
87%
Marketing and salesMarketing and sales
Acquisition of land
Acquisition of land
Project development
Project development ConstructionConstructionProject
ideaProject
idea DeliveryDelivery
Preparing projectPreparing project
// BWG presentation // // 17 //
Acquisition of land
Acquisition of land
Operation:Acquisition of land
Marketing and salesMarketing and sales
Project development
Project development ConstructionConstructionProject
ideaProject
idea DeliveryDelivery
Preparing projectPreparing project
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Projects under dev.
63 %
Acquisition in progress
24 %
Projects ready for sale13 %
Continous land acquisition
Land bank with 10 years horizon
Projects vary up to 250 – 300 units
Stepwise development and construction
Strong local presence
Land and project portfolioTotal capacity of about 12 000
units
Acquisition of land: Land and project portfolio capacity 12 000 units
// BWG presentation // // 19 //
11,2 % 13,30 % 12,60 % 13,40 %
14,4 % 13,80 % 15,10 % 15,90 %
27,6 % 26,60 % 27,50 % 26,60 %
14,3 % 14,50 % 13,40 % 12,10 %
31,80 % 30,90 % 31,90 %32,5 %
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
2003 2004 2005 2006
SubcontractorsDirect labourMaterialsProperty developmentProperties/land
Acquisition of land:Land represents a small part of total costs
Historical figures for Block Watne AS. 2006 is Jan-Sep
Share of costs – based on completed projects
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Operation:Project development
Acquisition of land
Acquisition of land
Marketing and salesMarketing and sales
Project development
Project development ConstructionConstructionProject
ideaProject
idea DeliveryDelivery
Preparing projectPreparing project
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Operation:Stepwise dynamic project development
// BWG presentation // // 22 //
Operation:Construction
Acquisition of land
Acquisition of land
Marketing and salesMarketing and sales
Project development
Project development ConstructionConstructionProject
ideaProject
idea DeliveryDelivery
Preparing projectPreparing project
// BWG presentation // // 23 //
Framing Framing Exterior and roofingExterior and roofing Interior IInterior I Interior IIInterior II
Specialised two-man carpenter teams in each phase
Only wood based production executed by own production staff
Employed carpenters and production staff
Piece-rate / performance based compensation of carpenters
Operation:Highly standardised four phased building process
// BWG presentation // // 24 //
High speed construction:Highly efficient material logistics
Raw material production (doors, windows, wood materials)
Building site
Element production
Storage materials and elements
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High speed construction:One-supplier strategy
Steady production in all geographical areas throughthe year
Building process divided in four phases. Less material onsite at any given time
One-supplier strategy
Highly standardised productsand few, but large suppliers –just in time
Raw material production (doors, windows, wood materials)
Block Watne building site
AgendaOperation
OpportunitiesKey drivers
Company overview
Financials
Market & Market position
// BWG presentation // // 27 //
Organic growth in Norway
Organic growth in Norway
Opportunities inSkandinavia
Opportunities inSkandinavia
Growth potential in other geographical areas
Expand the ”constructionfor individuals” market
Expand after-marketadd ons/services
Opportunities:Growth potential in a fragmented market
Future consolidation in a fragmented market
// BWG presentation // // 28 //
Going forwards:Key drivers for profitable growth
Macroeconomy
Macroeconomy
BNP 2007E: 3.8, 2008E: 3.0Inflation 2007E: 1.3, 2008E: 2.0
Source: Norges Bank
Labourimmigration
Labourimmigration
Net immigration 2006: 23 00052 000 work permits to foreign labours; + 50% from 2005 Source: Statistics Norway
ReplacementsReplacements
Approx. 15 000 units/yearIncreasing needSource: Prognosesenteret
EmploymentEmploymentUnemployment rate:2007E: 3.02008E: 3.3Source: Norges Bank
Interestrates
Interestrates
2007: 3.752008: 4.50
Source: Norges Bank
“Boy meetsgirl”
“Boy meetsgirl”
The “need factor”Stabilizing towards
economy
Appendix
// BWG presentation // // 30 //
Controls the entire value chainCapacity: employed production staffStandardisation: suppliers, logistics, productionProject management: stepwise development, strict cost controlLong term diversified land portfolioFinancial strength, solid marginsLow cap. ex., high dividend capacity Lean organisation, dynamic to changeLong-term relations local sub-contractors
A fragmented market, low market shareFinancial strength secures buying powerAbnormal cost and price inflation in high pressure areasExtend business: further development in “Residential construction for individuals”and add onsBrand recognitionOptimise pricing modelIncreasing demand for one/two family homes
Quick changes in interest rates and unemployment Large changes in costs of building materials and servicesShortage of building materialsShortage of production staff
Decentralised org. model demands constant management focus Human resource vulnerability, several key personsExtreme weather conditionsDependency of sub-contractor capacity
Company overview:SWOT- analysis
Stre
ngth
Wea
knes
sesO
pportunitiesThreats
// BWG presentation // // 31 //
Financials:Financing model per 30.09.2006
Equity 655 30 %
Total 2 217 100 %
766796
Interest bearing debt (gross) * 35 %Other liabilities 35 %
* Interest bearing debtSubordinated loan 95
Gross interest bearing debt 766Cash and cash equivalents (88)Net interest bearing debt 678
508163
Long-term liabilities to financial inst.Other liabilities
Long-term liabilities to financial inst. - instalmentsNo instalments required paid until December 2009
December 2010 420
3940
December 2009June 2010