2014 was characterised by the sharp fall in the oil price, record low interest rates and the weakness of the Norwegian krone. This naturally had a sizeable impact on Ferd, and the group generated a return of NOK 600 million or 2.6% in 2014, which is significantly lower than we achieved in the two years prior to 2014. Most of Ferd’s business areas and portfolio companies, however, achieved good results, but the overall level of profit was dragged down by Aibel and Elopak.

In 2014 Aibel experienced a drop of 25% in the volume of maintenance and modification contracts compared to 2013, and the company’s results were markedly lower because of this. The way in which Aibel’s management and employees have addressed the difficult market situation has been impressive to see. Robust restructuring measures and a new implementation model have strengthened Aibel’s productivity and competitiveness, and have been welcomed by its customers. On 24 February 2015 Statoil announced that Aibel, which had been competing with a range of other suppliers, had won the contract for the engineering work, procurement and construction of the deck for the drilling platform on the Johan Sverdrup field. It is hard to imagine a better endorsement of Aibel’s implementation model and competitiveness. Ferd supported Aibel with all that we were able to contribute. It is also pleasing to be able to report that the collaboration with our partner Ratos worked very well during such a challenging time.

Elopak made good progress with its growth projects last year. The proprietary-developed aseptic filling machine is now being tested by customers for milk filling, the order volumes placed by leading customers for the roll-fed material for packaging aseptic products are increasing strongly, and the expansion into North America is progressing as planned. However, Elopak reported lower profits in 2014 than in 2013 as a consequence of high development costs, strong competition in Europe and a fall in the market for fresh and aseptic juice in Europe.

Because of the lower results achieved by Aibel and Elopak, we have assessed the value of Ferd’s investment in these companies to be lower at the end of 2014 than at the end of 2013. The other companies in Ferd Capital’s portfolio all made good progress, with increased operating revenue.

Ferd Real Estate reported a return of 15% for 2014. The successful completion of large development projects, sales of apartments that were well received in the market, and a generally strong real estate market all contributed to this. Ferd Invest’s mandate is Nordic in scope, and in 2014 this business area generated a return that was slightly below its benchmark index. Including currency gains, it reported a return of 15% and so benefitted from the strength of the Swedish and Danish stock markets. Ferd Hedge Fund concentrated its portfolio throughout 2014 into fewer funds. This slightly increased the level of risk, but also increased the expected return. Ferd Hedge Fund reported a return that was higher than its benchmark index. Ferd Special Investments is in the process of refocusing its investment strategy. It reported a return of 10% for 2014. Ferd Social Entrepreneurs entered into agreements with three new entrepreneurs in 2014. The portfolio of social entrepreneurs made consistently good progress and sizeable social benefits were created.

Ferd’s vision is to create enduring value and to leave clear footprints. We obviously spend a lot of time thinking about how we will actually manage to realise the vision to create enduring value. We have to assume that interest rates will remain unusually low for a long time both in Norway and internationally. We are finding that there is a lot of competition for good investment opportunities due to the high level of equity capital in the markets, and this is driving returns and risk premiums down. Loan capital is also readily available on attractive terms, at least for strong borrowers. We have to be able to generate good risk-adjusted returns for our owners in this type of market too.

We are finding that there is a lot of competition for good investment opportunities due to the high level of equity capital in the markets, and this is driving returns and risk premiums down.

In order to do so, we have to be conscious of Ferd’s advantages and how we can best use them to generate returns. The fact that Ferd is owned by a family that has a long-term perspective on the company’s activities gives it significant strengths. We have a strong capital base, we operate in a predictable framework, and we have the flexibility to invest only when we think there are good value-creating investment opportunities. We need to have skilled employees who are aware of the value of Ferd’s advantages if we are to make best use of them. At the same time, Ferd has to be financially strong with the solvency and liquidity required for us not to be forced into making value-destroying changes if the market goes against us. On the contrary, we need to be able to use the opportunities that weak markets create for a business such as Ferd.

The fact that Ferd is owned by a family that has a long-term perspective on the company’s activities gives it significant strengths.

Our analysis shows that Ferd has created the most value by finding new investment areas, changing its investment strategies in accordance with market developments and being an active owner. 2014 was a year in which several of our portfolio companies had to implement profound restructuring measures, whether because of changes in the market as in the case of Aibel or on the basis of internal situations as in the case of Mestergruppen. The portfolio companies’ management teams are responsible for carrying out restructurings, but Ferd as owner has a responsibility to contribute and to facilitate the conditions required for good results. We are also responsible as an active owner for contributing ideas for organic and structural growth initiatives. We succeeded in 2014 in creating value by being an active owner.

Our analysis shows that Ferd has created the most value by finding new investment areas, changing its investment strategies in accordance with market developments and being an active owner.

In the autumn of 2014, Ferd invested approximately NOK 800 million in a 10% ownership interest in Petroleum Geo-Services, a stock exchange listed seismic company. This investment was made after a thorough analysis both of the sector and the company’s competitive position on the basis of publically available information. The stock exchange offers a large range of opportunities for Ferd to use its experience as an investor in both listed and non-listed companies. We also think that by being a constructive shareholder committed to good corporate governance, Ferd will be viewed positively by other shareholders. In addition, we adopted a new investment mandate to invest in global funds that target rates of return that are higher than the funds in which Ferd Hedge Fund invests. Two of our business areas will have new people in charge in 2015. This provides a good opportunity to consider whether any strategic adjustments are required in order to ensure the best possible use is made of Ferd’s strengths.

With regard to 2015, the only promise I can make is that we will have both the ability and the desire to make use of the opportunities we have, but we will be patient and will only invest where we see attractive potential for value creation.

With regard to 2015, the only promise I can make is that we will have both the ability and the desire to make use of the opportunities we have, but we will be patient and will only invest where we see attractive potential for value creation.