Annual Report 1999 - Skanska

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Order backlog by totalnumber of orders invarious value intervals SEK 5.0 M 63%SEK 5.1-20.0 M 20%SEK 20.1-50.0 M 8%SEK 50.1-100.0 M 4%>SEK 100.0 M 5%Order backlog by totalorder value ineach value intervalSkanska’s operationsSkanska’s core operations encompass construction-relatedservices and project development.Construction operations, includingproject development with a short-term investmenthorizon, take place in the Skanska USA,Skanska Sweden and Skanska Europe businessareas. Project development with a long-terminvestment horizon, as well as property management,take place in the Skanska ProjectDevelopment and Real Estate business area.As the tables below indicate, these operationsare governed by different business factors andprerequisites in terms of margins, financial return,cash flow and tied-up capital. Meanwhilethey offer opportunities for collaboration,which have largely provided the basis forthe Group’s value enhancement over theyears.Construction-related servicesConstruction operations are characterized byhigh sales, low margins and little tied-up capital.The financial return is therefore high andthe financial risk is low. The low margins posespecial demands on efficiency and cost controls.The operative risk is limited by the factthat the Group works in many geographicmarkets with different economic cycles. Theorder backlog is also highly diversified interms of contract size, contract form and typeof client, as illustrated in the adjacent piecharts. SEK 5.0 M 3%SEK 5.1-20.0 M 6%SEK 20.1-50.0 M 9%SEK 50.1-100.0 M 9%>SEK 100.0 M 73%Summary of different business factors governing Skanska’s operationsCapital Potential growth Sensitivity toOperations Margins turnover Profitability in net asset value interest ratesConstruction operations Low High High – MediumLong-term project developmentand real estate operations – Low Low Yes Low● 12 Skanska Annual Report 1999Order backlog byclient categoryPublic sector 33%Business sector 60%Private individuals(housing)Order backlog bytype of contract7%Direct63%negotiationTender 37%Financial highlights by branch of operationsConstruction Industry Real estate Other Group1999, SEK bn 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998Income from business operations 1.9 1.0 0.3 0.2 –0.6 –0.2 1.6 1.0Income from property management 0.6 0.4 0.6 0.4Gain on sale of properties 0.8 1.2 –0.1 0.1 0.7 1.3Gain on sale of other assets 3.3 1.0 3.3 1.0Share of income in associated companies 0.7 0.7 0.7 0.7Operating income 1.9 1.0 0.3 0.2 1.4 1.6 3.3 1.6 6.9 4.4Operating margin, % 2.7 1.8 4.7 3.3 8.7 6.8Return on capital employed, % 24 16 7 5 16 22 32 27Cash flow from business operations 2.0 1.7 0.5 0.1 0.5 0.5 -0.4 -0.8 2.6 1.5ConstructionNet sales Operating income Operating margin, %SEK bn 1999 1998 1999 1998 1999 1998Building construction 51.3 41.5 0.9 0.4 1.7 1.0Civil construction 21.9 15.4 1.1 0.6 4.9 4.4Total 73.2 56.9 2.0 1.0 2.7 1.9Order bookings, SEK bn 90.2 71.5Increase in order backlog during 1999, % 38.7Increase in net sales during 1999, % 28.8
Long-term project developmentand investment propertiesReal estate operations tie up more capitalthan construction operations due to thelarge portfolio of investment properties andsizable capital spending for new projects.Operating income in real estate operationsconsists of income from continuing propertymanagement plus gains on the sale of fullydeveloped properties. Operating income maytherefore vary sharply from one year to another,mainly depending on the scale of propertydivestments. During 1999, Skanska ProjectDevelopment and Real Estate sold realestate projects for a gain of SEK 0.8 billion.The Group’s real estate developmentprojects in largeCentral European cities withstrong growth are now graduallyincreasing and will alsobe of relatively greater importancein the project portfolio.To analyze the total profitability of real estateoperations, the change in market valueof existing investment properties, as well asdevelopment gains on completed real estateprojects, must also be taken into account.On December 31, 1999, the market value ofthe Group’s investment properties was estimatedat about SEK 13.2 billion.Real estate operations1999 1998Operating incomefrom property management 0.6 0.4Gain on sale of properties 0.8 1.2Operating income 1.4 1.6Estimated market value,investment properties 13.2 11.6Book value,investment properties 6.9 6.4The construction time for a real estateproject can be estimated at 15 months,counting from the construction decision toproject completion. The throughput timefrom groundbreaking to divestment of acompleted project varies, among otherthings depending on the general market situationfor property divestments. Skanska’sambition is to shorten this throughput timein order to create room for new projectswithout increasing tied-up capital.The Group’s real estate development projectsin strongly expansive Central Europeanmetropolitan areas are now gradually growingand will also assume a relatively largerweight in its project portfolio. Skanska seesmajor potential for value enhancement inthese projects, while the risk level is consideredsomewhat higher than elsewhere inEurope. Completed projects in Central Europeancities are expected to yield about 13-15percent on the capital invested.Investment propertiesInvestments, divestmentsand capital gainsSEK M25002000150010005000-500-1000-1500-2000-25001997 1998 1999DivestmentsInvestmentsCapital gains● 13 Skanska Annual Report 1999
Page 1 and 2: Annual Report 1999
Page 4 and 5: ContentsContents 2Comments by the P
Page 6 and 7: Comments by thePresident and CEOSka
Page 8 and 9: Mission, goalsand strategySkanska
Page 10 and 11: Markets,competitorsand clientsSkans
Page 12 and 13: Employees and net sales by country/
Page 16 and 17: Project developmentSkanska’s proj
Page 18 and 19: The environmentIn Skanska’s judgm
Page 20 and 21: EmployeesSkanska has 45,000 employe
Page 22 and 23: Skanska USASkanska USA includes the
Page 24 and 25: The Big Dig,BostonBoston’s Centra
Page 26 and 27: Skanska SwedenSkanska Sweden includ
Page 28: Bo KlokA joint venture betweenSkans
Page 31 and 32: Percentage ofSkanska’s net salesP
Page 34 and 35: SkanskaProject Developmentand Real
Page 36 and 37: ness area operates, Budapest develo
Page 38 and 39: Stadshagen,StockholmA new urban re-
Page 40 and 41: Strategicservice companiesThe Skans
Page 42 and 43: Share data● 40 Skanska Annual Rep
Page 44 and 45: Five-year groupfinancial summary 1
Page 46 and 47: Report of the DirectorsStructural c
Page 48 and 49: Share of income in associated compa
Page 50 and 51: ● 48 Skanska Annual Report 1999Re
Page 52 and 53: Consolidatedincome statementSEK M N
Page 54 and 55: Consolidatedbalance sheetSEK M Note
Page 56 and 57: Comments onthe balance sheetThe bal
Page 58 and 59: Parent Companyincome statementSEK M
Page 60 and 61: SEK M Note 1999 1998SHAREHOLDERS’
Page 62 and 63: Accounting andvaluation principles
Page 64 and 65:
Notes to thefinancial statementsAmo
Page 66 and 67:
● 64 Skanska Annual Report 1999No
Page 68 and 69:
Note 17Income from financial curren
Page 70 and 71:
Note 23Holdings in Group companiesS
Page 72 and 73:
Note 30Provisions for pensionsand s
Page 74 and 75:
Note 40Adjustments for items not in
Page 76 and 77:
Proposed allocationof earningsThe B
Page 78 and 79:
Property list 1Investment propertie
Page 80 and 81:
County, municipality, Year built/ L
Page 82 and 83:
Board of Directorsand AuditorsBo Ry
Page 84 and 85:
Annual Shareholders’MeetingThe An
Page 86:
Nybron GroupNybron ABBox 805SE-382
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Annual Report 1999 - Skanska

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