competition rules and corruption legislation.As part of the Group’s training programs,the Code of Conduct has been translated toall languages used in the business units.The task of developing a program forfollowing up and reporting on compliancewith the Code of Conduct is currentlyunderway.PersonnelThe average number of employees in theGroup during the year was 69,669 (72,698).This included 14,236 (15,014) employees inSweden.The Group’s human resources departmentswere strengthened during <strong>2003</strong> by increasedactivities at the corporate level, supplementedby closer collaboration with activities beingcarried out in <strong>Skanska</strong>’s line operations.One of the most important goals of theGroup’s strategy is to attract and retain thebest employees in the market. The review ofthe Group’s talent management program,that began in 2002 thus continued during<strong>2003</strong>, and the announced changes in theprogram have taken shape. The new managementdevelopment tool has been used onthe 250 highest executives in the Group.They were assessed and received feedback onsuch important characteristics as customerfocus, leadership qualities and technical andbusiness skills.One important element of the programis to ensure that future high-level managerspossess a knowledge and understandingof what is required to be top executives at<strong>Skanska</strong>. The Group has thus establishedcontact with the International Institutefor Management Development (IMD) inSwitzerland, which will provide suitable toolsas well as train all new senior executives intheir new role. The first program, includingparticipants from all four business streams,started in November.OptionsThirty-one senior executives hold a total of3,540,000 employee stock options, dividedinto two programs. The 2000-2005 employeestock options encompass 1,236,000 optionswith an exercise price of SEK 94.40. The2001-2006 employee stock options consistsof 2,304,000 options with an exercise priceof SEK 128.The option programs encompass syntheticoptions and settlement will take place incash. The options were provided free of costand may only be exercised on the conditionthat the person is still employed by <strong>Skanska</strong>on the exercise date or has retired with apension. Those who receive stock optionsmay not transfer the right to exercise them.The synthetic option programs arereported in the balance sheet as a provisionif the market price of a <strong>Skanska</strong> SeriesB share on the balance sheet exceeds eachrespective exercise price. The change inthis provision during the year is includedin the income statement and is reported asa personnel expense. Because the marketprice on December 31, <strong>2003</strong> was below theexercise price, no such personnel expensewas reported.Most of the obligations that the syntheticoption programs may cause, if the marketprice of a <strong>Skanska</strong> Series B share exceedsthe respective exercise price on the balancesheet date, have been hedged with the aidof equity swaps related to shares in <strong>Skanska</strong>AB. The difference between the market priceon the balance sheet date and the initialprices of the swap agreement is reporteddirectly against shareholders’ equity.The market price of a <strong>Skanska</strong> share onDecember 31, <strong>2003</strong> was below the exerciseprices related to the equity swaps. The year’schange of about SEK 42 M was reporteddirectly against shareholders’ equity. Theoption programs do not result in any dilutionof shareholders’ equity.<strong>Annual</strong> MeetingThe <strong>Annual</strong> Shareholders’ Meeting of<strong>Skanska</strong> AB will be held at 5:00 p.m. onMarch 30, 2004 at the Berwald Hall, DagHammarskjölds väg 3, Stockholm. Sweden.The nomination committee of <strong>Skanska</strong>AB consists of Sverker Martin-Löf, Chairmanof <strong>Skanska</strong> AB and Vice Chairman ofAB Industrivärden; Carl-Olof By, ExecutiveVice President of AB Industrivärden; StaffanGrefbäck, Head of Investment Managementat Alecta; Per Ludvigsson, President of InterIKEA Investment AB; Mats Guldbrand,Equities Manager, AMF Pension; and CurtKällströmer, Head of the Chairman’s Office,Svenska Handelsbanken.Proposed dividendThe Board of Directors proposes a regulardividend of SEK 3.00 (2.00) for the <strong>2003</strong>financial year, which is equivalent to a totalpayment of SEK 1,256 M (837).The regular dividend shall reflect theportion of estimated sustained profit aftertaxes that is not needed to develop the Group’score business. The ambition is that thedividend shall grow over time. Based on theGroup’s foreseeable capital needs, surplusesin shareholders’ equity shall be transferredin an effective way to the shareholders.Parent CompanyProfit for the year amounted to SEK 1,416 M(1,189). The average number of employeeswas 56 (56).Market outlookConstruction investments remain weak in<strong>Skanska</strong>’s main markets, except for the CzechRepublic and Private Finance Initiative(PFI) projects in the United Kingdom. Themain reason for diminishing constructionactivity is the low volume of investment inindustrial and commercial construction. Inthe U.S., investment activity in industrialand commercial construction is at a lowlevel. This was previously offset by projectsin the healthcare and education sectors, butlower public appropriations are expected tohave adverse effects in these sectors as well.Industrial construction in the U.S. is expectedto increase at the same pace as private investments.Swedish construction is decreasingdue to lower activity in commercial building.Except for PFI project volume in the U.K.,British investments in other segments ofimportance to <strong>Skanska</strong> are decreasing. ThePolish commercial construction market isbeginning to show some signs of recovery,but the competitive situation is difficult.Residential construction remains at ahigh level in the Czech Republic, Finlandand Russia. In Norway, the demand forhousing units rose during the second half of<strong>2003</strong>. In Sweden, most residential constructiontoday consists of units in the mediumand lower price segments, for which there isheavy demand.Civil construction in <strong>Skanska</strong>’s mainmarkets is showing certain signs of slowrecovery. American civil construction isexpected to diminish over time as a consequenceof large budget deficits in individualstates. However, New York City and vicinity,where <strong>Skanska</strong> has a strong position ininfrastructure construction, is expected tooutperform the U.S. as a whole in the nextfew years. In Finland, civil construction isincreasing. In Sweden, the government’sdeclaration that it intends to step up itsinfrastructure investments has generatedhopes. The Czech Republic and Poland areexpected to show some growth. In SouthAmerica, the market situation has stabilized,with a good outlook for power transmissionprojects in the oil and gas industries, whichare important sectors for <strong>Skanska</strong>’s operationsin this region.The high vacancy rate in the marketswhere <strong>Skanska</strong> is active in commercial projectdevelopment will lead to a continuedcautious approach to investments in newprojects.34 <strong>Report</strong> of the Directors – <strong>Skanska</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2003</strong>
Consolidated income statementSEK M Note <strong>2003</strong> 2002Net sales 6, 7 132,879 142,033Construction, manufacturing andproperty management expenses 7 –119,973 –130,452Gross income 12,906 11,581Selling and administrative expenses 10 –8,453 –10,315Income from joint ventures 21 83 –277Income from associated companies 22 –4 –8Operating income 8, 9, 11, 12, 23, 35, 36, 38 4,532 981Income from associated companies 13, 22 2 5Income from other financial fixed assets 12, 13 –601 –473Income from financial current assets 13 209 476Interest expenses and similar items 13 –70 –916Income after financial items 14 4,072 73Taxes on profit for the year 16 –1,303 –856Minority interests –8 –54Net profit for the year 2,761 –837Net profit per share, SEK 43 6.60 –2.00Average number of shares 26, 43 418,533,072 418,533,072Proposed dividend per share, SEK 3.00 2.00See notes 1, 2, 3, 4, 5, 33, 37, 39, 40, 41, 42, 43, 44.<strong>Skanska</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2003</strong> – Consolidated income statement 35
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