Skanska Annual Report 2003

The average interest rate for all Groupinterest-bearing liabilities amounted to 4.62(5.16) percent at year-end. The proportionof loans in foreign currencies decreased to33 (48) percent.At year-end, the Group’s unutilized creditfacilities amounted to SEK 5,227 M (5,541).Currency hedgingThe Group consists mostly of business unitswith operations in their respective homemarket and with transactions mainly inlocal currency.In those cases where contracted inflowsin foreign currencies are not offset by outflowsin the same currency, the foreign currencyis sold by means of forward contracts.The Group’s earnings are marginallyaffected by this hedging measure.Unrealized gains and losses in forwardcontracts are part of the valuation of eachproject. Shareholders’ equity in foreign subsidiariesis normally not currency hedged,since these sums are regarded as investmentsof a long-term nature. Exceptionsmay occur, however. Given the large scaleof the shareholders’ equity denominated inAmerican dollars, the shareholders’ equityof the Group’s U.S. subsidiaries is currencyhedged.Skanska’s portion of the shareholders’equity in two former property companiesin the United Kingdom has also beencurrency-hedged. In Commercial ProjectDevelopment and BOT operations, investmentsare normally financed through loansin functional or local currencies.Return on shareholders’ equity andcapital employedIn keeping with the Group’s strategic plan,capital employed was gradually reduced.The plan that was presented in January 2003estimated that the Group’s capital employedcould be decreased to SEK 30 billion. SEK16 billion was allocated to Construction andServices, SEK 3 billion to Residential ProjectCapital employed by business streamDevelopment, SEK 8 billion to CommercialProject Development and SEK 3 billion toBOT.Capital employed was sharply reducedduring the year. In Construction and Servicesas well as Residential Project Development,capital employed dropped below the targetfigure, while the Commercial ProjectDevelopment business stream approachedits target figure. BOT operations are in abuild-up phase.At year-end 2003, the Group’s capitalemployed amounted to SEK 24,460 M(31,640).Return on capital employed rose from4.2 per cent to 17.1 percent.Return on equity andreturn on capital employedThe shareholders’ equity of the Groupdecreased to SEK 14,169 M (14,217), dividedinto SEK 11,267 M (11,532) of unrestrictedequity and SEK 2,902 M (2,685) ofrestricted equity. Provisions to restrictedequity amounted to SEK 0 M (0). The mainexplanations for the drop in shareholders’equity were the payment of a dividend ofSEK 837 M for the 2002 financial year andthe application of Recommendation No. 29of the Swedish Financial Accounting StandardsCouncil, “Employee Benefits,” whichhad a nonrecurring negative effect of SEK1,110 M. Beyond this, negative currencytranslation effects on the shareholders’Residential CommercialConstruction Project Projectand Services Development Development BOT Central TotalIntangible fixed assets 4,304 8 0 387 19 4,718Tangible fixed assets 6,657 46 7 1 19 6,730Shares and participations 739 98 63 720 –170 1,450Commercial properties 1,051 0 9,485 0 –236 10,300Residential properties 16 3,391 0 0 –13 3,394Interest-bearing receivables 1,673 213 140 95 1,083 3,204Net working capital –8,282 –963 –314 21 –2,835 –12,373Cash & bank balances 3,371 138 78 19 3,431 7,037Capital employed 9,529 2,931 9,459 1,243 1,298 24,460403020100-10 equity of foreign subsidiaries, taking intoaccount currency hedging measures, totaledabout SEK 900 M.Return on shareholders’ equity amountedto 19.5 (–5.2) percent.Equity/assets and debt/equity ratioThe visible equity/assets ratio rose from 18.9percent to 21.5 percent. One contributingreason for the increase in the equity/ assetsratio was the Group’s systematic effortduring the year to reduce capital employedand thereby total assets.Because of the reduction in net debt, thedebt/equity ratio declined from 0.6 to 0.0.Equity/assets and debt/equity ratio Changes in the Board andmanagementAt the Annual Shareholders’ Meeting inMay 2003, Board members Per-Olof Erikssonand Eliot Cutler resigned. Elected asnew members were Ulrika Francke and Jane Garvey as well as Stuart Graham, Presidentand CEO. Among the Board members appointedby employee organizations, no changes occurred.In April, Daniel Johannesson, Executive Vice President, left the Senior ExecutiveTeam.In August, Keith Clarke, Executive VicePresident, resigned from the Senior ExecutiveTeam. In June, Tor Krusell was appointedSenior Vice President Human Resources anda member of the Senior Executive Team.After this, the Senior Executive Team has thefollowing structure and allocation ofchiefresponsibility for the business units reportingdirectly to it:Stuart Graham, President and CEO, isresponsible in the Group’s Senior ExecutiveTeam for Skanska USA Building, SkanskaUSA Civil och Skanska Services.32 Report of the Directors – Skanska Annual Report 2003