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JM develops new residential areas in attractive locations for people who demand high standards in their living environment. Our work is characterised by a holistic approach and attention to detail — we want to take lasting pride in the homes and residential areas we develop. 200ANNUAL REPORT8 Norway Sweden Finland Denmark Belgium JM is one of the leading developers of housing and residential areas in the Nordic region. Operations focus on new production of homes in attractive loca- tions, with the main focus on expanding metropolitan areas and university towns in Sweden, Norway, Denmark, Finland and Belgium. We are also involved in project development of commercial premises and contract work, primarily in the Greater Stockholm area. JM seeks to promote long- term quality and environmental considerations in all its operations. Annual sales total approximately SEK 12 billion and the company has some 2,000 employees. JM is a public limited company listed on the OMX Nordic Exchange in the Large Cap segment. Business concept To create attractive living and working environments that satisfy individual needs both today and in the future. Vision JM creates houses where people feel at home. JM IN BRIEF Objective for shareholder value The goal is to give shareholders a higher total return, total of dividend and increased value, than shareholders in companies with a similar risk profi le and business activities. INCOME, OPERATING PROFIT, GEOGRAPHIC DISTRIBUTION SEKm SEKm OF INCOME, % 2008 (2007) 14,000 2,500 12,000 12,731 2,301 12,065 12,229 2,000 17 (20) 10,000 1,881 1,500 56 (48) 8,000 27 (32) 6,000 1,000 1,083 4,000 500 2,000 Stockholm Rest of Sweden 0 0 2006 2007 2008 2006 2007 2008 International “We see continued Contents strong interest in our projects in Sweden.” Johan Skoglund, – JM IN BRIEF President and CEO 1 THE YEAR IN BRIEF 2 CEO’S COMMENTS 4 BUSINESS CONCEPT, GOALS AND STRATEGIES 6 JM’S CORE BUSINESS 8 MARKET OVERVIEW 16 RESIDENTIAL BUILDING RIGHTS 18 PROJECT PROPERTIES 2 19 BUSINESS SEGMENTS 24 CUSTOMERS 28 SUSTAINABLE URBAN PLANNING 33 EMPLOYEES 37 RISKS AND RISK MANAGEMENT FINANCIAL REPORTS 41 BOARD OF DIRECTORS’ REPORT 8 GROUP: Despite the economic downturn, certain 45 INCOME STATEMENT demand drivers developed 46 BALANCE SHEET in a positive direction in 48 CASH FLOW STATEMENT Sweden. 50 CHANGES IN SHAREHOLDERS’ EQUITY 51 NOTES TO THE FINANCIAL STATEMENTS PARENT COMPANY: 67 INCOME STATEMENT AND CASH FLOW STATEMENT 68 BALANCE SHEET 69 CHANGES IN SHAREHOLDERS’ EQUITY 69 NOTES TO THE FINANCIAL STATEMENTS 24 72 FIVE-YEAR OVERVIEW—GROUP At mobil.jm.se visitors kan view 74 QUARTERLY OVERVIEW—GROUP JM homes directly 75 QUARTERLY OVERVIEW—BUSINESS SEGMENTS on their mobile 76 PROPOSED DISPOSITION OF EARNINGS phones. 77 AUDITORS’ REPORT 78 DEFINITIONS AND GLOSSARY Low-energy houses in all housing production in Sweden. SHAREHOLDER INFORMATION 28 80 CORPORATE GOVERNANCE REPORT 86 BOARD OF DIRECTORS AND AUDITORS 87 EXECUTIVE MANAGEMENT 88 THE JM SHARE 90 NOTICE OF ANNUAL GENERAL MEETING AND FINANCIAL CALENDAR 91 JM’S PROPERTIES 96 ADDRESSES This Annual Report is a translation of the original text in Swedish, which is the official version. Cover photo: Buying a JM home should be as simple, secure and convenient as living in one. You’ll have time left over for other things. THE YEAR IN BRIEF 1 Continued cautious demand and declining production • Income fell by 4 percent to SEK 12,229m (12,731) and number SEKm 2008 2007 of residential units sold dropped to 1,871 (3,880) • Earnings before tax declined to SEK 1,052m (2,297) and net Income 12,229 12,731 profit for the year decreased to SEK 818m (1,665). Write- Operating profit 1,0832,301 downs of SEK 320m (0) for development properties were charged against operating profit. Operating margin decreased Profit before tax 1,052 2,297 to 8.9 percent (18.1) • Property sales of SEK 748m (653) provided capital gains of Cash flow from operating activities 101 1,826 SEK 73m (182) Operating margin (%) 8.9 18.1 • Return on equity for the past twelve months was 22.9 per- cent (44.5). Earnings per share for the year totaled SEK 9.50 Return on equity (%) 22.9 44.5 (18.30) • Consolidated cash flow including net investment in proper- Equity/assets ratio (%) 32 39 ties was SEK 101m (1,826) after a strong cash flow during the Earnings per share (SEK) 9.50 18.30 fourth quarter • The Board of Directors proposes SEK 0 (5.50) in dividend for Number of housing starts 1,829 4,065 2008 while awaiting a normalized supply of liquidity from the banking system for new projects to be started. Number of residential units sold 1,871 3,880 For definitions, see page 78. INCOME BY INCOME BY OPERATING PROFIT BY BUSINESS SEGMENT, % BUSINESS SEGMENT, SEKm BUSINESS SEGMENT, SEKm 6,000 1,500 5,000 1,200 4,000 900 3,000 600 2,000 300 1,000 0 0 –300 2007 2008 2007 2008 JM Residential Stockholm 43% JM Residential Sweden 27% JM Residental Stockholm JM Residental Stockholm JM Residential Sweden JM Residential Sweden JM International 17% JM International JM International JM Property Development 2% JM Property Development JM Property Development JM Production 11% JM Production JM Production JM ANNUAL REPORT 2008 2 CEO’S COMMENTS we implemented the staff cuts it was important to make a large Turbulent 2008 enough adjustment to staffing, at the same time that we had to retain expertise in housing construction in order to continue to develop projects in the best locations. I am mainly thinking of When we look back at 2008, it is the recession and financial Stockholm, with projects like Dalénum on Lidingö and Kvarnhol- crisis that mainly affected sales and earnings. After several years men in Nacka, as well as projects in Malmö and the Oslo area. of good sales, we noted declining demand and lower prices for In several projects we built fewer apartments per stage than residential units in the six-month report, and during the autumn originally planned. In certain markets smaller homes are in the economy worsened, augmented by the financial crisis. The demand and we are also considering solutions with a more eco- slowdown in the economy was dramatic at the end of the year, nomical standard. JM is currently dedicating considerable time to even by historical measures. concept design in projects that we will start once the economy Construction activity was adversely affected and the number rebounds. of housing starts in Sweden declined by over 20 percent dur- We are also considering opportunities, in these turbulent ing the year to about 21,700. During this period the JM Group times, to build more leasehold projects, more senior housing began construction on about 1,800 residential units, down from and assisted living housing. I also believe that we can increase the previous levels of about 4,000 — an adjustment in response to percentage of contract work if demand continues to be strong the sharp drop in demand. in this market. The purpose of all of these measures is to retain our expertise during the current weaker economy. CHANGED CONDITIONS JM has consistently — during both boom and recession — con- For anyone about to invest in a new home in the autumn of 2008, centrated on and carried out residential projects. Through our the tightening of credit in the financial sector was quickly felt long-term involvement on the local market, JM and our sub- and uncertainties with respect to pricing increased. Uncertainty sidiaries have created trusting relationships with representatives was also substantial with respect to the private economy and of the local authorities. In December, we sold four properties customers became more cautious in general. in Stockholm — residential projects consisting of a total of 371 JM always works based on the strategy that there must be apartments to the public housing company Stockholmshem. It is a clear demand for planned residential projects. Consequently, gratifying to be able to contribute JM’s know-how about housing during the autumn we adapted production by starting smaller construction to Stockholmshem’s ambitious initiative to create stages, or by postponing startup of certain new projects, and by more leasehold apartments in Stockholm. adapting prices to the current market. These measures were not sufficient; we were also forced to downsize the organization and BUILDING RIGHTS PORTFOLIO therefore at the end of the year we announced cutbacks of about The portfolio of development land is one of JM’s most important 600 employees, which have now unfortunately resulted in layoffs. assets. We are constantly investing in land for development for The substantial interest rate cuts and economic stimulus future housing construction and at year-end 2008 we had what package from the political system begin to have an impact on may be the best mix ever, with 31,000 building rights, many in the Swedish market, which to some extent have already calmed attractive locations in Stockholm. general concerns. However, it is difficult to evaluate how deep In the current recession, with weak demand and a low imple- or long the recession will be. mentation rate in the projects, we actually have more than enough building rights for our needs and therefore we will be MEASURES TO DEAL WITH THE ECONOMY restrictive about new acquisitions. However, it is pivotal for JM As the economy rapidly deteriorated, we have taken several to have good projects to work with in the future. measures: • Adaptation of the organization UNCHANGED STRATEGY • Sharp reduction of capacity, primarily in foreign operations JM will be the leading project developer of high-quality housing • Adaptation of projects in terms of costs in the Nordic region.