Review of 2010 – USD version - Skanska

Financial review 2010
Skanska’s operations delivered good earnings during 2010, but sales in
Orderingång och orderstock i byggverksamheten
both US dollars (USD) and local currencies decreased compared to the
Mdr kr
previous year. The margins in 175
several Construction operations reached
record levels, while large positive cash flows were generated.
150
In Residential Development operations, the pace of homes started
and sold increased. During the 125year, Skanska started 4,113 new homes,
began 14 new commercial property development projects and reached
100
financial close on three new public-private partnership (PPP) projects,
among them New Karolinska 75 Solna. This represented a total investment
commitment of about USD 2.1 billion, which will also generate a con-
50
struction volume of about USD 3.5 billion for Skanska’s Construction
operations.
25
During the final days of 2010, Skanska signed a sales agreement
0
related to the concession for its stake Kv 4 Kv in 1 Kv the 2 Kv Autopista 3 Kv 4 Kv 1 Kv Central 2 Kv 3 Kv 4highway in
–08 –09 –09 –09 –09 –10 –10 –10 –10
Chile. The transaction is expected to be completed no later than during
the third quarter of 2011.
Orderstock
Orderingång, rullande 12 mån
•
Construction
Intäkter, rullande 12 mån
The market for building construction • Orderingång
gradually
per kvartal
improved. The Nordic
markets in particular, especially Sweden, showed a stable trend while
the Czech market was weaker. In the United States, the demand within
certain building construction segments such as healthcare and computer
centers was relatively good. Civil construction markets continued to
show a stable trend in most of the Group’s markets. The number of
bidders is still large, however, which means tight bidding margins.
This is especially clear in the U.S. market.
In the United Kingdom and the Czech Republic, the market was
affected by public sector austerity programs, which results in reduced
public construction investments in these markets. The Polish market is
stable but the competition is fierce.
Residential Development
The housing market performed well in all of Skanska’s Nordic markets,
with good demand and a stable price trend. In the Czech Republic the
market slowly strengthened.
Commercial Property Development
Great interest and increasing activity by property investors are resulting
in higher transaction volume, with falling yield requirements. Vacancy
rates are stable in the office markets in the Nordic and Central European
cities where Skanska performs commercial property development. In the
United States there is good potential, because many market players lack
financial resources, to develop new office projects.
Infrastructure Development
Due to fiscal tightening in the British public sector, a general cutback
in public investments is occurring in the U.K. These cutbacks will also
affect new PPP projects, but to what extent remains uncertain.
In other European markets, the supply of projects is more limited,
although interest in PPP solutions has strengthened. As the financing
market becomes more stable, the conditions for new PPP projects
have also improved. There is potential for new projects in the U.S and
Latin America, but the lead times for these are difficult to predict.
Order bookings and backlog
Order bookings and backlog in construction
USD bn
25
20
15
10
5
0
Q4
–08
Q1
–09
Q2
–09
Q3
–09
Q4
–09
Q1
–10
Q2
–10
Q3
–10
Q4
–10
Order backlog
Order bookings, rolling 12 month basis
Revenue, rolling 12 month basis
• Order bookings per quarter
Order bookings
Order bookings increased by 8 percent to USD 18.2 (16.8) billion.
Adjusted for currency rate effects, order bookings increased by 6 percent.
Order bookings in USD were 16 (–1) percent higher than revenue
during 2010.
During the year, order bookings increased in local currencies in
Skanska’s Swedish, Norwegian, Finnish and Latin American operations,
while other units showed a decline in order bookings.
Among the contracts that were signed during 2010, a number of
major contracts in segments important to Skanska deserve particular
mention.
Nordic countries
In the Nordic countries, the Group received a number of major assignments
during the year. In Sweden, Skanska was chosen to design and
build New Karolinska Solna, a new university hospital that was procured
as a public-private partnership (PPP). The construction contract
amounted to about USD 2.0 billion. Skanska will invest USD 88.2 M,
corresponding to a 50 percent stake in the project company. The assignment
will be carried out jointly by the Group’s Swedish and British
construction units, with Skanska Sweden responsible for 70 percent
and Skanska UK responsible for 30 percent of the contract amount.
In Sweden, Skanska was also commissioned to develop and construct
a combined congress, hotel and concert hall facility in Malmö, with a
construction contract totaling about USD 0.2 billion. Skanska Sweden
furthermore secured an assignment to construct a new veterinary and
domestic animal center in Uppsala, with a contract amount of about
USD 0.2 billion. In addition, Skanska Sweden received a design-build
contract worth about USD 0.2 billion for the new headquarters of the
Swedish Security Service in Solna. In Norway, Skanska was commissioned
to construct a new office building for Statoil in Oslo, with a contract
amount totaling about USD 0.2 billion.
Other European markets
In Slovakia, Skanska was contracted to build the R4 expressway, comprising
a 14 km (9 mi.) long stretch of highway including 14 bridges.
The contract amount was about USD 102.0 M. In the United Kingdom,
Skanska was awarded a contract to design and build a new prison in
London, with a contract amount of USD 0.2 billion. Skanska received
two other major assignments in the London area; one was to build the
Brent Civic Centre, with a contract amount of about USD 129.0 M,
and the other to build tunnels for power transmission, with a contract
amount of about USD 134.6 M. Skanska UK also received an assignment
to build three new schools in Essex. The construction contract totaled
about USD 108.2 M and the project is being carried out as a publicprivate
partnership (PPP).
70 Report of the Directors Skanska Review of 2010 – USD version