presentation at seb enskilda, copenhagen, 11. january 2007...

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


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


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


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


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 %


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



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


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



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


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


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


Acquisition of land

Acquisition of land

Operation:Acquisition of land


Project development


ideaProject




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


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


Operation:Project development

Acquisition of land

Acquisition of land


Project development


ideaProject




Operation:Stepwise dynamic project development


Operation:Construction

Acquisition of land

Acquisition of land


Project development


ideaProject




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


High speed construction:Highly efficient material logistics

Raw material production (doors, windows, wood materials)

Building site

Element production

Storage materials and elements


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



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


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


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


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

presentation at seb enskilda, copenhagen, 11. january 2007...

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