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Annual Report 2012 Report Annual Rygg Vik PEAB ANNUAL REPORT 2012 REPORT ANNUAL PEAB Annual report 2012 Vik CONTENTS 2012 in summary 1 Comments from the CEO 2 Construction and civil engineering market 5 Business model 8 Group strategies 10 Financial and operative goals 11 Board of Directors’ report 13-35 The Group 13 Business area Construction 16 Business area Civil Engineering 20 Business area Industry 23 Business area Property Development 26 Risks and risk management 28 Sustainability 29 Other information and profit disposition 34 Financial reports and notes 37-83 Auditors’ report 84 Corporate governance report 86 Board of Directors 90 Executive management and auditors 91 The Peab share 92 Five-year overview 94 Financial and construction-related definitions 95 Summons to attend the Annual General Meeting 96 Shareholder information and addresses 97 Peab AB is a public company. Company ID 556061-4330. Domicile Förslöv, Sweden. All values are expressed in Swedish krona, abbreviated to SEK and million to MSEK. Numbers presented in parentheses refer to 2011 unless otherwise specified. Data regarding markets and the competition are Peab’s own assessments, unless another source is specified. These assessments are based on the best and latest available facts from, among others, published material. The formal annual and consolidated accounts which has been audited by the company accountant, pages 13-83. Cover picture: Gothia Towers, Gothenburg, Sweden Photo: Andreas Ulvdell Vik A Nordic Community Builder Peab is a Nordic construction and civil engineering company with ope- rative net sales of SEK 46 billion. We have 14,000 engaged employees and around 130 offices in Sweden, Norway and Finland. With our local presence and four collaborating business areas we can handle both small and large, complex projects. Our goal is to always surpass our customers’ expectations. Construction performs contract work for external customers, the other Operative net sales units in Peab and our own developed housing projects. Operations comprise per business area, 2012 everything from new construction of homes and premises to renovation and construction maintenance. Property Development, 1% (0%) Industry, Civil Engineering is active on the local civil engineering market as 21% (21%) well as in infrastructure projects such as bridges and roads and the management and maintenance of streets and roads. Construction, 54% (56%) Industry delivers among other things asphalt, cement, foundations, electricity services, transportation, machine and crane services as well as prefab to both Civil external customers and the other units in Peab. Engineering, 24% (23%) Property Development primarily develops commercial property and apartment buildings. These operations are a vital part of developing Peab’s contractor business and complete customer offers. A Nordic Community Builder: World class events and shopping Arenastaden, Solna October 2012: Peab is building a completely new city district, Arenastaden, outside Stockholm with apartments, offices, a multi-arena and one of the biggest shopping malls in the Nordic region. Every part is unique in itself – together they are exceptional. This is a place for special meetings and moments. Arenastaden, which breaks both construction technological and size records, was previously a rundown industrial area that is being transformed through state-of-the-art engineering. We are creating a city district that will take both inhabitants and visitors into the future. Read more about Arenastaden at www.peab.se/arenastaden Vik Rygg PEAB IN SUMMARY A Nordic customer base creates Highlights opportunities for profitable growth Peab is organized in four business areas; Construction, Civil Engineering, Peab works on a Nordic market. Sweden is the largest market at 81 percent. Industry and new in 2012 Property Development. Norway and Finland increased their share of Group operating net sales In addition to continued investments in existing development projects, business during 2012 from 18 to 19 percent. area Property Development acquired a handful of large new projects, among them parts of Vasallen and at the same time sold others such as the housing development property to Domestica. As part of Peab’s long-term program for Norrland, which Peab initiated over 20 years ago, we won a number of new contracts during the year from customers such as LKAB, Boliden and Northland Resources. Peab is currently one of the Operative net sales per Operative net sales per largest private employers in Norrland. geographic market, 2012 customer type, 2012 Sweden’s new national arena, Friends Arena, was built by Peab and inaugurated Finland Other in October 2012. We continue to develop Arenastaden in Solna. We have started 6% (7%) 11% (13%) construction on housing there and on one of Sweden’s largest shopping centers, Norway Public 13% (11%) 31% (32%) the Mall of Scandinavia. Through a jointly owned company Peab and Folksam acquired KF Fastigheter’s share of Kvarnholmen Utveckling AB as well as another company that came with development rights. After the acquisition Kvarnholmen Utveckling AB, which works with managing the development rights for the production of more than 1,500 new apartments, is owned equally by JM and by the Peab and Folksam jointly owned company. Private 58% (55%) Peab is building the extension of E4 South at Sundsvall. The project is a general contract with functional requirements and a future management and repair Sweden contract that Peab’s business areas Civil Engineering and Industry are jointly 81% (82%) responsible for. In March 2013 Deputy CEO Jesper Göransson took over as CEO and acting President of Peab. He replaces Jan Johansson. The process to find a new ordinary CEO has been initiated by the Board. 2012 IN SUMMARY Stable volumes but lower profits Orders received for Construction and Civil Engineering increased by 2 percent to SEK Operative net sales 38,743 million. Order backlog at the end of the year was somewhat lower than at the start MSEK largely due to a high level of production during 2012. 50,000 Group operative net sales increased by 5 percent to SEK 45,997 million due to the good 40,000 market situation in the beginning of the year together with a high level of production 30,000 throughout the year. Net sales increased in all the business areas. 20,000 The operative operating profit decreased to SEK 1,002 million (1,483) primarily due to write- 10,000 downs totaling SEK 675 million, of which SEK 300 million was for Tele2 Arena in Stockholm and SEK 375 million in construction operations in Norway. 0 2008* 2009 2010 2011 2012 Cash flow from current operations increased to SEK 503 million (60) despite an increase in * Pro forma including Peab Industri acquisitions of project and development property. Earnings per share were SEK 2.47 (3.26). The equity/assets ratio amounted to 24.9 percent (25.4), which is on par with the financial goal. Operative operating profit and The Board proposes a dividend of SEK 1.60 per share, which is equivalent to 65 percent of margin the result for the year. MSEK % 3,000 6 An action plan was initiated in the business area Construction with the intent to improve profitability by methodically developing leadership, project organization and internal pro- 2,500 5 cesses. This will, among other things, lead to a greater focus on profitability when choosing 2,000 4 projects, ensure that we have the right resources for the projects we take on and that 1,500 3 follow-up and control of ongoing projects function well. 1,000 2 The Group’s other operations and Group staff were reviewed during the year for the purpose 500 1 of reducing costs and thereby raising profitability. 0 0 2008* 2009 2010 2011 2012 Peab set up a Medium Term Notes program (MTN) with a loan ceiling of SEK 3,000 million. * Pro forma including Peab Industri This extended our capital base with a new complement to traditional bank financing. At the end of the year obligations worth a total of SEK 1,000 million were outstanding under the MTN program. Financial summary Orders received and order backlog Construction and Civil Engineering Jan-Dec Jan-Dec Jan-Dec 2012 2011 2010 MSEK MSEK Operative net sales, MSEK 1) 45,997 44,015 38,184 40,000 40,000 Net sales, MSEK 46,840 43,539 38,045 Operative operating profit, MSEK 1) 1,002 1,483 1,563 30,000 30,000 Operative operating margin, % 1) 2.2 3.4 4.1 20,000 20,000 Operating profit, MSEK 1,055 1,505 1,503 Operating margin, % 2.3 3.5 4.0 10,000 10,000 Pre-tax profit, MSEK 813 1,195 1,513 Earnings per share before dilution, SEK 2.47 3.26 4.11 0 0 Dividend per share, SEK 2) 1.60 2.10 2.60 2008 2009 2010 2011 2012 Return on equity, % 9.2 12.1 15.6 Order backlog per 31 Dec Order intake Equity/assets ratio, % 24.9 25.4 27.8 Cash flow before financing, MSEK 974 –1,071 –315 Net debt, MSEK 6,470 6,626 5,719 1) Operative net sales and operative operating profit are reported according to pecentage of completion method. Net sales and operating profit are reported according to legal accounting. 2) Board of Directors’ proposal for 2012 to the AGM. Return on equity 1) Equity/assets ratio 1) Dividend % % SEK % 35 35 4 80 Goal >25% 30 30 70 25 25 3 60 Goal >20% 50 20 20 2 40 15 15 30 10 10 1 20 5 5 10 0 0 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012* 1) According to legal accounting 1) According to legal accounting Dividend per share Dividend, % * For 2012, Board of Directors' proposal PEAB ANNUAL REPORT 2012 1 COMMENTS FROM THE CEO Lasting, sustainable and cooperation In many ways 2012 was an eventful year for Peab, a mixture of good news and disappointments.
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