Annual Report 2011 - Skanska

Other European countriesPolandCzech Republic and SlovakiaUnited KingdomIn the Czech Republic and Slovakia, Prague and Bratislava are Skanska’s most important residentialdevelopment markets. During 2011, Skanska also began residential development operations inPoland and the U.K. and carried out a number of land investments.Revenue OtherEuropean countriesResidential Czech Republic, 91%• New markets, 9%Development in other European countriesRevenue Operating income Operating margin, % Capital employed 1 employed ,% 2Return on capitalSEK M 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010Czech Republic 3 504 513 3 46 0.6 9.0 366 556 0.7 6.7New markets 47 –47 neg 434 negTotal 551 513 –44 46 –8.0 9.0 800 556 neg 6.71 Capital employed according to IFRSs.2 Return on capital employed based on operating income according to segment reporting.3 Including Slovakia.CompetitorsCentral GroupFinepDOM DevelopmentJW ConstructionBerkeley GroupBovis HomesMajor events during the yearDuring 2011, Skanska established residential developmentoperations in Poland and made its first land investmentfor this purpose. The site is 69,000 sq. m (17.9 acres) in sizeand is located in a very attractive neighborhood about5 km (3 mi.) from the Warsaw city center.Skanska made its first land purchases for residentialdevelopment in the U.K. Two of these acquisitions arelocated in Great Kneighton, Cambridge. For one of theseland plots, the local plan for the first project was approvedand a building permit for 128 homes was granted. Constructionof the project started. In conjunction withthis, 39 affordable homes were sold. According to plans,full-scale sales will begin early in 2012. As for the secondsite, which will accommodate some 310 homes, Skanskaexpects to apply for a building permit during the first halfof 2012.In the Czech Republic and Slovakia, Skanska sold morethan 400 homes in 2011. The number of homes started wassimilar to the number sold.MarketThe Czech and Slovakian housing markets remainedweak, but volume increased somewhat. The main reasonfor the weak market was domestic political instability,which led to uncertainty among potential home buyers.In Poland, the political situation and demand are morestable, while the economic situation in the U.K. isstrained. Meanwhile there is an underlying need for newhomes. Generally low interest rates in Europe are alsobenefiting home sales, in the form of lower home financingcosts.EarningsIn the U.K. and Poland, Skanska Residential Developmentwas in a start-up phase and did not generate any sizablerevenue during 2011.The Czech and Slovakian markets were weak. Althoughthe situation improved somewhat, earnings were pulleddown by a writedown of land in Slovakia.OutlookIn 2012 Skanska expects continued uncertainty aboutpolitical and economic developments in the Czech Republic,which will dampen the market outlook there. The landinvestments made in Poland and the U.K. will lead to newproject start-ups and home sales in these markets.50 Residential Development Skanska Annual Report 2011