Skanska Annual Report 2003

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Business streamsConstruction and ServicesConstruction and Services is Skanska’s largest business stream. Constructionrefers to building construction (both non-residential and residential)and civil construction. The business stream also includes Skanska Services,which specializes in facilities management.SEK M Change 2003 2002Net sales –11% 121,602 136,361Operating income 173% 1,685 618Capital employed –30% 9,529 13,540Operating cash flow 81% 3,301 1,821Residential Project DevelopmentThis business stream develops residential projects for immediate sale.Housing units are tailored for selected customer categories. The constructionassignments are carried out by Skanska’s construction units ineach respective market. Skanska is one of the largest residential developersin the Nordic countries and also has a sizable presence in Prague(Czech Republic) and St. Petersburg (Russia).SEK M Change 2003 2002Net sales –14% 6,334 7,333Operating income –21% 298 377Capital employed –41% 2,931 4,977Operating cash flow –38% 970 1,562Commercial Project DevelopmentThe business stream initiates, develops, leases and divests commercial propertyprojects. Its project development operations focus on office buildings,shopping centers and logistics properties in the Swedish cities of Stockholmand Gothenburg, in the Öresund region (Malmö, Sweden−Copenhagen,Denmark), Warsaw (Poland), Prague (Czech Republic) and Budapest(Hungary). It works through two companies: Skanska Project DevelopmentSweden and Skanska Project Development Europe.SEK M Change 2003 2002Net sales 300% 8,861 2,214Operating income 192% 3,061 1,049Capital employed –27% 9,459 13,039Operating cash flow 710% 7,110 878BOTBOT (Build Operate Transfer) specializes in identifying, developing andinvesting in privately financed infrastructure projects such as roads,hospitals and power generation plants. Its operations focus on creatingnew potential for projects in markets where Skanska has constructionunits.Skanska’s home marketsGDP/ Construction/ Construction,USD Capita Capita % of GDPUnited States 38,255 3,219 8.4Sweden 31,636 3,145 9.9United Kingdom 29,833 2,278 8.0Norway 48,258 3,777 7.8Finland 30,960 3,282 10.6Czech Republic 8,246 801 10.7Denmark 39,064 4,212 11.2Poland 5,253 372 7.1Hong Kong 20,973 1,085 4.8Argentina 13, 014 651 5.0India 48 3 5.2Sources: Swedish Construction Federation, United Nations, SwedishInstitute of International AffairsThe largest global constructioncompanies 1Total sales 2002Company Country USD bnVinci France 16.6Bouygues France 15.2Skanska AB Sweden 14.0Hochtief AG Germany 12.0Bechtel United States 9.7Fluor Corp. United States 7.8Centex, Dallas United States 7.1China State Const.Engineering Corp. China 6.4Grupo Dragados, Spain 6.2China RailwayEngineering Corp. China 5.71 Excluding Japanese construction companiesSource: Engineering News RecordSEK M MSEK 2003 2002Net sales 129% 87 38Operating income n.a. 27 –41Capital employed 19% 1,243 1,044Operating cash flow n.a. –172 –617ConsolidatedSEK M Change 2003 2002Net sales –6% 132,879 142,033Operating income 362% 4,532 981Capital employed –23% 24,460 31,640Operating cash flow 253% 11,317 3,2068Business streams – Skanska Annual Report 2003
Construction and ServicesConstruction and Services is Skanska’s largest business stream. It includes building and civilconstruction, as well as services related to the operation and maintenance of properties.Non-residential building construction accounts for 56 percent, civil construction 35 percent,residential construction 5 percent and service 4 percent of order backlog for the business stream.Swiss Re office building, London, United KingdomSEK M Change 2003 2002Net sales –11% 121,602 136,361Operating income 173% 1,685 618Operating margin, % 0.9 1.4 0.5Capital employed –30% 9,529 13,540Return on capital employed, % 1 2.5 16.3 13.8Operating cash flow 81% 3,301 1,821Order bookings –9% 120,562 132,889Order backlog –14% 116,303 135,0791 Calculated on the basis of operating income before lump-sum writedown of acquisition goodwill and tangible fixed assets.Order backlog, SEK 116 bn Construction includes non-residential buildingand civil construction, as well as residentialconstruction (development of residentialprojects is done in the business streamResidential Project Development). Non-residentialbuilding construction is traditionallycharacterized by high capital turnover, limitedcapital employed and low margins.Civil construction consists primarily ofinfrastructure projects. These projects areusually ongoing for a longer period, have adifferent risk profile and are more capitalintensive.This justifies a somewhat highermargin.Broad array of value-adding servicesBy offering value-adding services and knowhow,Skanska achieves higher margins. Bothin non-residential building and civil construction,there is an increasing proportionof design-build contracts, in which Skanskais responsible for both design and implementation.Because of its global presence, Skanskacan follow key customers that operate inmore than one of its home markets, such asIKEA and Pfizer.As needed, Skanska Financial Servicescan assist the customer in arrangingthe financing. Through the operationsof Skanska Services units, contractingassignments in the Nordic countries canalso be extended to cover operation andmaintenance of completed projects.The business of Skanska Services, knownas facilities management (FM), is a matter ofdeveloping and delivering services that companiesand the public sector need to back uptheir core operations. This includes a broadspectrum of services related to workplace,property and production-related supportand maintenance. Aside from assumingresponsibility for these services, the missionincludes improving its services and systematicallyreducing costs to the customer.Companies often lack the resources tomanage and improve their internal FMoperations, since their focus is on core operations.Skanska Services − which specializesin developing FM solutions − has well-testedworking methods, customized support systemsand large purchasing volume, creatingcreates efficiencies and synergies that benefitthe customer.Transfers of expertiseThe Skanska Group’s collective expertiseis also utilized across national boundariesand between different business units. Forexample, Nordic employees with experiencefrom major bridge projects are participatingin Skanska’s Cooper River bridge project inSouth Carolina. By taking advantage of specialexpertise at Skanska UK, Skanska Polandwas able to land a contract to build ZloteTarasy, Poland’s largest building constructionproject.A higher degree of industrialization andstandardization are other steps for improvingprofitability. Skanska’s Nordic and CentralEuropean business units are also workingtogether to achieve economies of scalethrough coordinated purchasing.Construction and Services account forabout 90 percent of the Group’s total salesand 40 percent of capital employed.Skanska Annual Report 2003 – Construction and Services9
Page 3: A train to the planeThe JFK AirTrai
Page 6 and 7: Comments by the President and CEOTo
Page 8 and 9: Mission, vision and goalsSkanska sh
Page 10 and 11: OrganizationSkanska is a global Gro
Page 14 and 15: MarketsSwedenSEK M Change 2003 2002
Page 16 and 17: Czech RepublicSEK M Change 2003 200
Page 18 and 19: Residential Project DevelopmentSkan
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Page 30 and 31: Report of the DirectorsThe Board of
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Page 34 and 35: headquarters, was sold during the y
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Page 40 and 41: Consolidated balance sheetSEK M Not
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Note 9Accounting for extraordinary
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Note 28Provisions for pensions and
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Note 35PersonnelPersonnel figures a
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The due dates of future minimum lea
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Note 42 Five-year Group financial s
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Note 43DefinitionsInterest-bearing
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Proposed allocation of earningsThe
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Board of DirectorsSverker Martin-L
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Senior Executive TeamHans BiörckJo
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Skanska Annual Report 2003

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