ANNUAL REPORT 2006 - Skanska

SEK M 2006 2005
Strategic investments
Acquisitions of businesses –683 –50
Shares 0 0
Strategic investments –683 –50
Strategic divestments
Divestments of businesses 140 537
Shares 11 41
Strategic divestments 151 578
Net strategic divestments –532 528
Total divestments –1,146 3,645
Depreciation/amortization, non-current assets –1,147 –1,073
Investments in property, plant and equipment, which were related
to continuous replacement investment in operations, increased to
SEK –1,728 M (–1,455).
Investments in the form of equity as well as subordinated loans
in the Infrastructure Development business stream amounted to
SEK –286 M (–476). The present value of the remaining investment
obligations related to ongoing projects totaled about SEK 0.6 billion.
In Residential Development, net investments in current-asset
properties totaled SEK -698 M. Fully developed residential projects
were sold for SEK 4,455 M, while investments amounted to
SEK -5,153 M. Investment volume increased sharply compared to
the preceding year, and divestment volume increased somewhat.
Commercial Development carried out net divestments of
SEK 1,327 M. Investments amounted to SEK –1,639 M (–1,135)
and divestments were SEK 2,966 M (4,430). Divestment volume
decreased sharply, while investment volume rose somewhat.
Companies were acquired at a cost of SEK -683 M, and companies
and shares were divested in the amount of SEK 151 M.
Net strategic investments thus totaled SEK –532 M.
The most significant acquisition during the year was
McNicholas Holding PLC, a British company that services power,
gas and water utility distribution networks. McNicholas operates
mainly in London and southeastern England and has about 1,300
employees. The company’s 2006 revenue was about SEK 2.3 billion,
with an operating income of SEK 96 M. The purchase price
was SEK 681 M. The company was acquired as of December 31,
2006 and is not included at all in the Group’s 2006 revenue and
earnings.
During the third quarter, the Group sold the operations of the
Swedish company TMM Trädgård & Markmiljö AB. The sale
yielded a capital gain of about SEK 62 M. The company specializes
in garden and landscape contracting and construction. It has
about 120 employees and annual sales of about SEK 160 M.
During 2006 Skanska closed down most of its Russian operations.
The Group’s operating cash flow
Cash flow for the year amounted to SEK –2,343 M (3,638).
Cash flow from business operations fell from SEK 5,354 M to
SEK 2,326 M, which was a decrease of SEK 3,028 M. The decrease
is entirely explained by large net investments in operations.
Increased net investments in land for Residential Development
operations and a lower divestment volume of projects and completed
properties, plus increased investment in ongoing Commercial
Development projects, contributed to the decrease. The Construction
business stream had a positive cash flow effect of about
SEK 1 billion due to the financial close of the St. Bartholomew’s
and The Royal London Hospital project. Net investments in property,
plant and equipment rose, mainly related to continuous
replacement investments in operations.
In the Infrastructure Development business stream, too, investments
in the form of equity and subordinated loans exceeded cash
flow from operating activities and from divestments made during
2006.
Taxes paid in operating activities fell from SEK –1,475 M to
SEK –1,040 M. During 2005, among other things Skanska made
a supplementary tax payment of SEK 600 M related to reversals of
tax allocation reserves.
The change in interest-bearing receivables and liabilities from
SEK –484 M to SEK –1,488 is explained by a settlement of interestbearing
liabilities and provisions as well as by an increase in interest-bearing
receivables, attributable among other things to an
increase in interest-bearing financial investments. The negative
cash flow from net strategic investments was mainly attributable
to the acquisition of the British company McNicholas.
Cash flow for the year, SEK –2,343 M, together with translation
differences of SEK –365 M, reduced cash and cash equivalents
to SEK 10,970 M (13,678).
The Group’s operating cash flow
SEK M 2006 2005
Cash flow from business operations before
change in working capital 3,482 3,313
Change in working capital 90 456
Net investments in the business –614 3,117
Adjustments in payment dates of net investments 408 –57
Taxes paid in business operations –1,040 –1,475
Cash flow from business operations 2,326 5,354
Net interest items and other financial items 90 –120
Taxes paid in financing activities –27 36
Cash flow from financing activities 63 –84
Cash flow from operations 2,389 5,270
Net strategic investments –532 528
Taxes paid on strategic divestments 0 –1
Cash flow from strategic investments –532 527
Dividend etc. –2,712 –1,675
Cash flow before change in interest-bearing
receivables and liabilities –855 4,122
Changes in interest-bearing receivables and liabilities –1,488 –484
Cash flow for the year –2,343 3,638
Cash and cash equivalents, January 1 13,678 8,868
Reclassifications in cash and cash equivalents 0 751
Exchange rate differences in cash and cash equivalents –365 421
Cash and cash equivalents, December 31 10,970 13,678
Financing and liquidity
At year-end 2006, the Group had interest-bearing net receivables
amounting to SEK 10,377 M (11,111). Net interest items, excluding
capitalized interest, amounted to SEK 299 (171). The change
is mainly attributable to higher market interest rates.
Interest-bearing assets decreased to SEK 15,441 M (16,975).
Of these, receivables in foreign currencies accounted for 61 (61)
percent. The average interest refixing period for all of the Group’s
interest-bearing assets was 0.2 (0.1) year, and the interest rate
averaged 3.26 (2.42) percent.
Skanska Annual Report 2006 Report of the Directors 57