Annual Report 2011 Report Annual

Vik Annual report 2011 report Annual

Rygg PEAB ANNUAL REPORT 2011

VICTORIA TOWER TOWER VICTORIA Kista Vik

CONTENTS Peab at a glance 1 Comments from the CEO 2 Nordic construction and civil engineering market 4 Business model 9 Peab’s six Group strategies 10 Operative and financial goals 12 A new Nordic organization in 2012 13 Board of Directors’ report 14 The Group 15 Business area Construction 18 Business area Civil Engineering 22 Business area Industry 25 Risks and risk management 28 Sustainability 29 Other information and profit disposition 33 Financial reports and notes 36 Auditors’ report 88 Corporate governance report 89 Board of Directors 94 Executive management and auditors 95 The Peab share 96 Five year overview 98 Financial and construction-related definitions 99 Summons to attend the Annual General Meeting 100 Shareholder information and addresses 101

Peab AB is a public company. Company ID 556061-4330. Domicile Förslöv, Sweden.

All values are expressed in Swedish krona, abbreviated to SEK. Numbers presented in parentheses refer to 2010 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 sources in the public sector and the construction and civil engineering trades.

Audited financial reports, pages 14-88.

Photo cover: Natacha Jovic. Vik

Peab at a glance

The Nordic Community Builder Peab is a Nordic construction and civil engineering company that cooperates over borders in order to surpass our customers’ expectations. We have 130 offices in Sweden, Norway and Finland, which means we are always close to our customers. Peab has around 15,000 employees and in 2011 net sales amounted to TelgePeab Södertälje has been struggling for several years SEK 44 billion. with a high housing shortage and troublesome unemployment in the municipality. To counter this we started TelgePeab, a jointly owned construction company by Södertälje municipality and Peab, which provides members of the community that are unemployed or receive employment aid with the opportunity to get training and work. By being innovative TelgePeab has broken fresh Trysil ground and in the first year alone built more than Trysil is one of Norway’s most popular ski destinations 50 apartments. and Peab has built the Park Inn Trysil Mountain Resort with 900 beds and apartments in different sizes. This is a top of the line ski resort which offers just about everything a tourist can dream of - skiing, mountain climbing and hiking, a spa, first class restaurants and a relax facility etc. The Park Inn Trysil project is an excellent example of how Peab’s effective cooperation between entities and over country borders can be. Puuviikki Puuviikkii is the largest wooden construction project of apartments in Finland. It’s located in the Viiki district of Helsinki and has become a renowned cutting edge project, involving Tammerfors University and the Finnish government’s research institute VTT. Wood is a local material which requires less transportation and is very useful from a sustainable perspective. The Peab School Peab Schools are currently located in Ängelholm, Malmö, Solna and Upplands Väsby and a fifth school will open in Gothenburg in 2012. A number of Swedish and Norwegian municipalities have expressed an interest in starting up new schools. In 2011 the Peab School was named “Trade Recom- mended School” by the building and other unions. The Peab School is a good example of community building. Seinäjoki When Peab built the considerable extension to the hospital in Seinäjoki focus was on the building’s function. The objective was to use shared space and equipment as efficiently as possible without lowering the quality of primary and specialized care. This project is one of Peab’s largest construction projects ever in Finland.

Angered The public swimming pool and ice-skating rink in Angered is a typical community building project. A number of people living in Angered were given intern- ships and project jobs, which in many cases then lead to employment in Peab or a subcontractor. The facility has an efficient comprehensive solution with a distinct environmental profile. For example, the heat from chillers is used to warm the pool. Varvsstaden Varvsstaden is located on the site Kockum was previously situated in Malmö and it has become an important district of development in the city. All in all 1,500 new homes and 5,000 new workplaces, along with schools, daycare centers and stores are planned for the area. Peab is developing Varvsstaden in close cooperation with the City of Malmö. It will be sustainability certified and easily identified as a sustainable city district. Vik Rygg

Complete offer for the Nordic region Peab offers total solutions that create genuine added value for our customers thanks to our expertise and operations in Construction, Civil Engineering and Industry. Construction Peab performs quality contract work for external customers and for our own development projects. Operations comprise everything from new construction to renovation and construction maintenance. Civil Engineering Peab is active on the local civil engineering market as well as in infrastructure projects such as bridges and roads. We are also responsible for the management and maintenance of streets and roads. Industry Peab has industrial operations that include asphalt, cement, foundations, electricity, transportation, machines and cranes.

Operative net sales per business area, 2011

Growth on a Nordic market Profitable growth is the foundation of Peab’s value creation. We expand both organically and through acquisitions throughout the Nordic region.

Construction 56% Civil Engineering 23% Industy 21%

Sustainable development Peab intends to be a pioneer in sustainable community building. This means that we strive to plan and carry out all our projects responsibly, long-term and in line with our ethical guidelines. This is our way of taking environmental, economic and social aspects into consideration in our work.

Operative net sales per customer type, 2011

Customer relations Peab prioritizes long lasting customer relations built on trust. This is why we work closely with our customers, for instance through our Trust-based Contracts and Partnering.

Public 32% Private 55% Other 13% 2011 in summary

Operative net sales 1) Operative net sales Group operative net sales in 2011 amounted to SEK 44,015 million (38,184), which was an MSEK increase of 15 percent. Adjusted for acquired and divested units, operative net sales increased 50,000 by 13 percent compared to the previous year. 40,000

30,000 1) Operative operating profit 20,000 The operative operating profit decreased by 5 percent and amounted to SEK 1,483 million 10,000 (1,563). 0 2007 2008* 2009 2010 2011 Earnings per share * Proforma including Peab Industry. Earnings per share before dilution were SEK 3.26 (4.11).

Operative operating profit and Orders received operating margin

Orders received in 2011 amounted to SEK 37,986 million (34,764), which is an increase of 9 MSEK % percent compared to the previous year. Order backlog for Construction and Civil Engineering 3,000 6 increased by 5 percent to SEK 28,378 million since year-end 2010. 2,500 5 2,000 4 Further investment in growth 1,500 3 Peab is in an expansive phase in our endeavour to increase our presence on the Nordic 1,000 2 market. We have therefore acquired companies, invested in machines and housing and prop- 500 1 erty development projects as well as started up in new places. 0 0 2007* 2008* 2009 2010 2011

Operative operating Operative operating Financing proﬁt margin, % * Proforma including Peab Industry. To ensure Peab’s growth strategy the Group issued bonds for SEK 1,000 million in 2011. This gave us the ability to further expand our capital base through this complement to Peab’s bank Order backlog Construction and financing. Civil Engineering per 31 December

MSEK New President and CEO 30,000 Jan Johansson became the new President and CEO of Peab at the Annual General Meeting in 25,000 May 2011. During the year Peab’s business structure and organization has been adapted to 20,000 our vision of being the Nordic Community Builder. Among other things, as of 1 January 2012 15,000 Peab is organized into four independent business areas: Construction, Civil Engineering, 10,000 Industry and the new business area Property Development. These operations were until end 5,000 of 2011 included in Construction. 0 2007 2008 2009 2010 2011 Business ethics Peab does not tolerate any law-breaking or ethical transgressions. In our work against corrup- Equity/assets ratio !) tion we have launched the Ethics Round, a program about our stance regarding ethics, laws % 35 and what is right, for our employees. Around 2,000 supervisors and other employees partici- Goal >25% 30 pated in the program in 2011. 25 20 15 10 Jan-Dec Jan-Dec Jan-Dec 5 Financial summary 2011 2010 2009 0 2007 2008 2009 2010 2011 Operative net sales, MSEK 44,015 38,184 35,140 Net sales, MSEK 43,539 38,045 34,868 Operative operating profit, MSEK 1,483 1,563 1,601 Return on equity 1) Operative operating margin, % 3.4 4.1 4.6 % Operating profit, MSEK 1,505 1,503 1,573 35 Operating margin, % 3.5 4.0 4.5 30 Goal >20% Pre-tax profit, MSEK 1,195 1,513 1,619 25 Earnings per share before dilution, SEK 3.26 4.11 4.52 20 Dividend per share, SEK 2) 2.10 2.60 2.50 15 Return on equity, % 12.1 15.6 18.7 10 Equity/assets ratio, % 25.4 27.8 28.6 5 Net debt, MSEK 6,626 5,719 4,571 0 1) Operative net sales and operative operating profit are reported according to pecentage of completion method. Netsales 2007 2008 2009 2010 2011 and operating profit are according to legal accounting. 2) Board of Directors’ proposal for 2011 to the AGM. 1) According to legal accounting.

PEAB ANNUAL REPORT 2011 1 COMMENTS FROM THE CEO

A platform for communities of the future

The development of our business is guided by our vision of becoming the Nordic Community Builder. Together with our customers and partners we actively participate in creating communities for the future. This makes Peab a unique workplace, and this is one of the reasons why I, with great humility, took on the roll of CEO in May 2011.

During the year operative net sales increased by 15 percent. future. Is it possible to be a community builder and have a business Peab’s daily operations earn well and we have used our cash flow perspective at the same time? Of course it is and, in fact, these to make investments in all our Nordic operations. We have two parts make a whole. acquired companies, started up in new places and invested in Developing the mines in Norrbotten for Northland Resources development projects. These steps are important in our work to and Boliden among others, are good examples of how we work to become the Nordic Community Builder, an ambition that comes develop the local community while we run a commercially impor- with obligations. We have to live up to our customers’ expectations tant project. Peab is working closely with the client and the public in sustainability for instance, which has meant investing in know- sector to develop a rural area in Norrland by providing job opportu- how. All in all 2011 has entailed broad investments that have nities, building infrastructure and creating educational opportuni- charged profitability and cash flow in the short-term but this will ties that give people a reason to stay. Arenastaden in Solna is strengthen our position on the markets where we are active in the another example of community development, where we are turning long-term. an abandoned industrial landscape into a modern city district with long-term sustainable solutions to meet the entirely new demands Good order situation modern society puts on housing, work and entertainment. At a time when the future of the economy is difficult to assess our »At a time when the future of the substantial inflow of orders and high order backlog is a good economy is difficult to assess our cushion. We are particularly pleased about the commission to build the Mall of Scandinavia in Solna, which is Peab’s largest substantial inflow of orders and high project ever. Other large orders customers have entrusted to us orderbacklog is a good cushion.« are the construction of the new E4 in Sundsvall, a housing project Bolyftet – our program to renovate the housing projects from the in Nydalen, Oslo, the new big hotel Triple Towers in Gothenburg, 70s – represents a completely new way of looking at the role a the research facility Max IV in Lund, a contract for the operation of company like Peab can play in these circumstances. It’s a concept highway Romerike Midt outside Oslo, big projects connected to based on sustainability from a comprehensive perspective, the mining industry in Norrbotten and Finland’s largest wood focused on the people living in the projects. Through Bolyftet they construction project Puuviikki in Helsinki. might, for example, receive training from Peab and as a result work with a renewal project that can then provide them with a job. Components for a stronger Financial, environmental and energy efficiency aspects are also position on the market included in Peab’s program. We have just started our journey to become the Nordic Community Builder. This vision is based on three fundamental Intensified work with Group pillars that strengthen our position on the market at the same time we develop communities for the future all over the Nordic strategies region: During 2011 we intensified and concretized the work on our Group Peab builds sustainable communities for the future – we strategies. Several important steps were taken in sustainability conserve resources and our climate smart solutions have such as environmental certification of all our own housing and spreadheaded developments commercial property development projects. Now we have gone Peab is the Nordic company – the obvious partner for one step further in Varvsstaden in Malmö by commencing sustain- community building ability certification of an entire city district. Peab attracts talented people – we come up with ideas, take We have also spotlighted customer satisfaction. The new initiative and break new ground CSI (Customer Satisfaction Index) which was developed to measure what our customers think of us will contribute very valu- Together with our customers and other key players we can create able information concerning what we do well and what we need the conditions necessary to meet the demands from people and to improve. Our daily contact with customers – used correctly – is environments in sustainable development – today and in the also a good source of new insights. During the year I have met a

2 PEAB ANNUAL REPORT 2011 COMMENTS FROM THE CEO

»Based on our core values “down-to-earth, developing, personal and reliable” we have created a way of doing things and a company culture that appeals to a lot of people.«

great number of clients and I always leave thinking that if we are Currently we are working to develop two very important areas of really good listeners these meetings can be a treasure trove for our operations: the work environment and ethics. In 2012 we will ideas on how to make our business even better. Trying to surpass make a number of substantial investments in our work environment our customers’ expectations has always been an important part of and several measures will take the company to a higher level. our business concept. Another prioritized area is ethics, which is always on the executive management agenda. We have made it very clear in this matter that Peab does not tolerate, any ethical infringements or law- Good market conditions in the breaking on any level. long-term The economies of our three markets are fundamentally strong We create added value and the market conditions for construction and civil engineering After more than 50 years of growth we are now taking vital steps are favorable in the long-term. There is a substantial underlying to becoming the Nordic Community Builder. This is being done need for housing and the demand for rentals continues to be good within the framework of our financial goals where we currently although we have noted longer sales processes in tenant-owned meet our goals for our equity/assets ratio and dividends. Our housing during the second half of 2011. We believe the other types expansion has affected profitability in the short-term but with a of construction and civil engineering projects will also gain from reinforced market position we will have long-term good conditions the relatively strong domestic economies and low interest rates. for achieving our return on equity goal as well. It’s difficult to predict market developments in the near future As of 1 January 2012 our operations are divided into four and we are carefully monitoring the effects of the uncertain Nordic business areas: Civil Engineering, Construction, Property financial situation in Europe. Nonetheless we believe the rate of Development and Industry. This gives us a more effective organi- start-ups will be lower in building construction but that volumes in zation, it clarifies how the company is steered and develops our civil engineering will remain stable. This is one of the reasons why offer to our customers. Creating the independent business area our program for better cost efficiency, through the development of Property Development marks our ambition to become a leader in more effective processes and industrial construction, will be an both acquiring and enriching and managing and divesting important part of our work. We also have the advantage of a commercial property. strong financial base built on a long tradition of profitable growth, In summary I can conclude that Peab has the strength a well diversified business, good access to liquid funds and stable required to become the Nordic Community Builder. We have relations with our banks. committed and competent employees, strong leadership and more than 50 years of experience. Although our journey to The work environment and achieve our vision has just begun the platform we are creating ethics in focus gives us a good vehicle to arrive at our destination. Brand and internal studies show that customers, employees and Förslöv in April, 2012 the world around us have a positive view of Peab and the work we do. Based on our four core values “down-to-earth, developing, personal and reliable” we have created a way of doing things and Jan Johansson a company culture that appeals to a lot of people. This is a signifi- President and CEO cant part of why our personnel has worked so well this year.

PEAB ANNUAL REPORT 2011 3 CONSTRUCTION AND CIVIL ENGINEERING MARKET

Nordic construction and civil engineering market There have been a number of surprises on the Nordic construction and civil engineering market in 2011. Ongoing building construction has been much higher than expected in several sectors in Sweden and Norway, while the Finnish market is showing signs of a new slowdown. This situation can most likely be explained by the economic structure of the three countries and their relations with the rest of Europe.

Source: Industrifakta.

SWEDEN FINLAND The underlying forces and threats on the Nordic construction and Like Sweden Finland was hit by a drastic drop in growth in the first civil engineering market are varying more and more between the phase of the crisis but it did not recover as well in 2010 and 2011. three countries. This is particularly true for the effects of the debt Finnish industry, which is highly dependent on exports, was crisis in Europe. Sweden was deeply affected in the first phase in touched by the problems of other EMU countries but the effect on 2008-2009 with a drastic reduction in GDP but it quickly recovered employment was slight and therefore domestic consumption in 2010 and 2011. Worth noting is that the hardest hit sector was remained unscathed. Finland has also noted a slowdown in the manufacturing because of a drop in demand for exports while the service sector and because it is a member of the EMU its options service sector remained basically untouched. Growth in retail for stimulating its economy are limited. This means that uncer- slowed as households in Sweden tightened their purse strings. tainty regarding economic developments is greater in Finland Government finances, including most municipalities, were not than it is in Sweden and Norway. particularly affected by the downturn either, even though tax revenues shrunk slightly due to higher unemployment. And since Sweden is not a member of EMU it was free to make its own Housing finance and monetary policy decisions. SWEDEN Swedish housing construction is impacted by several strong NORWAY structural factors. Too little production for a number of years in Norway and Sweden have stable finances, which means they relation to demographic developments has led to a growing imbal- have room to maneuver to meet changes in the world around ance between available housing and demand. Urbanization, high them. Due to, among other things, significant investments in the immigration and a rapidly growing number of young households oil business which stimulated its economy Norway’s GDP was have added to the existing housing shortage in several growth only marginally affected by the first phase of the debt crisis. zones and this situation is not expected to change for many years Household consumption remained high due to historically low to come. At the same time requirements for a larger down interest rates and high employment, and this contributed to payment and higher economic margins has reduced many poten- stabilizing the Norwegian economy. However, there is growing tial buyers’ ability to buy a tenant-owned apartment or single concern over the accelerating borrowing levels of households home. The lack of land available for a reasonable price to build and municipalities. If the debt crisis should get worse both Norway both apartment buildings and single homes on continues to be a and Sweden still have room in their state finances to stimulate problem. This development has only worsened by higher interest their economies. rates from banks and falling prices on existing housing which

Gross domestic product in the Nordic region Interest rates and currencies Fixed prices, change in percent 10 year Government bonds

% Interest 6 6 4 5 2

0 4 -2 -4 3 -6 2 -8

-10 1 2008 2009 2010 2011 2012P 2013F 2005 2006 2007 2008 2009 2010 2011 2012 Sweden Norway Finland F=Forecast Sweden Norway Finland

Source: National Institute of Economic Research (NIER) Source: Sveriges Riksbank

4 PEAB ANNUAL REPORT 2011 CONSTRUCTION AND CIVIL ENGINEERING MARKET

DISTRICT KUGGÖREN Kärrtorp, Stockholm

makes households uncertain and further curtails mobility in major buildings fell by 6 percent and by all of 15 percent for single sections of the housing market. It is also quite possible that the homes. At the same time renovation of apartment buildings grew turbulence in Europe has contributed to dampening Swedish by more than 10 percent, which means that the refurbishing of all household’s faith in the future and desire to invest. A trend in 2011 the big housing projects built in 1960-1975 has begun. An annual in the housing market was a shift in demand towards rentals and increase of 10-15 percent is projected for the period 2012-2013. this development will no doubt expand in the next 1-2 years.

New construction of housing is the only sector on the Swedish NORWAY market where start-ups diminished in 2011 and forecasts for On the Norwegian market powerful forces have driven housing 2012-2013 point downward as well. In 2011 start-ups of apartment construction. Intense population growth, high employment levels and relatively low interest rates have together with a hefty housing Total investments 2010-2013 shortage increased demand in 2011. Single home construction Building construction start-ups, ongoing civil engineering investments, BSEK, 2011 prices. has also been stimulated by record high prices for existing BSEK houses. At the same time household borrowing has reached an 250 16% 9% –5% –1% alarming level and Norwegian banks, like Swedish, have become 5% 10% –3% –4% 200 more restrictive in granting loans. Other hindrances on the Norwe-

150 3% 3% –1% –5% gian housing market have been a growing shortage of labor and land to build on. Start-ups of single homes and apartment build- 100 ings have surpassed expectations. This is particularly true for 50 apartment buildings where they more than doubled. The increase 0 in construction of single homes was a more moderate 13 percent. 2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 Sweden Norway Finland This means that apartment buildings represent almost half of Source: Industrifakta

PEAB ANNUAL REPORT 2011 5 CONSTRUCTION AND CIVIL ENGINEERING MARKET

building construction in 2011 compared to a fifth two years earlier. and investments fell to only a third of what they were two years The forecast for 2012 is slight growth in single home construction ago. During the next two years single home construction is and a rather substantial, negative turn in apartment buildings. expected to continue to contract by about 5 percent annually, new Apartment building refurbishing more than doubled in Norway in construction of apartment buildings is expected to level off some- 2011 and a sizable drop is expected even in this sector in 2012. what while renovation is expected to increase by around 10 percent during 2012.

FINLAND Developments in Finnish housing production have been similar to Office, retail and other those in Sweden in 2011 with a reduction of 6 percent in single homes and 3 percent in apartment buildings. This situation is commercial space more or less a return to normal after the intense rise in both SWEDEN sectors in 2010. Mostly single home construction was stimulated Employment in the service sector in Sweden has not noticeably by low interest rates and higher employment levels but during the dropped. This has led to a stable development in rent levels and past year conditions on the market have changed significantly. As vacancies for offices and neither hotels nor restaurants have been a member of the EMU Finland is particularly affected by the finan- particularly affected by external economic turbulence yet. There is cial turbulence in Europe and, concerned about rising unemploy- still a demand for large, modern offices in the big cities although ment, households have become more careful when buying interest in older office space has diminished. This is often being homes. In addition, the Finnish banks have become more restric- converted into apartments or some other use. However, the situa- tive and the government has reduced subsidies. However, there is tion for new construction in retail has worsened since Swedish still a considerable need for new housing because of the fluctua- household consumption is not growing at its previous rate. None- tion of the population to growth zones. This is particularly true for theless there is a great need to rebuild and renovate retail prem- the youngest and the oldest households although many of them ises and to some extent offices. In 2011 start-ups in construction cannot afford the cost of a newly built home, no matter the owner- of commercial space increased by more than 60 percent, which ship form. Refurbishment of apartment buildings shrunk in 2011 surpassed all expectations. This means a dramatic, negative turn

VÅGEN Örebro

6 PEAB ANNUAL REPORT 2011 CONSTRUCTION AND CIVIL ENGINEERING MARKET

can be expected in 2012 and a further reduction is forecasted for office premises and rent levels have continued to be relatively 2013 as well. This is explained by the increasing difficulties in good, the Finnish market is affected by the uncertainty in the financing new projects and the risk that lower employment levels EMU. Financing new projects has become more difficult and in the service sector will lead to more vacancies. households consume more carefully, which has dampened retail growth. As a result forecasts for construction of commercial space NORWAY indicate fewer ongoing projects by a total of 10 percent in the next Expectations and forecasts for start-ups in construction of two-year period and this figure can rise if the debt crisis deepens. commercial premises were surpassed in Norway, particularly in new construction. This was due to good profitability and high Public premises employments levels in the service sector as well as a shortage of modern office space, as in Sweden, in the big cities. However, SWEDEN construction of retail space has not developed as well as office Construction in the public sector in Sweden continued to grow space. Even if the Norwegian economy and domestic demand are throughout the debt crisis and this trend has not abated in 2011. still strong there are signs that it is becoming more difficult to In total start-ups of new construction and refurbishment of public finance new construction of commercial space projects because premises increased by more than 40 percent. An important factor banks are less willing to grant loans. This, together with the high behind this strong growth is several very large projects in, for level of investments in 2011, will probably lead to a return to more example, healthcare. Construction of energy related buildings has normal levels through a reduction in ongoing projects by about 25 also increased significantly. There is still a substantial need to percent in 2012. renovate public premises like schools and bring down energy consumption in the large areas of older buildings. Despite this a

FINLAND decline of about 30 percent in the construction of public space is Finland differs from both Sweden and Norway with a drop in start- projected for the next two-year period. This is in part a reaction to ups in construction of commercial space by about 10 percent in the previous upturn but also stems from uncertainty regarding 2011. Even if there is still a need for modern commercial and funding now that tax revenues are expected to diminish as economic growth contracts.

NORWAY Developments in Norway have been the same as in Sweden the past few years. High levels and continued growth have characterized construction in the public sector. This is due to a growing population and the centralization of public administration. Norway also needs new premises for healthcare and education and there are plans to increase building in culture and sport venues. Large areas of older buildings need to be refurbished and become more energy efficient and this will require considerable resources for a number of years to come. During the next two-year period public construction is expected to shrink by close 20 percent in total due to tighter local and national budgets.

FINLAND Finland differs from Sweden and Norway regarding construction in the public sector since start-ups in construction of public premises have declined successively the past few years and in 2011 the reduction was 5 percent, all of it in new construction. In spite of this, construction in the public sector dominates the Finnish building construction market. Due to the constant migration to the bigger cities, in particular the Helsinki region, the need for new public premises in healthcare, education etc. remains strong. However, since uncertainty surrounding EMU is considerable neither the local nor national government is expected to have the necessary resources over the next few years. Nonetheless fore-

PEAB ANNUAL REPORT 2011 7 CONSTRUCTION AND CIVIL ENGINEERING MARKET

casts indicate a slight increase in public building projects in 2012 continue through, among other things, the development of new and 2013, which can be explained by the fact that the state and building construction concepts with various degrees of prefab. municipalities will probably try to shore up employment when the BIM, Building Information Modeling, will become more common economy slows down. and lead to lower costs and more uniform quality through its virtual construction and better coordination of all the involved Civil engineering construction parties. Many construction companies have been struggling to recruit the expertise they need, especially in Sweden and Norway, SWEDEN and this problem will most likely continue in the years to come. Despite the tremendous need for investing in Swedish infrastruc- A more industrialized construction process could compensate in ture it appears civil engineering construction has declined some part for the lack of trained workers on construction sites. Greater few percent in 2011. This can in part be due to delays in planned use of IT, for example in electronic commerce that rationalizes the projects within energy supply but it is also a result of the fact that purchasing process, is expected to lead to higher productivity in the government has prioritized revamping existing infrastructure construction companies. Nonetheless governments and compa- over new construction. Energy supply has become an increas- nies in the entire Nordic area must allocate far more resources for ingly important growth area in civil engineering as have the big education and training in order to compensate for the coming road and railroad projects in major cities. A higher level of private waves of retirement. financing through different forms of public private partnerships (PPP) can facilitate future investments in Swedish infrastructure. They may well be needed to handle revamping railroad networks and the huge need for new infrastructure in, for example the Goth- enburg region. A slight annual growth of around 2 percent is projected in Swedish civil engineering over the next two years.

NORWAY Civil engineering construction is expected to increase in Norway by about 5 percent in 2011 and growth will continue during the period 2012-2013. The positive development is due to both mass transit projects and energy-related investments. Nonetheless road projects have dominated the civil engineering sector the past few years and they are expected to increase in the future. Munici- palities are planning to invest more in infrastructure, which is largely connected to the fluctuation of population to the major growth zones.

FINLAND Civil engineering construction is believed to have contracted in Finland by about 2 percent in 2011 and a slight increase is projected for 2012. Energy supply, railroads and tunnels are prioritized areas and investments in mining are expected as well. Finnish roads and other types of municipal facilities like sewage and water supply nets are in need of attention but there may not be funds to alleviate these problems in the near future.

Trends on the construction market

In all three countries productivity levels have to be improved in order to achieve greater cost efficiency. This is particularly important in housing where moderately priced housing for the young and old is urgently needed. Industrialization in construction will

8 PEAB ANNUAL REPORT 2011 BUSINESS MODEL

Business model Peab’s business model is based on our operations – Construction, Civil Engineering and Industry that together create a complete offer to the market. This makes us the obvious partner for community building in the Nordic region.

ESS CONCE IN PT US B

S L Vision

A V

O Construction I S Peab builds sustainable communities for the future G

I O

L Civil engineering We are the obvious partner for community building in the

N A I Nordic region. We come up with ideas, take initiative and

C Industry

N break new ground. We conserve resources and our climate

N I smart solutions have spearheaded developments. Our work

F is sustainable throughout its entire life cycle

Peab is the Nordic company for construction S S Our entire organisation works together to exceed our cus- T R AT E GIE tomers’ expectations. Peab is always close to our customers no matter whether they operate locally, nationally or globally. Satisfied customers contribute to our success in the entire Nordic region Based on our business concept we work to realise our vision and Peab attracts talented people achieve our financial goals through six Group strategies built on We are the number one Nordic employer. Our values are well established values, ethical principles and taking responsibility simple and clear. Our personnel is deeply engaged and our for a sustainable society. leaders committed to helping people develop. When our employees grow, Peab grows Business Concept

“Peab is a construction and civil engineering company that puts Group strategies total quality in every step of the construction process first. We realise our vision through six Group strategies: Through innovation combined with solid professional skills we Cost-efficient business make the customer’s interest our own and thereby build for the Investment in profitable growth in the Nordic region future.” Be seen and heard in the Nordic region Total quality is a powerful competitive edge for Peab. Our Pioneers in sustainable community building customers choose us because they see that our prices and quality are the best alternative. Being innovative means we always Strengthen and develop customer relations endeavour to find new solutions and at the same time maintain a Be the best workplace in the Nordic region good balance between the tried and true and the innovative. Our business is built on solid professional skills and engaged Financial goals co-workers, which means we can deliver a product that exceeds our customers’ expectations. By working closely with our Operations are steered by Group goals for return on equity, customers we ensure that our construction of today will meet equity/assets ratio and dividends. There are also a number of tomorrow’s demands for a sustainable society. operative goals for the individual business areas.

PEAB ANNUAL REPORT 2011 9 STRATEGIES

Peab’s six Group strategies Based on our business concept we work to realise our vision through six Group strategies.

STRATEGY BACKGROUND METHOD TOOLS IMPLEMENTED 2011 PRIORITIZED 2012 Cost-efficient Cost efficiency is essential to developing a competitive busi- Peab is able to make use of synergies and resources within • Industrial processes • Established key ratios for productivity that will be monitored • Further development of industrial business ness that can also produce a return for Peab’s owners, which and between operations. In addition, we work to continuously • Industrial construction • Internal trade mapped to find synergies processes is why we are always focused on increasing efficiency improve effectiveness in every function. • Coordinated purchasing • Environmental education material and program for purchasers • Advance management, steering and throughout our operations. • Logistic solutions was produced business development towards increased standardization • Operative goals and follow-up • Start of a purchase and delivery portal in order to standardize • Establish uniform work methods for • Focus on fixed costs and internationalize purchases • Pilot project in logistics to coordinate deliveries and become experience sharing and continuous more transportation efficient improvement • Complete our purchase and delivery portal • Create a logistics strategy • Increase internal loyalty to Peab’s purchasing agreements

Investment Profitable growth is essential to Peab’s value creation. Growth Peab expands both organically and through acquisitions • Personnel recruitment program • A number of activities to attract, recruit and train personnel • Invest in land and development in profitable is important since it improves our ability to compete – in part throughout the Nordic region. Currently there are greater • Acquisition processes for land and • Acquisitions in Industry; Hagströms i Näs, Sweden, Terje Hansen property for the construction and sale because big companies are usually involved in big projects opportunities in Finland and Norway but Sweden has further properties for housing and property AS, Norway and Norwegian Aggregate, Norway of developed and completed units growth in the and in part because size is an advantage that lowers costs. growth potential as well, particularly in construction mainte- development projects • Acquisitions in Construction; K. Nordang AS, Telemark Vestfold • Make complementary acquisitions to Nordic region nance. Peab needs to ensure the recruitment of co-workers • Acquisition processes for companies Entreprenör AS, Norway generate growth that can replace the coming retirement waves in order to be able to grow.

Be seen and We intend to make Peab a household name as the Nordic By focusing more on strengthening Peab’s brand locally and • Nordic communication platform • Analysis of Nordic interested parties’ familiarity with, and attitude • Broad implementation of communica- heard in the Community Builder. By being seen and heard, in our own through communication activities that support Group strategies, • External communication towards, Peab tion platform industry and on the Nordic market, we can better attract Peab will be considered and act like the Nordic Community • Internal communication • Establishment of a new communication strategy for Peab as the • Develop our communication organization Nordic region customers, personnel and investors. Builder. • Active participation in community Nordic Community Builder • Follow-up of Nordic interested parties’ planning • Marketing campaign for Peab Bostad in Sweden familiarity with, and attitude towards, • Capital Market Day on 30 November 2011 Peab

Pioneers in By being pioneers in sustainable community building we not A common definition of what sustainable community building • Sustainability report with key ratios • Projects will carried out based on our definition of sustainable • Sustainability in transportation and sustainable only create value for our customers and their customers, we means for Peab gives us a common set of goals. Based on this • Environmental and quality certification community building purchasing create value for society at large, our employees and our we work with goals that follow our business plan as well as according to ISO • Produced, developed and held courses and seminars • Set more measurable goals according community owners. This, in turn, paves the way for new markets and education and training and improving instruments and aids so • Environmental certification of buildings • Started the work to produce Peab’s first sustainability report to GRI business opportunities for both our customers and us. that a sustainable perspective is a natural part of every aspect building • Sustainability certification of city districs according to GRI • Continued work with ethical issues of our operations. • Energy optimization system L-CTRL • Started several own development projects that will be certified • Work on environmental certification of • Ethics council and Ethics Round through BREEAM or Miljöbyggnad (Environmental Building) buildings • Sponsoring policy • Started up an energy network as well as a network to certify • Greater investment in the work buildings environment • Participation in external networks • Carried out Ethics Round

Strengthen In addition to being the foundation of Peab’s operations our Besides the obvious of delivering the right quality for the right • Trust-based contracts • Pilot project and tests carried out for continuous measurement • CSI: and develop strong customer relations are the key to efficient production at price at the right time, customer relations are developed • Partnering of customer satisfaction in all operations • Work with improvements that lower prices with higher quality. through being sensitive and prioritizing long lasting relationships • Long lasting customer relations • Business concept with industrial thinking ready for the market: strengthen and develop us and our customer built on trust. We also work to continuously develop Peab’s • Concept development Single home concept, Bolyftet, Sheltered and senior housing, customer relations based on its different forms of cooperation such as Trust-based contracts, Peab PGS industrialized construction systems results relations • Customer Satisfaction Index Partnering and complete concepts. • Business concept: • Market and sell our concepts internally and externally

The best work- In the coming years more and more Peab employees will retire Peab will be the best workplace in the Nordic region by further • The Peab School • Through research and our own investigations Peab has defined • Continue to improve the total index in place in the while the labor force will diminish as people born in the 40s developing our employees and leaders, supporting creativity • Employment days what makes a workplace attractive, created clear goals to The Handshake leave it. This sharpens the competition for young, qualified and industrializing construction. For this reason Peab works • Individual development plans achieve this and initiated the process • Continued focus on developing leader- Nordic region workers – in construction and in industry in general. At the systematically to map employee work satisfaction. We have • Diverse workplace • Carried out an employee questionnaire based on the definition of ship same time Peab plans to grow which means we must be able also defined what a good workplace is and set measurable a good workplace • Employee questionnaire The Handshake • Increase all employees’ participation to attract, develop and keep new employees. goals to achieve this. • Carried out projects to develop key ratios and measurement in the work process and cooperation • Peab Leisure methods between different professions • Profit-sharing system • Continued investments in improving • Work environment program the work environment • Ethical stance

10 PEAB ANNUAL REPORT 2011 STRATEGIES

PEAB ANNUAL REPORT 2011 11 OPERATIVE AND FINANCIAL GOALS

Operative and financial goals Peab’s earnings will be used to develop our business and deliver a return to our owners.

Financial goals vidual company. These goals are regularly followed up through reports on the projects and profit units. Operational goals are Peab’s management steers operations based on the Board’s primarily focused on three areas: guidelines that are founded on three financial goals – return on Profitability: This is measured through the operating margin equity, the equity/assets ratio and dividends. They were adopted where we focus on price-setting and particularly overhead as in the spring of 2007 and are valid for the entire Group. The goals well as through the return on capital employed in order to are clear and simplify communication with financial markets. We ensure optimal use of the capital tied up in facilities and will adjust our financial goals as needed if significant changes in project developments. the structure of Peab or external circumstances, such as changes Cash flow and liquidity: Cash flow before financing must on the financial markets or through political decisions, occur. Over always be positive in the long-term. Even if this may deviate time goal achievement can vary depending on the different stages for a particular year, the tied up working capital and invest- of our development where some are characterized by expansions ment levels must, over time, match the cash flow generated and others by consolidation. At the moment Peab is in an expansive phase and has been by operative units. The Group’s liquid funds, including investing heavily the past few years. We have acquired compa- unutilised credit facilities, amounted to SEK 4.9 billion per nies, started up in new places and invested in different develop- 31 December 2011. ment projects. These investments are intended to strengthen our Tied up capital: Tied up capital is an important steering position but they have charged profitability and cash flow in the instrument to ensure that the business is capital effective, short term. that the Group prioritizes the right project and that Peab always has the resources it needs to grow. Two Group level investment teams decide on the business areas’ investments Operational goals for both machines and project property. This supports an Peab consists of a number of different operations with different entrepreneurial spirit in our units while ensuring that the conditions which therefore have internal goals that fit each indi- Group’s tied capital is used optimally.

PEAB GROUP’S FINANCIAL GOALS GOAL COMMENTS Return on equity will be a minimum of In recent years returns on equity have been higher Return on equity % 20 percent. than our goal. However, we have not met this goal 35 The goal is set to create an effective business since 2009 due to lower profits in current opera- 30 Goal >20% and a rational capital structure that limits the tions with contracting margins the past few years 25 20 owners’ contributed capital. as a result of the financial crisis in 2008. Invest- 15

ments made in 2011 have had a short-term 10 negative effect on profitability but long-term this 5 0 will strengthen our earnings. 2007 2008 2009 2010 2011

Equity/assets ratio will be a minimum of The equity/assets ratio goal has been reached or Equity/assets ratio % 25 percent. surpassed in recent years. The high rate of invest- 35 Goal >25% The equity/assets ratio regulates the relationship ment in past few years has led to a larger balance 30 between equity and debt. The goal, which is set sheet total, which has resulted in a lower equity/ 25 to balance the owners’ demands on returns and assets ratio. 20 the need to safeguard the business during times 15 with a more difficult market situation, entails that 10 5 a minimum of 25 percent of Group assets are 0 financed through equity. 2007 2008 2009 2010 2011

1) Dividends will be a minimum of A dividend of SEK 2.10 per share is proposed for Dividends % 70 50 percent of profit after tax. 2011. Calculated as a share of consolidated Goal >50% The goal is set to ensure the owners’ return on reported profit after tax the proposed dividend is 60 50 their contributed capital as well as meet the 66 percent. The proposed dividend corresponds 40

company’s need for funds to develop operations. to a direct return of 6.1 percent based on Peab’s 30 final market value on 31 December 2011. 20 10

0 2007 2008 2009 2010 2011

1) Board’s proposal for 2011 to the AGM.

12 PEAB ANNUAL REPORT 2011 ORGANIZATION

A new Nordic organization in 2012 Through our local presence we can take advantage of the local entrepeneur- ship and at the same time make the most of the strength in the Group’s collective resources, expertise and experience throughout the Nordic region.

As of 1 January 2012 Peab has a new organization that gives the Operations Development Group a well defined structure and a good basis for continuing our Communication work to become “The Nordic Community Builder”. It also bolsters Purchasing and Logistics our capacity to grow on the Nordic market. This means that Peab’s organization continues to rest on our solid value founda- Construction, Civil Engineering and Industry have been trans- tion and the four core values that permeate our entire organiza- formed into more independent business areas with Sweden, tion. We continuously develop our personnel based on this foun- Norway and Finland as their domestic markets. In connection with dation. this change a fourth business area, Property Development, was created. Peab’s executive management has been expanded to OUR CORE VALUES include the manager of each business area. The support functions Housing development, Construction Down-to-earth: We will be down-to-earth in the way we maintenance and Group costumers are included in business area work, decision-making will be close at hand and we will be Construction. They are there to aid the business area with con- sensitive to the needs of our customers. cept development and specialist knowledge. This increases Developing: We will be innovative, flexible and strive for Peab’s ability to create uniform, cost-efficient concepts and stand- continuous improvement. ard solutions. Personal: Through an honest and trustful dialogue with our At the same time a new staff organization on Group level has customers and partners we will create and maintain long- been formed. The staff teams will support executive management term, good relationships. and operations, strategically and in their day-to-day functions. The staff teams will work independently to achieve stipulated goals but Reliable: We will always perform with good business ethics, they will also coordinate and maintain a dialogue with each other. competence and professional skill.

The Group level staff functions are: Strategy and HR Finance and Treasury Acquisitions and Investments

The Peab Group

Business area Business area Business area Business area Construction Civil Engineering Industry Property Development

Strategy and HR

Finance and Treasury

Acquisitions and Investments

Operations Development

Communication

Purchasing and Logistics

PEAB ANNUAL REPORT 2011 13 BOARD OF DIRECTORS’ REPORT THE GROUP

Board of Directors’ Report The Board of Directors and the Chief Executive Officer of Peab AB (publ), Corporate ID Number: 556061-4330, hereby submit the following annual report and consolidated accounts for the 2011 financial year.

BEKKESTUA SUBWAY STATION Bærum, Norway

EXPERIUM Lindvallen

RESTAURANT ONDA Oslo, Norway BOARD OF DIRECTORS’ REPORT THE GROUP

Peab is one of the Nordic region’s leading construction and civil engineering companies. The Group primarily conducts business in Sweden, where Peab operates nationwide, but it also operates in Norway and Finland where it focuses on the capital city areas.

Net sales1) amounted to SEK -81 million (179). The shareholding is reported at market price on the balance sheet date. Peab’s holding in Group operative net sales for 2011 amounted to SEK 44,015 Catena is reported as an associated company and has therefore million (38,184), which was an increase of 15 percent. After not been given a market value. adjustments for acquired and divested units operative net sales Pre-tax profit amounted to SEK 1,195 million compared to increased by 13 percent compared to the last year. Group net SEK 1,513 million for the last year. sales for 2011 increased by 14 percent to SEK 43,539 million Tax for the year was SEK -252 million (-323), which corre- (38,045). Of the year’s net sales, SEK 7,616 million (5,425) was sponds to a tax rate of 21 percent (21). attributable to sales and production outside Sweden. Profit for the year amounted to SEK 943 million (1,190).

Profit1) Financial position Operative operating profit for 2011 was SEK 1,483 million The equity/assets ratio on 31 December 2011 was 25.4 percent compared to SEK 1,563 million for the last year, a decline by compared to 27.8 percent at the previous year-end. We are in an 5 percent. Operating profit for 2011 amounted to SEK 1,505 expansive phase, which has tied up more capital during the year. million compared to SEK 1,503 million for the last year. Peab is Interest-bearing net debt amounted to SEK 6,626 million compared in a phase of expansion, which has had a negative effect on to SEK 5,719 million at the end of 2010. The increase is primarily profitability in all our operations. Construction has suffered a connected to the strong growth in Peab through a higher level of decline in profits in ongoing production due to downwardly working capital, acquisitions and investments in machines as well adjusted project forecasts and lower revenue recognition in big as housing and property developments. Net debt decreased projects where production will continue for quite some time and during the fourth quarter, in part as a result of a strong cash flow. the uncertainty factor is initially high. However, housing The average interest rate in the loan portfolio including derivatives construction has finished the year well showing growing net was 3.5 percent (2.9) on 31 December 2011. sales and rising margins. Civil Engineering and Industry have Group liquid funds, including non-utilized credit facilities, also ended the year positively with high net sales levels and were SEK 4,944 million at the end of the year compared to SEK better margins than in 2010. 5,274 million on 31 December 2010. Depreciation for the year was SEK 803 million (725). At the end of the year, Group contingent liabilities, excluding Net financial items amounted to SEK -310 million (10), of joint and several liabilities in trading and limited partnerships, which net interest expense amounted to SEK -234 million amounted to SEK 2,136 million compared to SEK 1,602 million on (-175). The effect of valuing financial instruments at fair value 31 December 2010. Of contingent liabilities, obligations to tenant- affected net financial items by SEK -78 million (166), of which owners’ associations under construction were SEK 1,554 million the income effect of valuing the Brinova holding at fair value compared to SEK 1,238 million at the previous year-end.

Operative net sales Operative operating profit and Equity/assets ratio margin MSEK MSEK % % 50,000 3,000 6 35 30 Goal >25% 40,000 2,500 5 25 2,000 4 30,000 20 1,500 3 20,000 15 1,000 2 10 10,000 500 1 5 0 0 0 0 2007 2008* 2009 2010 2011 2007* 2008* 2009 2010 2011 2007 2008 2009 2010 2011

* Proforma including Peab Industry. Operative operating Operative operating proﬁt margin, % * Proforma including Peab Industry.

1) Peab applies IFRIC 15, Agreements for the Construction of Real Estate, in the reporting. As a result IAS 18, Revenue, will be applied to Peab’s housing projects in Finland and Norway as well as Peab’s own single homes in Sweden. Revenue from these projects will be recognised first when the home is handed over to the buyer. Segment reporting is based on the percentage of completion method for all our projects since this mirrors how executive management and the Board monitor the business. There is a bridge in segment reporting between operative reporting according to the percentage of completion method and legal reporting. Operative net sales and operative operating profit are reported according to the percentage of completion method. Operative net sales and operative operating profit are reported according to legal accounting.

PEAB ANNUAL REPORT 2011 15 BOARD OF DIRECTORS’ REPORT THE GROUP

WAY 41 Veddige

Investments Cash flow before financing amounted to SEK -1,071 million compared to SEK -315 million for the last year. The year’s funding Net investments of tangible and intangible assets amounted to amounted to SEK 1,689 million (-425). SEK 906 million (535) during the year. Project and development High earnings at the end of the year resulted in a strong cash properties were acquired for a total of SEK 273 million (797) flow in the fourth quarter. during the year. Orders received and order Cash flow backlog Construction and

Cash flow from current operations before changes in working Civil Engineering capital was SEK 2,192 million (1,890). Cash flow from changes in Orders received for 2011 amounted to SEK 37,986 million working capital was SEK -2,132 million (-727). The growth in net compared to SEK 34,764 million for the last year. sales during the year has generated a higher level of working Order backlog yet to be produced at the end of the year capital. The acquisition of project and development property for amounted to SEK 28,378 million compared to SEK 27,063 million SEK -682 million (-634) is also included in the change in working the last year. Order backlog has increased in construction opera- capital. tions since 2010. Of the total order backlog, 24 percent (29) is Cash flow from investment activities was SEK -1,131 million expected to be produced after the coming financial year. compared to SEK -1,478 million the previous year and this is due Construction projects accounted for 70 percent (68) of the order to Peab’s growth through strategic acquisitions as well as invest- backlog. Swedish operations accounted for 86 percent (88) of the ments in machines and housing and property development order backlog. projects. In addition, we have made a financial investment in a No orders received or order backlog is given for the business block of shares in Lemminkäinen Oyj. area Industry.

Net investments incl. project Cash flow before financing Orders received Construction and development property and Civil Engineering MSEK MSEK MSEK

8,000 1,500 40,000 1,200 35,000 900 6,000 30,000 600 300 25,000 4,000 0 20,000 -300 15,000 -600 2,000 10,000 -900 -1,200 5,000 0 -1,500 0 2007 2008* 2009 2010 2011 2007 2008* 2009 2010 2011 2007 2008 2009 2010 2011 * Including the effect of the acquisition * Including the effect of the acquisition of Peab Industry of Peab Industry

16 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT THE GROUP

ORDER BACKLOG AND ORDERS RECEIVED GROUP FUNCTIONS Construction and Civil Engineering In addition to the business areas, central companies, certain 31 Dec 31 Dec 31 Dec subsidiaries and joint ventures and other holdings are reported MSEK 2011 2010 2009 under Group Functions. The central companies primarily consist Coming financial year 21,578 19,137 17,338 of the parent company Peab AB and Peab Finans AB. Peab AB’s Next financial year 5,164 6,374 5,191 operations consist of executive management and shared Group Thereafter 1,636 1,552 1,958 Functions. The internal bank Peab Finans AB handles the Group’s Total order backlog 28,378 27,063 24,487 liquidity and debt management as well as financial risk exposure. Orders received 37,986 34,764 30,393 The company is also a service function for the subsidiaries and works out solutions for loans and investments, project-related Comments on the financing and currency risk hedging. business areas Operating profit for the year was SEK -199 million (-172).

Peab’s business areas Construction, Civil Engineering and Industry correspond to operating segments. For further information concerning operating segments, see note 3. The different operating segments are described in the following chapters. As of 1 January 2012 Peab has been organized into more independent business areas and at the same time a fourth business area was created, Property Development.

NET SALES AND OPERATING PROFIT PER BUSINESS AREA

Net sales Operating profit Operating margin MSEK 2011 2010 2009 2011 2010 2009 2011 2010 2009 Construction 27,967 24,186 22,355 599 835 814 2.1% 3.5% 3.6%

Civil Engineering 11,554 10,664 9,339 390 356 446 3.4% 3.3% 4.8%

Industry 10,404 8,508 7,581 693 544 514 6.7% 6.4% 6.8%

Group functions 176 146 180 –199 –172 –173

Eliminations –6,086 –5,320 –4,315

Operative1) 44,015 38,184 35,140 1,483 1,563 1,601 3.4% 4.1% 4.6%

Adjustment in housing reporting 2) –476 –139 –272 22 –60 –28

Legal 43,539 38,045 34,868 1,505 1,503 1,573 3.5% 4.0% 4.5%

1) According to percentage of completion method (IAS 11). 2) Adjustment of the accounting principle for own homes in Sweden and housing in Finland and Norway to the completion method (IAS 18).

Share of Group operative Share of Group operative Share of Group net sales 2011 operating profit 2011 employees 2011

Industry Industry 21% 20% Construction Construction Industry 36% 41% Civil 56% Civil Construction engineering engineering 55% 23% 25% Civil engineering 23%

PEAB ANNUAL REPORT 2011 17 BOARD OF DIRECTORS’ REPORT CONSTRUCTION

Construction – a leading Nordic business In Business area Construction we perform contract work for external customers and develop our own projects. Operations comprise everything from new construction to renovation and construction maintenance. Our business is run in five geographic divisions in Sweden, one division in Norway, one in Finland and a Nordic division that manages property development.

VICTORIA TOWER EMERGENCY ROOM Kista Malmö

NORDBY SHOPPING MALL KAJPLATSEN (DOCKLANDS) Strömstad Gävle BOARD OF DIRECTORS’ REPORT CONSTRUCTION CONSTRUCTION

Business area Construction is a local, geographically spread out SALES AND PROFIT organization with functions in housing development and construc- Operative net sales in 2011 amounted to SEK 27,967 million tion maintenance. We can offer the market total solutions, (24,186) which means an increase by 16 percent. Adjusted for concepts and experience from previous projects thanks to the acquisitions the increase was 13 percent. The operative operating business area’s collective resources. profit for the year was SEK 599 million compared to SEK 835 million the previous year. Operative operating margin decreased to 2.1 percent from 3.5 percent compared to the last year. MARKET DEVELOPMENTS Construction has suffered a decline in profits in ongoing pro- Housing duction due to downwardly adjusted project forecasts and lower Falling housing prices and tougher financing terms for homes revenue recognition in big projects where production will continue have together with households’ growing uncertainty shrunk for quite some time and the uncertaintyfactor is initially high. This demand for single homes and tenant-owner apartments and all has entailed lower margins compared with the previous year. this is expected to shift housing construction to rentals in 2012. However, housing construction has finished the year well with Lower interest rates can dampen this effect but probably not growing net sales and rising margins. enough to bolster up housing construction. At the same time the housing shortage is still significant and the rate of renovation and 2011 IN SUMMARY energy efficiency improvements must speed up in order to meet In line with the strategy for the whole Group to strengthen and climate goals. develop Peab’s customer relations we have launched three

Buildings and industry concepts during the year: Bolyftet, Peab Småhus and Annehem. 2011 has been a good year for commercial property and we have Bolyftet is a comprehensive concept for sustainable refurbish- a robust order backlog as we enter 2012. ment of the housing projects from the 70s. The concept balances social, financial, environmental and energy conservation aspects. In Construction maintenance addition to specially designed construction and energy technique Construction maintenance works with maintenance and minor solutions, as well as financing alternatives, the concept contains renovations. The work is ordered as needed and is invoiced measures to make the housing projects in need of upgrading safer directly. The market for construction maintenance is relatively and nicer, and create jobs there. Bolyftet can also be applied to new stable over business cycles but is slowly growing as the amount of production in order to make housing careers possible in these areas. existing property increases. Tougher competition, however, some- Peab Småhus is a concept for terrace houses, link houses times presses prices in projects paid by the hour. Fixed contracts and single homes. Based on a common technological platform the generally follow inflation. Nonetheless, since the entire market is house models are developed with customers in mind. Prefabri- enormous we see opportunities to continue to develop and cated houses with low energy consumption are built efficiently expand. and safeguarded from dampness.

CONSTRUCTION FACTS

MARKET SEGMENT our own projects in Property development MAJOR CUSTOMERS Housing: Produces all kinds of housing that are then sold when the time is right. Peab has a number of Group customers on which includes apartment buildings with the Nordic market such as IKEA, McDonald’s tenant-owners, condominiums and rentals. STRATEGIC PRIORITIES and Choice Hotels. Other large customers We also have a certain amount of single • More focus on profitability. Measures have are real estate companies, municipalities, home construction. Customers are commer- been taken during the year that will be county council and municipal real estate cial and municipal players. We initiate our followed up in 2012. companies, private customers like insurance own projects in Property development that • Continued implementation of Group strat- companies and smaller regional and local are then sold when the time is right. egies, in particular more focus on cost- customers. To a certain extent this group efficiency and sustainability Construction maintenance: Works with also includes private persons through • Significant investment in reinforcing maintenance, repairs, insurance claims, tenant-owner associations and single homes. service to real estate companies and indus- Peab’s operations in Norway and Finland in order to create a platform for further tries and smaller contracts. Customers are growth. IMPORTANT PLAYERS usually local although we have some nation- • Continued development of a common wide Group contracts. Some of the important players on the market management system and concepts in the are Skanska, NCC, JM, Lemminkäinen, YIT Building and industry: builds commercial Nordic region. and public facilities as well as industrial • Continued development of industrial and Veidekke. premises such as offices, shopping malls, construction. arenas, schools and hospitals for private, • Investment in the work environment and municipal and federal customers. We initiate safety.

PEAB ANNUAL REPORT 2011 19 BOARD OF DIRECTORS’ REPORT CONSTRUCTION

Annehem is a concept for senior and sheltered housing where we, already sold means we have a good platform to start up new together with our partners who are municipalities and real estate projects from. However, the current financial unrest and mortgage companies, offer turnkey senior and sheltered housing including ceiling in Sweden have resulted in longer sales processes, which associated facilities for services and activities in the buildings. has a negative effect on our ability to start up new projects with Annehem is primarily built on PGS, Peab’s concept for cost- the current demands on the number of homes sold before produc- efficient, industrial construction of apartment houses. tion begins. An effect of continued turbulence on the market can PGS is a modul-based construction system. The compo- be that interest rates are lower than would have otherwise been nents are manufactured in a factory and mounted on site. The the case, which is positive for housing construction. result is shorter construction times and high, uniform quality in Several aspects such as demography, the economy, interest attractive, energy-saving and environmentally friendly housing. rates, and access to mortgages are driving demand. All these fac- As part of our goal to establish, keep and further develop tors indicate continuing good demand in all kinds of housing and long lasting relationships with our customers we have signed a the demand for rental apartment buildings continues to be good. contract with IKEA which covers 10 new department stores in the Total holdings of project and development property at the end Nordic region. The first of these was built in Kuopio, Finland and of the year amounted to SEK 5,180 million compared to SEK 4,921 will be inaugurated in the summer of 2012. The other is under million per 31 December 2010. The increase is partly a result of construction in Älmhult, Sweden. reclassification of property from fixed assets. During the year we have reinforced the competence and The number of repurchased homes on 31 December 2011 support functions in our organizations in Finland and Norway. was 183 (213) and is evenly divided between Sweden, Norway Finland now has four regions since northern Finland has become and Finland. a region of its own in order to create a better balance in relation-

ship to the long distances. The regional division in Norway has Property development also been restructured, acquisitions made and recruiting done to Property development includes the development of commercial create better conditions for profitable development. property from the acquiring of land to the finished product for the purpose of generating projects for the building sections in Peab’s Housing production operations. Property development consists of projects such as Peab produces all kinds of housing which includes apartment stores, offices, industrial property and housing for rent. buildings with tenant-owners, condominiums and rentals. We also As of 1 January 2012 Property development will become a have a certain amount of single home construction. Our own business area in its own right. As a result competence and housing developments do not include rental production. resources have been transferred to the division to prepare for this. New production of Peab’s own housing developments made Our intention is to intensify our cooperation with real estate up 11 percent of net sales in 2011 compared to 9 percent in 2010. owners and broaden our expertise and experience in order to be The number of homes in production at the end of the year was even better partners to our customers in this market segment. 3,470 compared to 3,212 the previous year-end. The level of own housing development start-ups is slightly lower than last year and Construction maintenance amounted to 1,711 (2,113). The number of sold homes during the A new contract was signed with IKEA in 2011 to handle customer year was 1,531 compared to 2,179 during 2010. claims in Sweden concerning kitchen and bathroom furnishings The fact that 73 percent (77) of our housing in production is where IKEA offers handyman help to replace and fix faulty items.

TORE HALLERSBO, DEPUTY CEO AND BUSINESS AREA MANAGER CONSTRUCTION

WHAT ARE YOU MOST SATISFIED WITH IN 2011? We have galvanized our whole organization in the work with our group strategies and we are now steaming towards our goal to become the Nordic Community Builder.

We have been successful in winning new projects and therefore start 2012 with a well-filled order book.

We were able to start the hotel project Triple Towers in Gothenburg. The fact that we received this commission is an acknowledgement of our expertise in handling complex projects. The Mall of Scandinavia is Peab’s largest project ever and an important part of building Arenastaden, a completely new district in Solna where we are now planning for the construction of housing and more offices.

20 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT CONSTRUCTION CONSTRUCTION

This service was previously purchased from local firms via the 107 tenant-owned apartments in the block Skrovet in individual department stores. Dockan, part of Kockum’s old shipping yard in Malmö. During the year a call contract was signed with Volvo AB The City Hall and 86 apartment buildings in Esboo, right regarding construction maintenance. outside of Helsinki. We have had contracts with the Swedish Postal Service and The first stage of the shopping mall Avenas in Seinäjoki, Nordea for refurbishing and revamping commercial facilities for which is around 11,000 square meters. many years and these contracts were extended in 2011.

IMPORTANT PROJECTS IN 2012 IMPORTANT EVENTS IN 2011 A new block of apartment buildings with 113 apartments in Strong positions on the Nordic market, in part through the Helsinki. The contract is worth EUR 17 million. acquisition of 90.1 percent of the shares in K. Nordang AS. Stage 1 of the research center Max IV in Lund. The contract This is a construction company that operates in Western Nor- is worth around SEK 360 million. way and the acquisition strengthens our presence in Norway. An office and retail building in Tromsö, Norway. The contract Substantial investments in housing and property develop- is worth NOK 110 million. ment projects. A new concentrator in Garpenberg. The contract is worth Started up in new places in Norway and Finland. around SEK 500 million. Renovation and extension of a new psychiatric ward in Lund. IMPORTANT PROJECTS COMPLETED IN 2011 The contract is worth around SEK 500 million. Clarion Hotell Post, a remodeling of the classic post office on A new office building in Hammerfest in northern Norway. The Drottningtorget in central Gothenburg . contract is worth NOK 144 million. Three-story underground car park connected to Statoil’s new

headquarters at the old airport Fornebu in central Oslo. The Mall of Scandinavia. The contract is worth SEK 3,6 billion which makes it the largest single project in Peabs history.

Key ratios 2011 2010 Operative net sales, MSEK 27,967 24,186 Operative operating profit, MSEK 599 835 Operative operating margin, % 2.1 3.5 Order backlog on 31 December, MSEK 19,852 18,316 Number of employees 8,169 7,865

Own housing development production 2011 2010 Number of housing starts during the year 1,711 2,113 Number of homes sold during the year 1,531 2,179 Total number of homes under construction, at year end 3,470 3,212 Share of sold homes, at year end 73% 77% Number of repurchased tenant-owned rights/shares in Finnish companies on the balance sheet, at year end 183 213

Operative net sales Operative net sales 2011 per type of opera- Operative operating profit and margins tions MSEK MSEK % 30,000 1,200 6

25,000 1,000 5

20,000 800 4

15,000 600 3

10,000 400 2

5,000 200 1

New construction 62% Construction maintenance 11% 0 0 0 2007 2008 2009 2010 2011 Renovation 24% Other 3% 2007 2008 2009 2010 2011 Operating proﬁt Operating margin, %

PEAB ANNUAL REPORT 2011 21 BOARD OF DIRECTORS’ REPORT CIVIL ENGINEERING

Civil Engineering – a business with Nordic ambitions Business area Civil Engineering works with the local civil engineering market, in infrastructure and heavy construction as well as in operation and maintenance in Sweden, Norway and Finland. Our competitive capacity is primarily based on tight-knit and coordinated civil engineering operations.

ARENASTADEN Stockholm

UNDER GROUND IN KIRUNA Kiruna

PGA OF SWEDEN NATIONAL, LAKES COURSE Bara BOARD OF DIRECTORS’ REPORT CIVIL ENGINEERING CIVIL ENGINEERING

Peab’s Civil Engineering operations are built on cooperation over SALES AND PROFIT regional and national borders, uniting forces to develop product Net sales for 2011 amounted to SEK 11,554 million compared to areas and large scale advantages in big, complex projects. SEK 10,664 million for the last year, which is an increase of 8 Our factors for success are local presence, specialization percent. Even after adjustments for acquired units the increase based on product areas, structured experience sharing, support was 8 percent. functions adapted to our operations, closely held project steering Operating profit for the year amounted to SEK 390 million and a high level of refining within our organization. compared to SEK 356 million for the last year. Operating margin amounted to 3.4 percent compared to 3.3 percent for the last year. The orders received in tough competition continue to have a MARKET DEVELOPMENTS negative effect on operating profit and margins during the year. The market for the business area Civil Engineering is highly Civil Engineering ended the year positively with high net sales dependent on political decisions in the form of national and munic- levels and better margins than in 2010. ipal infrastructure plans and the state of the economy of course.

Local Civil Engineering Market 2011 IN SUMMARY This market segment is steered by the business cycle in general, The price situation has varied for different market segments in the municipal finances, housing construction and developments in business area during the year. The Local Civil Engineering Market business. The market was relatively stable in 2011 but there were has been hit hardest by the general uncertainty on the market. more local variations. However, we have managed to balance our business thanks to our three market segments. During the year we strengthened the Infrastructure/Heavy Construction business area’s management organization for greater coordina- The past few years have been good for road and railroad construction and efficiency. tion. This will probably level out in Sweden in 2012 but is expected The business area’s Swedish structure with three market to continue in Norway as well as in Finland, although not to the segments has been implemented in Norway. same degree. During the year we have carried out as number of activities to increase safety awareness and improve the work environment. Operation & Maintenance This work will continue to be prioritized in 2012. This market segment has a stable market in national highways. We have also prepared for the reorganization that was imple- There are still a lot of opportunities to grow on the municipal side mented in January 2012 which made Civil Engineering a more as this market opens up for competition. independent business area. This will allow us to further develop our internal cooperation and thereby concentrate our resources and take better advantage of our size.

CIVIL ENGINEERING FACTS

MARKET SEGMENT • Better cost efficiency through specializa- IMPORTANT PLAYERS tion in selected market segments, tailor- Local Civil Engineering Market: Does Local Civil Engineering Market: Local made and effective support functions, landscaping and pipelines, foundation work companies and big companies with local greater participation and cooperation and construction of energy plants. presence such as Skanska or NCC. between units. Infrastructure/Heavy Construction: Builds • Higher focus on a safer work environment. Infrastructure/Heavy Construction: roads, railroads, bridges, tunnels and ports Skanska, NCC, Veidekke and Lemminkäinen as well as industrial plants. MAJOR CUSTOMERS as well as Svevia, Mesta and Destia. Inter- Operation & Maintenance: Operation and Local Civil Engineering Market: Customers national companies such as Bilfinger Berger, maintenance of national and municipal are usually municipalities, local businesses Strabag and Hochtief are involved in certain highway and street networks, parks, outside and energy companies. market segments. property care as well as operating sewage Infrastructure/Heavy Construction: Operation & Maintenance: Svevia, Mesta, and water supply networks. Customers are usually national traffic Destia and others. administrations, municipalities and STRATEGIC PRIORITIES industrials. • Greater cooperation between the Nordic countries in carrying out projects, Operation & Maintenance: Customers are processes, sharing experiences and usually national traffic administrations, specialist expertise. municipalities and property owners.

PEAB ANNUAL REPORT 2011 23 BOARD OF DIRECTORS’ REPORT CIVIL ENGINEERING

IMPORTANT EVENTS IN 2011 IMPORTANT PROJECTS IN 2012 The first contract for road operation in Norway was signed. E4, Skönsmon-Myre, Sundsvall, 2011-2015 (plus operation Start-up of highway project Sundsvall South. The project is an and maintenance until 2035) operation and maintenance contract that runs for 20 years. Railroad overhaul Emmaboda-Karlskrona, 2011-2013 E45 Torpa – Stenröset, Göta river valley, 2011-2013

IMPORTANT PROJECTS COMPLETED IN 2011 Road operation and maintenance, Romeriket Midt outside Malmö C Train yard adaptation Oslo, 2011-2016 Highway 56, Västerås-Sala Operation and maintenance of Helsingborg’s road network, E18 Hjulsta Junction start 2010, 2-8 years Extension of the Velanda-Prässebo railroad south Preparations for mining, Kaunisvaara, Pajala, 2011-2013 of Trollhättan Concentrator, Garpenberg, 2011-2014 Raising the dam at Vitafors for LKAB, Norrbotten Operation and maintenance of roads in Sundsvall, Strömsund, Lycksele and Piteå for 3 years

Key ratios 2011 2010 Operative net sales, MSEK 11,554 10,664 Operative operating profit, MSEK 390 356 Operative operating margin, % 3.4 3.3 Order backlog on 31 December, MSEK 8,526 8,747 Number of employees 3,664 3,201

Net sales Operating profit and margin

MSEK MSEK % 12,000 500 5

10,000 400 4

8,000 300 3 6,000 200 2 4,000

100 1 2,000

0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Operating proﬁt Operating margin, %

TORE NILSSON, BUSINESS AREA MANAGER CIVIL ENGINEERING

WHAT ARE YOU MOST SATISFIED ABOUT IN 2011? We managed to maintain our operating margins despite the unstable market situation that cropped up in the second half of the year.

We at Peab contributed to developing mining and industry in Norrland by, among other things, the work we have done for the new mine in Kaunisvaara, Pajala and the new concentrator in Garpenberg.

We could clearly see the results of the fact that we have a tight-knit civil engineering business through the new markets we penetrated and the major projects we received during the year.

24 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT CIVIL ENGINEERING INDUSTRY

Industry – a stable business with Nordic resources Business area Industry, which in 2011 was run in two divisions, Industry and Con struction Systems, is comprised of a large number of companies and brands that rent construction machines, cranes, electrical material and provide transportation and machine services. Industry also manufactures and lays asphalt and produces, delivers and pumps out ready-mixed concrete. The business also manufactures prefabricated concrete elements, concrete piles, does foundation work and supplies gravel and rock. Our customers are the Nordic construction and civil engineering markets.

THE BUTTERFLY PARK Vellinge BOARD OF DIRECTORS’ REPORT INDUSTRY

Business area Industry guarantees Peab’s strategic resources was 6.7 percent compared to 6.4 percent for the last year. and ensures that Peab can meet the needs of private and public Both net sales and profits have increased compared to 2010 as a customers. result of more activity in construction and civil engineering markets. Our competitive advantages are our capacity in combination Industry ended the year positively with high net sales levels and with our geographically widespread local roots, a broad range of better margins than in 2010. machinery, strategic locations with access to raw materials as well as standardized concepts and effective logistic solutions. 2011 IN SUMMARY During the year the divisions Construction Systems and Industry MARKET DEVELOPMENTS have merged for better development, growth and synergies. A A considerable upswing has taken place on the Norwegian market large part of the positive development we have had during the for asphalt in the past year, which has countered the decline on year is a result of our work on becoming a Nordic player. the market in Sweden stemming from fewer investments by the We have begun to close down the roofing and mounting Swedish Transport Administration. company Interoc as part of focusing on our core business. The market for ready-mixed concrete and prefabricated Following Group strategies a new concept has been drawn up concrete elements has been good in 2011 due to the expanding together with Lambertsson. As a result we can offer the market construction business. As a result of fewer investments in infra- comprehensive solutions comprising work wagons, electricity, structure, growth on the market for gravel and rock has slowed cranes and safety and steering systems for efficient energy supply. slightly but at the same time demand continues to be high. The market for foundation work is basically stable although IMPORTANT EVENTS IN 2011 during the year demand has been hesitant, which has dampened Strong positions on the Nordic market through, among other growth. things, the acquisition of: Because construction has developed positively our opera- Hagströms i Nås AB, Sweden. The company works with tions in machines, electricity, cranes, transportation and machine • inspections, preparation of and measuring electrical rental has grown well in 2011. networks and is now part of Lambertsson. This enhances Lambertsson’s expertise and our offer to the power industry. SALES AND PROFIT 65 percent of the Norwegian asphalt manufacturer Terje Net sales for 2011 amounted to SEK 10,404 million compared to • Hansen AS. SEK 8,508 million the previous year, which is an increase of 22 percent. Even after adjustments for acquired and divested units the • Norwegian Aggregate AS, a company active in gravel and increase was 22 percent. A large part of the increase in net sales rock in Norway. stems from transportation operations that have lower margins and • Several smaller hauliers and trucking companies on the tie up less capital compared to Peab’s other industrial operations. Swedish market. Operating profit for the year amounted to SEK 693 million A substantial number of investments in strategic new factories compared to SEK 544 million for the last year. Operating margin and upgrades in our machinery.

INDUSTRY FACTS

MARKET SEGMENT Transportation and machines: Rental and IMPORTANT PLAYERS Asphalt: Manufactures and lays asphalt. supply of transportation and machine Asphalt, gravel and rock: Some important services. players are NCC, Skanska, Svevia, Concrete: Ready-mixed concrete, prefabri- Lemminkäinen, Veidekke and some local cated concrete elements. STRATEGIC PRIORITIES firms. Gravel and rock: Production and delivery • Industrialize operations by creating more Concrete: Players like Betongindustri, of ballast material as well as raw materials ready-made products, concepts and Färdigbetong Skanska, Sydsten, Finja and for asphalt and concrete production. comprehensive solutions for greater cost Strängbetong. efficiency and less resource consumption. Foundation work: Foundation work, pile- Foundation work: On the foundation work driving, tonguing, drill plinths. • Strategic establishments, both fixed and market are, among others, Per Aarsleff, mobile. Hercules, Skanska and Kynningsrud. Machine: Rents a broad range of construc- • Create a green profile in line with the Machines: Some important players in tion machines, work wagons, scaffolding. Group’s sustainability work. machine rental are Cramo, Ramirent, Cranes: Rents construction cranes, mobile Skanska Maskin and some local firms. • Strengthen and improve leadership. cranes, crane trucks and construction eleva- Cranes: Some players in cranes are: tors. MAJOR CUSTOMERS Skanska Maskin, Ramirent, Havator, Nordic Electricity: Temporary installations and Some of our major customers are the Crane Group, ED Knutsen Maskin. rental of electrical material and generators Swedish Transport Administration, Norwe- Transportation and machines: BDX and as well as services in energy technology. gian Public Roads Administration, munici- DSV are big in transportation and machines Contract work in the electric power industry palities, heavy industry and Peab together along with a number of local contractors and road lighting. with other construction companies. and trucking companies.

26 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT INDUSTRY INDUSTRY

KARL-GUNNAR KARLSSON, BUSINESS AREA MANAGER INDUSTRY

WHAT ARE YOU MOST SATISFIED ABOUT IN 2011? We delivered a good result, which is a consequence of being in sync with our business plans and our continual measurement of productivity improvements. By focusing on Norway we got our organization to function well there and saw profits improve. We also became the market leaders in crane rental in Norway and strengthened our position in asphalt. We stabilized Finnish operations and established a new concrete factory in central Helsinki. Positive developments in every division of Lambertsson.

Key ratios 2011 2010 Operative net sales, MSEK 10,404 8,508 Operative operating profit, MSEK 693 544 Operative operating margin, % 6.7 6.4 Number of employees 2,953 2,669

Net sales Operating profit and margin Share of net sales 2011

MSEK MSEK %

12,000 1,200 12

10,000 1,000 10 Internal 8,000 800 8 sales External 37% sales 6,000 600 6 63% 4,000 400 4

2,000 200 2

0 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Operating proﬁt Operating margin, %

WELL KNOWN LOCAL BRANDS WITH PEAB’S STRENGTH

PEAB ANNUAL REPORT 2011 27 BOARD OF DIRECTORS’ REPORT RISK AND RISK MANAGEMENT

Risk and risk management

MATERIAL RISKS AND UNCERTAINTY FACTORS SENSITIVITY ANALYSIS Peab’s business is exposed both to operational and financial Peab’s operations are sensitive to changes in, among other risks. Operational risks are as a rule greater than the financial things, volumes and margins. The sensitivity analysis below ones. The parent company is indirectly affected by the risks describes how pre-tax profit is affected by changes in some of the described in this section. important Group variables.

RISK MANAGEMENT SENSITIVITY ANALYSIS The management of operational risks is a continuous process considering the large number of projects the company has in Calculation Pre-tax profit MSEK basis Change effect progress that are started up, carried out and completed. Financial Operative risks are associated with capital tied up in the company and its Volume capital requirements, as well as interest and currency risks in (operating margin constant) 44,000 +/– 10% +/– 154 foreign activities. Operating margin (volume constant) 3.5% +/– 1% +/– 440 Material and FINANCIAL RISKS subcontractors 21,800 +/– 1% –/+ 218 The Group is also exposed to financial risks, such as interest rate Financial risks linked to changes in debt and interest rate levels. Peab’s Net debt shareholding in Brinova creates considerable exposure for the (interest rate constant) 6,626 +/– 10% – /+ 23 company through a single holding. Large fluctuations in the price Average effective int. rate1) (net debt constant) 3.5% +/– 1% –/+ 49 of the Brinova share exert a major impact on the valuation of the Holding of Brinova shares holding, which affects Peab’s net financial items. For further infor- (book value) 491 +/–10% +/– 49 mation on financial risks, see note 37. 1) The calculation is based on the assumption that SEK 4,929 million of the total net debt of SEK 6,626 million, has a fixed interest period shorter than one year and is thereby affected almost at once by a change in market interest rates. OPERATIONAL RISKS Peab’s business is largely project related. Operational risks in day- to-day business are connected to tenders, percentage of completion, price risks and circumstantial risks.

RISK RISK MANAGEMENT Tenders Structured risk assessment is crucial in the construction business to ensure Erroneous tenders and cost estimates can lead to significant losses in that risks are identified, correctly priced in tenders submitted and that the projects as well as the loss of an order. proper resources are available. Percentage of completion A prerequisite for percentage of completion is reliable forecasting. Well- Peab applies percentage of completion in most of its projects. Miscalculation developed procedures and system support for the monitoring and forecast- of percentage of completion can result in external accounting being seriously ing of each project is crucial to limiting risks of erroneous percentage of misleading or that strategic decisions are based on incorrect information. completion. Price risks Methods of limiting price risks include rationalising construction processes For Peab, price risks refer to aspects like unforeseen price hikes for materi- and purchasing procedures and always endeavouring to procure materials als, subcontractors and wages. Risks vary according to the type of contract. and subcontractors back in the tender stage or as early as possible in the Fixed price contracts also involve the risk of incorrect tender calculations process. and the risk that price hikes deteriorate profits because the company cannot demand compensation from the customer for them. Circumstantial risk Customers’ and suppliers’ credit worthiness is assessed and handled in the The uncertainty in the world around us and the financial markets can cause businesses. A prerequisite for contract project initiation is that the client financing difficulties for customers, suppliers and subcontractors. This can in has found financing for the project. turn lead to postponement of planned investments as well as difficulties in meeting existing obligations.

28 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT SUSTAINABILITY

»Several important steps have been taken in sustainability like environmental certification of all our own housing and commercial property developments.«

JAN JOHANSSON President and CEO

Comprehensive perspective on sustainability Peab’s strategy includes a comprehensive perspective on sustainability matters. This means that focus is not only on environmental impact but social and financial aspects as well, throughout the entire value chain.

Sustainability Report Our employees according to GRI WORKPLACE SAFETY IN FOCUS Peab has a vision of zero workplace accidents. In 2011 workplace As part of furthering our communication with the Group’s inter- accidents in Sweden dropped from 9.9 to 7.7 per one million man ested parties Peab has for the first time published a sustainability hours. In Finland they contracted from 54 to 31 and in Norway report based on the guidelines laid down by the Global Reporting they increased from 5.5 to 6.6 compared to the previous year. The Initiative (GRI). Peab’s work on sustainable development is statistics for workplace accidents are based on accidents that presented in greater detail in the report which can be found on lead to at least 8 hours absence. The Finnish application of sick www.peab.com. leave rules in relation to occupational injuries differs from that in Sweden and Norway which explains the higher figures there. All Code of Conduct incidents are followed up in Peab’s Web-based system for the Peab’s sustainability work is governed by our Code of Conduct. registration of accidents and incidents in Sweden called OTR This document is integrated into our overriding company policy (Accident and Incident Registration). and is based on the UN’s Global Compact which means that it Despite our intensive work to prevent accidents, in 2011 trag- covers environmental, social and ethical principles. The Code of ically two occurred resulting in death. One of the accidents hap- Conduct is supplemented by a number of underlying policies and pened on a construction site in Solna when a subcontractor was guidelines such as Peab’s ethical guidelines. mounting a staircase section. A stair element came loose causing the underlying staircase sections to collapse. The second accident occurred in a quarry in Norrköping where an employee was Management system crushed on a conveyor belt. Peab’s crisis organisation, trained by Peab has worked systematically with sustainability matters for MSB, the Swedish Civil Contingencies Agency, is called in when years. Responsibility and authority has been delegated out to our serious accidents occur. All accidents are thoroughly investigated line management and are an integrated part of our daily opera- and appropriate measures are taken to keep them from happen- tions. Peab’s management system, comprising quality, the work ing again. environment and the environment meets the requirements in the During the year the Group management decided to initiate an Swedish Work Environment Authority’s Provisions, AFS 2001:1 as extensive project aimed at further improving workplace safety. The well as in ISO 9001 and ISO 14000. project, which entails a number of measures, will run through 2012.

PEAB ANNUAL REPORT 2011 29 BOARD OF DIRECTORS’ REPORT SUSTAINABILITY

plan to hinder discrimination and support equal opportunities for all. Peab has zero tolerance of harassment or degrading treatment. If such a situation arises we take forceful measures in line with our equal treatment plan to stop it.

EMPLOYEE QUESTIONNAIRE THE HANDSHAKE The Handshake is Peab’s personnel questionnaire and it is distributed every other year. The purpose of the Handshake is to identify areas where Peab can improve by finding out how our employees view their work environment, leadership and Peab as an employer. In 2011 we sent out the questionnaire and 87 percent answered, which was a 1 percent increase since it was last carried out in 2009. The Handshake contains around 100 questions and showed that, for instance, 77 percent of our employees say that they would happily recommend others to work at Peab and 63 percent believe the environment is taken into consideration in their workplace, which is an increase of three percent from the latest measurement in 2009.

THE PEAB SCHOOL To ensure access to, new trained personnel The Peab School has HEALTH AND LEISURE opened a new school in Upplands-Väsby in 2011 and received Peab’s goal is to have the healthiest employees in the industry. permission to start up a fifth school in Gothenburg in 2012. The We work systematically to achieve this. For example, five human Peab Schools in Ängelholm and Malmö were among the first resource consultants have been hired to support and develop a schools in Sweden to be quality certified as a Trade Recom- workplace perspective that promotes health. All our employees mended School by the Swedish Construction Industry Training are invited to partake in Peab Health and Leisure, an activity aimed Board, BYN. at supporting and stimulating a healthy life style and spirit of community in our workplaces. Sick leave in Sweden, Norway and PARTNERSHIP AND PROFIT-SHARING Finland in 2011 and 2010 is presented in the diagram below. Peab has always endeavored to get our employees to understand the mechanics of a profitable company and we also want them to EQUALITY AND DIVERSITY share in Peab’s success. With this in mind we created a convert- Peab is a community builder with customers that come from every ible program and a profit-sharing foundation. Another purpose of part of society. Our vision is that the make-up of our personnel will the foundation is to stimulate our employees’ interest in staying mirror this diversity. All Peab employees have the right to be them- with the company and to create a better financial situation for our selves without being discriminated. We have an equal treatment personnel after they retire.

Number of accidents per million man hours Sick leave

Number % 60 6

50 5

40 4

30 3

20 2

10 1

0 0 Sweden Norway Finland Sweden Norway Finland

2011 2010 2011 2010

30 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT SUSTAINABILITY

Environmental issues – ENVIRONMENTALLY CERTIFIED CONSTRUCTION Interest in environmentally certified construction is growing and a natural part of our operations more and more new buildings are erected according to some kind

IMPORTANT ENVIRONMENTAL ASPECTS of standard. Peab decided some time ago that all our own prop- Peab continually identifies and analyses the environmental erty developments would be environmentally certified. Two exam- aspects of our business from a life cycle perspective. These are ples of projects started up in 2011 are city district Varvsstaden in then the basis for our work on minimizing our environmental Malmö and the Angered swimming pool and ice-skating rink in impact. Five important environmental aspects have been Gothenburg. These construction projects and the various environ- targeted: mental certifications are presented in more detail in Peab’s Sustainability Report 2011, which has been published on www. Use of resources/ resource consumption peab.com. Environmentally and health hazardous substances

Transportation OPERATIONS REQUIRED TO HAVE PERMITS Waste OR SUBMIT REPORTS Energy Peab runs operations required to have permits according to the Environmental Act in the Swedish subsidiaries Swerock, Skandi-

Peab strives to minimize resource consumption and waste. One naviska Byggelement and Peab Asfalt. There are operations that example of this is Eco-Paving, which is the collective name for require permits according to the Environmental Act in Finland. Peab’s environmentally adapted and energy efficient paving tech- In Sweden the operations required to have permits handle nology for low tempered asphalt. By lowering the temperature gravel and rock quarries, transport of waste and hazardous waste when paving asphalt energy can be saved and greenhouse gas and asphalting units. These operations’ primary environmental emissions reduced. impact is by using non-renewable raw materials and the future Peab uses BASTA and Byggvarubedömningen (BVB) when use of land. The operations in Finland requiring a permit primarily selecting which products to use in order to minimize environmen- work with ballast and manufacturing concrete. The operations tally and health hazardous substances. BASTA is a system used required to have permits represent about 3 percent of Group net by the industry to phase out hazardous substances in construc- sales 2011. Renewal and supplementation of permits is continuous. tion products. Construction product assessments from a life cycle Swerock’s concrete plants and Skandinaviska Byggele- perspective are reported in BVB. The criteria for the contents of a ment’s concrete product plants and Peab Asfalt’s stationary and substance are exactly the same in both systems and are based on mobile units must submit reports. Operations that must submit scientifically produced data. reports represent about 6 percent of the Group’s total net sales Energy efficiency is in focus in operations and after construc- 2011. tion is completed. We are constantly working on reducing energy consumption. In 2011 we launched a new energy optimizing system, L-CTRL, in our construction processes. This makes it possible for a project manager to steer all the energy used on the workplace like ventilation, heat and lighting via wireless transmis- sion to any computer in Peab’s network. As part of our effort to minimize environmental impact all the electricity Peab purchases in Sweden is environmentally classified waterpower. This means that we take the environment into consideration throughout the entire lifecycle of electricity production. Peab’s goal concerning waste is that the least possible amount ends up at the waste disposal site. This is achieved through optimal resource use, maximum reuse, sorting waste better to recycle as much material, and derive as much energy from it, as possible. All hazardous waste is handled properly and correctly. The Swedish business has measured sorting levels for quite some time and the sorting level rose from 63 percent in 2010 to 68 percent in 2011 in Peab’s Swedish construction operations. Our goal is to recycle 70 percent.

PEAB ANNUAL REPORT 2011 31 BOARD OF DIRECTORS’ REPORT SUSTAINABILITY REPORT

Business Ethics Peab in society

Peab’s stance is described in our ethical guidelines which have Peab’s ambition is to contribute to the development of local been communicated to all our employees. communities. One example of this is TelgePeab, which is a The Ethics Round, an educational program about Peab’s construction company in Södertälje jointly owned by Telge AB and position regarding ethics, the law and what is right, is part of our Peab. The purpose of the company is to provide the unemployed, work against corruption. Over 3,000 leaders and other officers people receiving employment aid and refugees a chance to have gone through the program between 2009 – 2011, almost receive an education, training and work and at the same time 2,000 of them in 2011. The program will continue in 2012. build housing on market terms. Peab does not accept any transgressions against the law or Peab is a big sponsor of sports and youth sports and we sup- our ethical guidelines. If anyone breaks these guidelines we have port a number of organizations that work with people who are in a an ethical council that decides whether the matter should be difficult situation or particularly vulnerable. Peab not only contrib- investigated or not and what measures to take. These might entail utes funds, we also contribute our time and competence. reporting the matter to the police or consequences for the During the year Peab became the principle partner of Mentor, employee that range from a reprimand to dismissal. en non-profit organization that works to prevent violence and drug Our work on ethical matters also includes our suppliers, abuse among the young. In addition to our financial contribution which is why Peab has signed an agreement with the Swedish we participate in preventive activities as mentors and motivators National Tax Authority aimed at fighting economic crime through to the young people in the schools Mentor cooperates with. better control of our supply chain. The agreement is the first of its Every Christmas Peab contributes to important projects in kind in our industry. This cooperation means that Peab has communities all over the Nordic region. In 2011 we donated SEK access to the National Tax Authority’s information on subcontrac- 235,000 to the Norwegian Utöya Fund which goes to rebuilding tors’ tax and employer contributions, which we use in supplier and renovating Utöya after the tragic events in the summer of evaluations. The information is checked against the business run 2011. We donated SEK 225,000 to the Finnish Mannerheim by the subcontractor, which helps to identify rogue companies and League for Child Welfare for their work against mobbing in eliminate criminal elements. schools throughout Finland. KVH (Qualified Care at Home) in Skåne received SEK 691,000. Peab also contributed to the Stefan Paulsson Memorial Fund that gives money to families struck by cancer in order to make life a little easier for them.

VÄSTKUSTBANAN MALMÖ BANGÅRD Ängelholm Malmö

32 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT OTHER INFORMATION AND APPROPRIATION OF PROFITS

Research and development of the first quarter of 2012. In keeping with this, executive management has expanded to include the managers of each Peab has an ongoing R&D program in our day-to-day production, business area. Peab’s executive management after the change: in part to be able to offer our customers improved products and Jan Johansson, CEO and President services, and in part to boost Peab’s competitiveness.

One of the development projects that has been in progress a Jesper Göransson, Deputy CEO and CFO while is PGS (Peab General System). PGS develops and supplies Mats Johansson, Deputy CEO, Strategy / HR a flexible system of pre-fab building components that are assem- Tore Hallersbo, Deputy CEO and BA Manager Construction bled to make up a complete apartment building. PGS entails Tore Nilsson, BA Manager Civil Engineering industrial building all the way from design to final assembly. The Karl-Gunnar Karlsson, BA Manager Industry first PGS concept buildings were constructed in 2009 and today PGS houses are constructed from southern Sweden up to the Tomas Anderson, BA Manager Property Development Mälardalen region in the middle of Sweden. Within Peab we focus in particularly on developing low-tem- Tina Hermansson Berg has been appointed new Director of perated asphalt which has a lower impact on both the environment Human Resources. Tina will take up her new position on 1 August and work environment. Eco-Paving is the collective name for 2012 and will be a member of executive management. Mats Peab Asphalt’s environmentally friendly and energy efficient pav- Johansson, the former HR Director, will remain in the executive ing technologies for low-temperated asphalt. The project is sup- management, in charge of Ethics and Security. ported by the Swedish Construction Industry Development Fund (SBUF) and The Swedish Transport Administration, and includes The Peab share both laboratory studies and full-scale tests out on the road. At the end of the year Peab’s share capital amounted to SEK 1,583,866,056 divided among a total of 296,049,730 shares, Important events in 2011 resulting in a nominal value of SEK 5.35 per share. Jan Johansson was appointed new President and CEO of Peab Of the shares, 34,319,957 are A shares with ten votes per and took up this position at the AGM on 10 May 2011. Jan share, and 261,729,773 are B shares with one vote per share. All Johansson, 52, has a Master of Science in Engineering and shares carry equal rights to participation in the company’s assets, joined Peab in 1986. Jan has been Vice President with responsi- profits and dividends. There are no restrictions in the articles of bility for Peab’s operations since 2009. Mats Paulsson was association concerning transferring shares or votes at the AGM. elected Vice Chairman of the Board. On 31 December 2011 there were approximately 33,000 Mats Leifland has resigned from his position as Deputy CEO shareholders in Peab. Mats Paulsson and his companies repre- of Peab and he has begun his new post as President of Medicon sent the largest single shareholder with 14.9 percent of the capital Village AB in Lund. Mats Leifland 54, joined Peab in 1995, when and 21.8 percent of the votes. The joint ownership related to the he was appointed CFO and he was a Deputy CEO from 1996. company’s founders Mats and Erik Paulsson with families and Peab has through shares and futures control over 2,080,225 companies amounted to 32 percent of the capital and 66 percent shares of Lemminkäinen Oyj, representing 10.59 percent of the of the votes at year-end. capital and votes. The acquisition was through a direct purchase of The company has no knowledge of any agreements between 1,140,225 shares on NASDAQ OMX Helsinki and through futures shareholders that can result in restriction of the right to transfer for the purchase of 940,000 shares. shares. Peab has issued unsecured bonds for a total of SEK 1,000 In 2007, Peab established a profit-sharing foundation. In accordance with its investment policy the assets of the foundation million that run for three, four and five years. These transactions must be placed mainly in Peab shares. As of 31 December 2011 are so-called private placements. Peab has also signed a new five the foundation owns 7,803,432 B shares in Peab. year credit agreement with DNB Bank for SEK 200 million which The articles of association specify that the Board members supplements the existing credit agreement of SEK 300 million due are ellected at the AGM. The articles of association do not include in 2013. any stipulation regarding the dismissal of Board members or changes to the articles of association. Important events after year-end Peab’s Annual General Meeting on 10 May 2011 resolved to Peab was divided into four business areas on 1 January 2012: authorise the Board to, during the period until the next Annual Construction, Civil Engineering, Industry and Property Develop- General Meeting, acquire shares so that the company would have ment. The Nordic region is the domestic market for all the busi- at most 10 percent of the total shares in Peab. As of 31 December ness areas. The new organization will be mirrored in reporting as 2011, Peab’s own B share holding amounted to 1,086,984 B

PEAB ANNUAL REPORT 2011 33 BOARD OF DIRECTORS’ REPORT OTHER INFORMATION AND APPROPRIATION OF PROFITS

shares, corresponding to 0.4 percent of the total number of that Peab will always be able to attract and keep competent shares. Senior officers. Senior officers must be offered a fixed salary on The AGM 2007 resolved to issue and offer convertibles to all market terms based on the responsibility and qualifications of the employees. In all, 41 percent of Peab’s employees applied to Senior officer. Salaries are determined for each calendar year. subscribe for convertibles. The convertibles run from 1 December From time to time Senior officers may be offered variable 2007 until 30 November 2012. The conversion rate for the Con- remuneration. Such variable remuneration may not exceed 60 vertible Promissory Notes 2007/2012 was fixed at SEK 68 and the percent of the regular salary and must above all be based on the issue amount was SEK 598,400,000 corresponding to 8,800,000 profit before tax of the Peab Group. Variable remuneration is new convertibles. Upon conversion to shares, dilution will amount determined for each fiscal year. to 2.97 percent of the share capital and 1.45 percent of the votes, Variable remuneration is settled the year after being earned based on the number of shares registered per 31 December 2011. and may either be paid out as a salary or as a lump sum pension premium. Holdings of own shares The Board must annually consider proposing a share-related incentive program to the Annual General Meeting. At the beginning of 2011 Peab’s own B share holding was From time to time Senior officers may be offered participation 9,308,220 which corresponds to 3.1 percent of the total number of in a LTI program. The condition for participation in a LTI program shares. In order to offset any dilution effects from the convertible is that the Senior officer reserves a minimum of 50 percent of his/ programs, to use in the financing of acquisitions etc. as well as her annual variable wage as a lump sum pension premium. The adjust the Group’s capital structure, Peab’s Annual General maximum annual amount in a LTI program may not exceed 40 Meeting on 10 May 2011 resolved to authorise the Board to, percent of basic wages. The amount in a LTI program, as with the during the period until the next Annual General Meeting, acquire reserve from the annual variable wages, are placed in a pension shares so that the company would have at most 10 percent of the savings fund linked to the Peab share. total shares in Peab. Senior officers are entitled to pension according to collective During 2011, 360,000 B shares were repurchased for a total bargaining agreements and contracts with Peab. All pension obli- of SEK 16 million. Peab sold 8,581,236 B shares to Ingvar Kam- gations are defined contribution pensions. prad, corresponding to 2.9 percent of the capital. The sale was Wage waives may be used to increase pension contributions performed as a direct transaction between the parties off- through lump sum pension premiums. exchange. On 31 December 2011 the Group held 1,086,984 own Senior officers are entitled to extra health insurance as well B shares. With a nominal value of SEK 5.35 per share the holding as those benefits otherwise enjoyed by other Peab employees. of own shares corresponded to a share capital of SEK 6 million The period of notice from Peab is, at the most, 24 months which makes up 0.4 percent of the total share capital. See note and the period of notice from Senior officers is, at the most, 6 29 for further information. months. If a severance pay is paid the total remuneration for salary Corporate governance during the period of notice and severance pay may not exceed For a detailed description of the work of the Board of Directors, 24 monthly wages. corporate governance and system for internal control, see page The Board of Directors decides on the salary and other terms 89, Corporate Governance Report. for the Chief Executive Officer based on a proposal from the Board’s remuneration committee. The Board’s remuneration committee decides on salary and other terms for remaining Senior Remuneration for senior officers based on a proposal from the Chief Executive Officer. officers According to the Companies Act the Board has the right in certain cases to deviate from these guidelines. For more informa- The Board’s proposal for guidelines to be presented to the AGM tion on adopted guidelines regarding wage determination and 2012: other remuneration to the Chief Executive Officer and other This remuneration policy comprises salary and other terms Senior officers, see note 8. for the executive management of Peab AB (“Peab”) including the Chief Executive Officer and other members of executive management, here referred to as “Senior officers”. Anticipated future development This remuneration policy must be used for any new agree- In Sweden ongoing building construction is believed to have ments or changes in existing agreements made with Senior officers increased by15 percent in 2011 after strong development in after the Annual General Meeting of Peab has adopted the policy. several sectors. Civil engineering construction is believed to have Salary and other terms of employment must be of such standing contracted by some 2 percent in 2011. According to assessments

34 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT OTHER INFORMATION AND APPROPRIATION OF PROFITS

by the analysis company Industrifakta this means that the total forecast for 2012 is no exception and this area is expected to construction investments in Sweden will have increased by 9 grow by 3 percent in Sweden and Norway and a slightly more percent 2011. There is a large degree of uncertainty regarding modest 2 percent in Finland. 2012, particularly concerning the effects of the debt crisis on credit supply which is fundamental for the entire construction and Parent company property sector. The forecast for ongoing building construction in The activities of the parent company consist of executive manage- 2012 indicates a reduction of 9 percent. The forecast for civil ment and common Group functions. Operating profit 2011 engineering in 2012 is an increase of some 2 percent. All in all this amounted to SEK –46 million (–70). means that investment volumes in Sweden are expected to drop by around 5 percent in 2012. After an increase in ongoing building construction in Norway Proposed appropriation by about 12 percent in 2011 forecasts indicate a leveling out and of profits reduction in construction volumes by about 5 percent in 2012. The following amounts in SEK are at the disposal of the Annual Civil engineering construction in Norway, which increased by General Meeting: about 5 percent 2011, is expected to further rise by 8 percent in Share premium reserve 2,308,208,948 2012. The driving factors behind this growth are extensive welfare Special reserve 55,000,000 projects and energy related investments. All in all this signifies a Fair value reserve –21,339,033 total forecast of a decrease of 3 percent in Norwegian construc- Profit brought forward 2,645,033,575 tion in 2012. Profit for the year 1,292,589,531 Ongoing building construction in Finland is believed to have increased by some 4 percent in 2011. In 2012 there is a great deal Total 6,280,293,025 of uncertainty surrounding the entire Finnish economy due to the The Board of Directors propose the following appropriation of turbulence in the EMU. The forecast for ongoing building con- disposable profits and non-restricted reserves: struction in 2012 indicates a reduction of 2 percent due to a drop Dividend, 296,049,730 shares at SEK 2.10 in apartment buildings and private premises. Civil engineering per share 621,704,433 1) construction is believed to have contracted by some 2 percent in Carried forward 5,658,588,592 2011 and the forecast for 2012 is a slight increase of 1 percent. Total 6,280,293,025 1) The total forecast for building investments in Finland in 2012 is a Of which to share premium reserve 2,308,208,948 Of which to special reserve 55,000,000 reduction of 1 percent, which can be an optimistic estimate. Of which to a fair value reserve –21,339,033 Renovation and maintenance has historically been much more resistant to financial crises and shifts in the economy. The

E.on Malmö

PEAB ANNUAL REPORT 2011 35 BOARD OF DIRECTORS’ REPORT INCOME STATEMENT AND REPORT ON COMPREHENSIVE INCOME FOR THE GROUP

Income statement for the Group

MSEK Note 2011 2010 Net sales 2,3 43,539 38,045 Production costs –39,842 –34,533 Gross profit 3,697 3,512

Sales and administrative expenses –2,265 –2,139 Profit from participation in associated companies and joint ventures 17,18 24 95 Other operating income 5 58 38 Ohter operating costs 6 –9 –3 Operating profit 3,7,8,9,10,38 1,505 1,503

Financial income 158 264 Financial expenses –466 –252 Profit from participation in joint ventures 18 –2 –2 Net finance 11 –310 10

Pre-tax profit 1,195 1,513

Tax 13 –252 –323 Profit for the year 943 1,190

Profit for the year attributable to: Shareholders in parent company 943 1,187 Non-controlling interests 0 3 Profit for the year 943 1,190

Profit per share 14 before dilution, SEK 3.26 4.11 after dilution, SEK 3.26 4.10

Statements of comprehensive income for the Group

MSEK Note 2011 2010 Profit for the year 943 1,190

Other comprehensive income Translation difference for the year when translating foreign operations 0 –167 Profit/loss from exchange risk hedging in foreign operations 1 65 Translation differences transferred to profit for the year –1 –3 Change for the year in fair value of financial assets available-for-sale –17 – Change for the year in fair value of cash flow hedges –204 33 Share in associated companies' other comprehensive income –2 – Tax attributable to components in other comprehensive income 13 16 –47 Other comprehensive income for the year –207 –119

Total comprehensive income for the year 736 1,071

Total comprehensive income for the year attributable to: Shareholders in parent company 736 1,068 Non-controlling interests 0 3 Total comprehensive income for the year 736 1,071

36 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT INCOME STATEMENT AND REPORT ON COMPREHENSIVE INCOME FOR THE GROUP BALANCE SHEET FOR THE GROUP

MSEK Note 2011 2010 Assets Intangible assets 15 2,231 2,190 Tangible assets 16 4,580 4,847 Participation in associated companies 17 88 208 Participation in joint ventures 18 1,235 1,065 Other securities held as fixed assets 21,36,37 885 704 Interest-bearing long-term receivables 20,36,37 1,314 474 Deferred tax recoverables 13 158 90 Other long-term receivables 22 359 79 Total fixed assets 10,850 9,657

Project and development properties 23 5,180 4,921 Inventories 24 416 411 Work in progress 25 1,689 1,263 Accounts receivable 26,36,37 6,535 5,955 Interest-bearing current receivables 20,36,37 237 36 Tax assets 75 98 Recognised but not invoiced income 27 4,580 3,801 Prepaid expenses and accrued income 352 342 Other current receivables 22,37 465 286 Short-term holdings 36,37 9 1 Liquid funds 36,37 961 809 Total current assets 20,499 17,923 Total assets 31,349 27,580

Equity 29 Share capital 1,584 1,584 Other contributed capital 2,576 2,576 Reserves –82 125 Profit brought forward included profit for the year 3,869 3,388 Equity attributable to shareholders in parent company 7,947 7,673 Non-controlling interests 0 0 Total Equity 7,947 7,673

Liabilities Interest-bearing long-term liabilities 30,36,37 7,399 5,425 Other long-term liabilities 33,36 110 35 Deferred tax liabilities 13 376 326 Provisions for pensions 31,36 13 12 Other provisions 32 310 263 Total long-term liabilities 8,208 6,061

Interest-bearing short-term liabilities 30,36,37 1,735 1,602 Accounts payable 36,37 4,508 4,074 Income tax liabilities 289 101 Invoiced income not yet recognised 34 4,269 4,133 Accrued expenses and deferred income 2,641 2,590 Other short-term liabilities 33,36 1,619 1,287 Provisions 32 133 59 Total short-term liabilities 15,194 13,846 Total liabilities 23,402 19,907 Total equity and liabilities 31,349 27,580 See note 40 for information concerning the Group’s pledged assets and contingent liabilities.

PEAB ANNUAL REPORT 2011 37 BOARD OF DIRECTORS’ REPORT REPORT ON CHANGES IN GROUP’S EQUITY

Equity attributable to shareholders in parent company Profit brought forward Other con- Fair included Non- Share tributed Translation value Hedging profit for controlling Total MSEK capital capital reserve reserve reserve the year Total interests equity Opening balance equity 2010-01-01 1,584 2,576 194 – 50 3,159 7,563 43 7,606 Comprehensive income for the year Profit for the year 1,187 1,187 3 1,190 Other comprehensive income for the year –155 36 –119 –119 Comprehensive income for the year 0 0 –155 – 36 1,187 1,068 3 1,071

Transactions with Group owners Contribution from and value transferred to owners Dividends –728 –728 –728 Acquisition of own shares –177 –177 –177 Sales of own shares 4 4 4 Total contribution from and value transferred 0 0 0 – 0 –901 –901 0 –901 to owners Changes in participation in subsidiaries Acquisition of non-controlling interests, previous controlling interests –57 –57 –46 –103 Total transactions with Group owners 0 0 0 – 0 –958 –958 –46 –1,004 Closing balance equity 2010-12-31 1,584 2,576 39 – 86 3,388 7,673 0 7,673

Opening balance equity 2011-01-01 1,584 2,576 39 – 86 3,388 7,673 0 7,673 Comprehensive income for the year Profit for the year 943 943 0 943 Other comprehensive income for the year –1 –17 –189 –207 –207 Comprehensive income for the year 0 0 –1 –17 –189 943 736 0 736

Transactions with Group owners Contribution from and value transferred to owners Dividends –746 –746 –746 Acquisition of own shares –16 –16 –16 Sales of own shares 300 300 300 Total contribution from and value transferred 0 0 0 – 0 –462 –462 0 –462 to owners

Changes in participation in subsidiaries Acquisition of non-controlling interests, previous controlling interests 0 0 0 0 Total transactions with Group owners 0 0 0 – 0 –462 –462 0 –462 Closing balance equity 2011-12-31 1,584 2,576 38 –17 –103 3,869 7,947 0 7,947

38 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT REPORT ON CHANGES IN GROUP’S EQUITY CASH FLOW STATEMENT FOR THE GROUP

MSEK Note 2011 2010 Current operations 44 Pre-tax profit 1,195 1,513 Adjustments for non-cash items 1,021 546 Income tax paid –24 –169 Cash flow from current operations before working capital changes 2,192 1,890

Cash flow from changes in working capital Increase (-) /Decrease (+) project and development properties –682 –634 Increase (-) /Decrease (+) inventories –413 46 Increase (-) /Decrease (+) current receivables –1,721 –1,774 Increase (+) /Decrease (-) current liabilities 684 1,635 Cash flow from changes in working capital –2,132 –727

Cash flow from current operations 60 1,163

Investment operations Acquistion of subsidiaries, net effect on liquid funds –329 –400 Sale of subsidiaries, net effect on liquid funds 77 58 Acquistion of intangible fixed assets –1 –17 Acquistion of tangible fixed assets –529 –873 Sale of tangible fixed assets 244 162 Acquistion of financial assets –818 –408 Sale of financial assets 225 – Cash flow from investment operations –1,131 –1,478

Cash flow before financing –1,071 –315

Financing operations Repurchases of own shares –16 –177 Withdrawal of own shares 300 – Borrowings 1,689 –425 Dividend distributed to the shareholders of the parent company –746 –728 Cash flow from financing operations 1,227 –1,330

Cash flow for the year 156 –1,645 Cash at the beginning of the year 810 2,488 Exchange rate differences in cash 4 –33 Cash at year-end 970 810

PEAB ANNUAL REPORT 2011 39 BOARD OF DIRECTORS’ REPORT INCOME STATEMENT FOR THE PARENT COMPANY

MSEK Note 2011 2010 Net sales 2 99 82 Administrative expenses 8,9 –145 –152 Operating profit –46 –70

Result from financial investments 11 Result from participations in Group companies 1,862 1,634 Result from participations in associated companies 6 59 Result from securities and receivables accounted for as fixed assets –23 233 Other interest income and similar profit items 0 3 Interest expenses and similar loss items –226 –251 Profit after financial items 1,573 1,608

Appropriations 12 –156 0 Pre-tax profit 1,417 1,608

Tax 13 –125 2 Profit for the year 1,292 1,610

Report on comprehensive income for the parent company MSEK 2011 2010 Profit for the year 1,292 1,610

Other comprehensive income Change for the year in fair value of available-for-sale financial assets –21 – Other comprehensive income for the year –21 – Total comprehensive income for the year 1,271 1,610

40 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT INCOME STATEMENT FOR THE PARENT COMPANY BALANCESHEET FOR THE PARENT COMPANY

MSEK Note 2011 2010 2009 Assets Fixed assets Tangible assets Machinery and equipment 16 2 2 2 Total tangible assets 2 2 2

Financial assets Participations in Group companies 42 11,525 11,728 11,634 Participations in associated companies 17 133 263 – Receivables from Group companies 19,36 1,447 1,015 1,546 Other securities held as fixed assets 21,36 709 602 430 Other long-term receivables 22,36 1 1 1 Total financial assets 13,815 13,609 13,611

Total fixed assets 13,817 13,611 13,613

Current assets Short-term receivables Receivables from Group companies 36 37 27 59 Interest-bearing short-term receivables 20,36 – 5 284 Prepaid expenses and accrued income 28 7 8 8 Total short-term receivables 44 40 351

Liquid funds 36 2 3 11 Total current assets 46 43 362 Total assets 13,863 13,654 13,975

Equity and liabilities Equity 29 Restricted equity Share capital 1,584 1,584 1,584 Statutory reserve 300 300 300

Non-restricted equity Share premium reserve 2,308 2,308 2,308 Special reserve 55 55 55 Fair value reserve –21 – – Profit brought forward 2,646 1,499 1,832 Profit for the year 1,292 1,609 567 Total equity 8,164 7,355 6,646

Untaxed reserves 43 156 0 0

Long-term liabilities Liabilities to Group companies 36 4,794 5,670 6,567 Convertible promissory note 36,37 590 581 573 Deferred tax liabilities 13 2 5 7 Total long-term liabilities 5,386 6,256 7,147

Short-term liabilities Accounts payable 36 11 4 7 Liabilities to Group companies 36 2 4 5 Tax liabilities 120 1 136 Other short-term liabilities 33,36 6 4 6 Accrued expenses and deferred income 35 18 30 28 Total short-term liabilities 157 43 182 Total equity 13,863 13,654 13,975

Pledged assets and contingent liabilities for parent Company Pledged assets – – – Contingent liabilities 40 18,195 15,126 13,626

PEAB ANNUAL REPORT 2011 41 BOARD OF DIRECTORS’ REPORT REPORT ON CHANGES IN THE PARENT COMPANY’S EQUITY

Restricted capital Non-restricted capital

Share Profit/loss Share Statutory premium Special Fair value brought Profit for Total MSEK capital reserve reserve reserve reserve forward the year equity Opening balance equity, 1 January 2010 1,584 300 2,308 55 – 1,832 567 6,646

Profit for the year 1,610 1,610 Other comprenhensive income for the year – – Total comprehensive income for the year – – – – – – 1,610 1,610

Allocation of profits 567 –567 0 Cash dividend –728 –728 Acquisition of own shares –177 –177 Withdrawal of own shares 4 4 Closing balance equity, 31 December 2010 1,584 300 2,308 55 – 1,498 1,610 7,355

Opening balance equity, 1 January 2011 1,584 300 2,308 55 – 1,498 1,610 7,355

Profit for the year 1,292 1,292 Other comprenhensive income for the year –21 –21 Total comprehensive income for the year – – – – –21 – 1,292 1,271

Allocation of profits 1,610 –1,610 0 Cash dividend –746 –746 Acquisition of own shares –16 –16 Withdrawal of own shares 300 300 Closing balance equity, 31 December 2011 1,584 300 2,308 55 –21 2,646 1,292 8,164

42 PEAB ANNUAL REPORT 2011 BOARD OF DIRECTORS’ REPORT REPORT ON CHANGES IN THE PARENT COMPANY’S EQUITY CASH FLOW STATEMENT FOR THE PARENT COMPANY

MSEK Note 2011 2010 Current operations 44 Pre-tax profit 1,573 1,608 Adjustments for non-cash items –1,638 –1,798 Income tax paid 8 –136 Cash flow from current operations before working capital changes –73 –326

Cash flow from changes in working capital Increase (-) /Decrease (+) current receivables –10 32 Increase (+) /Decrease (-) current liabilities –5 –4 Cash flow from changes in working capital –15 28

Cash flow from current operations –88 –298

Investment operations Acquistion of tangible fixed assets – 0 Acquistion of financial assets – –326 Sale of financial assets 1,596 2,654 Cash flow from investment operations 1,596 2,328

Cash flow before financing 1,508 2,030

Financing operations Repurchase of own shares –16 –177 Withdrawal of own shares 300 – Amortizations –1,047 –1,133 Dividend distributed –746 –728 Cash flow from financing operations –1,509 –2,038

Cash flow for the year –1 –8 Cash at the beginning of the year 3 11 Cash at year-end 2 3

PEAB ANNUAL REPORT 2011 43 NATIONAL ARCHIVE Tavastehus, Finland

44 PEAB ANNUAL REPORT 2011 CONTENTS NOTES

Note 1 Accounting principles 46 Note 2 Income distributed by type 54 Note 3 Operating segment 54 Note 4 Business combinations 56 Note 5 Other operating income 57 Note 6 Other operating costs 57 Note 7 Government grants 57 Note 8 Employees, personnel costs and remunerations to senior officers 57 Note 9 Fees and cost remunerations to auditors 60 Note 10 Operating costs divided by type 60 Note 11 Net financial income/expense 60 Note 12 Appropriations 61 Note 13 Taxes 61 Note 14 Earnings per share 64 Note 15 Intangible fixed assets 65 Note 16 Tangible fixed assets 66 Note 17 Participation in associated companies 67 Note 18 Participation in joint ventures 68 Note 19 Receivables from Group companies 69 Note 20 Interest-bearing receivables 69 Note 21 Ohter long-term securities holdings 69 Note 22 Other receivables 69 Note 23 Project and development properties 69 Note 24 Inventories 69 Note 25 Work in progress 69 Note 26 Accounts receivable 69 Note 27 Recognised income not yet invoiced 70 Note 28 Prepaid expenses and accrued income 70 Note 29 Equity 70 Note 30 Interest-bearing liabilities 71 Note 31 Pensions 71 Note 32 Provisions 72 Note 33 Other liabilities 73 Note 34 Invoiced income not yet recognised 73 Note 35 Accrued expenses and deferred income 73 Note 36 Valuation of financial assets and liabilities at fair value 74 Note 37 Financial risks and financial policy 77 Note 38 Operational lease contracts 80 Note 39 Investment obligations 80 Note 40 Pledged assets and contingent liabilities 80 Note 41 Related parties 81 Note 42 Group companies 82 Note 43 Untaxed reserves 85 Note 44 Cash flow statement 85 Note 45 Important estimates and assessments 86 Note 46 Information on parent company 86

PEAB ANNUAL REPORT 2011 45 NOTES

1 Note 1 Accounting principles liabilities. IFRS 9 has not yet been approved for use by EU and approval is not expected until EU can consider all three parts. Peab has therefore 2 Compliance with standards and legislation chosen not to carry out a consequence analysis for the time being. 3 The consolidated accounts have been drawn up in accordance with the IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrange- International Financial Reporting Standards (IFRS) issued by the Interna- 4 ments and IFRS 12 Disclosures of Interests in Other Entities deals with tional Accounting Standards Board (IASB) and interpretations from IFRS the consolidation of businesses, how joint ventures and joint operations 5 Interpretations Committee (IFRIC) which have been adopted by EU. In are presented and what information must be presented concerning these 6 addition, the Swedish Financial Reporting Board recommendation RFR 1 investments. At the same IAS 27 has been amended and is now titled Supplementary accounting rules for groups has also been applied. Separate financial statements. IAS 28 has also been amended and is now 7 The accounting principles given below for the Group have been applied titled Holdings in associates and joint ventures. These new and amended 8 consequently for all the periods presented in the consolidated financial standards will be applied from the financial year 2013 and retroactively. reports, if not otherwise stated. The Group’s accounting principles have EU is expected to approve these standards during the fourth quarter of 9 been applied consequently for reports and the consolidation of the parent 2012. None of the named new or amended standards are expected to 10 company, subsidiaries, associated companies and joint ventures in the affect Group accounting although they do require some additional consolidated financial reports. information. 11 The parent company applies the same accounting principles as the IFRS 13 Fair Value Measurement will be applied in the financial year 12 Group except in the cases stated below in the section on the parent 2013 and forwardly, and is only expected to affect the additional informa- company accounting principles. tion the Group presents. EU is expected to approve IFRS 13 during the 13 The annual report and the consolidated accounts have been approved second half of 2012. 14 of by the board and CEO for publication on 2 April 2012. The consolidated Amended IAS 19 Employee benefits eliminates the current rules that income statement and balance sheet and the parent company’s income 15 make it possible to even out actuary gains and losses over time. Instead statement and balance sheet will be presented for adoption by the AGM actuary gains and losses will be recognized in the comprehensive income 16 on 15 May 2012. statements as they occur. The yield on plan assets in the result is recog- 17 nized for an amount calculated on the discount rate used when calculating Valuation basis applied for preparation of the parent employee benefit obligations. The difference between the real and 18 company and group financial reports calculated yield of plan assets is recognized in the other comprehensive 19 Assets and liabilities are reported at historical acquisition values except income statement. The amendments will be applied from the financial for certain financial assets and liabilities which are assessed at fair value. year 2013 and retroactively. EU is expected to approve the amendments 20 Financial assets and liabilities valued at fair value consist of derivatives during the first half of 2012. In conjuncture with the amended IAS 19 21 and shares and holdings that are not reported as subsidaries/associated taking effect the Swedish Financial Reporting Board Recommendation companies or joint ventures. has withdrawn UFR 4 Accounting for special employer’s contribution and 22 tax on returns which means that special employer’s contribution reserves 23 Functional currency and reporting currency must be made for the current value of all future payments of special The parent company’s functional currency is the Swedish crown, which is employer’s contribution which is based on the employee benefit obliga- 24 also the currency in which the accounts of the parent company and the tions earned so far. Compared to the current rules this is expected to 25 Group are reported. Thus the financial reports are presented in Swedish result in a slight increase in the pension liability regarding completely or crowns. Unless otherwise indicated all amounts are rounded off to the 26 partially unfunded plans. Accounting of tax on yields is expected to nearest million. remain unchanged compared to the current application pending the 27 expected statement from the Swedish Financial Reporting Board Recom- 28 Estimates and assessments in the financial reports mendation. These changes are not expected to have any material effect Preparing the financial reports in accordance with the IFRSs requires that on Group results, other comprehensive results and net assets/equity. 29 the company management make estimates and assessments and make The amended IAS 1 Presentation of financial statements means that 30 assumptions which affect the application of the accounting policies and items in other comprehensive income must be separated into two catego- the recognised amounts with regard to assets, liabilities, revenues and ries and presented in other comprehensive income based on whether the 31 costs. The actual outcome may vary from these estimates and assess- items will at a later date be reported as income or not. The amendment 32 ments. will be applied from the financial year 2013 and retroactively under the Estimates and assumptions are regularly reviewed. Changes to esti- condition that EU approves the amendment, which is expected during the 33 mates are entered in the accounts of the period the change is made and, first half of 2012. Group presentations are affected by the fact that trans- 34 where applicable, in future periods. lation differences will belong to the category that can be reversed where- Assessments made by the company management when applying the as actuary gains and losses on defined benefit pension plans (see the 35 IFRSs which have a significant impact on the financial reports and above) will belong to the category that can never be reversed to profit/loss. 36 assessments made, which could result in substantial adjustments to fol- Items that will be reclassified are, for example, translation differences lowing years’ financial reports, are described in more detail in note 45. 37 and profit/loss on cash flow hedges. Items that will not be reclassified are, for example, actuary gains and losses and revaluations according to the 38 Changed accounting principles revaluation method for intangible and tangible assets. The amendment will 39 Group accounting principles are the same as in the Annual Reports 2010. be applied for the financial year that starts 1 July 2012 and retroactively. The amendments of IFRSs and the new IFRIC 19 applied from 2011 have Other new or amended IFRSs together with interpretations are not 40 not had any significant effect on Group accounting. expected to have any effect on Group accounting. 41 New IFRSs and interpretations that have not yet been applied Operating segments 42 The Group has chosen not to prematurely apply new standards or inter- An operating segment is an entity in the Group that engages in business 43 pretations when preparing these financial reports and plans no premature activities from which it may earn revenues and incur expenses and for application in the coming years. which discrete financial information is available. An operating segment’s 44 IFRS 9, Financial Instruments, will replace IAS 39, Financial Instruments: results are reviewed by the company’s highest decision maker in order to 45 Recognition and Measurement, as of 2015. IASB has published the first assess its performance and to be able to allocate resources to the seg- two of at least three sections that together make up IFRS 9. The first two ment. In accordance with IFRS 8, segment information is provided for the 46 parts deal with classifying and measuring financial assets and financial Group only.

46 PEAB ANNUAL REPORT 2011 NOTES

Classification etc. which do not comprise operations, the acquisition cost of each identifiable 1 Fixed assets, long-term liabilities principally consist of amounts which asset and liability is divided based on its relative fair value at the time of may be expected to be recovered or defrayed later than 12 months after acquisition. 2 the balance sheet date. Current assets and current liabilities principally The financial reports of subsidiaries are recognised in the consolidated 3 consist of amounts which may be expected to be recovered or defrayed accounts from the date the controlling influence arises and remain in the 4 within 12 months of the balance sheet date. consolidated report until the date it ceases. 5 Consolidation principles Joint ventures 6 Subsidiaries For accounting purposes, joint ventures are entities where the Group Subsidiaries are entities over which Peab AB exercises a controlling through co-operation agreements with one or more partners exercises a 7 influence. The term controlling influence refers to a direct or indirect right joint controlling influence over operational and financial management. 8 to mould the company’s financial and operating strategies in order to From the date on which the joint controlling influence is assumed, partici- obtain financial benefits. When assessing whether a controlling interest pations in joint ventures are recognised in consolidated accounts in 9 is involved, potential share voting rights which can be exercised immedi- accordance with the equity method, whereby the value of participations 10 ately or can be converted must be taken into account. in joint ventures recognised in the consolidated accounts corresponds to Business combinations are recognised using the purchase accounting the Group’s participation in the equity of joint ventures and Group good- 11 method, under which acquisitions of subsidiaries are regarded as trans- will and other possible residual Group deficit and surplus values. The 12 actions through which the Group indirectly acquires the assets of the Group’s participations in joint ventures after tax and minorities adjusted subsidiary and takes over its liabilities and contingent liabilities. The for depreciation, write-downs or dispersal of acquired deficit and surplus 13 consolidated acquisition value is calculated in an acquisition analysis in values are recognised in consolidated profit for the year as Participations 14 in profit of joint ventures. Only equity earned after the acquisition is conjunction with the acquisition. The analysis establishes the acquisition 15 value of the participations or the business, the fair value on acquisition recognised in the consolidated equity. Dividends received form joint date of the acquired identifiable assets and the liabilities and contingent ventures reduce the accounting value of the investment. 16 liabilities taken over. Upon acquisition, any differences between the acquisition value of the 17 From 1 January goodwill in business combinations is calculated as the holding and the owner company’s participation in the net fair value of sum of transferred reimbursement, any non-controlling interest (previously the joint venture’s identifiable assets, liabilities and contingent liabilities is 18 called minority interest) and the fair value of previously acquired shares recognised primarily according to the same principles as for subsidiaries 19 (in step acquisitions) less the fair value of the subsidiary’s identifiable with the difference that acquisitions costs are activated in the acquisition assets and overtaken liabilities. Where the difference is negative this is value of the shares and that changes in ownership while maintaining joint 20 recognised directly in profit/loss for the year. Goodwill from acquisitions control are reported as separate partial acquisitions respectively partial 21 before 2010 is calculated as the sum of transferred reimbursement and disposals of shares proportional to the groupwise value. acquisition expenses less the fair value of acquired identifiable net assets The equity method is applied until the time the joint controlling influence 22 from each acquired share after which the acquisition value of goodwill ceases. 23 from all the separately acquired shares is aggregated. Acquisition costs for business combinations from 2010 on are expensed but are included in Associated companies 24 goodwill in acquisitions made before that date. Associated companies are those companies in which the Group has a 25 significant but not controlling influence over operating and financial Conditional consideration from 2010 on is measured at fair value at the 26 time of acquisition and subsequent changes in fair value are recognised control usually through shareholdings of between 20 and 50 percent. in profit and loss as they occur. For acquisitions before 2010 conditional From the date on which the significant influence is assumed, participations 27 in affiliated companies are recognised in consolidated accounts in consideration is only reported when it is possible to calculate a probable 28 and reliable amount and any adjustments thereafter are recognised in accordance with the equity method. For a description of the equity goodwill. method, see Joint Ventures above. 29 In subsidiaries acquired from 2010 on where there are owners with a 30 non-controlling interest the Group reports net assets attributable to owners Transactions which must be eliminated upon consolidation of non-controlling interests either as the fair value of all net assets Intra-group receivables and liabilities, revenues or costs or unrealised 31 excluding goodwill or the fair value of all assets including goodwill. The gains or losses stemming from intra-group transactions between Group 32 choice is made individually for each acquisition. companies are eliminated completely when preparing the consolidated Increased ownership in companies in stages is reported as step accounts. 33 acquisitions. In step acquisitions from 2010 on that lead to control the Unrealised gains arising from transactions with joint ventures are elimi- 34 previously acquired shares are remeasured in accordance with the latest nated to the extent these refer to the Group’s ownership participation in the acquired share and the resulting profit or loss is recognised in the income company. Unrealised losses are eliminated in the same way as unrealised 35 statement. Step acquisitions before 2010 are reported as an aggregation gains but only to the extent there is no write-down requirement. 36 of the acquisition-date values and any remeasurement when control is 37 achieved is recognised in the remeasurement reserve in equity. Foreign currency When control has been achieved the change in ownership is reported Transactions in foreign currency 38 Transactions in foreign currency are converted to the functional currency as a transfer in equity between the parent company and the non-control- 39 ling interests, without remeasuring the subsidiary’s net assets. In changes at the exchange rate on the transaction date. The functional currency is in ownership while maintaining control prior to 2010 the difference the currency of the primary financial surroundings where the company 40 between payment and the acquisition’s share of booked identifiable operates. Monetary assets and liabilities in foreign currency are converted 41 assets were recognised in goodwill. to the functional currency at the exchange rate applying on the balance From 1 January 2010 partial disposal of an investment in a subsidiary sheet day. Exchange rate differences arising during translation are recog- 42 that results in loss of control triggers remeasurement of the residual hold- nised in profit/loss for the year. Non-monetary assets and liabilities which 43 ing to fair value. Any difference between fair value and carrying amount is are recognised at historical acquisition value are converted at the recognised in profit or loss for changes in ownership. No such remeas- exchange rate applying at the time of the transaction. Non-monetary 44 urement was performed on residual holdings that formed a joint venture assets reported at fair value are recalculated to the functional currency at 45 or associated company prior to 2010. the exchange rate current at the time of valuation at fair value. When acquisitions of subsidiaries involve the acquisition of net assets 46

PEAB ANNUAL REPORT 2011 47 NOTES

1 The financial reports of foreign business Other income Assets and liabilities in foreign entities including goodwill and other Group Other income excluding construction contracts is recognised in accord- 2 deficit and surplus values are converted from the foreign company’s ance with IAS 18 Revenue. Income from the sale of goods is recognised 3 functional currency to the Group’s reporting currency, Swedish crowns, at in profit/loss for the year when the material risks and benefits associated 4 the exchange rate applying on balance sheet day. Earnings and costs in with ownership of the goods has been transferred to the buyer. Crane a foreign entity are converted to Swedish crowns at an average rate and machinery hire income is recognised linearly over the hiring period. 5 approximating to the rates applying on the respective transaction dates. Translation differences arising when converting the currency of foreign 6 Government grants companies are recognised in other comprehensive income and are accu- Government grants are recognised in the balance sheet as government 7 mulated in a separate component in equity as a translation reserve. receivables when it is reasonably certain that the contribution will be 8 received and that the Group will meet the requirements for the grant. 9 Net investment in a foreign company Grants are amortised systematically in profit/loss for the year as cost Translation differences arising from the translation of a foreign net invest- reductions in the same way and over the same periods as the costs that 10 ment are recognised via other comprehensive income in the translation the grants are intended to offset. Government grants related to assets are 11 reserve in equity. Translation differences also comprise exchange rate recognised as a reduction in the recognised value of the asset. differences from loans which form a part of the parent company’s invest- 12 ment in foreign subsidiaries (so-called extended investment). When a for- Leasing 13 eign subsidiary is divested, the accumulated translation differences Operational leasing agreements attributable to the company are reclassified from equity to profit/loss for Expenses for operational leasing agreements where the Group is the les- 14 the year. see are recognised linearly in profit/loss for the year over the leasing peri- 15 Accumulated translation differences attributable to foreign companies od. Benefits obtained from the signing of an agreement are recognised 16 are presented as a separate capital class and contain translation differ- linearly in profit/loss for the year over the term of the leasing agreement. ences accumulated from 1 January 2004 onwards. Accumulated transla- Variable costs are expensed in the periods they occur. 17 tion differences before 1 January 2004 are divided into other own capital Revenues relating to operational leasing agreements where the Group 18 classes and are not recognised separately. is the lessor are recognised in a straight line over the life of the lease agreement. Costs arising from leasing agreements are recognised as 19 Income they arise. 20 Construction contracts Current construction contracts are reported in accordance with IAS 11, 21 Financial leasing agreements Construction contracts. Under IAS 11 income and expenses must be rec- Minimum leasing charges are divided between interest costs and amorti- 22 ognised as the contract is completed. This principle is known as the per- zation of the outstanding debt. Interest costs are distributed over the centage of completion method. Income and expenses are recognised in 23 leasing term such that an amount corresponding to a fixed interest rate profit and loss in proportion to the percentage completion of the for the debt accounted in the respective period is recognised in each 24 contract. The percentage completion of the contract is determined based accounting period. Contingent rents are carried as expenses in the on the defrayed project costs compared to the project costs corresponding periods it occurs. 25 to the project income for the whole contract. The application of the 26 percentage of completion method is prerequisite on it being possible to Financial income and expenses 27 calculate the outcome in a reliable manner. In case of contracts where Financial income and expenses consist of interest income on cash at the outcome cannot be reliably calculated, income is calculated in bank, receivables and interest-bearing securities, interest expenses on 28 proportion to the costs defrayed. Feared losses are charged to income loans, dividend revenues, realised and unrealised gains and losses on 29 as soon as they become known. financial investments and derivatives used within the financial business. In the balance sheet, construction contracts are entered project by Interest income on receivables and interest expenses on liabilities 30 project either as Recognised but non-invoiced income under current are calculated in accordance with the effective interest rate method. The 31 assets or as Invoiced income not yet recognised under current liabilities. effective interest rate is the discount rate for estimated future payments Those projects with higher accumulated income than invoiced are recog- 32 and disbursements during the expected life of a financial instrument to nised as assets whilst those projects which have been invoiced in excess the financial asset’s or liability’s net book value. Interest income and 33 of the accumulated income are recognised as liabilities. interest expenses include accrued transaction costs and possible Swedish tenant-owned housing projects are reported according to IAS 34 discounts, premiums and other differences between the original value 11, Construction contracts, which entails applying the percentage of of the receivable or liability and the amount received when it falls due. 35 completion method as the project progresses based on expenses that Dividend income is recognised when the right to payment is estab- have occurred in relationship to the project’s calculated total cost. A con- 36 lished. tract is drawn up which regulates the sales of land and construction of The results of sales of financial investments are recognised when the 37 the property with the tenant-owned association, which is an independent risks and benefits associated with ownership of the instrument are materi- 38 legal entity. ally transferred to the buyer and the Group no longer has control of the instrument. 39 Own developed housing projects for sales Interest costs are charged to income during the period to which they 40 Since Peab has housing projects in Finland and Norway as well as our refer except to the extent that they are included in that asset’s acquisition value. An asset for which interest can be included in the acquisition price 41 own home developments in Sweden Peab does not have an external independent other party at the start of a project, which means that the is an asset which must necessarily require considerable time to prepare 42 projects are reported according to IAS 18 Revenue and income from for the intended use or sale. Interest costs are capitalised according to 43 these projects is recognised first when the projects are handed over to IAS 23, Borrowing costs. the buyer. Expenses are recognised as work-in-progress in the balance Interest rate swaps are used to hedge against interest risks connected 44 sheet. On account invoices to customers are reported as non-interest- to Group loans. Interest rate swaps are valued at fair value in the balance 45 bearing liabilities, and loans to finance housing projects are reported as sheet. The coupon rate part is recognised on a current basis in profit/loss interest-bearing liabilities. for the year as a correction of the interest expense. Unrealised changes 46 in the fair value of rate swaps are recognised in other comprehensive

48 PEAB ANNUAL REPORT 2011 NOTES

income and are part of the hedging provision until the hedged item Classification and valuation 1 affects profit/loss for the year and as long as the criteria for hedge Financial instruments which are not derivatives are initially recorded at reporting is met. acquisition value corresponding to the instrument’s fair value with the 2 addition of transaction costs for all financial instruments except for those 3 Taxes classified as financial assets, which are recognised at fair value in profit 4 Income tax consists of current tax and deferred tax. Income tax is recog- for the year which are recorded at fair value minus transaction costs. nised in profit/loss for the year except when the underlying transaction is Financial instruments are classified upon first recognition based on the 5 recognised in equity, in which case the relevant tax is recognised in other purpose for which the instrument was acquired. Classification determines 6 comprehensive income or equity. how financial instruments are valued after first recognition as described Current tax is tax that must be paid or will be received during the current below. 7 year. This also includes current tax attributable to earlier periods. Current Liquid funds consist of cash and immediately available balances at 8 and deferred tax is calculated applying the tax rates and tax rules banks and equivalent institutes and current liquid investments with resolved upon or in practice resolved upon on the balance sheet day. maturities from the acquisition date of less than three months and which 9 Deferred tax is calculated according to the balance sheet method are exposed to only insignificant value fluctuation risks. 10 based on temporary differences between the accounted and tax values of assets and liabilities. Temporary differences are not taken into account 11 Financial assets valued at fair value via profit/loss for the difference generated by the recognition of groupwise goodwill and Financial assets in this category are constantly valued at fair value with 12 nor for difference that occurred at first recognition of assets and liabilities value changes recognised in profit/loss for the year. This category which are not business combinations and which at the time of the trans- 13 consists of two sub-groups: financial assets held for trading and other action did not affect either recognised or taxable profits. Further are not financial assets which the company initially chooses to place in this 14 temporary differences attributable to participations in subsidiaries and category with the support of the so called fair value option. The first sub- 15 joint ventures, which are not expected to be written back in the foreseea- group includes derivatives with positive fair value except for derivatives ble future, taken into account. Valuation of deferred tax is based on how 16 which are identified and in effect hedge instruments. The Group has the underlying value of assets or liabilities is expected to be realised or decided to include listed shares which the executive management’s risk 17 regulated. management and investment strategy manages and values based on fair When companies are acquired such acquisition either refers to business 18 value in the second sub-group. combinations or asset purchase. Asset purchase refers to, for example, 19 the acquired company only owning one or more properties with tenancy agreements but the acquisition not comprising processes required to Financial assets available for sale 20 operate property business. When recognising asset purchase no deferred Included in the category financial assets available for sale are financial 21 tax is recognised separately. The fair value of deferred tax liabilities is assets not classified in any other category or financial assets that the instead deducted from the fair value of the acquired asset. company has chosen to initially classify in this category. Shareholdings 22 Deferred tax receivables relating to deductible temporary differences and participation not recognized at fair value via profit and loss, and 23 and loss carry-forwards are only recognised to the extent it is likely they which are not subsidiaries, associated companies or joint ventures, are can be exercised. The value of deferred tax receivables is reduced when reported in this category. Assets in this category are valued at fair value 24 it is no longer assessed they can be utilised. with the changes in value for the period reported in other comprehensive 25 income. Accumulated changes in value are reported in a separate component of equity, with the exception of changes in value stemming from 26 Financial instruments write-downs. Received dividends are reported in profit/loss for the year. On the assets side, financial instruments entered to the balance sheet 27 When the asset is divested the accumulated profit/loss, which was previ- include liquid funds, short-term investments, accounts receivable, ously reported in other comprehensive income, is reported in profit/loss 28 securities holdings, loan receivables and derivatives. On the liabilities for the year. side, they include accounts payable, borrowing and derivatives. 29 30 Loans and receivables Recognition in and removal from the balance sheet Loans and receivables are financial assets which are not derivatives with 31 Financial assets and financial liabilities are entered to the balance sheet fixed payments or with payments which can be determined and which 32 when the company becomes involved in accordance with the instrument’s are not listed in an active market. These assets are valued at amortized contractual terms. Accounts receivable are reported when the company cost. The amortized cost is determined based on the effective interest 33 has performed and the other party has a contractual responsibility to pay, rate which is calculated at the time of acquisition. Accounts receivable 34 even if the invoice has not yet been sent. Accounts receivable are entered are recognised at the estimated impact amount, i.e. after deduction of into the balance sheet when the invoice has been sent. Liabilities are distressed debts. 35 recognised when the counterparty has performed the service and there 36 is a contractual payment obligation even if the invoice has not been Financial liabilities valued at fair value via profit/loss received. Accounts payable are recognised when the invoice is received. 37 Financial liabilities in this category are valued at fair value with the changes Financial assets are removed from the balance sheet when the rights of in value reported in profit/loss for the year. 38 the agreement have been realised, fall due or the company loses control The category consists of two sub-groups: financial liabilities which are of them. The same applies to parts of financial assets. Financial liabilities 39 held for trading and other financial liabilities which the company initially are removed from the balance sheet when contractual obligations are chose to place in this category with the support of the so called fair value 40 discharged or have been otherwise extinguished. The same applies to option. The first sub-category includes derivatives with negative fair value parts of financial liability. 41 except for derivatives which are identified and in effect hedge instru- Financial assets and financial liabilities are offset and recognised at a 42 ments. The Group has not included any financial liabilities in the second net amount in the balance sheet only where there is a legal right to offset sub-category. 43 the amounts and it is intended to adjust the items with a net amount or to at the same time capitalise the asset and adjust the liability. 44 On-demand acquisitions and on-demand sales of financial assets are Other financial liabilities 45 reported on the transaction date, which is the date the company under- Loans and other financial liabilities, e.g. accounts payable, are included takes to acquire or sell the asset. in this category. Liabilities are recognised at accrued acquisition value. 46

PEAB ANNUAL REPORT 2011 49 NOTES

1 Derivates are recognised in profit for the year as financial income and expenses. The Group’s derivatives consist of interest rate, exchange rate and share The claim part is ascribed to the loan and accounts receivable category 2 derivatives utilised to hedge risks of changes in exchange rates, interest and initially valued as the difference between the acquisition value of the 3 rate changes and changes in the fair value of shares. Derivatives not convertible and the initial fair value of the option. Subsequently the claim 4 used for hedge accounting are classified as financial assets or financial part is valued at accrued acquisition value based on the derived implicit liabilities held for trading and are valued at fair value. Value changes are interest rate which gives an even return over the contractual life of the 5 recognised in profit/loss. The valuation method involves the discounting of claim. 6 future cash flows. Derivatives are initially recognised at fair value, and consequently trans- Issued convertible promissory notes 7 action costs are charged to profit/loss for the period. After first recognition Convertible promissory notes can be converted to shares if the counter- 8 derivatives are recognised as described below. If the derivative is used party exercises the option to convert the claim to shares and are recog- for hedge accounting and to the extent this is effective, the value change nised as a compound financial instrument divided into a liability part 9 to the derivative is recognised on the same line in profit/loss for the year and an equity part. The fair value of the liability at the time of issue is 10 as the hedged item. Even if hedge accounting is not applied, the value calculated by discounting future payment flows at the current market rate gain or reduction to the derivative is recognised as income or expenses in for similar liabilities without conversion rights. The value of the equity 11 operating profit or in net financials items depending on the purpose for capital instrument is calculated as the difference between the issuing 12 which the derivative is used and whether its use relates to an operating funds when the convertible promissory note was issued and the fair value item or a financial item. In hedge accounting, the non-effective part is of the financial liability at the time of issue. Deferred tax attributable to 13 recognised in the same way as value changes to derivatives that are not liabilities at the issue date is deducted from the recognised value of the 14 used in hedge accounting. If hedge accounting is not applied to the use equity instrument. Interest expenses are recognised in profit for the year 15 of interest rate swaps, the coupon rate is recognised as interest and the and are calculated applying the effective interest rate method. remaining value change of the interest rate swap is recognised as other 16 financial income or other financial costs. Tangible fixed assets 17 The exchange rate contracts used to hedge future cash flow is recog- Owned assets nised applying the rules for hedge accounting. These hedge instruments Tangible fixed assets are recognised in consolidated accounts at acquisi- 18 are recognised at fair value in the balance sheet. The value changes for tion value minus accumulated depreciation and amortization and any 19 the period are recognised in other comprehensive income and the accu- write-downs. The acquisition value consists of the purchase price and mulated value changes in a separate component of equity (the hedging 20 costs directly attributable to putting the asset in place in the condition reserve) until the hedged flow matches profit/loss for the year whereupon required for utilisation in accordance with the purpose of the acquisition. 21 the accumulated value changes of the hedge instrument are reclassified Borrowing costs are included in the acquisition value of internally to profit/loss for the year when the hedged transaction matches profit/loss 22 produced fixed assets according to IAS 23. The accounting principles for the year. applying to impairment loss are listed below. 23 Loans to foreign subsidiaries (extended investment) through investments The value of a tangible fixed asset is derecognised from the balance in foreign subsidiaries have been to some extent financially hedged 24 sheet upon scrapping or divestment or when no future financial benefits through forward contracts. Hedge accounting has not been applied. are expected from the use or scrapping/divestment of the asset. Gains 25 These loans are recognised at the price on balance sheet day and and losses arising from divestment or scrapping of an asset consist of 26 derivatives are recognised at fair value according to the above. the difference between the sale price and the asset’s booked value minus Holdings of shares noted in foreign stock exchanges that are classified direct costs of sale. 27 as financial assets available for sale have been hedged through forward 28 exchange contracts. Hedging accounting has been used for these hedges by recognizing the translation effect from the translation of shares Leased assets 29 to the functional currency in profit/loss for the year instead of other Leasing is classified in the consolidated accounts either as financial or operating leasing. Financial leasing applies in circumstances where the 30 comprehensive income. The translation effect is offset to the extent the hedge is effective by the changes in the fair value of the hedging financial risks and benefits associated with ownership are substantially 31 instrument, which is also recognized in profit/loss for the year. transferred to the lessee. Where such is not the case, operating leasing applies. 32 Hedge accounting of net investments Assets which are rented under financial leasing agreements are recog- 33 To a certain extent measures have been taken to reduce exchange risks nised as assets in the consolidated balance sheet. Payment obligations 34 connected to investments in operations abroad. This has been done by associated with future leasing charges have been recognised as long- taking out loans in the same currency as the net investments. These loans term current liabilities. The leased assets are depreciated according to 35 are recognised at the translated rate on balance sheet day. The effective plan while leasing payments are entered under interest and amortisation 36 part of the period’s exchange rate changes in relation to hedge instru- of liabilities. Assets which are rented under operational leasing agreements have 37 ments is recognised in and the accumulated changes in a separate component of equity (the translation reserve), in order to meet and partly not been recognised as assets in the consolidated balance sheet. Leas- 38 match the translation differences that affect other comprehensive income ing charges for operational leasing agreements are charged to income in a straight line over the life of the lease. 39 concerning net assets in the hedged operations abroad. In the cases where the hedge is not effective, the ineffective part is recognised Assets which are rented out under financial leasing agreements are not 40 directly in profit for the year as a financial item. recognised as tangible fixed assets since the risks and opportunities connected to ownership of the assets are transferred to the lessee. A financial 41 Holdings of convertible certificates of claim receivable referring to future minimum leasing fees is reported instead. 42 Convertible certificates of claim may be converted to shares through 43 the exercise of the option to convert the claim to shares. The option to Future expenses convert a convertible certificate of claim to shares is not closely related to Future expenses are only added to the acquisition value if it is likely that 44 the claim right and therefore it is separated as an “embedded derivative” the future financial benefits associated with the asset will benefit the -com 45 belonging to the valuation category financial assets held for trading. pany and the acquisition value can be reliably estimated. All other future Therefore the derivative part is initially valued and subsequently on an expenses are recognised as costs as they arise. 46 ongoing basis according to a valuation model at fair value. Value changes

50 PEAB ANNUAL REPORT 2011 NOTES

Borrowing costs resources for completing development and then applying or selling the 1 Borrowing costs which are directly attributable to the purchase, construc- intangible asset. The recognised value includes all directly attributable tion or production of an asset and which require considerable time to expenses, including for materials and services, payroll costs, the registra- 2 complete for the intended use or sale are included in the acquisition value tion of legal rights, depreciation of patents and licences, borrowing costs. 3 Other development costs are reported in profit for the year as costs as of the asset. Borrowing costs are activated provided that it is probable 4 that they will result in future financial benefits and the costs can be they arise. Development costs are recognised in the balance sheet at reliably measured. acquisition value minus accumulated depreciation and possible write- 5 downs. 6 Depreciation principles 7 Depreciation is based on the original acquisition value minus the calculated Other intangible assets residual value. Depreciation is made linearly over the assessed useful life Other intangible assets acquired by the Group are recognised at acquisi- 8 of the asset. tion value minus accumulated depreciation, amortization and write- 9 downs. Costs defrayed for internally generated goodwill and internally Buildings (operating buildings) 25-100 years generated brands are reported in profit for the year as the costs arise. 10 Land improvements 25-50 years Asphalt and concrete factories 10-15 years 11 Depreciation policies Vehicles and construction machinery 5-6 years 12 Depreciation is linearly recognised in profit for the year over the estimated PCs 3 years useful life of the intangible asset provided the useful life can be deter- 13 Other equipment and inventories 5-10 years mined. Goodwill and other intangible assets with an indeterminate useful 14 The useful life and residual value of assets are assessed annually. life is tested for the need for write-down annually or as soon as there are indications that the asset in question has declined in value. Depreciable 15 intangible assets are depreciated from the date when the asset became Real estate 16 available for use. Group real estate holdings are divided as follows: The estimated useful lives are: 17 – Buildings and land entered under tangible fixed assets Brands 10 years 18 – Project and development properties as inventories among current assets Customer relations 3-5 years 19 Properties used in the Group’s own operations consisting of office build- Agency agreements 2-7 years 20 ings and warehouses (operational buildings) are entered as buildings Site leasehold agreements During the term of the agreement and land under tangible fixed assets. Valuation is made in accordance The useful life and residual value of assets are assessed annually. 21 with IAS 16, Tangible fixed assets, at acquisition value deducted for accu- 22 mulated depreciation and possible write-downs. Inventories 23 Direct and indirect holdings of undeveloped land and redeveloped Inventories are valued at the lowest of acquisition value and net sale value. tracts for future development, developed investment properties for project The acquisition value of stocks are calculated using the first-in, first-out 24 development, improvement and subsequent sale and which are expected method and include expenses arising with the acquisition of the stock 25 to be realized during our normal operational cycle are entered as project assets and their transport to their current location and condition. For and development property under current assets. Valuation is made in manufactured goods the acquisition value includes a reasonable share 26 accordance with IAS 2, Inventories, at the lowest of either acquisition of the indirect costs based on a normal capacity. 27 value or net sales value. The net sale value is the estimated sale price in the current business minus estimated costs of completion and bringing about the sale. 28 Intangible assets 29 Goodwill Impairment loss Goodwill refers to the difference between the acquisition value of a The recognised value of Group assets is checked each balance sheet 30 business and the fair value of acquired identifiable assets, assumed day to assess whether there is a write-down requirement. IAS 36 is 31 liabilities and contingent liabilities. applied to the testing of write-down requirements for other assets besides 32 Upon the transition to the IFRSs, the rules of the IFRSs have not been financial assets which are tested in accordance with IAS 39, assets for applied retroactively to goodwill in acquisitions made before 1 January sale and divestment groups recognised which are tested in accordance 33 2004, rather the recognised value on that date will in future constitute the with IFRS 5, inventories, plan assets used for financing of remuneration to 34 Group’s acquisition value after write-down testing. employees and deferred tax receivables. The recognised value of the Goodwill is value at acquisition value minus any accumulated write- above-mentioned excepted assets is tested applying the respective 35 downs. Goodwill is divided between cash-generating units and is tested standards. 36 at least once a year for write-down needs. Goodwill stemming from the acquisition of joint ventures and affiliated companies is included in the 37 Impairment test of tangible and intangible assets and participa- recognised value of participations in joint ventures and affiliated tion in subsidiaries, joint ventures, associated companies etc. 38 companies. If write-down requirements are indicated, the recovery value of the asset In the case of business acquisitions which are less than the net value 39 is estimated in accordance with IAS 36. Moreover, the recovery value of of the acquired assets and the assumed liabilities and contingent goodwill, other intangible assets of indeterminate useful life and intangible 40 liabilities, the difference is recognised directly in profit for the year. assets which are not yet ready for use is estimated each year. If it is not 41 possible to establish materially independent cash flows for a certain Research and development asset, when testing for write-down needs the assets are grouped at the 42 Research costs intended to acquire new scientific or technological knowl- lowest level where it is possible to identify materially independent cash 43 edge are reported as costs as they arise. flow – a so-called cash-generating unit. Development costs where the results of research or other knowledge is Write-downs are recognised when the book value of an asset or a 44 applied to the production of new or improved products or processes are cash generating unit exceeds the recovery value. Write-downs are 45 reported as an asset in the balance sheet if the product or process is expensed in profit for the year. Write-downs of assets attributable to a technically or commercially useful and the company has adequate cash-generating unit (group of units) are firstly allocated to goodwill, 46

PEAB ANNUAL REPORT 2011 51 NOTES

1 followed by the proportional write-down of the other assets in the unit When calculating earnings per share after dilution, profit and the average (group of units). number of shares are adjusted to allow for the effects of the diluting 2 The recovery value is the highest of utility value and fair value minus potential of shares which in the reported periods stem from convertible 3 cost of sale. When calculating utility value, future cash flows are discounted certificates of claim and options issued to the employees. Earnings per 4 with a discount factor that takes into consideration the risk-free interest share after dilution are calculated by increasing the number of shares rate and the risks which are associated with the specific asset. with the total number shares the convertibles represent and increasing 5 profit with the reported interest cost after tax. 6 Impairment test for financial assets Employee benefits 7 Each time reports are drawn up the company assesses whether there are Defined contribution pension plans objective indications that a financial asset or a group of financial assets 8 Pension plans are only classified as defined contribution pension plans need to be written down. Objective indications partly consist of occurred where the company’s obligations are limited to the contributions the 9 observable circumstances which have a negative impact on possibilities company has undertaken to pay. In such cases the size of an employee’s of recovering the acquisition value and partly on significant or lengthy 10 pension depends on the contributions the company pays to the plan or decreases in the fair value of an investment in a financial placing classi- 11 to the insurance company and the return on capital produced by the fied as a financial asset available for sale. contributions. Consequently, the employees bear the actuarial risk (that 12 Accounts receivable that need to be written down are reported as the payments will be lower than expected) and the investment risk (that the present value of the anticipated future cash flows. Current receivables 13 invested assets will not be adequate to produce the expected return). The are, however, not discounted. Write-downs charge profit for the year. company’s obligations concerning contributions to defined contribution 14 Equity instruments classified as financial instruments available for sale plans are expensed in profit for the year as they are earned by the are written down if the fair value is significantly lower than the acquisition 15 employee performing work for the company during the period. 16 value, or when the decline in value has been a long, drawn out process. When an equity instrument classified as a financial instrument available 17 for sale is written down, previously reported accumulated profit or loss in Defined benefit pension plans The Group’s defined benefit plans consist of the Swedish ITP Plan for 18 equity via other comprehensive income is reclassified to profit/loss for the year. The amount of accumulated loss that is reclassified from equity via Salaried Staff which is managed through insurance with Alecta, pension 19 other comprehensive income to profit/loss for the year consists of the plans for a small number of executive personnel in Sweden and Norway 20 difference between the acquisition cost and the current fair value after and the AFP pension in Norway. The Group’s net obligations relating to defined benefit plans are calcu- 21 reductions for any write-downs on a financial asset which has already been reported in profit/loss for the year. lated separately for each plan through an assessment of the future 22 payments which employees have earned through their employment both during the present and previous periods. Such payment is discounted to 23 Reversed write-downs a net present value deducted for the fair value of any plan assets. The 24 A write-down is reversed if there are both indications that write-down discount rate is the market rate of government bonds of equivalent 25 requirements no longer exist and assumptions upon which the calculation maturity. Calculations are performed by a qualified actuary. of the recovery value were based have changed. However, write-downs The so-called corridor rule is applied. The corridor rule involves that 26 of goodwill are never reversed. Reversing is only performed to the extent part of the accumulated actuarial gains and losses which exceeds 10 per 27 that the recognised value after reversing of the asset does not exceed the cent of the greatest of the obligation’s net present value and the plan recognised value which would have been recognised deducted for asset’s fair value being recognised in the income statement over the 28 depreciation where necessary if write-down had not been made. expected average remaining working life of the employee covered by the 29 Write-downs of investments held to maturity or loans and receivables plan. Otherwise account is not taken of actuarial gains and losses. 30 recognised at amortized cost are reversed if a subsequent rise in the When there is a difference between how pension costs are determined recovery value may objectively be attributed to a circumstance occurring in the legal entity and group, a provision or a claim is recognised relating 31 after write-down was made. to special payroll tax based on this difference. 32 Write-downs of equity instruments classified as financial instruments Net interest on pension liabilities and anticipated returns on associated available for sale are reversed via other comprehensive income and not plans assets are recognised in net financial items. Other components are 33 via profit/loss for the year. All revaluations that follow are based on the recognised as income or expenses in operating profit. 34 written down value and are reported in other comprehensive income. 35 Remuneration upon resignation or dismissal Share capital 36 A reserve for remuneration relating to the dismissal of staff is only estab- Repurchase of own shares lished if the company is demonstrably subject to, without any realistic 37 Holdings of own shares and other equity instruments are recognised as a opportunity for avoidance, a formal detailed plan for the termination of 38 reduction in equity. Liquid funds from the divestment of such equity employment prior to the normal time. When remuneration is made as an instruments are recognised as an increase in equity. Any transaction offer to encourage voluntary retirement, a cost is recognised if it is likely 39 costs are charged directly to equity. that the offer will be accepted and the number of employees who will 40 accept the offer can be reliably estimated. 41 Dividends Dividends are entered as liabilities after they have been approved by the 42 Short-term remuneration AGM. Short-term remuneration to employees is calculated without discount and 43 are reported as a cost when the related services are received. 44 Earnings per share A provision is recognised for the expected costs of participations in The calculation of earnings per share is based on consolidated profit for profits and bonus payments when the Group has an applicable legal or 45 the year attributable to the shareholders of the parent company and on informal obligation to make such payments for services received from 46 the weighted average number of outstanding shares during the year. employees and the obligations can be reliably estimated.

52 PEAB ANNUAL REPORT 2011 NOTES

Provisions Classification and design types 1 Provisions are entered in the balance sheet when the Group is subject to The parent company’s income statement and balance sheet are present- an actual or informal legal obligation as a consequence of a circum- ed in accordance with the design in the Swedish Company Accounts Act. 2 stance occurring and it is likely that financial resources will be required to The difference to IAS 1 Design of financial reports which is applied to the 3 meet the obligation and a reliable estimate of the amount can be made. design of the consolidated financial reports is primarily the reporting of 4 financial income and expenses, fixed assets, equity and the presentation Guarantees of provisions under a separate heading in the balance sheet. 5 Provisions for guarantees are recognised when the underlying products 6 or services are sold. The provisions are based on historical data about Subsidiaries, joint ventures and associated companies the guarantees and a weighing up of the conceivable outcomes relative 7 Participation in subsidiaries, joint ventures and associated companies is to the probabilities that the outcomes are associated with. recognised in the parent company applying the acquisition value method. 8 This means that acquisition costs are included in the reported value of 9 Restoration costs the holding in the subsidiary. In Group accounting acquisition costs These refer to the estimated restoration costs for rock and gravel quarries related to shares in subsidiaries are recognised directly in profit and loss 10 after operations are terminated. The provision increases with the quarried as they occur. 11 amount and is reversed after restoration is completed. The reserved amount is expected to be utilised successively following completion of 12 Financial guarantees quarrying. The parent company’s financial guarantee agreements mainly consist of 13 personal guarantees to the benefit of subsidiaries and joint ventures. The Terminated activities 14 parent company recognises financial guarantee agreements as provisions A terminated activity is a part of the company’s business which constitutes in the balance sheet when the company has an obligation for which 15 an independent business area or a significant activity within a geographical payment is likely to be required to adjust the obligation. area or is a subsidiary which is acquired exclusively for the purpose of 16 resale. Profit or loss after tax from terminated operations is booked as a 17 separate post in the income statement. When an operation is classified as Forestalled dividends terminated the presentation of the comparison year’s income statement is Forestalled dividends from subsidiaries are recognised when the parent 18 altered so that it is as if the terminated operation was shut down at the company alone is entitled to decide on the size of the dividend and the 19 beginning of the comparison year. company has taken a decision on the size of the dividend before the 20 parent company publishes its financial reports. Contingent liabilities 21 A contingent liability is recognised in accounts when there is a possible Tangible fixed assets obligation attributable to events occurred, the occurrence of which can 22 Tangible fixed assets in the parent company are recognised at acquisition only be confirmed by one or more uncertain future events, or when there 23 value minus accumulated depreciation and any write-downs in the same is an undertaking not recognised as a liability or provision because it is way as for the Group but with the addition of possible write-ups. 24 not likely that the use of resources will be required. 25 The parent company’s accounting principles Leased assets 26 The parent company has prepared its annual report in accordance with All leasing agreements in the parent company are recognised according the Swedish Company Accounts Act (1995:1554) and Swedish Financial to the rules for operating leasing. 27 Reporting Board recommendation RFR 2 Accounting rules for legal 28 entities. The Swedish Financial Reporting Board statements concerning Employee benefits listed companies are also applied. RFR 2 requires that the parent company, Defined benefit pension plans 29 in the annual report for the legal entity, use all EU adopted IFRSs and The parent company applies different assumptions for the calculation of 30 interpretations as far as possible within the framework of the Swedish defined benefit plans than those in IAS 19. The parent company complies Company Accounts Act, the Job Security Law and with due regard for the with the provisions of the Job Security Law and the instructions of the 31 relationship between accounting and taxes. The recommendation states Swedish Financial Supervisory, as this is a precondition for tax allowance 32 which exceptions and additions must be made to the IFRSs. rights. 33 Changed accounting principles Taxes 34 The parent company accounting principles are unchanged in 2011 com- Untaxed reserves including deferred tax liabilities are recognised in the pared to 2010 with the exception of the presentation of Group contribu- 35 parent company. On the other hand, in the Group accounts, untaxed tions. Swedish Financial Reporting Board has withdrawn recommendation reserves are divided between deferred tax liabilities and equity. 36 UFR 2 Group contributions and shareholder’s contributions and replaced it with the rules in RFR 2. The parent company has chosen to report both 37 Shareholder’s contributions paid and received Group contributions in net financial items under Profit/ Shareholder’s contributions are recognized directly in equity in the receiver 38 loss from shares in Group companies and will apply this principle retro- and are activated in shares and participation in the provider wherever actively on the comparable year. The tax effect of Group contribution is 39 write-downs are not required. recognized in profit/loss under Taxes. Previously paid and received 40 Group contributions were recognized directly in equity including associated tax effects. 41 42 Differences between the Group’s and parent company’s accounting principles 43 Differences between the Group’s and parent company’s accounting 44 principles are given below. The below stated accounting principles for the parent company have been applied consistently to all periods presented 45 in the parent company’s financial reports. 46

PEAB ANNUAL REPORT 2011 53 NOTES

1 Note 2 Income distributed by type jects will be recognised first when the home is handed over to the buyer. A bridge has therefore been created in segment reporting between oper- 2 Income distributed by main income type ative reporting according to the percentage of completion method and 3 Group Parent company legal reporting. For more information regarding principles for housing MSEK 2011 2010 2011 2010 production, see note 1. 4 Internal pricing between Group segments is based on the “arm’s Income from contracting 38,946 34,079 – – length” principle, in other words, between well informed independent par- 5 Sales of goods 1,423 1,438 – – ties and who are interested in the realisation of the transactions. Sales of property 803 808 – – 6 Segments operating profit include attributable items which can be Crane and plant rental 619 648 – – 7 reasonably and reliably allocated to the segments. Non-allocated items Transport services 1,473 767 – – consist of financial income and expenses, and taxes. Assets and liabilities 8 Administrative services – – 99 81 are not divided into segments since they are only followed up on Group 9 Other 275 305 0 1 level. Total 43,539 38,045 99 82 10 Segments 11 The Group consists during 2011 of following business areas; • Construction: Business area Construction comprises the Group’s con- Note 3 Operating segment 12 struction related services and is run in five divisions in Sweden, one division in Norway and one division in Finland and a Nordic division that 13 Group business is divided into operating segments based on which parts runs the Group’s property development. Production is comprised of the company’s highest decision makers, i.e. executive management, fol- 14 housing for external customers and our own housing developments but lows. Operating segments in Peab during 2011 were Construction, Civil also public and commercial premises and buildings. Customers are 15 Engineering and Industry, which correspond to how operations were private property owners, municipalities and companies. Operations in organised. From 1 January 2012 the Group has been divided into four 16 Construction also include construction related services such as con- business areas; Construction, Civil Engineering Industry and Property struction maintenance and repairs. 17 Development. • Civil Engineering: Business area Civil Engineering works with the 18 The Group’s internal reporting is constructed so that executive management follows every business area up to and including operating profit. construction of larger infrastructure and civil engineering projects and smaller projects on the local market. Customers are the Swedish Trans- 19 Assets and liabilities are only followed up on Group level. port Administration, municipalities and local businesses. Civil Engineer- Segments are reported according to the percentage of completion in 20 ing also operates and maintains roads and municipal facilities. projects since that reflects the way executive management and the board 21 monitors operations. From 1 January 2010 Peab applies IFRIC 15, Agree- • Industry: Business area Industry, whose customers are the Nordic construction and civil engineering markets, was run in two divisions, 22 ments for the construction of real estate, in legal accounting. IAS 18, Rev- enue, will be applied for housing projects in Finland and Norway as well Industry and Construction Systems, in 2011. Most of the business is 23 as our own housing developments in Sweden. Revenue from these pro- generated on the Swedish market. Other operations consists of items not allocated to a business area and 24 are reported as one item under Group functions. Group 2011 25 Total Adjustment for different 26 Civil Group operative for accounting principles for MSEK Construction Engineering Industry funcions Eliminations the Group housing production Group 27 Income 28 External sales 27,000 10,397 6,576 42 44,015 –476 43,539 Internal sales 967 1,157 3,828 134 –6,086 0 0 29 Total income 27,967 11,554 10,404 176 –6,086 44,015 –476 43,539 30 31 Operating costs –27,390 –11,163 –9,763 –375 6,086 –42,605 498 –42,107 Profit from participation in associated companies 32 and joint ventures 22 –1 3 24 24 33 Other operating income 58 58 58 Other operating costs –9 –9 –9 34 Operating profit 599 390 693 –199 0 1,483 22 1,505 35 36 Financial income 158 Financial expenses –466 37 Profit from participation in joint ventures –2 38 Pre-tax profit 1,195 39 Tax –252 Profit for the year 943 40 41 Other comprehensive income for the year –207 42 Total comprehensive income for the year 736

43 Depreciation –49 –64 –676 –14 –803 –803 44 Write-downs –38 –17 –58 –113 –113 45 Returned write-downs 7 1 8 8 Significant items in addition to depreciation and –51 0 92 –56 –15 –15 46 write-downs that are not related to payments

54 PEAB ANNUAL REPORT 2011 NOTES

Group 2010 1 Total Adjustment for different Civil Group operative for accounting principles for 2 MSEK Construction Engineering Industry funcions Eliminations the Group housing production Group 3 Income External sales 23,206 9,590 5,356 32 38,184 –139 38,045 4 Internal sales 980 1,074 3,152 114 –5 320 0 0 5 Total income 24,186 10,664 8,508 146 –5 320 38,184 –139 38,045 6

Operating costs –23 360 –10,308 –8,079 –324 5 320 –36,751 79 –36,672 7 Profit from participation in associated companies 8 and joint ventures 9 78 8 95 95 Other operating income 40 –2 38 38 9 Other operating costs –3 –3 –3 10 Operating profit 835 356 544 –172 0 1,563 –60 1,503 11

Financial income 264 12 Financial expenses –252 13 Profit from participation in joint ventures –2 Pre-tax profit 1,513 14 Tax –323 15 Profit for the year 1,190 16

Other comprehensive income for the year –119 17 Total comprehensive income for the year 1,071 18 19 Depreciation –39 –67 –597 –22 –725 –725 Write-downs –17 –9 –12 –19 –57 –57 20 Significant items in addition to depreciation and 115 62 –10 167 167 21 write-downs that are not related to payments 22

Geografic areas 23 Income from external customers are grouped to geografic areas according to where the customers are located. 24 Information concerning intangible and tangible assets is based on geografic areas grouped according to where the assets are located. 25 Group Sweden Norway Finland Other markets Total 26 MSEK 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 External sales 35,923 32,620 4,387 3,284 3,193 2,053 36 88 43,539 38,045 27 Intangible and tangible fixed assets 5,752 6,273 815 538 244 226 – – 6,811 7,037 28 29 Parent company Group functions Sweden MSEK 2011 2010 2011 2010 30 Net sales 99 82 99 82 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2011 55 NOTES

1 Note 4 Business combinations are consolidated to 100 percent and the calculated purchase price for the rest of the shares is reported as a liability. 2 2011 3 In 2011 Peab aquired a further 50 percent of Kokpunkten Fastighets AB, 65 Acquisitions after the balance sheet date percent of Terje Hansen AS, 90 percent of K. Nordang AS, 91 percent of There have been no acquistions of importance in 2012. 4 Telemark Vestfold Entreprenör AS, 100 percent of Norweigan Aggregates AS, 100 percent of Hagström i Nås AB, 100 percent of Mora-Orsa Bygg 5 2010 tjänst AB, 100 percent of Gryttby Grus & Sand AB, 100 percent of Bjurholms In 2010 Peab aquired a further 50 percent of Fältjägaren Fastigheter AB, 6 Lastbilcentral Ekonomisk Förening and operations at Ängelholms Airport. The a further 50 percent of LS Sydost AB, 100 percent of Ångström & acquisitions are part of Peab´s vision to become the Nordic Community 7 Mellgren AB, 100 percent of A-frakt AB, 100 percent of Rolf Olsens Vei Builder through the strategy of investing in profitable growth in the Nordic 30/32 AS, and 100 percent of P Andersson Fastighet 1 i Mälardalen AB. 8 region. The above acquisitions in 2010 individually do not have any material The above acquisitions in 2011 individually do not have any material 9 acquisition effect from a Group perspective and the information on acquisition effect from a Group perspective and the information on acquisition effects is therefore given collectively. 10 acquisition effects is therefore given collectively. In the period after acquisition the above subsidiaries contributed In the period after acquisition the above subsidiaries contributed SEK 11 SEK 296 million to Group income and SEK 14 million to profits after tax 607 million to Group income and SEK 8 million to profit after tax in 2011. in 2010. If the acquisitions had taken place on 1 January 2010, the 12 If the acquisitions had taken place on 1 January 2011, the combined combined effect of these acquisitions on Group income would have been effect of these acquisitions on Group income would have been SEK 824 SEK 460 million and on profit for the year after tax by SEK 22 million. 13 million and on profit for the year after tax by SEK –18 million. 14 Effects of acquisitions in 2010 Effects of acquisitions in 2011 The acquisitions’ preliminary effects on Group assets and liabilities are 15 The acquisitions’ preliminary effects on Group assets and liabilities are shown below. 16 shown below. The acquisition analyses may be adjusted during a twelve month period. The acquired companies’ net assets at the time of acquisition: 17 2010 18 The acquired companies’ net assets at the time of acquisition: MSEK 2011 Tangible fixed assets 482 MSEK 19 Project and development property 73 Intangible fixed asset 70 Inventories 3 20 Tangible fixed assets 148 21 Financial fixed assets 15 Accounts receivable and other receivables 83 Liquid funds 76 22 Deferred tax receivables 56 Project and development property 73 Interest-bearing liabilities –340 23 Inventories 19 Accounts payable and other current liabilities –152 24 Accounts receivable and other receivables 308 Deferred tax liabilities –22 25 Liquid funds 50 Net identifiable assets and liabilities 203 Interest-bearing liabilities –149 Previous holdings –22 26 Accounts payable and other current liabilities –371 Non-controlling interests 102 27 Deferred tax liabilities –37 Group goodwill 10 28 Net identifiable assets and liabilities 182 Consideration transferred 293 Previous holdings –31 29 Goodwill consists of, among other things, human resources and future Negative goodwill recognized as income –12 30 synergy effects regarding common systems and shared resources which Group goodwill 59 do not meet the criteria for recognition as intangible assets at the time of 31 Consideration transferred 198 acquisition. 32 Transaction costs connected to the acquisitions amount to SEK 0.4 mil- Goodwill consists of, among other things, human resources and future lion and relate to consulting fees concerning due diligence. Transactions 33 synergy effects regarding common systems and shared resources which costs are reported in the income statement as sales and administrative do not meet the criteria for recognition as intangible assets at the time of 34 expenses. acquisition. Goodwill value amounting to SEK 21 million provides a fiscal Acquired receivables amount to SEK 83 million and consist mainly of 35 depreciation deduction. accounts receivable. Transaction costs connected to the acquisitions amount to SEK 1.3 mil- 36 lion and relate to consulting fees concerning due diligence. Transactions Consideration transferred 37 costs are reported in the income statement as sales and administrative MSEK expenses. Paid in cash 288 38 Acquired receivables amount to SEK 308 million and consist mainly of Paid with own shares 5 39 accounts receivables. Total consideration transferred 293 40 Consideration transferred 41 MSEK During the year assets via acquisition of shares (asset acquisitions) have Paid in cash 192 been acquired resulting in a cash flow of SEK –165 million. 42 Conditional purchase sum 6 Acquisitions of non-controlling interests 2010 Total consideration transferred 198 43 In 2010 Peab acquired the remaining shares, 1.89 percent, in Peab 44 During the year assets via acquisition of shares (asset acquisitions) have Industri AB, amounting to SEK 54 million, the remaining shares, 30 percent, in Ljungbyhed Park AB amounting to SEK 46 million and the remain- 45 been acquired resulting in a cash flow of SEK –182 million. The anticipated acquisition method has been used on acquisitions that ing shares, 0.44 percent, in Annehem Fastigheter AB amounting to SEK 2 46 are short of 100 percent of equity when there is a put/call option for the million. The Group shows a reduction in non-controlling interests of SEK acquisition of the rest of the shares. The method means that the companies 46 million and a reduction in profit brought forward of SEK 57 million.

56 PEAB ANNUAL REPORT 2011 NOTES

Note 5 Other operating income Note 7 Government grants 1

Group Group 2 MSEK 2011 2010 Goverment grants received as compensation for operating costs amounted 3 in 2011 to SEK 24 million (16), and have reduced costs in the income state- Capital gains from shares sold in Group companies/ – 4 4 joint ventures ment. Profit from sale of fixed assets 36 23 5 Exchange gains on receivables/liabilities relating to 1 1 6 operations Negative goodwill 12 – 7 Other 9 10 8 Total 58 38 9 10 11 12 Note 6 Other operating costs Note 8 Employees, personnel costs and remunerations to 13 senior officers 14 Group MSEK 2011 2010 Payroll costs for employees 15 Loss from sale of fixed assets –5 –1 Group 16 Exchange loss on receivables/liabilities relating MSEK 2011 2010 –1 –2 17 to operations Wages and remunerations 5,906 5,283 Other –3 – Pension expenses, defined benefit plans 7 1 18 Total –9 –3 Pension expenses, defined contribution plans 449 424 19 Social insurance costs 1,709 1,563 20 Total 8,071 7,271 21 Average number of employees 22 No. of Of whom No. of Of whom employees men 2011 employees men 2010 23 2011 percent 2010 percent 24 Parent company Sweden 31 58 30 63 25 Subsidaries 26 Sweden 12,512 92 11,748 92 27 Norway 1,192 90 1,059 92 28 Finland 822 89 701 89 Poland 3 67 3 67 29 Total in subsidaries 14,529 92 13,511 92 30 Total in Group 14,560 92 13,541 92 31 Gender distribution in the Board of Directors and executive 32 management 33 2011 2010 Percentage Percentage 34 of women of women Parent company 35 The Board of Directors 18% 10% 36 Other senior officers 0% 0% 37 Group total 38 The Board of Directors 18% 10% Other senior officers 0% 0% 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2011 57 NOTES

1 Salaries and other payments divided between senior officers Remuneration and other benefits in 2010 and other staff, and social security costs for the parent company Basic sal- 2 The Board and senior officers exist only in the parent company. The fig- ary/Board Variable remunera- remunera- Other Pension ures in the tables below are the same for the parent company and the 3 Thousands, SEK tion tion benefits costs Total Group and are therefore reported in the same table. Other employees in 4 Chairman of the Board, the tables below refer solely to employees in the parent company. Göran Grosskopf 450 450 5 Other members of the Group and parent company 2011 Board of Board 6 Directors and senior officers Other Annette Brodin Rampe 150 150 7 MSEK (12 persons) 1) employees Total Karl-Axel Granlund 200 200 8 Salary and remuneration 18 21 39 Svante Paulsson 150 150 (of which variable Lars Sköld 150 150 (1) (1) 9 remuneration etc.) Fredrik Paulsson 150 150 10 Social security costs 13 19 32 Total related to Board - of which pension costs 6 11 17 of Directors 1,250 1,250 11 Member of the Board 12 Group and parent Company 2010 Board of and CEO, Mats Directors and Paulsson 3,630 1,564 5,194 senior officers Other 13 1) MSEK (11 persons) 1) employees Total Other senior officers 10,065 3,744 334 4,631 18,774 14 Salary and remuneration 15 23 38 Total 14,945 5,308 334 4,631 25,218 (of which variable 15 (1) (1) 1) Comprises the number of persons that during the year received remuneration for the remuneration etc.) period they were senior officers. 16 Social security costs 14 20 34 17 - of which pension costs 10 12 22 Comments on the tables 18 Variable remuneration has in certain cases been paid as a lump sum pension From time to time the CEO and other senior officers may be offered varia- premium of SEK 0 million (5) to the executive management. Variable remuner- ble remuneration. Other benefits refer to company cars. 19 ation has in certain cases been paid as a lump sum pension premium of SEK Pension costs refer to costs charged to the year. See note 31 for addi- 0 million (1) to other employees. This part of variable remuneration is reported 20 tional information about pensions. All remuneration and benefits were in social security costs – of which pension costs. charged to Peab AB. 21 Jan Johansson was appointed President and CEO of Peab and took over 22 Benefits for senior officers the post on 10 May 2011 at the AGM. Mats Paulsson was named Vice Remuneration and other benefits in 2011 Chairman of the Board. 23 Basic sal- From January 2011 and until the AGM, the group senior officers con- 24 ary/Board Variable sisted of five persons. Thereafter the group of senior officers consisted of remunera- remunera- Other Pension four persons. 25 Thousands, SEK tion tion benefits costs Total Chairman of the Board, The Board of Directors 26 Göran Grosskopf 510 510 The 2011 AGM decided on a remuneration to external members of the 27 Vice Chairman of the Board, Mats Paulsson 3,000 3,000 Board of a maximum of SEK 4,620 thousand (1,250), of which SEK 450 28 Other members of the thousand (400) consisted of remuneration to the Chairman of the Board. 29 Board A remuneration of SEK 2,765 thousand was decided as a special com- Annette Brodin Rampe 175 175 pensation to the Vice Chairman of the Board for his availability to the 30 Karl-Axel Granlund 235 235 Group in matters concerning customers and the market. Remuneration to 31 Svante Paulsson 175 175 all other members of the Board consists of a maximum of SEK 4,440 Lars Sköld 175 175 thousand (1,150), and SEK 180 thousand (100) for work in the remunera- 32 Fredrik Paulsson 175 175 tion and finance committees. During the year total remuneration amount- 33 Anne-Marie Pålsson 175 175 ed to SEK 4,620 thousand (1,250). Total related to Board Remuneration is not paid to members of the Board who are permanent 34 of Directors 4,620 4,620 employees of the Group. There are no agreements on future pension/ 35 CEO until Maj 2011, retirement remuneration or other benefits either for the Chairman of the Mats Paulsson 1,680 33 1,713 Board of Directors or for other members of the Board. 36 Member of the Board and CEO, Principles for the remuneration to senior officers 37 Jan Johansson 2) 4,121 47 91 1,934 6,193 The group senior officers is comprised of four senior officers who are Other senior officers 1) 7,834 159 279 3,604 11,876 38 members of executive management. This group consisted of five persons 39 Total 18,255 239 370 5,538 24,402 until the AGM in May 2011. The principles for remuneration to senior offic- 40 1) Comprises the number of persons that during the year received remuneration for the ers were adopted by the AGM 2011. period they were senior officers. Remuneration to the CEO and other senior officers consists of a fixed 41 2) Wages for the period Jan-May 2011 amounted to SEK 1,636 thousand, wages for the salary, variable remuneration, extra health insurance and those benefits period June-Dec 2011 amounted to SEK 2,485 thousand. Pension premiums for the 42 period Jan-May 2011 amounted to SEK 623 thousand, pension premiums for the otherwise enjoyed by other Peab employees as well as pension. All pen- period June-Dec 2011 amounted to SEK 1,311 thousand. sion obligations should be defined contribution pensions.The total remu- 43 neration paid to each senior officer is based on market terms and the 44 responsibilities and qualifications of the senior officer. From time to time, senior officers may be offered variable remuneration. 45 Such variable remuneration may not exceed 60 percent of the regular sal- 46 ary and must above all be based on the pre-tax profit of the Peab Group. Variable remuneration is decided upon each financial year.

58 PEAB ANNUAL REPORT 2011 NOTES

Variable remuneration is settled the year after being earned and may the annual variable remuneration are placed in a pension savings con- 1 either be paid out as salary or as a lump sum pension premium. If varia- nected to the Peab share. ble remuneration is paid out on a one-off basis, certain adjustments are During 2011 468 persons, including senior officers, were offered to 2 made so as to neutralize the total cost for Peab. participate in a LTI program. The LTI program runs until 2014 with annual 3 Notice on the part of Peab is a maximum of 24 months and senior reviews of targets for the Group. The targets were not met in 2011 and 4 officers are required to give a maximum of six months notice. No sever- therefore no provisions were made for the LTI program. ance pay apart for salary is paid during the period of notice. 5 Profit sharing foundation 6 Variable remuneration In 2007, Peab founded a profit sharing foundation. The object of the profit Variable remuneration for the CEO and other senior officers is related to sharing foundation is to create increased participation through employee 7 meeting profit targets for the Group. Variable remuneration for the financial co-ownership and to better our employees’ financial situation after retire- 8 ment. Individual shares in profits will be proportional to the employee’s year 2011 was maximized at SEK 2,800 thousand (2,200) for the CEO and 9 a total of SEK 6,525 thousand (5,175) for the other senior officers. working hours. Upon retirement, the employee can withdraw their share in the foundation. Under the foundation’s investment policy, its assets must be 10 mainly invested in shares in Peab. The CEO Peab has not allocated any funds in 2011 for profit sharing. In 2010 11 Jan Johansson was appointed President and CEO of Peab and took over Peab reserved the maximum, SEK 100 million, and the amount less spe- 12 the post on 10 May 2011 at the AGM. The current CEO of Peab AB cial employer’s contribution was paid to the foundation in 2011. received a salary including benefits of SEK 4,121 thousand –( ) in total in Senior officers have not been entitled to benefits from the profit sharing 13 2011. Wages for the period Jan-May 2011 amounted to SEK 1,636 thou- foundation. 14 sand and wages for the period June-Dec 2011 amounted to SEK 2,485 thousand. In addition, his variable remuneration for 2011 was SEK 47 thou- Convertible Promissory Notes 2007/2012 15 sand (–). The former CEO of Peab AB received a salary including benefits At the AGM 2007 in Peab AB it was decided to issue and offer converti- 16 of SEK 2,870 thousand (3,630) in total in 2011. In addition, his variable bles to all employees. The offer was made to all employees of Peab and 17 remunertion for 2011 was SEK 33 thousand (1,564). of Peab Industri on market terms, and every employee was given the Pension premiums paid out for the current CEO amounted to SEK option to subscribe to 200 convertibles in Peab. The purpose of issuing 18 1,934 thousand (–) during the year. Pension premiums for the period Jan- personnel convertibles was to increase Peab employees’ long-term 19 May 2011 amounted to SEK 623 thousand and pension premiums for the financial involvement with the company. period June-Dec 2011 amounted to SEK 1,311 thousand. Employees paid the market price for the convertibles they received and 20 Pension commitments for the CEO give him the right to pension from the scheme is not conditional on continued employment or performance 21 the age of 65. There is a supplementary commitment whereby the com- by the employees. The employees were offered external bank financing pany or the CEO can trigger early retirement from the age of 62. Annual of the convertible loan without any guarantees or other undertakings on 22 pension premiums of 47 percent of basic salary are paid for these com- the part of Peab. 23 mitments. These pensions are part of defined contribution plans. The convertibles run from 1 December 2007 to 30 November 2012 with Notice on the part of Peab is a maximum of 24 months and the CEO is a settlement date of 15 January 2008 and each convertible could be 24 required to give a maximum of 6 months notice. If a severance pay is converted during part of December 2010 and 2011 to B shares in Peab. 25 paid the total remuneration for salary during the period of notice and Conversion to shares will also be possible during part of September 26 severance pay may not exceed 24 monthly wages. 2012. The conversion price was set at SEK 68, and the issue sum of Peab 27 Other senior officers Convertible Promissory Notes 2007/2012 to SEK 598 million corresponding 28 The term other senior officers refers to the three other persons that together to 8,800,000 new convertibles. Upon conversion to shares, dilution will with the CEO make up Peab’s executive management. amount to 2.97 percent of the share capital and 1.45 percent of the 29 Salary and other remuneration including benefits for other senior officers votes, based on the number of shares registered per 29 February 2012. 30 The convertible interest rate is 5.44 percent. In all, 41 percent of Peab’s amounted to SEK 8,113 thousand (10,399). Variable remuneration for 31 2011 for three persons that during the year were members of executive employees subscribed for convertibles when it was possible in 2007. management amounted to SEK 159 thousand (3,744). Convertible loans are reported in notes 11 and 30. Peab Industri AB 32 has had a convertible program with the same period and terms. In Pension premiums paid out for other senior officers amounted to SEK 33 3,604 thousand (4,631) during the year. connection with Peab AB’s offer to the shareholders of Peab Industri AB There are early retirement pension commitments for other senior officers. to acquire the shares in Peab Industri AB, all convertible owners also 34 received an offer for cash payment for their convertibles for a nominal All pension benefits are unassailable. 35 Pension commitments for other senior officers give them the right to amount that included accrued interest. 99.6 percent had been repaid at pension from the age of 65. There is a supplementary commitment 31 December 2011. 36 whereby the company or the senior official can trigger early retirement 37 from the age of 62. Annual pension premiums of 47 percent of basic salary are paid for these commitments. These pensions are part of 38 defined contribution plans. 39 If given notice by the company other senior officers are entitled to a maximum of two years’ salaries deducted by salaries from new employers. 40 The period of notice from senior officers is six months. 41 42 Long-term incentive program (LTI program) From time to time, senior officers may be offered to the opportunity to 43 participate in a LTI program. In order to participate in a LTI program the 44 senior officer must reserve at least 50 percent of their annual variable remuneration as a lump sum pension premium. Annual income from the 45 LTI program may not exceed 40 percent of the fixed annual salary. 46 Income from the LTI program and the provision of at least 50 percent of

PEAB ANNUAL REPORT 2011 59 NOTES

1 Note 9 Fees and cost remunerations to auditors Note 11 Net financial income/expense

2 Group Parent company Group 3 MSEK 2011 2010 2011 2010 MSEK 2011 2010 4 KPMG AB Interest income 1) 131 54 Auditing assignments 14 13 3 2 Dividend received related to financial assets 5 Other audit-related assignments 3 2 1 1 valued at fair value 20 18 6 Tax advisory services 0 1 0 0 Net profit related to financial assets valued at fair value 2) 4 179 Other assignments 1 0 0 0 7 Change in value currency swaps (trading) 3 2 8 Other Net exchange rate fluctuation – 8 9 Auditing assignments 1 1 – – Other items 0 3 Financial income 158 264 10 Total 19 17 4 3

11 Auditing assignments refer to examination of the annual report, accounting Interest expenses 3) –358 –222 and administration by the Board of Directors and the CEO, other work 12 Net loss related to financial assets valued at fair value 2) –85 –10 which it is the business of the company auditor to perform and advice and Change in value currency swaps (trading) –1 –5 13 other assistance stemming from observations made in connection with Net exchange rate fluctuation –5 – such examination of the performance of other similar work. 14 Other items –17 –15 15 Financial expenses –466 –252 16 Profit from participation in joint ventures 4) –2 –2 Net financial income/expense –310 10 17 1) Refers to interest from items valued at accrued acquisition value. 18 2) Of whitch shareholding in Brinova Fastigheter AB SEK –81 million (179). 19 3) Refers to interest from items valued at accrued acquisition value except current interest 20 net from the interest coupon portion of interest swaps totaling SEK –6 million (–18). 4) Interest expenses on loans from joint venture companies have been offset against profit Note 10 Operating costs divided by type 21 from participation in joint venture companies. There is, according to the contracts, a legal right for offsets in the balance sheet accounts between the debt to joint venture 22 Group companies and holdings of preference shares in joint venture companies. 23 MSEK 2011 2010 Material 9,969 7,586 24 Profit from participation in Group companies Subcontractors 12,075 10,751 Parent company 25 Personnel expenses 9,729 8,209 MSEK 2011 2010 Other production costs 9,040 8,426 26 Dividends 1,150 1,458 Depreciation 803 725 27 Paid Group contribution –169 –136 Write-downs 113 57 Received Group contribution 1,003 380 28 Other operating costs 378 918 Write–downs –122 –69 29 Total 42,107 36,672 Capital gains from sales – 1 30 Total 1,862 1,634 31 Profit from participation in associated companies 32 Parent company 33 MSEK 2011 2010 34 Dividends 136 59 35 Write–downs –130 – Total 6 59 36

37 Profits from securities and receivables recorded as fixed 38 assets 39 Parent company MSEK 2011 2010 40 Dividends 20 18 41 Interest income, external 1) 0 4 42 Interest income, Group companies 1) 39 32 Net profit related to financial assets valued at fair 43 value 2) –85 179 44 Exchange rate gain 3 0 45 Total –23 233 46 1) Interest income refers to interest from items valued at accrued acquisition value. 2) Refers to shareholdings in Brinova Fastigheter AB SEK –81 million (179).

60 PEAB ANNUAL REPORT 2011 NOTES

Interest income and similar profit/loss items Parent company 1 Parent company MSEK 2011 2010 2 MSEK 2011 2010 Current tax expenses/income Interest income, external 1) 0 3 Tax income for the year –124 0 3 Total 0 3 Adjustment of tax attributable to previous years –3 0 4 –127 0 1) Interest income refers to interest from items valued at accrued acquisition value. 5 Deferred tax income 6 Interest expenses and similar profit/loss items Temporary differences 2 2 7 Parent company 2 2 8 MSEK 2011 2010 Interest expenses, external 1) –33 –33 Total reported tax income in the parent company –125 2 9 Interest expenses, Group companies 1) –185 –200 Reconciliation of effective tax 10 Net loss related to financial assets valued Group at fair value – –10 11 MSEK 2011 2011 (%) 2010 2010 (%) Other items –8 –8 12 Pre-tax profit 1,195 1,513 Total –226 –251 Tax with tax rate for the parent 13 1) Interest expenses refer to interest from items valued at accrued acquisition value. company –314 26.3 –398 26.3 14 Effect of other tax rates for foreign subsidiaries 3 –0.3 –2 0.1 15 Non-deductible expenses –129 10.8 –91 6.0 16 Tax exempt income 88 –7.4 100 –6.6 17 Deductible non profit-influencing items 34 –2.8 25 –1.7 18 Revaluation of previous years Note 12 Appropriations 19 reported values of deferred taxes 21 –1.8 6 –0.4 Utilised non-capitalised loss 20 Parent company carry-forwards 2 –0.2 14 –0.9 MSEK 2011 2010 21 Tax attributable to previous years 40 –3.3 3 –0.2 Transfer to tax allocation reserve –156 – Changed tax rates –1 0.1 – – 22 Change in additional depreciations, machinery and Increase in loss carry-forwards equipment 0 0 23 without corresponding activation Total –156 0 of deferred tax –1 0.1 –3 0.2 24 Standard interest on tax allocation 25 reserve 0 0.0 –1 0.1 26 Adjustment of net profit for joint ventures included in pre-tax profit 5 –0.4 24 –1.6 27 Reported effective tax –252 21.1 –323 21.3 28 Note 13 Taxes Parent company 29 Recognised in the income statement MSEK 2011 2011 (%) 2010 2010 (%) 30 Pre-tax profit 1,417 1,608 31 Tax in accordance with tax rate Group for the parent company –373 26.3 –423 26.3 32 MSEK 2011 2010 Non-deductible expenses –94 6.6 –24 1.5 Current tax expenses/income 33 Tax exempt income 345 –24.3 449 –27.9 Tax expenses/income for the year –278 34 34 Tax attributable to previous years –3 0.2 Adjustment of tax attributable to previous years 40 3 Reported effective tax –125 8.8 2 –0.1 35 –238 37 36 Deferred tax expenses/income 37 Temporary differences –9 42 38 Capitalised tax value of loss carry-forwards during the year 16 10 39 Utilisation of capitalised tax value of loss 40 carried forwards –41 –418 Changed tax rates –1 – 41 Revaluation of reported deferred tax values 21 6 42 –14 –360 43 Total reported tax expenses in the Group –252 –323 44 45 46

PEAB ANNUAL REPORT 2011 61 NOTES

1 Tax attributable to other comprehensive income Deferred tax Deferred tax 2 Group 2011 2010 Parent company receivables liabilities Net Pre- After Pre- After 3 MSEK tax Tax tax tax Tax tax MSEK 2011 2010 2011 2010 2011 2010 4 Translation difference for Convertible the year when transla- promissory notes – – –2 –5 –2 –5 5 ting foreign operations –1 1 0 –170 –33 –203 – – –2 –5 –2 –5 6 Loss from exchange risk hedging in foreign The ongoing correspondence between the Swedish Tax Authorities 7 operations 1 1 65 –17 48 as well as assessments made together with external experts on the 8 Financial assets availa- deductability of individual deductions have been taken into considerable for sale –17 –17 0 tion when evaluating deferred tax receivables. Deferred tax attributable 9 Cash flow hedges –204 15 –189 33 3 36 to deductions where the right to deduct is uncertain has not been reported 10 Shares in associated as an asset. The value of the deferred tax from these deductions per companies/JVs other 2011-12-31 is approximately SEK 386 million (425). 11 comprehensive income –2 –2 0 12 Other comprehensive Temporary differences between reported and fiscal value of par- income –223 16 –207 –72 –47 –119 13 ticipations directly owned by the parent company Normally there are no temporary differences between reported and fiscal 14 Reported in the balance sheet values of shares directly owned by the parent company for business 15 Deferred tax recoverables and tax liabilities purposes, i. e. neither upon divestment or distribution of dividends, as such transactions are not taxable. Therefore no deferred tax has been 16 Deferred tax Deferred tax reported for these holdings. 17 Group receivables liabilities Net MSEK 2011 2010 2011 2010 2011 2010 Unreported deferred tax receivables 18 Loss carry-forwards 190 67 190 67 The tax value of loss carry-forwards for which deferred tax receivables 19 Untaxed reserves –83 –45 –83 –45 have not been reported in the balance sheet amounted to SEK 1 million (1) in 2011-12-31 and refer to the Polish and Latvian businesses. These tax Tangible fixed assets –254 –182 –254 –182 20 loss carry-forwards fall due in 2012-2016. In the light of recent years’ loss- Group surplus values –210 –218 –210 –218 21 es in these companies and the extremely limited activities in the future it is Securities holdings/ unlikely that loss carry-forwards can be offset against future taxable gains. 22 Convertible receivables –5 –5 –5 –5 23 Current receivables 31 –3 –3 31 24 Work in progress 13 –10 –10 13 25 Pensions 5 10 5 10 26 Provisions 152 93 152 93 347 214 –565 –450 –218 –236 27 Offset –189 –124 189 124 – – 28 Net 158 90 –376 –326 –218 –236 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

62 PEAB ANNUAL REPORT 2011 NOTES

Changes in deferred tax on temporary differences and loss carry-forwards 1 Group Amount Recognised Recognised in Acquisition/ Amount per 1 Jan in profit other compre- divestment of per 31 Dec 2 MSEK 2011 for the year hensive income companies 2011 3 Loss carry-forwards 67 79 3 41 190 4 Untaxed reserves –45 –37 –1 –83 Tangible fixed assets –182 –81 4 5 –254 5 Group surplus values –218 28 –20 –210 6 Securities holdings/Convertible receivables –5 0 –5 7 Current receivables 31 –35 1 –3 8 Work in progress 13 –16 –7 –10 Pensions 10 –5 5 9 Provisions 93 53 6 152 10 Total –236 –14 7 25 –218 11 12

Amount Recognised Recognised in Acquisition/ Amount 13 per 1 Jan in profit other compre- divestment of per 31 Dec MSEK 2010 for the year hensive income companies 2010 14 Loss carry-forwards 496 –415 –12 –2 67 15 Untaxed reserves –96 51 –45 16 Tangible fixed assets –138 –45 1 –182 17 Group surplus values –293 90 3 –18 –218 Securities holdings/Convertible receivables –6 1 –5 18 Current receivables 58 –23 –4 31 19 Work in progress 3 4 6 13 20 Pensions 10 10 21 Provisions 106 –8 –5 93 Other 17 –15 –3 1 0 22 Total 157 –360 –15 –18 –236 23 24 25 Parent company Amount Recognised Amount per 1 Jan in income Recognised per 31 Dec 26 MSEK 2011 statement in equity 2011 Convertibel debentures –5 3 – –2 27 Total –5 3 – –2 28 29 Amount Recognised Amount Recognised per 1 Jan in income per 31 Dec 30 in equity MSEK 2010 statement 2010 31 Convertibel debentures –7 2 – –5 32 Total –7 2 – –5 33 34 35 36 37 38 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2011 63 NOTES

1 Note 14 Earnings per share Profit attributable to the parent company’s ordinary shareholders after dilution 2 Earnings per share MSEK 2011 2010 3 Before dilution After dilution Profit attributable to the parent company's 4 SEK 2011 2010 2011 2010 ordinary shareholders 943 1,187 Earnings per share 3.26 4.11 3.26 4.10 Interest rate effect on convertible promissory 5 notes (after tax) 32 32 6 Earnings per share before dilution Profit attributable to the parent company's ordinary shareholders after dilution 975 1,219 7 The calculation of earnings per share for 2011 was based on profit for the year attributable to the parent company’s ordinary shareholders Weighted average number of outstanding ordinary 8 amounting to SEK 943 million (1,187) and on a weighted average number shares after dilution 1) of outstanding shares in 2011 of 288,929,907 (288,640,136). 9 Thousands of shares 2011 2010 10 Earnings per share after dilution Weighted average number of outstanding 11 The calculation of earnings per share for 2011 was based on profit for ordinary shares before dilution 288,930 288,640 the year attributable to the parent company’s ordinary shareholders Effect of converting convertible promissory notes 8,800 8,800 12 amounting to SEK 975 million (1,219) and on a weighted average number Weighted average numbers of outstanding 13 of outstanding shares in 2011 of 297,729,907 (297,440,136). The two ordinary shares after dilution 297,730 297,440 components were calculated as follows: 14 1) Repurchased shares are not included in the calculation. 15 Weighted average numbers of outstanding ordinary shares before dilution 1) 16 Thousands of shares 2011 2010 17 Total number of outstanding ordinary shares per 18 1 January 286,742 291,144 Acquisition/disposal of own shares during the year 8,221 -4,402 19 Total number of outstanding shares per 20 31 December 294,963 286,742 21 Weighted average numbers of outstanding ordinary shares before dilution 288,930 288,640 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

64 PEAB ANNUAL REPORT 2011 NOTES

Note 15 Intangible fixed assets 1

Intangible fixed 2 Intangible fixed assets, external purchase assets, internally developed 3 Group 2011 Tenancies Other 4 Customer gravel and intangible Industrial MSEK Goodwill Brands relations rock quarries assets construction Total 5 Opening acquistion value 1,775 215 71 202 50 93 2,406 6 Purchases 82 25 14 12 1 134 Sales/disposals –15 –4 –19 7 Reclassifications –1 –7 –8 8 Translation differences for the year –1 0 –1 Closing accumulated acquisition value 1,840 240 81 202 55 94 2,512 9 Opening depreciation – –62 –43 –16 –22 –18 –61 10 Sales/disposals 4 4 11 Depreciation for the year 1) –22 –13 –11 –8 –10 –64 Reclassifications 2 2 12 Closing accumulated depreciation – –84 –52 –27 –28 –28 –219 13 Opening write-downs –55 – – – – – –55 Sales through companies sold 15 15 14 Write-downs for the year 2) –21 –21 15 Reclassifications –1 –1 16 Closing accumulated write-downs –62 – – – – – –62 Closing book value 1,778 156 29 175 27 66 2,231 17 18 Intangible fixed 19 Intangible fixed assets, external purchase assets, internally developed 20 Group 2010 Tenancies Other Customer gravel and intangible Industrial 21 MSEK Goodwill Brands relations rock quarries assets construction Total Opening acquisition value 1,790 221 78 202 55 92 2,438 22 Purchases 15 4 1 20 23 Sales/disposals –4 –1 –9 –14 24 Sales through companies sold –5 –5 Translation differences for the year –26 –5 –2 –33 25 Closing accumulated acquisition value 1,775 215 71 202 50 93 2,406 26 Opening depreciation – –43 –39 –8 –17 –9 –116 Sales/disposals 1 8 9 27 Sales through companies sold 1 1 28 1) Depreciation for the year –21 –12 –8 –6 –9 –56 29 Translation differences for the year 1 1 Closing accumulated depreciation – –62 –43 –16 –22 –18 –161 30 Opening write-downs –41 – – – – – –41 31 Sales/disposals 4 1 5 32 Sales through companies sold 4 4 Write-downs for the year 2) –23 –1 –4 –28 33 Translation differences for the year 5 5 34 Closing accumulated write-downs –55 – – – – – –55 Closing book value 1,720 153 28 186 28 75 2,190 35 36 37 38 1) Annual depreciation is reported in the following lines of the income statement: 2) Annual write-downs is reported in the following lines of the income statement: 2011 2010 2011 2010 39 Production costs –56 –43 Production costs –21 –28 40 Sales and administrative expenses –8 –13 Sales and administrative expenses – – 41 Total –64 –56 Total –21 –28 42 43 44 45 46

PEAB ANNUAL REPORT 2011 65 NOTES

1 Write-down testing of goodwill in cash generating units Tax burden: The tax rate in forecasts is based on Peab’s expected tax The balance sheet of the Peab Group 2011-12-31 included total goodwill situation in Sweden, Norway and Finland with regards to tax rates, loss 2 of SEK 1,778 million (1,720). Cash generating units with significant carry-forwards etc. 3 reported goodwill value compared with the total reported value of the Discount rate: Forecasted cash flows and residual values are discounted Group per segment are specified below. 4 to current value applying a weighted average cost of capital (WACC). 5 Interest rates on borrowed capital has been market adjusted to each MSEK 2011 2010 country. The required return on equity is based on the Capital Asset Pricing 6 Construction Model. A pre-tax weighted discount rate has been used in calculating use- 7 Nybyggarna i Nerike AB 22 22 ful value. The discount rate used on cash generating units in average in Other units in Sweden 86 61 Sweden is 6.6 percent (9.0), in Norway 7.4 percent (9.3) and in Finland 6.7 8 Peab Oy Group 68 68 percent (8.9). 9 Björn Bygg AS Group 57 57 10 K Nordang AS 22 – Telemark Vestfold Entreprenör AS 24 – 11 Other units in Norway 60 58 12 Civil Engineering Berg & Falk AB 17 33 13 Olof Mobjer Entreprenad AB 15 15 14 Markarbete i Värmland AB 13 13 15 Other units - Civil Engineering 99 99 Industry 16 Peab Industri Group 1,295 1,294 17 Total 1,778 1,720 18 19 Goodwill write-downs Group goodwill write-downs in 2011 amounted to SEK 21 million (23). The 20 majority stemmes from shutting down operations. For the cash generating 21 units where calculation of the recovery value was made and no write-down Note 16 Tangible fixed assets 22 need was identified, company management has assessed that no feasible possible changes in important assumptions would result in a recovery val- Group 2011 23 ue lower than the recorded value. Buildings Machinery Construc- and and tion in 24 MSEK land equipment progress Total Method for calculating recovery value Opening acquisition value 2,572 5,744 351 8,667 25 For all goodwill values the recovery value for the cash generating units has Purchases 80 965 93 1,138 26 been based on calculation of useful value. The calculation model is based on a discount of forecasted future cash flows compared to the unit’s Purchases via acquired companies 35 173 208 27 reported values. These future cash flows are based on 5 year forecasts 28 produced by the management of the respective cash generating units. Sales/disposals –41 –356 –397 Goodwill impairment tests have an infinite time horizon and extrapolation of Sales through companies sold –7 –66 –73 29 cash flow for the years after the forecast was calculated based on a growth Reclassifications –310 17 –331 –624 30 rate from year 6 onwards of 2 percent. Translation differences for the 31 year 2 –3 –1 Important variables when calculating useful value Closing accumulated 32 The following variables are important and common to all cash generating acquisition value 2,331 6,540 47 8,918 33 units in the calculation of the useful value. Opening depreciation –471 –3,332 – –3,803 Sales: The competitiveness of the business, expected changes in the Accumulated depreciation in 34 acquired companies –6 –68 –74 construction business cycle, general financial conditions, investment plans 35 of public and municipal customers, interest rate levels and local market Sales/disposals 10 267 277 36 conditions. Sales through companies sold 17 17 Reclassifications –2 1 –1 Operating margin: Historic profitability levels and operative efficiency, 37 Depreciation for the year –75 –664 –739 access to key personnel and qualified manpower, the ability to cooperate Translation differences for the 38 with customers/customer relations, access of internal resources, raises in year 1 1 39 salary, materials and subcontractor costs. Closing accumulated 40 Working capital requirements: Individual case assessment of whether the depreciation –544 –3,778 – –4,322 41 working capital reflects the company’s needs or whether it should be Opening write-downs –10 –7 – –17 adjusted for the forecast period. A reasonable or cautious assumption for Reclassifications 5 5 42 future development is that it parallels net sales growth. A high level of inter- Write-downs for the year 1) –4 –4 nally developed projects may entail a greater need for working capital. 43 Closing accumulated 44 Investment needs: The company’s investment needs are assessed on the write-downs –5 –11 – –16 investments required to achieve the initially forecast cash flow, i.e. not Closing book value 1,782 2,751 47 4,580 45 including expansion investments. Normally investment levels are equivalent 46 to the depreciation rate of tangible fixed assets.

66 PEAB ANNUAL REPORT 2011 NOTES

Group 2010 Note 17 Participation in associated companies 1 Buildings Machinery Construc- and and tion in Group 2 MSEK land equipment progress Total MSEK 2011 2010 Opening acquisition value 2,535 5,550 276 8,361 3 Acquisition value carried forward 208 – Purchases 127 596 427 1,150 4 Acquisition of associated companies – 263 Purchases via acquired 5 companies 148 22 170 Dividend for the year –136 –59 Sales/disposals –57 –338 –99 –494 Profit from participation in associated companies 18 4 6 Sales through companies sold –629 –7 –636 Translation differences for the year –2 – 7 Reclassifications 465 –10 –253 202 Accumulated acquisition values carried forward 88 208 8 Translation differences for the Book value carried forward 88 208 year –17 –69 –86 9 Closing accumulated Specifications of Group’s holdings in associated companies acquisition value 2,572 5,744 351 8,667 10 2011 2010 Opening depreciation –409 –3,036 – –3,445 11 Company Share Book Share Book Accumulated depreciation in Registered office, Corp.Id.no percent value percent value acquired companies –5 –6 –11 12 Catena AB Sales/disposals 6 259 265 Göteborg, 556294-1715 19,97 88 19,97 208 13 Sales through companies sold 6 6 12 Total 88 208 14 Reclassifications –2 6 4 15 Depreciation for the year –70 –599 –669 The items below are included in the consolidated financial statements. Translation differences for the They make up Group participation in the income and costs, assets and 16 year 3 38 41 liabilities of associated companies. 17 Closing accumulated depreciation –471 –3,332 – –3,803 18 MSEK 2011 2010 Opening write-downs –5 –7 – –12 19 Write-downs for the year 1) –5 –5 Income 25 8 Closing accumulated Expenses –7 –4 20 write-downs –10 –7 – –17 Profit 18 4 21 Closing book value 2,091 2,405 351 4,847 22 Fixed assets 137 451 1) Annual write-downs is reported in the following lines of the Current assets 21 16 23 income statement: Total assets 158 467 2011 2010 24 Production costs –4 –5 25 Current liabilities 7 19 Total –4 –5 Long-term liabilities 63 240 26 Total liabilities 70 259 27 Parent company Machinery and equipment Net assets/liabilities 88 208 28 MSEK 2011 2010 Associated company participation is reported in Peab with a quarterly 29 Opening acquisition value 8 7 delay since Catena is a listed company. 30 Purchases – 1 Closing accumulated acquisition value 8 8 Parent company 31 Opening depreciation –6 –5 MSEK 2011 2010 32 Depreciation of the year 0 –1 Acquisition value carried forward 263 – 33 Closing accumulated depreciation –6 –6 Acquisition of associated companies – 263 Closing book value 2 2 Write-downs –130 – 34 Accumulated acquisition values carried forward 133 263 35 Group financial leasing Companies in the Group lease vehicles, construction machinery and other Book value carried forward 133 263 36 production equipment through many different leasing agreements. The recorded value related to Group financial leasing amounted to SEK 582 Specification of parent company’s direct holding of shares in 37 million (408). When the leasing agreements terminate Peab normally has a associated companies 38 liability to buy equipment at its residual value. The leased assets are 2011 2010 owned by the lessors. 39 Company Share Book Share Book Registered office, Corp.Id.no percent value percent value 40 Catena AB 41 Göteborg, 556294-1715 19.97 133 19.97 263 Total 133 263 42 43 44 45 46

PEAB ANNUAL REPORT 2011 67 NOTES

1 Note 18 Participation in joint ventures

2 Specification of Group holdings of participation in joint ventures 3 Company Share Book value, MSEK Company Share Book value, MSEK 4 Registered office, Corp.Id.no percent 2011 2010 Registered office, Corp.Id.no percent 2011 2010 TCL S.à.r.l. Floodelokka 1 AS 5 Luxemburg, 19982401227 45 279 273 Skien, 995 230 666 50 2 – St Eriks AB Östersund Sport & Event AB 6 Staffanstorp, 556203-4750 44.6 239 237 Östersund, 556707-0239 33 1 1 7 Nyckel 0328 SE Byggutveckling Svenska AB Stockholm, 517100-0069 30 210 175 Linköping, 556627-2117 50 1 1 8 Fotbollsstadion i Malmö Fastighets AB Kokpunkten Fastighet AB Malmö, 556727-4641 50 78 76 Stockholm, 556759-5094 50 – 31 9 Råsta Holding AB Gartnerhagen Bolig AS 10 Solna, 556742-6761 37.5 72 50 Alta, 990 025 924 50 – 4 Dockan Exploatering AB Others no specified items 1 2 11 Malmö, 556594-2645 33 41 42 Total 1,235 1,065 12 Österåkers Näs Fastighets HB Stockholm, 969723-2107 30 30 31 13 Fastighets AB Partille 11 Partille, 556518-4354 50 30 – The items below are included in the consolidated financial statements. 14 Telemark Vestfold Utvikling AS They make up Group participation in the income and costs, assets and 15 Skien, 987 208 279 33.4 29 – liabilities of joint ventures. Mountian Resort Trysil AS 16 Trysil, 996 284 115 50 25 – MSEK 2011 2010 Log. Tostarp AB 17 Income 1,108 580 Helsingborg, 556667-8784 50 22 22 18 Ale Exploatering AB Expenses –1,102 –491 Göteborg, 556426-2730 50 22 19 Profit 6 89 19 Fastigheten Preppen HB Göteborg, 969684-0983 50 18 13 20 Fixed assets 2,746 804 Fastighets AB Centur 21 Stockholm, 556813-6369 50 16 – Current assets 1,871 1,546 22 Floodelokka 1 KS Total assets 4,617 2,350 Skien, 955 230 658 45 13 – Stora Hammar Exploatering AB 23 Long-term liabilities 2,869 577 Vellinge, 556763-4216 50 12 12 24 Fjällvärme i Lindvallen AB Current liabilities 513 708 25 Malung-Sälen, 556536-1895 50 12 7 Total liabilities 3,382 1,285 Skiab Invest AB Net assets/liabilities 1,235 1,065 26 Malung-Sälen, 556848-5220 50 9 – 27 Svenska Fräs & Asfaltsåtervinning SFA AB Markaryd, 556214-7354 30 9 8 28 Gransångaren AB Västerås, 556591-2994 46 8 6 29 Kungsörs Grus AB 30 Kungsör, 556044-4134 50 7 6 Sjökrona Exploatering AB 31 Helsingborg, 556790-5624 25 6 7 32 Skanör Invest AB Båstad, 556713-5743 50 6 6 33 I Tolv AB Eksjö, 556513-2478 35 5 5 34 KB Älvhögsborg 35 Trollhättan, 916899-2734 50 5 5 Hälsostaden i Ängelholm AB 36 Ängelholm, 556790-5723 33.3 5 5 Fastighets AB Bryggeriet 37 Göteborg, 556141-6115 50 4 4 38 Kirkebakken Vest AS Horten, 988 796 174 50 4 4 39 Tomasjord Park AS 40 Tromsö, 983 723 853 50 3 4 Log. Sunnanå AB 41 Helsingborg, 556699-7788 50 3 3 Mälarstrandens Utvecklings AB 42 Västerås, 556695-5414 44 2 2 43 Expressbetong AB Halmstad, 556317-1452 50 2 2 44 Dampskipskaia H-fest AS 45 Hammerfest, 988 780 499 50 2 2 KB Blåsut Åstorp 46 Stockholm, 969691-9043 50 2 0

68 PEAB ANNUAL REPORT 2011 NOTES

Note 19 Receivables from Group companies Note 22 Other receivables 1 2 Parent company Other long-term receivables MSEK 2011 2010 Group Parent company 3 MSEK 2011 2010 2011 2010 Acquisition values carried forward 1,015 1,546 4 Receivables from joint ventures 177 22 – – Added receivables 814 411 Other long–term receivables 182 57 1 1 5 Settled receivables –382 –942 Total 359 79 1 1 Book value carried forward 1,447 1,015 6 7 Other current receivables Group Parent company 8 MSEK 2011 2010 2011 2010 9 Note 20 Interest-bearing receivables Receivables from joint ventures 103 27 – – 10 Other current receivables 362 259 – – Interest-bearing long-term receivables 11 Group Parent company Total 465 286 – – MSEK 2011 2010 2011 2010 12 Receivables from joint ventures 895 75 – – 13 Other interest-bearing Note 23 Project and development properties long-term receivables 419 399 – – 14 Total 1,314 474 – – Group 15 MSEK 2011 2010 16 Direct owned project and development properties 4,485 4,103 Interest-bearing short-term receivables Advanced project and development properties 0 13 17 MSEK 2011 2010 2011 2010 Participation in Finnish housing companies 246 264 Receivables from joint ventures 31 21 – – 18 Bought-back participation in tenant-owner's associ- Other interest-bearing ations and similar 437 492 19 receivables 206 15 – 5 Other 12 49 20 Total 237 36 – 5 Total 5,180 4,921 21

Project and development properties were written down for a total of 22 SEK 14 million (8). 23 Note 21 Ohter long-term securities holdings Recovery 24 Group Of project and development property at a book value of SEK 5,180 million 25 MSEK 2011 2010 (4,921) approximately SEK 3,800 million (approximately 3,300) is expected 26 Financial assets recognised at fair value through the to be recovered through the start of production or sales more than 12 income statement months after the balance sheet day. The remaining part is expected to be 27 recovered within 12 months of the balance sheet day. Fair value option 28

Shares and participation 1) 530 599 29 Available-for-sale financial assets Note 24 Inventories 30 Shares and participation 2) 191 –

Loan receivables 164 105 Group 31 Total 885 704 MSEK 2011 2010 32 1) SEK 491 million (572) of Group holdings refer to shares i in Brinova Fastigheter AB. Raw materials and consumables 74 65 33 2) Refers to shares in Lemminkäinen Oyj. Products in progress 56 69 Finished products and goods for resale 286 277 34 Of which, other long-term securities holdings valued Total 416 411 35 at fair value 36 Parent company MSEK 2011 2010 37 Note 25 Work in progress Acquisition values 38 Opening balance 1 January 290 286 At the end of the year there was work-in-progress for a total of SEK 1,689 39 Assets added 29 4 million (1,263) in the Group refering to costs in housing projects reported Closing balance per 31 December 319 290 according to IAS 18, Revenue. 40 41 Accumulated change in value through the 42 income statement Note 26 Accounts receivable 43 Opening balance 1 January 296 127 Accounts receivables were written down for factual and feared bad debts Unrealised change in value through for a total of SEK 74 million (16) of which factual Group bad debts amounted 44 the income statement for the year –85 169 to SEK 5 million (3). The loss was a result of some of the company’s cus- 45 Closing balance per 31 December 211 296 tomers going bankrupt. The parent company had no bad debts. Book value 31 December 530 586 46

For additional information about fair value per category and class see Note 36.

PEAB ANNUAL REPORT 2011 69 NOTES

1 Note 27 Recognised income not yet invoiced Reserves Translation reserve 2 Group The translation reserve comprises all exchange rate differences from 3 MSEK 2011 2010 translating financial reports of foreign companies that have prepared their Recognised income on incompleted contracts 30,682 22,780 financial reports in another currency than the one used in Group financial 4 Invoicing on incompleted contracts –26,102 –18,979 statements. The parent company and the Group present their reports in Swedish crowns (SEK). The translation reserve also consists of exchange 5 Total 4,580 3,801 rate differences from extended investment in foreign business and 6 re-borrowing from foreign activities. Recognised income from contracts in progress is reported with the 7 application of percentage of completion method. The calculation of the Fair value reserve 8 degree of recognition is made on the basis of the project costs incurred The fair value reserve incudes the accumulated net change of the fair at the end of the period in relation to the project income corresponding to 9 value of financial assets available for sale until the asset has been project costs for the whole project. eliminated from the financial position report. 10 Contract assignments are reported in the balance sheet on the basis of gross project for project, either as Recognised but non-invoiced income Hedging reserve 11 in current assets or as Invoiced but unrecognised income in short-term The hedging reserve comprises the effective part of the accumulated net 12 liabilities. Projects that have higher recognised incomes than the amount changes in fair value in a hedge instrument attributable to a hedged risk in invoiced are reported as assets, while projects that have been invoiced a cash flow which has as yet not influenced the income statement. 13 for more than recognised income are reported as liabilities. 14 Retained earnings including profit for the year Retained earnings including profit for the year consist of profit in the parent 15 Note 28 Prepaid expenses and accrued income company and its subsidiaries, associated companies and joint ventures. 16 Previous provisions for reserve funds, excluding transferred premium Parent company funds and previous investment funds are included in this equity item. 17 MSEK 2011 2010 Accrued interest income 2 3 Repurchased shares 18 Repurchased shares comprise the purchase cost minus the sales income Prepaid overhead expenses 5 5 for own shares held by the parent company. As of 31 December 2011, 19 Total 7 8 the Group’s holding of own shares was 1,086,984 (9,308,220). 20 21 Dividend Note 29 Equity After the balance sheet day the Board of Directors and the CEO proposed 22 the following dividend. The dividend will be proposed for adoption by the Shares and share capital 23 AGM on 15 May 2012. Group Number of A cash dividend of SEK 2.10 (2.60) per share, totalling SEK 621,704,433 issued fully Share capital, 24 A shares B shares paid shares SEK (769,729,298), was calculated on the number of registered shares. Total dividends are calculated on outstanding shares at the time of distribution. 25 Number of issued shares 1 January 26 The parent company 2011 34,319,957 261,729,773 296,049,730 1,583,866,056 27 Restricted reserves Total number of Restricted reserves may not be impaired by the distribution of dividends. 28 issued shares 31 December 2011 34,319,957 261,729,773 296,049,730 1,583,866,056 Reserve fund 29 The purpose of the reserve fund is to retain a part of the net profit which 30 An A share entitles the holder to 10 votes and a B share to 1 vote. The par is not allocated to cover balanced losses. The reserve also includes value of all shares is SEK 5.35. amounts transferred to the share premium reserve before 1 January 2006. 31 For those shares in the company’s own holding (see below) all rights 32 have been revoked until these shares are reissued. Unrestricted equity Together with profit for the year the following funds make up unrestricted 33 Repurchased own shares as reduced equity item retained equity, i.e. the sum available for dividends to the shareholders. 34 earnings including profit for the year Amount that Premium reserve 35 Number of affected equity, When shares are issued at a premium, i.e. when more must be paid for shares 1) MSEK 2) the shares than their nominal price, an amount equivalent to the amount 36 2011 2010 2011 2010 received in excess of the share’s nominal value is transferred to the share 37 Opening repurchased own premium reserve. The amount transferred to the share premium reserve shares 9,308,220 4,906,220 1,213 1,040 starting 1 January 2006 is included in unrestricted capital. 38 Purchases during the year 360,000 4,524,000 16 177 39 Divestments during the Special reserves year –8,581,236 –122,000 –300 -4 Refers to allocations to reserves upon the reduction of share capital for 40 use as resolved by the AGM. Closing repurchased own 41 shares 1,086,984 9,308,220 929 1,213 Reserve for fair value 42 1) During 2007 a withdrawal of 5,500,000 shares was made. The company uses the Annual Accounts Act rules for the valuation of 43 2) Amount included in equity refers to the accumulated net amount of acquired and financial instruments at fair value according to chapter 4 paragraph 14a-e. divested own shares. A change in value caused by an exchange rate change on a monetary 44 item which is part of the company’s net investment in a foreign unit is 45 Other contributed capital recognized in equity. Refers to equity contributed by the owners. Includes premiums paid in Retained earnings 46 conjunction with new issues. Consist of the previous year’s retained earnings after the distribution of profits.

70 PEAB ANNUAL REPORT 2011 NOTES

Note 30 Interest-bearing liabilities Note 31 Pensions 1

Long-term liabilities Defined benefit pension plans 2

Group Group 3 MSEK 2011 2010 MSEK 2011 2010 4 Bank loans 5,363 4,563 Present value of unfunded obligations 15 11 5 Convertible promissory notes 592 584 Present value of fully or partially funded obligations 48 28 Bonds 998 – Total net present of obligations 63 39 6 Financial leasing liabilities 446 278 7 Total 7,399 5,425 Fair value of plan assets –30 –21 8 Net present value of obligations 33 18 Current liabilities 9 Bank loans including overdraft facilities 722 778 Unrecognised actuarial gains (+) and losses (-) –20 –6 10 Commercial paper 818 634 Net reporting of defined benefit plans recognised 11 Short-term part of leasing liabilities 195 190 as provisions for pensions 13 12 Total 1,735 1,602 12 Review of defined benefit plans 13 1) Convertible promissory notes 2007/2012 Defined benefit plans consist of the Swedish ITP Plan for Salaried Staff Group which is managed through insurance with Alecta, pension plans for a 14 MSEK 2011 2010 small number of executive personnel in Sweden and Norway and the AFP 15 Nominal value after issue of 8,800,000 convertible pension in Norway. As Alecta cannot submit the information required to 16 promissory notes 598 598 account for the ITP plan as a defined benefit plan, this is entered as a Original amount classified as equity –35 –35 defined contribution plan (see below). 17 Capitalised interest 28 20 18 Changes in obligations of present value for defined benefit Recorded liability on 31 December 591 583 plans 19 1) The convertible promissory notes run from 1 December 2007, with settlement day in MSEK 2011 2010 January 2008, to 30 November 2012 with a coupon interest rate of 5.44 percent. 20 Net obligations for defined benefit plans as 21 Convertible promissory notes Peab Industri 2007/2012 2) at 1 January 39 47 Paid out remunerations –3 –12 22 Group Expenses for work during current period and MSEK 2011 2010 23 interest expenses 5 4 Remaining part of the liability, 2007/2012 1 1 Actuarial gains and losses 7 6 24 Recorded liability on 31 December 1 1 Effect from business acquisitions 16 0 25 2) Remaining part of Peab Industri’s personnel convertibles which had not been Translation differences –1 –6 acquired per 31 December 2011 by Peab AB. 26 Obligations for defined benefit plans as at 31 December 63 39 27 Financial leasing liabilities 28 Financial leasing liabilities fall due for payment as follows; Changes in recognised fair value in the balance sheet for plan assets 29 Group Minimum Minimum MSEK 2011 2010 leasing Capital leasing Capital 30 charge Interest amount charge Interest amount Fair value for plan assets as at 1 January 21 20 31 MSEK 2011 2011 2011 2010 2010 2010 Contributions from employer 2 2 32 Within one year 205 10 195 198 8 190 Expected return 1 1 Between one Difference between expected and actual return –1 –1 33 and five years 406 19 387 264 12 252 Effect from business acquisitions 7 0 Later than five 34 years 62 3 59 27 1 26 Translation differences 0 –1 35 Total 673 32 641 489 21 468 Obligations for defined benefit plans as at 31 December 30 21 36 Variable lease fees was SEK 4 million (7). 37 38 For further information concerning Group financial leasing, see note 16. 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2011 71 NOTES

1 Expenses charged to income statement Note 32 Provisions MSEK 2011 2010 2 Provisions which are long-term liabilities Expenses for work during current period 6 4 Group 3 Interest expenses on obligations 1 1 MSEK 2011 2010 4 Expected return on plan assets –1 1 Guarantee risk reserve 231 159 Recognised actuarial gains (–) and losses (+) 2 1 5 Close-down costs 0 2 Total net expense in the income statement 8 7 6 Re-establishment costs 63 57 7 Expenses are recognised in the following lines in Disputes 6 12 Other 10 33 8 the income statement MSEK 2011 2010 Total 310 263 9 Production costs 3 4 Provisions which are current liabilities 10 Sales and administrative expenses 4 2 Group Financial expenses 1 1 11 MSEK 2011 2010 Total 8 7 12 Guarantee risk reserve 63 57 Close-down costs 13 – 13 Actual return on plan assets 0 0 Disputes 44 1 14 Other 13 1 Assumptions for defined benefit plan obligations 15 Total 133 59 The most important actuarial assumptions 16 on balance sheet day 2011 2010 Provisions which are long-term liabilities Discount rate 2.68% 3.20% 17 Group Expected return on plan assets 4.08% 4.60% 18 2011 Re- Future pay increase 2.60% 4.00% Guarantee Close- establish- 19 Future increase in pensions 3.00% 3.75% risk down ment Dis- MSEK reserve costs costs putes Other 20 Historical information Opening book value 159 2 57 12 33 Provisions set aside 21 MSEK 2011 2010 2009 2008 2007 during the year 102 12 1 6 Present value of defined benefit 22 Amounts requisitioned plan obligations 63 39 47 37 13 23 during the year –31 –2 –6 –7 –30 Fair value of plan assets –30 –21 –20 –15 –3 Provisions via acquired 24 Plan deficit 33 18 27 22 10 companies 2 4 25 Reversed unutilized Old-age pension and family pension obligations for salaried staff in provisions during the year –1 –3 26 Sweden are managed through insurance with Alecta. According to a Closing book value 231 0 63 6 10 27 statement from the Swedish Financial Reporting Board, UFR 3, this is a defined benefit plan that comprises several employers. The company did 28 Provisions which are current liabilities not have the necessary information required to recognise this plan as a Group 29 defined benefit plan in the 2011 financial year. Therefore the pension plan 2011 Guarantee which is secured through insurance with Alecta is reported as a defined risk Close-down 30 contribution plan. Annual charges for pension insurances from Alecta MSEK reserve costs Disputes Other 31 amounted to SEK 133 million (124). Alecta’s surplus may be distributed Opening book value 57 1 1 Provisions set aside 32 among the policyholders and/or the insured. At the end of 2011, Alecta’s surplus in the form of collective consolidation level amounted to 113 per- during the year 41 13 44 12 33 cent (146 ). The collective consolidation level is made up of the market Amounts requisitioned during the year –20 34 value of Alecta’s assets as a percentage of the insurance undertakings calculated in accordance with Alecta’s insurance adjustment assump- Reversed unutilized provisions during the year –15 –1 35 tions, which do not accord with IAS 19. 36 Closing book value 63 13 44 13 Defined contribution plans 37 The group has defined contribution plans which are entirely paid for by Guarantee risk reserve 38 the company. Payments to these plans are made on a current basis Refers to the estimated cost of remedying faults and deficiencies in termi- according to the rules of each plan. nated projects that arise while the project is under warranty. Resources 39 are consumed during the guarantee period of the project which is gener- Parent ally two to five years. As the effect of the time point for payment is not 40 Group company significant expected future disbursements are not valued at present value. 41 MSEK 2011 2010 2011 2010 42 Expenses of defined contribution plans1) 448 424 17 22

43 1) This include SEK 133 million (124) referring to an ITP plan financed in Alecta, see above. 44 45 46

72 PEAB ANNUAL REPORT 2011 NOTES

Close-down costs Note 34 Invoiced income not yet recognised 1 Refers to costs within Construction business in Norway. Group 2 Re-establishment costs MSEK 2011 2010 3 Refers to restoration costs for gravel pits and rock quarries after termina- Invoiced sales on uncompleted contracting projects 42,079 37,744 4 tion of operations in the Industry business. The provision grows in relation Recognised income on uncompleted contracting to the amount quarried and is reversed after restoration is complete. The projects –37,810 –33,611 5 reserved sum is expected to be used successively after operations are Total 4,269 4,133 6 terminated. The estimated restoration time is 1 to 15 years. Recognised income from contracts in progress is reported with the 7 Disputes application of percentage of completion method. The calculation of the 8 Refers to disputes within Industry business. degree of recognition is made on the basis of the project costs incurred at the end of the period in relation to the project income corresponding to 9 Other project costs for the whole project. 10 Refers to provisions within Construction and Industry business. Contract assignments are reported in the balance sheet on the basis 11 of gross project for project, either as Recognised but non-invoiced income in current assets or as Invoicied but unrecognised income in 12 short-term liabilities. Projects that have higher recognised incomes that 13 what has been invoiced are reported as assets, while projects that have been invoiced for more than recognised income are reported as liabilities. 14 15 16 17

Note 33 Other liabilities Note 35 Accrued expenses and deferred income 18 19 Group Parent company 20 MSEK 2011 2010 MSEK 2011 2010 Other long-term liabilities Accrued payroll expenses 9 17 21 Additional purchase price 21 7 Accrued social security expenses 5 5 22 Interest rate swaps 57 10 Accrued interest expenses 3 3 23 Other long-term liabilities 32 18 Accrued overhead expenses 1 5 Total 110 35 Total 18 30 24 25 Other short-term liabilities 26 Liabilities to joint ventures 17 17 27 Additional purchase price 23 62 Tax at source, social security costs 179 134 28 Value added tax 524 372 29 On account work in progress 736 569 30 Other short-term liabilities 140 133 Total 1,619 1,287 31 32 Parent company 33 MSEK 2011 2010 Other short-term liabilities 34 Tax at source 1 1 35 Other short-term liabilities 5 3 36 Total 6 4 37 38 39 40 41 42 43 44 45 46

PEAB ANNUAL REPORT 2011 73 NOTES

1 Note 36 Valuation of financial assets and liabilities at fair value

2 Under IAS 39, Financial instruments, financial instruments are valued either at accrued acquisition value or fair value depending on which category they 3 belong to. Classification largely depends on the purpose of the holding. The items which have been the object of valuation at fair value are listed shareholdings, diffrent types of derivates and unlisted funds. 4 The fair value of listed shareholdings and share derivatives are calculated according to the closing price at the end of the accounting period. When 5 calculation the fair value of unlisted funds marketvalue from the manager were used. 6 When calculating the fair value of interest-bearing receivables and liabilities and interest rate swaps, future cash flow were discounted to the listed market interest for the remaining terms of maturity. When calculating the value of currency swaps, spot rates on balance sheet day were used. The 7 booked value of non-interest-bearing asset and liability items such as accounts receivable and accounts payable with a remaining maturity of less than 8 six months is believed to reflect the fair value. The adjacent tables show the reported values compared with the estimated fair value per type of financial asset and liability. 9 10 Financial Financial liabilities 11 Financial assets valued Derivates used assets Trade valued at fair Other at fair value through in hedge available and loan value through financial 12 Group 2011 income statement accounting for sales receivables income statement liabilities 13 Financial assets Holdings Holdings Total valued at for trading for trading recognised Fair 14 MSEK fair value purposes purposes value value Financial assets 15 Other securities held as fixed assets 530 1) 191 1) 164 885 885 16 Interest-bearing long-term receivables 1,314 1,314 1,327 17 Other long-term receivables 1 357 358 358 18 Accounts receivables 6,535 6,535 6,535 Interest-bearing short-term receivables 237 237 234 19 Prepaid expenses and accrued income 1 2) 2 17 20 20 20 Other short-term receivables 5 343 348 348 21 Short-term holdings 9 9 9 22 Liquid funds 961 961 961 Total financial assets 530 1 8 191 9,937 – – 10,667 10,677 23 Financial liabilities 24 Interest-bearing long-term liabilities 7,399 7,399 7,407 25 Other long-term liabilities 57 53 110 110 26 Provisions for pensions 13 13 13 27 Interest-bearing short-term liabilities 1,735 1,735 1,735 Accounts payable 4,508 4,508 4,508 28 Accrued expenses and deferred income 8 2 2) 20 30 30 29 Other short-term liabilities 15 115 130 130 30 Total financial liabilities – – 80 – – 2 13,843 13,925 13,933 31 Unrealised profit/loss 10 –8 32 1) Listed shares and unlisted funds. 2) Derivatives. 33 34 35 36 37 38 39 40 41 42 43 44 45 46

74 PEAB ANNUAL REPORT 2011 NOTES

Financial Financial liabilities 1 Financial assets valued Derivates used assets Trade valued at fair Other at fair value through in hedge available and loan value through financial 2 Group 2010 income statement accounting for sale receivables income statement liabilities 3 Financial assets Holdings Holdings Total valued at for trading for trading recognised Fair 4 MSEK fair value purposes purposes value value 5 Financial assets Other securities held as fixed assets 599 1) 105 704 704 6 Interest-bearing long-term receivables 474 474 471 7 Other long-term receivables 16 62 78 78 8 Accounts receivables 5,955 5,955 5,955 Interest-bearing short-term receivables 36 36 36 9 Prepaid expenses and accrued income 2 9 11 11 10 Other short-term receivables 95 113 208 208 11 Short-term holdings 1 1 1 12 Liquid funds 809 809 809 Total financial assets 599 – 113 – 7,564 – – 8,276 8,273 13

Financial liabilities 14 Interest-bearing long-term liabilities 5,425 5,425 5,433 15 Other long-term liabilities 10 24 34 34 16 Provisions for pensions 12 12 12 17 Interest-bearing short-term liabilities 1,602 1,602 1,602 Accounts payable 4,074 4,074 4,074 18 Accrued expenses and deferred income 1 2 2) 14 17 17 19 Other short-term liabilities 203 203 203 20 Total financial liabilities – – 11 – – 2 11,354 11,367 11,375 21 Unrealised profit/loss –3 –8 22 1) Listed shares and unlisted funds. 2) Derivatives. 23

The effect of valuing financial instruments at fair value was included in the Group’s profi for a total of SEK –79 million (166), of which SEK –81 million 24 (179) referred to market valuation of shareholdings in Brinova. Market valuation of interest rate and currency swaps was included for at total of 2 (–3). 25 26 Financial Financial liabilities 27 Financial assets valued Derivates used assets Trade valued at fair Other at fair value through in hedge available and loan value through financial 28 Parent company 2011 income statement accounting for sale receivables income statement liabilities Financial assets Holdings Holdings Total 29 valued at for trading for trading recognised Fair 30 MSEK fair value purposes purposes value value Financial assets 31 Long-term receivables Group companies 1,447 1,447 1,452 32 1) 1) Other securities held as fixed assets 501 191 17 709 709 33 Other long-term receivables 1 1 1 Short-term receivables Group companies 37 37 37 34 Liquid funds 2 2 2 35 Total financial assets 501 – – 191 1,504 – – 2,196 2,201 36 Financial liabilities 37 Long-term liabilities Group companies 4,794 4,794 4,794 38 Convertible promissory notes 590 590 595 Accounts payable 11 11 11 39 Short-term liabilities Group companies 2 2 2 40 Accrued expenses and deferred income 3 3 3 41 Total financial liabilities – – – – – – 5,400 5,400 5,405 42 Unrealised profit/loss 5 –5 43 1) Listed companies. 44 45 46

PEAB ANNUAL REPORT 2011 75 NOTES

1 Financial Financial liabilities Financial assets valued Derivates used assets Trade valued at fair Other 2 at fair value through in hedge available and loan value through financial 3 Parent company 2010 income statement accounting for sale receivables income statement liabilities Financial assets Holdings Holdings Total 4 valued at for trading for trading recognised Fair MSEK fair value purposes purposes value value 5 Financial assets 6 Long-term receivables Group companies 1,015 1,015 1,019 7 Other securities held as fixed assets 586 1) 16 602 602 Other long-term receivables 1 1 1 8 Short-term receivables Group companies 27 27 27 9 Interest-bearing short-term receivables 5 5 5 10 Prepaid expenses and accrued income 3 3 3 11 Liquid funds 3 3 3 Total financial assets 586 – – – 1,070 – – 1,656 1,660 12 13 Financial liabilities Long-term liabilities Group companies 5,670 5,670 5 670 14 Convertible promissory notes 581 581 585 15 Accounts payable 4 4 4 16 Short-term liabilities Group companies 4 4 4 Accrued expenses and deferred income 3 3 3 17 Total financial liabilities – – – – – – 6,262 6,262 6,266 18 Unrealised profit/loss 4 –4 19 20 1) Listed companies. 21 The effect of valuing financial instruments at fair value was included in the parent company’s profits for at total of SEK –85 million (169), 22 of which SEK –81 million (179) referred to market valuation of shareholdings in Brinova. 23 Fair value 24 Measurement of fair value is based on a three level hierarchy. 25 Level 1: prices that reflect quoted prices on an active market for identical assets 26 Level 2: based on direct or indirect observable inputs not included in level 1 Level 3: based on inputs unobservable to the market 27 Fair value for listed companies has been determined according to level 1. All listed companies has been added to the category financial assets valued at 28 fair value option except for the holding in Lemminkäinen that has been classified as Financial asset available for sale. In the category financial assets val- 29 ued at fair value option also includes some holding for which fair value been determined according to level 3 (see reconciliation below). Other financial assets and liabilities valued at fair value in the balance sheet has been determined according to level 2. 30 31 32 33 34 Group Group Other long-term Other long-term Mkr Mkr 35 securities holdings 1) securities holdings 1) 36 Opening balance 2011-01-01 13 Opening balance 2010-01-01 – 37 Purchase value acquisitions 18 Purchase value acquisitions 13 Sales proceeds –4 Closing balance 2010-12-31 13 38 Reported in net financial items in profit 2 1) Refers to an investment in a unlisted fund. The possession are valued at fair value for the year 39 through the income statement supported by ”Fair value option”, see note 21. Closing balance 2011-12-31 29 40 41 42 43 44 45 46

76 PEAB ANNUAL REPORT 2011 NOTES

Not 37 Financial risks and financial policies The financial policy dictates that Group net debt be mainly covered by 1 loan commitments that mature between 1 – 7 years. At the end of the Finance and treasury year, the average loan period for utilised credits was 30 months (34), for 2 The Group is exposed to various types of financial risk through its opera- unutilised credits 23 months (35), and for all granted credits 28 months 3 tions. The term financial risk refers to fluctuations in the company’s profits (34). Peab’s base financing was renegotiated and extended in 2007. In and cash flow resulting from changes in exchange rates, interest rates, 2011 the bilateral loan agreements were renegotiated and at the end of 4 refinancing and credit risks. Group finance and treasury is governed by the year the loan commitments totalled SEK 2,950 million (3,250) divided the financial policy established by Peab’s Board of Directors. The policy among 5 banks (6). The loan agreements, which are not subject to amor- 5 is a framework of guidelines and regulations in the form of a risk mandate tization, run until September 2014. In connection with the renegotiation of 6 and limitations in finance and treasury. The Board has appointed a the bilateral loan agreements in 2011 Peab signed a new credit facility finance and treasury committee which is chaired by the Chairman of the with a loan framework of SEK 200 million and five years maturity. The 7 Board. It is authorised to take decisions that follow the financial policy in base financing in Peab Industri, which was acquired in December 2008, 8 between meetings of the Board. The finance and treasury committee is made up of bilateral loan agreements totalling SEK 2,300 million divid- must report any such decisions at the next meeting of the Board. The ed among four banks. The loan agreements, which are not subject to 9 Group staff team Finance and Treasury and the Group’s internal bank amortization, run until June 2014. The bilateral loan agreements all have Peab Finans AB manage coordination of Group finance and treasury. The the same basic documentation and contain financial covenants in the 10 overall responsibility of the finance and treasury function is to provide form of interest coverage ratio and equity/assets ratio that the Group must 11 cost-effective funding and to minimise the negative effects on Group prof- meet, which are standard for this kind of loan. Peab had exceeded these it due to the cost of financial risks. key ratios by a broad margin at the end of the year. 12 The liquidity risk refers to the risk of Peab having difficulties in meeting Peab set up a lending program for commercial papers in 2004. Under 13 its payment obligations as a result of a lack of liquidity or problems in the program, Peab can issue commercial papers for a maximum of SEK converting or recieving new loans. The Group has a rolling one-month 3,5 billion. The borrower is Peab Finans AB and the guarantor is Peab AB. 14 liquidity plan for all the units in the Group. Plans are updated each week. At the end of the year, Peab had outstanding commercial papers worth Group forecasts also comprise liquidity planning in the medium term. SEK 818 million (634). 15 Liquidity planning is used to handle the liquidity risk and the cost of Peab issued convertible bonds to all employees in December 2007. 16 Group financing. The objective is for the Group to be able to meet its Settlement was in January 2008. A total of 8.8 million convertibles were financial obligations in favourable and unfavourable market conditions issued for a total nominal sum of SEK 598.4 million. The interest coupon 17 without running into significant unforeseen costs. Liquidity risks are man- rate on the convertible bonds is fixed at 5.44 percent. The convertibles aged centrally for the entire Group by the central finance and treasury run from 1 December 2007 to 30 November 2012. 18 function and at year end liquidity was available as shown below. In 2011 Peab has issued unsecured bonds for a nominal value of SEK 19 1,000 million that run for three, four and five years. In February 2012 Peab Available liquid funds received FSA approval and registration for the issuance of Medium Term 20 Notes (MTN) with a loan limit of SEK 3 billion. The bonds are issued with Group 21 1-15 years maturity. The borrower is Peab Finans AB and the guarantor is MSEK 2011-12-31 2010-12-31 Peab AB. 22 1) Liquid funds and bank holdings 1,122 941 Total credit commitments, excluding unutilised leasing lines, excluding Unused overdraft facilities 1,189 1,150 the part of the certificate program which has not been utilised and 23 Other unused credit lines 2,633 3,183 excluding the unutilised part of the MTN program amounted to SEK 24 12,969 million (11,508) per 31 December 2011. Of the total credit com- Total 4,944 5,274 mitments, SEK 9,147 million (7,039) was utilised. 25 1) Of which 200 million are reported as interest bearing short-term receivables. 26 27 28

Age analysis of financial liabilities, undiscounted cashflow including interest 29

Average interest Nominal 30 Group 2011 rate as per blance value, original Amount Maturing Maturing Maturing Maturing Maturing Maturing MSEK Currency sheet day, % currency SEK in 2012 in 2013 in 2014 in 2015 in 2016 2017– 31 Bank loans SEK 3.3 4,664 4,664 1,096 269 2,430 331 190 348 32 Bank loans NOK 3.7 1,019 1,173 467 212 480 14 – – 33 Bank loans EUR 2.0 86 769 113 22 236 11 7 380 34 Commercial paper SEK 3.1 825 825 825 – – – – – Bonds SEK 4.3 1,193 1,193 43 43 243 134 730 – 35 Convertible promissory notes SEK 5.4 622 622 622 – – – – – 36 Financial leasing liabilities SEK 3.3 569 569 196 163 130 24 21 35 37 Financial leasing liabilities NOK 3.8 109 126 20 25 25 9 21 26 Total interest bearing financial liabilities 9,941 3,382 734 3,544 523 969 789 38 Accounts payable SEK – 3,937 3,937 3,937 – – – – – 39 Accounts payable NOK – 354 407 407 – – – – – 40 Accounts payable EUR – 18 164 164 – – – – – 41 Other liabilities SEK – 183 183 145 2 18 2 1 15 Interest rate swaps – 60 60 16 15 10 8 6 5 42 Currency swaps – 10 10 10 – – – – – 43 Total non-interest bearing financial liabilities 4,761 4,679 17 28 10 7 20 44 Total financial liabilities 14,702 8,061 751 3,572 533 976 809 45 46

PEAB ANNUAL REPORT 2011 77 NOTES

1 Average interest Nominal Group 2010 rate as per blance value, original Amount Maturing Maturing Maturing Maturing Maturing Maturing 2 Mkr Currency sheet day, % currency SEK in 2011 in 2012 in 2013 in 2014 in 2015 2016– 3 Bank loans SEK 2.5 4,080 4,080 786 629 164 1,939 335 227 Bank loans NOK 3.4 839 964 254 38 74 460 8 130 4 Bank loans EUR 1.6 101 905 374 43 42 261 33 152 5 Commercial paper SEK 1.8 636 636 636 – – – – – 6 Convertible promissory notes SEK 5.4 648 648 32 616 – – – – Financial leasing liabilities SEK 2.3 488 488 194 101 58 55 54 26 7 Financial leasing liabilities NOK 3.8 17 20 9 4 3 2 1 1 8 Total interest bearing financial liabilities 7,741 2,285 1,431 341 2,717 431 536 9 Accounts payable SEK – 3,655 3,655 3,655 – – – – – Accounts payable NOK – 268 308 308 – – – – – 10 Accounts payable EUR – 12 111 111 – – – – – 11 Other liabilities SEK – 227 227 215 6 1 3 1 1 12 Interest rate swaps – 10 10 4 4 2 – – – Currency swaps – 3 3 3 – – – – – 13 Total non-interest bearing financial liabilities 4,314 4,296 10 3 3 1 1 14 Total financial liabilities 12,055 6,581 1,441 344 2,720 432 537 15 Interest rate risk exceed 24 months. Peab has chosen short fixed interest periods for out- 16 The interest rate risk is the risk that Peab’s cash flow or the value of finan- standing credits. Per 31 December 2011 there were interest rate swaps in 17 cial instruments may vary with changes in market interest rates. Interest SEK 2,550 million (1,100) with maturity between 3 and 7 years at an effec- rate risk can result in changes in fair values and cash flows. A crucial fac- tive interest rate of 2.6 percent (2.9) according to the table below. Peab 18 tor affecting interest rate risk is the fixed interest period. On 31 December pays a fixed annual interest rate and receives floating rates (Stibor 3 19 2011, interest-bearing net debt amounted to SEK 6,626 million (5,719). months) in the interest rate swap. The swap agreement is recognised at Total interest-bearing liabilities amounted to SEK 9,147 million (7,039), of fair value in financial report. Per 2011-12-31 this fair value was SEK –57 20 which SEK 1,735 million (1,602) were short-term. The financial policy dic- million (6). 21 tates that the average fixed interest period on total borrowing may not 22 Rate derivates

23 Nominal value, Amount Maturing in Maturing in Maturing in Maturing in Maturing in Maturing 24 MSEK Currency Effective rate, % original currency SEK 2012 2013 2014 2015 2016 2017– Interest rate swaps 2011-12-31 SEK 2.6 2,550 2,550 – 450 – 500 600 1,000 25 Interest rate swaps 2010-12-31 SEK 2.9 1,100 1,100 – 450 – 500 – 150 26 27 As the table below shows, the fixed interest period for SEK 6,423 million Currency risks 28 (4,750) of the Group’s total interest-bearing liabilities, including deriva- The risk that fair values and cash flows from financial instruments may tives, is less than 1 year. Interest-bearing asset items totalling SEK 1,494 fluctuate with changes in the value of foreign currencies is referred to as 29 million (1,256) have short fixed interest periods, with the result that the a currency risk. 30 fixed interest period for SEK 4,929 million (3,494) of Group net debt, including derivatives, is less than 1 year, making these liabilities directly Financial exposure 31 susceptible to changes in market interest rates. Since the majority of the Group borrowing is done in local currencies to reduce currency risks in 32 financial liabilities have a short maturity most of the interest rate risk is operations. Assets and liabilities in foreign currency are translated at the considered a cash flow risk. For further information see the sensitivity rate on the balance sheet date. Borrowing in the interest-bearing liabilities 33 analysis on page 28 in the Board of Directors’ report. per 31 December 2011, including leasing but excluding currency 34 derivatives, was allocated as follows: Loan period for utilised credit, excluding derivates 35 Local currency per 31 December 2011 in millions MSEK 36 Average SEK 7,224 7,224 effective 37 Amount interest rate Share EUR 79 710 Fixed interest period MSEK percent percent 38 NOK 1,054 1,213 2012 8,973 3.5 98 Total 9,147 39 2013- 174 4.3 2 40 Total 9,147 100 Internal loans are used to handle temporary liquidity needs in Peab’s foreign operations. Currency swaps are used to eliminate exchanges risks. 41 Fixed interest rate period on utilised credits, including Currency swaps usually run three month. Currency swaps are reported at 42 derivates per 31 December 2011 fair value in book closing and value changes are reported as unrealised Average exchange rate differences in the income statement and as current receiv- 43 effective ables and liabilities in the balance sheet. At the end of the year, there Amount interest rate Share were outstanding currency swaps relating to financial exposure of EUR 44 Fixed interest period MSEK percent percent 29 million (10) and NOK 148 million (148). Of the outstanding currency 2012 6,423 3.5 70 45 swaps for financial exposure of 29 MEUR, 22 MEUR refers to currency 2013- 2,724 2.7 30 46 hedge of shares in Lemminkäinen Oyj. Exchange rate differences in net Total 9,147 100 financials items from financial exposure were SEK 3 million (8) in 2011. Exchange rate differences in operating profit were SEK 0 million (–2).

78 PEAB ANNUAL REPORT 2011 NOTES

Exposure of net assets in foreign currency customers where invoicing is continuous during production. The Group’s 1 The translation exposure arising from investments in foreign net assets are customers undergo a credit rating control providing information on cus- primarily hedged through loans in foreign currency or forward exchange tomers’ financial positions from various credit rating companies before 2 contracts. At the end of 2011, hedging through forward exchange con- a project is undertaken. The Group has established a credit policy for 3 tracts and loans in NOK for foreign net assets in Norway amounted to handling customer credit. For instance, it specifies where decisions, NOK 233 million (166). Regarding foreign net assets in Finland hedging regarding credit limits of various magnitudes are taken and how uncertain 4 through forward exchange contracts and loans in EUR 16 million (16). receivables should be handled. Bank guarantees or other collateral are 5 required for customers with low credit ratings or insufficient credit history. Foreign net assets The maximum exposure to credit risk is the reported value presented in 6 Of which Of which the Group balance sheet. Total bad debts in construction operations 7 Lokal currency in millions 2011-12-31 hedged 2010-12-31 hedged amounted to SEK 5 million (3). Credit quality in accounts receivable not NOK 874 233 643 166 fallen due and not written-down is considered good. 8 EUR 87 16 77 16 9 Age analysis, not written down accounts receivable due PLN 5 – 4 – Book value of recivables 10 LVL 1 – – – not writtendown 11 MSEK 2011 2010 A 10 percent stronger EURO rate on 31 December 2011 would entail a 12 positive translation effect on equity of SEK 63 million (55). A corresponding Accounts receivable, not fallen due 5,201 5,045 strengthening of the Norwegian crown would generate a positive transla- Accounts receivable, fallen due 0 – 30 days 692 414 13 tion effect on equity of SEK 74 million (55). The translation effects are Accounts receivable, fallen due 30 – 90 days 218 113 14 calculated on that part of foreign net assets which is not hedged. The Accounts receivable, fallen due 90 – 180 days 74 104 effects of corresponding exchange rate changes on profit for the year are 15 Accounts receivable, fallen due 180 – 360 days 97 67 limited. Accounts receivable, fallen due 360 days 253 212 16 Annual exchange rate differences in equity (net assets in foreign subsidiaries) amounted to SEK 0 million (–167). Total 6,535 5,955 17 18 Commercial exposure Accounts receivable written-down Although international purchases and sales of goods and services in for- MSEK 2011 2010 19 eign currency are currently small, they are expected to increase as the Opening balance 26 35 20 Group expands and the competition grows in terms of purchasing goods Reversed write-downs –21 –25 and services. Contracted or forecast currency flows can be hedged for 21 Write-downs for the year 74 16 6 months from the date of the contract. At the end of the year, there were 22 exchange rate hedges related to forecasted currency flows of NOK 260 Translation difference 0 – million (290), EUR 26 million (16), 1 MUSD (2) and 0 MGBP (1). Balance carried forward 79 26 23 Since anticipated currency flows are hedged there are no transaction There are no mature receivables of significant amounts for other financial 24 or translation effects on equity (other than in the hedged reserve) or in receivables. profit for the year if currency rates change. In the reported cash flow 25 hedges has no inefficiency occurred. Capital management 26 Market price risk Peab aims to have a good capital structure and financial stability in order to provide a stable basis for continuing business activities, there by ena- 27 Peab are exposed to market price risk through shareholdings in the listed bling the company to keep existing owners and attract new ones. A good companies Brinova, Victoria Park, Catena and Lemminkäinen. On closing 28 capital structure is also intended to promote the development of good date reported value were 780 million (794). Peab also has futures con- relations with the Group’s creditors in a manner which benefits all parties. 29 tracts in Lemminkäinen for purchase of 940,000 shares. The future con- Capital is defined as Equity and refers to the equity attributable to the tracts are identified as hedging of future cash flow. 30 owners of shares in the parent company. 31 Credit risk Equity Credit risk refers to the risk of a counterparty failing to meet their 32 MSEK 2011 2010 obligations. 33 Share capital 1,584 1,584 Credit risks in financial instrument Other contributed capital 2,576 2,576 34 Credit risks in financial instruments are very limited, since Peab only Reserves –82 125 35 deals with counterparties with high credit ratings. Counterparty risks are Retained earnings including profit for the year 3,869 3,388 primarily associated with receivables on banks and other counterparties 36 Equity related to shareholders in parent company 7,947 7,673 involved in the purchase of derivatives. The financial policy contains spe- 37 cial counterparty regulations which specify the maximum credit exposure for various counterparties. The framework agreement of the International One of Peab’s targets is an equity/assets ratio (Equity divided by the 38 balance sheet total) in excess of 25 percent. The Board of Directors Swaps and Derivatives Association (ISDA) is used with all counterparties 39 in derivative transactions. Peab did not suffer any financial instrument believes that this level is well suited to Peab’s construction and civil engi- losses in 2011. neering activities in Sweden, Norway and Finland. The target is a part 40 ofthe Group’s strategic planning. If the equity/assets ratio is expected to Total counterparty exposure related to derivative trading calculated as a 41 net receivable per counterparty amounted to SEK 0 million (15) at the end exceed this level on a permanent basis, the capital should be transferred of 2011. The estimated gross exposure to counterparty risks related to to the shareholders in the appropriate form. The equity/assets ratio at the 42 liquid funds and current investments amounted to SEK 1,170 million (810). end of 2011 was 25.4 percent (27.8). It is the ambition of the Board of Directors to preserve a balance 43 Credit risk in accounts recievable between a high rate of return on equity, which can be done through 44 The risk that Group customers cannot meet their obligations, i.e. payment increased lending, and the security and benefits associated with a higher is not received from customers, is one customer credit risk. Bad debts are equity ratio. Therefore, one of Peab’s financial targets is a return on equity 45 very rare in construction since there are so many different projects and (Profit for the period attributable to holders of participations in the parent 46

PEAB ANNUAL REPORT 2011 79 NOTES

1 company divided by the average equity attributable to holdings of partici- Note 39 Investment obligations pations in the parent company) in excess of 20 percent. The return on 2 equity was 12.1 percent (15.6) at the end of 2011. By way of comparison, In 2011, the Group has signed agreements to acquire tangible fixed 3 the Group’s average interest expenses on interest-bearing borrowing was assets amounting to SEK 207 million (107). 3.5 percent (2.9). By participating in joint ventures, the Group has committed to investing 4 Peab´s goal concerning dividends is an annual distribution of 50 per- SEK 455 million (4). 5 cent of profits after tax to shareholders. The level of dividends should be Joint venture companies have committed investments of SEK 220 reasonable in relationships to developments in Peab´s profit and consoli- 6 million (9). Most of the investment obligations should be regulated in the dation requirements. An ordinary dividend of SEK 2.10 per share (2.60) is coming financial year. 7 proposed for 2011. Calculated as a share of the Group’s reported profit The parent company has not signed any agreements to acquire tangi- after tax, the proposed dividend amounts to 66 percent (63). Exclusive of ble fixed assets. 8 the 1,086,984 B shares owned by Peab AB on 14 February 2012, which 9 do not entitle to dividend, the proposed dividend is equivalent to a total dividend distribution of SEK 619 million (746). Besides the ordinary divi- 10 dend, extracash dividends may be proposed if the Board of Directors 11 finds there are sufficient funds which are not considered necessary to Group development. Extra dividends may also be made in other forms 12 besides cash. Note 40 Pledged assets and contingent liabilities 13 The Board of Directors aims to get as many of the Group’s employees- to become shareholders as possible. In order to achieve this end, allem- 14 ployees of the Group were offered the chance of purchasing converti- Pledged assets 15 blepromissory notes on two separate occasions, 2005 and 2007. On the Group Parent company last occasion 41 percent of Peab’s employees applied to subscribe to MSEK 2011 2010 2011 2010 16 convertibles. For own liabilities and 17 At the start of 2011, Peab’s holding of own shares amounted to provisions 9,308,220 B shares, corresponding to 3.1 percent of the total number Related to long-term liabilities 18 ofshares. On 10 May 2011, the Peab Annual General Meeting authorise to credit institutions: 19 the Board of Directors to acquire at the most the number of shares in Real estate mortgages 1,894 1,409 Peab AB such that after acquisition Peab would hold a maximumof 10 Floating charges 3 22 20 percent of the registered shares in the company. In 2011 360,000 B Assets with attached liens 519 429 21 shares, corresponding to 0.1 percent of the total number of shares, were Other 2 3 repurchased for SEK 16 million. During the same period 8,581,236 B 22 Related to current liabilities shares were divested for SEK 300 million, in connection with the Kamprad to credit institutions: 23 family became a major shareholder in Peab. As of 31 December 2011, Real estate mortgages 434 606 Peab’s holding of own shares amounted to 1,086,984 B shares, corre- Assets with attached liens 165 135 24 sponding to 0.4 percent of the total number of shares. The purpose of Restricted bank balance – 66 25 the purchase of own shares is, among others, to improve the capital structure of the company and to be used in the financing of acquisitions. Other – – 26 Some of Peab’s loan agreements contain financial covenants in the Total related to own liabilities and provisions 3,017 2,670 – – 27 form of Interest coverage rate and equity/assets ratio which the Group must comply with, which is normal for this type of loan agreement. At the For own contingent liabilities 28 end of the year, Peab fulfilled these covenants with a broad margin. and guarantees 29 Real estate mortgages 2 2 30 Floating charges 8 22 31 Note 38 Operational lease contracts Restricted bank balance 48 1 Assets with attached liens 60 104 32 Leasing charged to income statement for the period: Total for own contingent 33 Group liabilities and guarantees 118 129 – – 34 MSEK 2011 2010 Other 0 0 – – Minimum lease fees 375 295 Total pledged assets 3,135 2,799 – – 35 Total leasing costs 375 295 36 Contingent liabilities Group Parent company MSEK 2011 2010 2011 2010 37 Interminable leasing payments amount to: MSEK 2011 2010 Shared obligations as part- 38 owner in limited partnerships 254 251 – – Within a year 309 258 Responsibility in consortium of 39 Between one and five years 477 377 other shareholders liabilities – 0 – – 40 Later than five years 2 – Guarantees and contracting Total 788 635 guarantees for Group 41 companies – – 16,069 13,558 42 Rental of premises and office inventories cost classified as operating Guarantee liabilities for the benifit of joint ventures 519 153 519 153 43 leasing contracts. Main part of the leasing cost refers to rental of premises according to the contracts. The leasing contracts run without special Other guarantees and 44 restrictions with an option to renew. Other operational leasing agreements contingent liabilities 1,617 1,449 1,607 1,415 Total 2,390 1,853 18,195 15,126 45 are divided among a number of lesser agreements. Leasing income generated by objects that are rented to a third party is Other guarantee and contingent liabilities primarily refer to obligations to 46 marginal. tenant-owner cooperatives.

80 PEAB ANNUAL REPORT 2011 NOTES

Note 41 Related parties Summary of transactions with related parties 1 Group Related parties 2 MSEK 2011 2010 The Group is subject to considerable influence by brothers Mats and Erik Transactions with joint ventures 3 Paulsson with family, children and companies. Their combined votes accounted for some 66 percent of the votes in Peab AB per 31 December Sales to joint ventures 147 363 4 2011. As a result of the Paulsson families significant influence on Peab, Purchases from joint ventures 188 188 5 transactions with the below companies are classified as transactions with Interest income from joint ventures 7 – 6 related parties. Liabilities to joint ventures 23 18 Receivables from joint ventures 290 72 7 Brinova Dividends from joint ventures 93 8 8 The Brinova Group is subject to considerable influence by brothers Mats and Erik Paulsson with family, children and companies through their own- 9 Transactions with associated companies ership of the company. Erik Paulsson is a member of the Board of Direc- 10 tors of Brinova Fastigheter AB. Dividends from associated companies 136 59 11 Wihlborgs Fastigheter Transactions with Brinova 12 Erik Paulsson is Chairman of the Board of Directors of Wihlborgs Fasti- Sales to Brinova 125 44 13 gheter and has a significant influence. Sara Karlsson is a member of the Purchases from Brinova 0 1 Board of Directors of Wihlborgs Fastigheter. Receivables from Brinova 16 14 14 Shareholdings in Brinova, fair value 491 572 Skistar 15 The Skistar Group is subject to considerable influence by brothers Mats Dividends from Brinova 20 17 16 and Erik Paulsson with family, children and companies through their own- 17 ership of the company. Erik Paulsson is Chairman of the Board of Direc- Transactions with Skistar tors and Mats Paulsson is a member of the Board of Directors of Skistar. Sales to Skistar 85 12 18 Purchases from Skistar 4 0 19 Fabege Receivables from Skistar 8 2 Erik Paulsson is Chairman of the Board of Directors and has significant 20 influence. Svante Paulsson is a member of the Board of Directors of Transactions with Wihlborgs 21 Fabege. Sales to Wihlborgs 287 353 22 Backahill Purchases from Wihlborgs 9 9 23 Backahill is subject to significant influence by Erik Paulsson and family Liabilities to Wihlborgs 2 3 24 through their holdings in the company. Svante Paulsson is a member of Receivables from Wihlborgs 51 26 the Board of Directors of Backahill. 25 Transactions with Fabege Kranpunkten 26 Sales to Fabege 436 346 Kranpunkten is subject to considerable influence by Fredrik Paulsson 27 Purchases from Fabege 36 27 through his ownership of the company. Fredrik Paulsson is a member of 28 the Board of Directors and CEO of Kranpunkten. Liabilities to Fabege 3 10 Receivables from Fabege 111 52 29 Gullbergs 30 Gullbergs is subject to considerable influence by Fredrik Paulsson Transactions with Backahill through his ownership of the company. 31 Sales to Backahill 58 50 Purchases from Backahill 2 2 32 Subsidiaries In addition to the related parties above stated for the group, the parent Receivables from Backahill 11 17 33 company has a close relationship with its subsidiaries, see note 42. 34 Transactions with Kranpunkten Sales to Kranpunkten 30 25 35 Purchases from Kranpunken 68 54 36 Liabilities to Kranpunkten 14 10 37 Receivables from Kranpunkten 5 5 38

Transactions with Gullbergs 39 Sales to Gullbergs 6 5 40 Purchases from Gullbergs 69 59 41 Liabilities to Gullbergs 15 12 Receivables from Gullbergs 1 1 42 43 44 45 46

PEAB ANNUAL REPORT 2011 81 NOTES

1 Summary of transactions with related parties Note 42 Group companies Parent company 2 Book value in MSEK 2011 2010 3 parent company, Transactions with subsidiaries Registered Share of MSEK Company Corp.ID.nr office equity 1) 2) 2011 2010 4 Sales to subsidiaries 99 82 Peab Finans AB 556552-1324 Båstad 100.0% 1,616 1,616 Purchases to subsidiaries 18 21 5 Peab Sverige AB 556099-9202 Båstad 100.0% 3,522 3,322 6 Liabilities to subsidiaries 4,794 5,670 Peab Sp.z.o.o 40624 Warszawa 100.0% Receivables from subsidiaries 1,447 1,015 7 Kompetenskraft i Solna AB 556737-7683 Solna 100.0% Dividends from subsidiaries 1,150 1,458 Kompetansekraft AS 991687971 Oslo 100.0% 8 KB Muraren 135 916837-9841 Båstad 100.0% 9 Transactions with associated companies KB Möllevarvet 969639-7877 Båstad 100.0% Dividends from associated companies 136 59 Granit & Beton Trean HB 916621-3802 Båstad 100.0% 10 Mölletofta i Klippan AB 556069-3953 Klippan 100.0% KB Snickaren 204 969684-0975 Båstad 100.0% 11 Transactions with Brinova Interoc Projekt AB 556519-7091 Båstad 100.0% Shareholdings in Brinova, fair value 491 572 12 Torghuset i Värnamo AB 556607-6807 Båstad 100.0% 13 Dividends from Brinova 20 17 Peab Brunnshög AB 556649-9116 Båstad 100.0% 14 Båramo i Värnamo AB 556713-7871 Båstad 100.0% Transactions with Skistar Peab Elevbyggen AB 556101-0355 Alingsås 100.0% Peab Projektutveckling 15 Purchases from Skistar 3 0 556092-9852 Göteborg 100.0% Väst AB 16 S:t Jörgen AB 556341-8887 Göteborg 100.0% 17 Transactions with Backahill Peab Trading Väst AB 556594-9590 Göteborg 100.0% Purchases from Backahill 2 2 Peab Högsbo AB 556594-4583 Göteborg 100.0% 18 Lambel AB 556577-8890 Göteborg 100.0% 19 Transactions with Gullbergs KB St Jörgen 916840-0407 Göteborg 100.0% 20 Purchases from Gullbergs 0 6 HB Solrosen 7-8 916897-4088 Borås 100.0% Smögen Exploatering AB 556090-5472 Sotenäs 100.0% 21 Executive management Kreaton AB 556644-5010 Göteborg 100.0% 22 For information on salaries and other remuneration to the Board of Direc- Interoc AB 556058-5837 Stockholm 100.0% Rörman Installation & tors and the CEO and senior officers along with information on costs and 556026-0316 Sundbyberg 100.0% 23 obligations relating to pensions and similar benefits and agreements on Service Sverige AB Peab Bostad AB 556237-5161 Stockholm 100.0% retirement remuneration, see note 8. 24 Haninge Park KB 916637-2590 Sollentuna 100.0% Fastighetsbolaget 25 556691-9907 Solna 100.0% Transaction terms Måsbodarna Tre AB 26 Transactions with related parties were priced on general market terms. Österhöjdens Garage AB 556753-0240 Upplands-Bro 100.0% 27 Telge Peab AB 556790-5889 Stockholm 100.0% Vilunda Parkering AB 556802-5596 Stockholm 100.0% 28 Peab Trading Öst AB 556778-8749 Stockholm 100.0% 29 Enavallens Fastighets AB 556734-0871 Enköping 100.0% Peab Trading Solna AB 556793-1554 Solna 100.0% 30 KB Messingen 916837-9817 Stockholm 100.0% Upplands 31 Vilunda Hyresbostäder AB 556793-1547 100.0% Väsby 32 Fastighets AB Spelhagen 556795-0992 Solna 100.0% 33 DGV i Enskede AB 556750-3791 Stockholm 100.0% Täljö Utveckling nr 2 AB 556716-7175 Stockholm 100.0% 34 Ulriksdal Utveckling AB 556509-6392 Solna 100.0% 35 Haga Expolatering AB 556715-4850 Stockholm 100.0% Messingen AB 556627-1689 Stockholm 100.0% 36 Fastighets AB Mynningen 556772-4280 Västerås 100.0% 37 ATS Service AB 556707-9719 Markaryd 100.0% 38 Huvusta Strand Holding AB 556769-7080 Solna 100.0% Huvusta Strand AB 556109-5323 Solna 100.0% 39 TGS Fastigheter Nr 2 AB 556680-5106 Linköping 100.0% 40 Hanbjelken AB 556699-4306 Stockholm 100.0% Forsen 2 i Eskilstuna AB 556749-4801 Eskilstuna 100.0% 41 Furuspecialen i Nyköping 556695-9986 Flen 100.0% Fastighets AB 42 Eldslundfastigheter 556750-2165 Linköping 100.0% 43 Sverige AB Råsta Arenabostäder AB 556789-3002 Solna 100.0% 44 Råsta Köpcenterbostäder AB 556789-2921 Solna 100.0% 45 Klövern Sture AB 556872-5633 Nyköping 100.0% Ångström & Mellgren AB 556592-6895 Västerås 100.0% 46

82 PEAB ANNUAL REPORT 2011 NOTES

Book value in Book value in 1 parent company, parent company, Registered Share of MSEK Registered Share of MSEK 2 Corp.ID.nr 1) 2) Corp.ID.nr 1) 2) Company office equity 2011 2010 Company office equity 2011 2010 3 Peab Förvaltning 556632-7747 Nyköping 100.0% Lappmarken i Malmö KB 916611-9918 Båstad 99.9% Nyköping AB Peab Boarp AB 556715-0247 Båstad 100.0% 4 Norrvikens Fastigheter AB 556703-1470 Stockholm 100.0% Annehem Hylliecentrum AB 556683-4478 Malmö 100.0% Peab Projektfastigheter AB 556202-6962 Stockholm 100.0% 5 Annehem Hyllie point 1 AB 556762-0553 Malmö 100.0% Fastighetsförvaltnings- 916563-4271 Stockholm 100.0% 6 bolaget Gasellen 2 HB Annehem Hyllie point 2 AB 556762-0546 Malmö 100.0% Olsson & Zarins Annehem Hyllie point 3 AB 556762-0587 Malmö 100.0% 556439-3592 Uppsala 100.0% 7 Baltinvest AB Malmöoket AB 556709-6713 Malmö 100.0% Kungsfiskaren Bygg & 8 556471-2296 Stockholm 100.0% Malmöoket Ekonomisk Fastighet AB 769614-7821 Malmö 100.0% Förening 9 Stockholm Entreprenad AB 556569-4386 Stockholm 100.0% Malmöoket nr 2 Ekonomisk Stockholm 769619-1829 Malmö 100.0% 556036-9133 Stockholm 100.0% Förening 10 Hamnentreprenad AB Peab Sverige AB, dansk filial 1595622 Fredrikshavn 100.0% Peab Projektutveckling 556421-1091 Sundsvall 100.0% Peab Sverige AB, norsk filial 976 580 176 Oslo 100.0% 11 Nord AB Skillingenäs AB 556587-0192 Båstad 100.0% Peab Infra Oy 2303725-2 Helsingfors 100.0% 12 Riksten Friluftsstad AB 556547-8764 Stockholm 100.0% Annehem Bygg & Projekt AB 556699-8430 Malmö 100.0% 13 Berg & Väg Maskin AB 556130-4972 Salem 100.0% Ängelholms Flygplats AB 556814-2896 Båstad 100.0% Kipsala Business Center 40003729343 Lettland 100.0% Peab Trading Nord AB 556715-4827 Solna 100.0% 14 Fastighetsbolaget KB Klagshamn Exploatering 916563-4412 Båstad 100.0% 556715-5337 Solna 100.0% Pollaren AB 15 Peab I 5 AB 556679-4276 Östersund 100.0% H2 Helsingborg AB 556544-1986 Helsingborg 100.0% 16 Peab Construction Syd AB 556292-2368 Båstad 100.0% Utvecklingsbolaget Södra Peab Construction i 556830-9925 Båstad 100.0% 556626-9089 Båstad 100.0% Stationsområdet i Växjö AB 17 Göteborg AB BEFAB Entreprenad 556595-7452 Linköping 100.0% Peab Utveckling Nord AB 556341-7228 Båstad 100.0% Mjölby AB 18 Stadsliden Utveckling AB 556874-7413 Umeå 100.0% BEFAB Markteknik AB 556581-4612 Linköping 100.0% 19 J Almqvist Bygg i Gnosjö AB 556421-1299 Båstad 100.0% Mora-Orsa Byggtjänst AB 556624-6160 Orsa 100.0% Peabskolan AB 556442-7432 Båstad 100.0% Byggtjänst i Offerdal AB 556835-9755 Krokom 100.0% 20 Peab Byggservice Väst AB 556066-3675 Båstad 100.0% Kokpunkten Fastighets AB 556759-5094 Stockholm 100.0% 21 Nybyggarna i Nerike AB 556582-1146 Örebro 100.0% Nya Bara Utvecklings AB 556858-4311 Stockholm 100.0% Linje & Kabelplöjning i Torghusen i Bara AB 556858-4360 Stockholm 100.0% 22 556487-3098 Borlänge 100.0% Borlänge AB Centrumhuset i Bara AB 556858-4378 Stockholm 100.0% 23 Kompligens Fastigheter AB 556691-2555 Båstad 100.0% Peab PGS AB 556428-5905 Båstad 100.0% 24 BKVA Fastighets AB 556694-4244 Båstad 100.0% Hatteskär AB 556874-6936 Båstad 100.0% Olof Mobjer Entreprenad AB 556445-1275 Båstad 100.0% Peab Oy 1509374-8 Helsingfors 100.0% 488 488 25 West Wind AB 556615-7797 Solna 100.0% Kehitysyhtiö Pyynikki Oy 2214064-5 Helsingfors 100.0% 26 Geodells Byggnads AB 556396-4187 Järfälla 100.0% Peab AS 990 040 729 Olso 100.0% 359 97 Ljungbyhed Park AB 556545-4294 Klippan 100.0% Gydas Vei DA 982 796 083 Olso 100.0% 27 Activus Ljungbyhed AB 556558-9644 Klippan 100.0% Björn Bygg AS 943 672 520 Tromsö 100.0% 28 Ljungbyheds Golfcenter AB 556571-3012 Klippan 100.0% Peab Eiendomsutvikling AS 987 099 011 Oslo 100.0% Peab 556741-8586 Solna 100.0% Vardentoppen AS 991 866 620 Oslo 100.0% 29 Exploateraarenastaden AB Peab Drivaarena AB 556741-8578 Solna 100.0% Heimdalsgata 4 Utv. DA 987 572 809 Oslo 100.0% 30 Peab Ägaarena 1 AB 556741-8552 Solna 100.0% ANS Solligården 957 524 346 Olso 100.0% 31 Peab Ägaarena 2 AB 556741-8560 Solna 100.0% Peab Bolig Prosjekt AS 990 892 385 Oslo 100.0% G Nilsson Last & Planering Areal Invest AS 982 113 377 Rygge 100.0% 32 556236-0908 Kristianstad 100.0% i Ranseröd AB Bergkrystallen Parkering AS 891 324 782 Oslo 100.0% 33 AB Jämshögs Grus & 556048-3918 Olofström 100.0% Strömmen Centrum AS 985 704 449 Oslo 100.0% Entreprenad AB Hebö Utvikling AS 976 466 160 Oslo 100.0% 34 Peab Fastigheter i Växjö AB 556716-6664 Båstad 100.0% Peab Næring Stømmen AS 995 518 562 Oslo 100.0% Peab Ugglarp AB 556094-5072 Båstad 100.0% 35 HälsingeBygg Raaen Entreprenør AS 860 882 582 Horten 100.0% 556624-4025 Hudiksvall 100.0% 36 i Hudiksvall AB Senter Bygg Entreprenör AS 976 469 429 Modum 100.0% Telemark Vestfold Värby Fastighets AB 556703-4771 Båstad 100.0% 959 414 572 Skien 91.0% 37 Peab Exploatering AB 556129-8562 Stockholm 100.0% Entreprenør Hus & Hyttebygg AS 990 347 093 Skien 100.0% 38 Berg och Falk AB 556602-3064 Ödeshög 100.0% K. Nordang AS 936 574 696 Stranda 90.1% BEFAB Schakt AB 556555-2287 Mjölby 100.0% 39 Byggservice & Peab Byggservice 986 346 384 Oslo 100.0% 87 88 556715-4843 Stockholm 100.0% Vedlikehold AS Nordost AB 40 Peab Invest AS 981 704 665 Oslo 100.0% 1,332 1,332 Peab Filmstaden AB 556773-7506 Båstad 100.0% Peab Industri AB 556594-9558 Ängelholm 100.0% 2,588 2,588 41 Henrik Persson Holding AB 556767-1838 Alingsås 100.0% Peab Industri Våxtorp AB 556232-8368 Båstad 100.0% Fastighets AB Ekudden 556628-0326 Alingsås 100.0% 42 Peab Industri Sverige AB 556594-9624 Ängelholm 100.0% AB Alingsås Trähus AB 556576-5194 Alingsås 100.0% 43 Västgöta Mark och Lambertsson Sverige AB 556190-1637 Båstad 100.0% 556644-1308 Alingsås 100.0% Entpreprenad AB Lambertsson Kran AB 556543-5293 Båstad 100.0% 44 Husgruppen i Alingsås KB 969728-7887 Göteborg 100.0% KB Muraren 105 916837-9544 Mölndal 100.0% 45 Peab Energi AB 556104-1533 Båstad 100.0% Krantorp KB 969623-0540 Mölndal 100.0% Åstorps Bioenergi AB 556644-8246 Båstad 100.0% ATS Kraftservice AB 556467-5998 Lindesberg 100.0% 46 Peab Tubsockan AB 556715-1773 Båstad 100.0% Hagström i Nås AB 556377-1376 Vansbro 100.0%

PEAB ANNUAL REPORT 2011 83 NOTES

1 Book value in Book value in parent company, parent company, 2 Registered Share of MSEK Registered Share of MSEK Corp.ID.nr 1) 2) Corp.ID.nr 1) 2) 3 Company office equity 2011 2010 Company office equity 2011 2010 HN Kraftlinjeteknik AB 556411-8585 Vansbro 100.0% JaCo AB 556554-6487 Båstad 100.0% 4 Swerock AB 556081-3031 Helsingborg 100.0% Varvstaden AB 556683-1722 Båstad 100.0% 5 Swerock Uppsala AB 556031-3289 Uppsala 100.0% Skånehus AB 556547-6958 Båstad 100.0% AB Uppsala Grus 556206-6281 Uppsala 100.0% Fältjägaren Fastigheter AB 556688-3517 Östersund 100.0% 6 Rådasand AB 556042-8699 Lidköping 100.0% Fältjägaren 1 AB 556851-7287 Östersund 100.0% 7 Peab Transport & Maskin AB 556097-9493 Örkelljunga 100.0% Fältjägaren 3 AB 556851-7261 Östersund 100.0% 8 Peab Bildrift AB 556313-9608 Helsingborg 100.0% Fältjägaren 4 AB 556851-7279 Östersund 100.0% AB Roler 556100-0729 Örebro 100.0% Fältjägaren 5 AB 556851-7246 Östersund 100.0% 9 Peab Vagnpark AB 556234-0371 Båstad 100.0% Fältjägaren 7 AB 556855-7176 Östersund 100.0% 10 UMF Entreprenad AB 556658-8116 Uddevalla 100.0% Birsta Fastigheter AB 556190-3765 Helsingborg 100.0% 60 60 Grävsam AB 556530-4978 Uddevalla 100.0% Peab Norden AB 556134-4333 Båstad 100.0% 13 16 11 BNH Maskinstation AB 556655-9612 Helsingborg 100.0% Peab Skandinavien AB 556568-8784 Båstad 100.0% 0 0 Flygstaden Intressenter 12 Ferdigbetong AS 987 013 117 Tromsö 100.0% 556438-9665 Båstad 100.0% 272 272 i Söderhamn AB A-frakt AB 556449-8045 Arvidsjaur 100.0% HDWG Finans AB 556470-0184 Båstad 100.0% 13 P Andersson Fastighet 1 556824-5624 Stockholm 100.0% i Mälardalen AB Ortum AB 556641-8355 Helsingborg 100.0% 14 Bjurholms Lastbilcentral Åke & Clas Skoogh 794000-0123 Bjurholm 100.0% 556722-9066 Kristianstad 100.0% 15 Ekonomisk Förening Holding AB Stockholms Kommersiella Gryttby Grus och Sand AB 556846-9323 Uppsala 100.0% 556105-6499 Stockholm 100.0% 16 Skandinaviska Fastighets AB 556034-2148 Helsingborg 100.0% Byggelement AB Skånska Stenhus AB 556233-8680 Stockholm 100.0% 17 Flygstaden Intressenter Lättklinkerbetong AB 556239-1721 Alingsås 100.0% 556541-5360 Båstad 100.0% Skandinaviska Byggelement i Grevie AB 18 892 890 692 Slemmestad 100.0% Norge AS Peab Hem AB 556077-8499 Båstad 100.0% 1 1 19 Peab Asfalt AB 556098-8122 Båstad 100.0% Peab Rydebäck AB 556397-3071 Båstad 100.0% Asfaltbeläggningar 556279-8768 Boden 100.0% Peab Vimmerbyvägen AB 556776-4690 Båstad 100.0% 20 i Boden AB Peab Hisingstorp AB 556776-4708 Båstad 100.0% Pionjären Fastighets AB 556114-9773 Boden 100.0% 21 Peab Jägargården AB 556781-6680 Båstad 100.0% Asfalt & Väg i Strängnäs AB 556545-6034 Strängnäs 100.0% Peab Brämaregården AB 556781-6698 Båstad 100.0% 22 Kvalitetsasfalt 556537-5432 Västerås 100.0% Peab Hjässan AB 556453-1688 Uddevalla 100.0% 23 i Mellansverige AB Peab Asfalt Norge AS 994 628 577 Slemmestad 100.0% Peab Sofiedal AB 556470-0176 Båstad 100.0% 24 Norwegian Aggregates AS 977 483 336 Trondheim 100.0% Peab Kastanjeparken AB 556059-0910 Båstad 100.0% 25 Verran Betong AS 962 042 791 Trondheim 100.0% Peab Utsikten AB 556715-0239 Båstad 100.0% Terje Hansen AS 930 969 451 Frogner 100.0% Peab Porten AB 556831-0030 Båstad 100.0% 26 Peab Grundläggning Peab Vidar AB 556866-4311 Båstad 100.0% 556554-1587 Båstad 100.0% 27 Norden AB Isstadion i Lambohov AB 556869-5836 Båstad 100.0% Peab Grundläggning AB 556154-7364 Båstad 100.0% Peab 556824-8453 Båstad 100.0% 0 0 28 Nordisk Fundamentering AS 996 217 981 Oslo 100.0% Fastighetsutveckling AB Peab Fastighetsutveckling ATS Mark AB 556707-8380 Markaryd 100.0% 556825-9856 Båstad 100.0% 29 Sverige AB Peab Industri Norge AS 990 609 527 Oslo 100.0% Peab dotterbolag 1 AB 556855-6954 Stockholm 100.0% 30 Lambertsson Norge AS 985 129 738 Skedsmo 100.0% Interoc Fasad AB 556864-4156 Stockholm 100.0% Kranor AS 976 313 062 Slemmestad 100.0% 31 Peab Bad AB 556870-3564 Solna 100.0% Rolf Olsens vei 30/32 AS 990 285 624 Oslo 100.0% Peab FU Måby AB 556874-6837 Solna 100.0% 32 Peab Industri Finland AB 556687-9226 Helsingborg 100.0% Riksten Studenbostäder AB 556874-6852 Solna 100.0% Peab Industri Finland AB, 33 2006361-5 Nurmijärvi 100.0% finsk filial Incasec AB 556591-2267 Båstad 100.0% 0 0 34 Peab Industri Oy 1509160-3 Vasa 100.0% Peab Grevie AB 556715-0213 Båstad 100.0% 0 0 Peab Invest Yek AB 556753-4226 Borås 100.0% 35 Lambertsson Oy 0937993-4 Turku 100.0% Annehem Fastigheter AB 556683-4452 Malmö 100.0% 272 272 Peab Konsult AB 556715-0254 Båstad 100.0% 0 0 Annehem Fastigheter & Peab Invest Oy 1773022-9 Helsingfors 100.0% 91 635 36 556715-5220 Malmö 100.0% Projekt AB Carpenova AB 556753-4242 Båstad 100.0% 0 0 37 Fastighets AB 556563-0711 Ängelholm 100.0% 0 0 Peab Vejby AB 556663-2682 Båstad 100.0% 102 219 Skeppsdockan i Malmö 38 Fastighets AB Grisen 556466-1055 Båstad 100.0% Peab Park AB 556107-0003 Båstad 100.0% 2 2 39 Valhall Flyg AB 556718-8593 Ängelholm 100.0% Skåne Projektfastigheter AB 556471-9143 Båstad 100.0% 1 1 Hyresmaskiner Gösta Valhall Flyg KB 969724-7865 Ängelholm 100.0% 0 0 556082-6470 Båstad 100.0% 40 Pettersson AB Peab International AB 556568-6721 Båstad 100.0% 348 348 Mauritz Larsson 556036-8242 Båstad 100.0% 41 Peab International B.V. 34 119 597 Amsterdam 100.0% Byggnads AB 42 Br Paulsson Peab AB 556113-4114 Båstad 99.9% 157 157 HB Muraren 126 916837-9759 Göteborg 100.0% Stadiongatans Projektfastigheter Väst AB 556044-1866 Båstad 100.0% 556141-1736 Malmö 100.0% 43 Lokaluthyrning AB Projektfastigheter Norrviken Exploaterings AB 556245-3356 Båstad 100.0% Götaland AB 556259-3540 Båstad 100.0% 44 Vejby Transport & Miljö AB 556240-2742 Ängelholm 100.0% 1 1 Total 11,525 11,728 Peab Konstruktion AB 556061-1500 Stockholm 100.0% 42 42 45 1) The capital participation accords with the vote participation. Peab Utvecklings AB 556511-5408 Båstad 100.0% 171 171 46 2) In addition to the Group companies acquired in 2011 (see note 4), the proportion of Fastighets AB Skånehus 556371-3816 Helsingborg 100.0% capital for 2011 corresponds with the proportion of capital 2010. Peab Holding AB 556594-9533 Båstad 100.0% 0 0

84 PEAB ANNUAL REPORT 2011 NOTES

Parent company Adjustments for not included in cash flow 1 Group Parent company MSEK 2011 2010 MSEK 2011 2010 2011 2010 2 Acquisition value brought forward 14,084 13,938 Profit from participation in joint 3 Purchases – 64 ventures/associated companies –21 –95 4 Paid shareholder contribution 463 100 Dividends received from joint Repaid shareholder contribution –544 – ventures 228 67 5 Sales – –18 Group contribution received/ 6 Accumulated acquisition values brought forward 14,003 14,084 leaved – – –834 –244 7 Revaluations brought forward 100 100 Depreciation and write-downs 853 774 253 69 Accumulated revaluations carried forward 100 100 Unrealised exchange rate 8 difference 4 58 Write-downs brought forward –2,456 –2,404 9 Gains on sale of fixed assets –75 –34 – –1 Sales – 17 Gains on sale of 10 Write-downs for the year –122 –69 business/subsidiary –45 –39 Accumulated write-downs carried forward –2,578 –2,456 11 Provisions 43 1 Book value carried forward 11,525 11,728 Change in fair value of 12 financial instruments 93 –161 89 –164 During the year, participation in Group companies were written down by SEK 13 Accrued expenses and 122 million (69). The write-downs refers to dormant companies or companies 14 with little activity where values have been written down to the equity value. provisions –59 –25 Annual write-downs are reported in the income statement on the ”Profit from Dividends from subsidiaries – – –1,146 –1,458 15 shares in Group companies” line. Total 1,021 546 –1,638 –1,798 16 17 Transactions without payments 18 Group MSEK 2011 2010 19 Aquisition of assets by financial leasing 345 112 20 Aquisition of subsidiaries financed by loan 21 from the seller – 48 Aquisition of subsidiaries with own shares – 5 22 23 Note 43 Untaxed reserves Acquisition of subsidiaries and businesses 24 Parent company Group 25 Mkr 2011 2010 MSEK 2011 2010 26 Tax allocation reserve 156 – Acquired assets and liabilities Accumulated additional depreciation, machinery Intangible assets 129 15 27 and equipment 0 0 Tangible assets 146 503 28 Total 156 0 Financial assets –16 29 Deferred tax recoverables 57 Project and development properties and inventories 323 448 30 Operating receivables 305 94 31 Liquid funds 52 126 32 Long-term provisions –5 –1 Note 44 Cash flow statement 33 Interest-bearing long-term liabilities –170 –487 34 Paid interest and dividends received Deferred tax liabilities –36 –16 Group Parent company Current liabilities –392 –205 35 MSEK 2011 2010 2011 2010 393 477 36 Dividends received 250 85 157 77 Intäktsförd negativ goodwill –12 37 Interest received 121 60 38 39 Non-controlling interests – 102 Interest paid –352 –222 –217 –234 Purchase prices 381 579 38 Loan from seller – –48 39 Aquisition with own shares – –5 40 Paid purchase price 381 526 Less: Liquid funds in acquired companies –52 –126 41 Effect on liquid funds 329 400 42 43 44 45 46

PEAB ANNUAL REPORT 2011 85 NOTES

1 Disposal of subsidiaries higher than the reported values in those cases where goodwill values are Group substantial. 2 MSEK 2011 2010 Project and development properties 3 Sold assets and liabilities The book value has been estimated based on prevailing price levels per Tangible assets – 703 4 property at the respective location. Changes in supply and demand may 5 Financial assets –161 4 alter reported values and write-downs may be required. For more infor- Project and development properties and inventories 1,083 70 mation on Project and development property, see note 23. 6 Operating receivables 15 142 Disputes 7 Liquid funds 2 19 The actual outcome in disputed amounts may deviate from those, accord- 8 Long-term provisions –5 ing to the best estimate, recorded. For more information on disputes, see Interest-bearing long-term liabilities –816 –512 note 32. 9 Deferred tax liabilities –5 10 Taxes Current liabilities –51 –280 Changes in tax legislation and changed praxis with regard to the interpre- 11 67 141 tation of tax laws can have a considerable impact on the size of recorded 12 Sales price 112 180 deferred taxes. For more information on taxes, see note 13. Less: capital contributed in kind received as payment –95 Accounting principles 13 Less: Loan to buyer –33 –8 Tenant-owner projects in Sweden Received purchase sum 79 77 14 Tenant-owner associations that Peab signs construction contracts with are 15 Less: Liquid funds in disposed companies –2 –19 autonomous and from Peab independent legal entities. Tenant-owner asso- Effect on liquid funds 77 58 ciations are tools members of the association can use to order, construct 16 and manage a property and this is beneficial for the tenant-owners. Peab 17 Liquid funds signs contracts regarding the sale of land and construction contracts with 18 The following components are included in liquid funds; newly established tenant-owner associations as clients. The contracts are signed by the board in the tenant-owner association at the start up of con- 19 Group struction. No member of the board in the tenant-owner association repre- 20 MSEK 2011 2010 sents Peab. Tenant-owner associations can influence the design of the buildings about to be constructed. A new obligatory financial plan is drawn Liquid funds 961 809 21 up if changes are made that significantly affect the financial prerequisites. Short-term holdings The contract gives the tenant-owner association normal client rights in rela- 22 (equivalent to liquid funds) 9 1 tion to Peab. Our overall assessment is that the contracts meet the definition Total 970 810 23 of a construction contract according to IAS 11. 24 Real estate agents handle the sales of the tenant rights through direct contracts with the tenant-owner associations. The individual home pur- Note 45 Important estimates and assessments 25 chasers sign sub-contracts with the tenant-owner associations. During construction the association finances the land and construction 26 Group Management has together with the Board of Directors discussed with two building loans, one where the association takes out a mortgage developments, selections and information regarding the Group’s impor- 27 for the final financing and one that Peab stands surety for regarding the tant accounting principles and assessments, as well as the application of home purchasers’ deposits. 28 these principles and assessments. The tenant-owner associations carry the entire value risk on the property. Certain important accounting estimates made when applying the 29 In addition, Peab guarantees that it will acquire any apartments from Group’s accounting principles are described below. the tenant-owner associations that remain unsold six months after the 30 The sources of uncertainty in the assessments given below refer to building is complete, which is a requirement from the certifiers, i.e. insur- uncertainties that entail a risk that the value of assets or liabilities may be 31 ance companies and banks. This repurchase obligation is limited since significantly adjusted in the coming fiscal year. tenant-owner associations do not sign construction contracts until most of 32 Peab’s operative business is sensitive to changes in, among other the apartments are under contract with a home purchaser and, in our things, volume and margins. The financial risks are connected to the 33 experience, generally do not represent high amounts. The few apartments business’ tied-up capital, capital needs, interest risk and currency risk. bought by Peab are usually sold within a short period of time without any 34 For more information about how the changes in important variables affect other costs than a few months of fees to the tenant-owner association. Group profit after tax, see the sensitivity analysis on page 28. 35 Reserves are made for possible estimated costs. No other guarantees or 36 Percentage of completion obligations are given to the tenant-owner association than the normal guarantees in conventional construction contracts 37 Profit reported for contract projects in progress is calculated through percentage of their completion based on the degree of completion of the Other accounting standards and interpretations 38 project. This requires that project revenue and costs can be calculated New accounting standards and interpretations of existing standards can in a reliable manner. A prerequisite is a well functioning system for calcu- 39 lead to changes that wherein certain transactions in the future are handled lation, forecasting and project monitoring. Forecasts of the final outcome differently than according to current praxis. 40 of the project are critical estimates crucial to accounting for the results of 41 operations during the project. There is a risk that the final results of a project deviate from those that have been successively reported. 42 43 Impairment tests of goodwill Note 46 Information on parent company When calculating cash generating units’ recoverable amount in order to 44 assess the need to write-down goodwill, several estimations and assess- Peab AB is a Swedish registered limited company domiciled in Båstad. Peab AB’s shares are listed on NASDAQ OMX Stockholm. The address of 45 ments about the future have been made. These are presented in note 15. As is apparent in the description in note 15 changes beyond what can the head office is Margretetorpsvägen 84, SE-260 92 Förslöv. 46 reasonably be expected during 2012 of the conditions for these estima- The consolidated accounts for 2011 consist of the parent company and tions and assessments could have a significant effect on goodwill. This its subsidiaries, together referred to as the Group. The Group also risk is however very low since the recoverable values are for the most part includes shares of holdings in joint ventures and associated companies.

86 PEAB ANNUAL REPORT 2011 BOARD AND CEO ASSURANCE

The Annual Report has been prepared in accordance with good accounting practices in Sweden and the consolidated accounts have been prepared in accordance with International Accounting Standards, stated in the regulation of the European Parliament and the Council of Ministers (EG) no 1606/2002 of July 19, 2002, concerning the application of international accounting standards. The Annual Report and the consolidated accounts give a true and fair view of the parent company as well as of the Group’s condition and result. The Directors’ report of the parent company and of the Group companies give a true and fair view of the companies’ business development, condition and result. It also states major risks and uncertainty factors ahead of the parent company and the Group companies.

Förslöv, April 2, 2012

Göran Grosskopf Mats Paulsson

Chairman of the Board Vice Chairman of the Board

Annette Brodin Rampe Karl-Axel Granlund Member of the Board Member of the Board

Svante Paulsson Fredrik Paulsson Member of the Board Member of the Board

Lars Sköld Anne-Marie Pålsson Member of the Board Member of the Board

Patrik Svensson Kim Thomsen Member of the Board Member of the Board

Lars Modin Member of the Board

The Annual Report and the consolidated accounts have been approved for publication by the Board of Directors and the Chief Executive Officer on April 2, 2012. The consolidated income statement and balance sheet and the parent company’s income statement and balance sheet will be presented for adoption by the AGM on May 15, 2012.

PEAB ANNUAL REPORT 2011 87 AUDIT REPORT

Audit report To the annual meeting of the shareholders of Peab AB (publ) Corporate identity number 556061-4330

REPORT ON THE ANNUAL ACCOUNTS AND consistent with the other parts of the annual accounts and consolidated CONSOLIDATED ACCOUNTS accounts. We have audited the annual accounts and consolidated accounts of We therefore recommend that the annual meeting of shareholders Peab AB (publ) for the year 2011. The annual accounts and consoli- adopt the income statement and balance sheet for the parent company dated accounts of the company are included in the printed version of and the group. this document on pages 14-87. Responsibilities of the Board of Directors and the Managing REPORT ON OTHER LEGAL AND REGULATORY Director for the annual accounts and consolidated accounts REQUIREMENTS The Board of Directors and the Managing Director are responsible for In addition to our audit of the annual accounts and consolidated the preparation and fair presentation of these annual accounts and accounts, we have examined the proposed appropriations of the consolidated accounts in accordance with International Financial company’s profit or loss and the administration of the Board of Directors Reporting Standards, as adopted by the EU, and the Annual Accounts and the Managing Director of Peab AB (publ) for the year 2011. Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from Responsibilities of the Board of Directors and the Managing material misstatement, whether due to fraud or error. Director The Board of Directors is responsible for the proposal for appropriations of the company’s profit or loss, and the Board of Directors and Auditors’ responsibility the Managing Director are responsible for administration under the Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our Companies Act. audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards Auditors’ responsibility require that we comply with ethical requirements and plan and perform Our responsibility is to express an opinion with reasonable assurance the audit to obtain reasonable assurance about whether the annual on the proposed appropriations of the company’s profit or loss and on accounts and consolidated accounts are free from material the administration based on our audit. We conducted the audit in misstatement. accordance with generally accepted auditing standards in Sweden. An audit involves performing procedures to obtain audit evidence As basis for our opinion on the Board of Directors’ proposed about the amounts and disclosures in the annual accounts and con- appropriations of the company’s profit or loss, we examined the solidated accounts. The procedures selected depend on the auditor’s Board of Directors’ reasoned statement and a selection of supporting judgment, including the assessment of the risks of material misstate- evidence in order to be able to assess whether the proposal is in ment of the annual accounts and consolidated accounts, whether accordance with the Companies Act. due to fraud or error. In making those risk assessments, the auditor As basis for our opinion concerning discharge from liability, in considers internal control relevant to the company’s preparation and addition to our audit of the annual accounts and consolidated fair presentation of the annual accounts and consolidated accounts accounts, we examined significant decisions, actions taken and in order to design audit procedures that are appropriate in the circum- circumstances of the company in order to determine whether any stances, but not for the purpose of expressing an opinion on the member of the Board of Directors or the Managing Director is liable effectiveness of the company’s internal control. An audit also includes to the company. We also examined whether any member of the Board evaluating the appropriateness of accounting policies used and the of Directors or the Managing Director has, in any other way, acted in reasonableness of accounting estimates made by the Board of contravention of the Companies Act, the Annual Accounts Act or the Directors and the Managing Director, as well as evaluating the overall Articles of Association. presentation of the annual accounts and consolidated accounts. We believe that the audit evidence we have obtained is sufficient We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. and appropriate to provide a basis for our audit opinion. Opinions Opinions We recommend to the annual meeting of shareholders that the profit In our opinion, the annual accounts have been prepared in accordance be appropriated in accordance with the proposal in the statutory with the Annual Accounts Act and present fairly, in all material respects, administration report and that the members of the Board of Directors the financial position of the parent company as of 31 December 2011 and the Managing Director are discharged from liability for the and of its financial performance and its cash flows for the year then financial year. ended in accordance with Annual Accounts Act, and the consolidated accounts have been prepared in accordance with the Annual Account Förslöv, 2 April, 2012 Act and present fairly, in all material respects, the financial position of the group as of 31 December 2011 and of their financial performance

and cash flows in accordance with International Financial Reporting Standard, as adopted by the EU, and the Annual Accounts Act. A corporate governance statement has been prepared. The statutory Alf Svensson Thomas Thiel administration report and the corporate governance statement are Authorized Public Accountant Authorized Public Accountant

88 PEAB ANNUAL REPORT 2011 CORPORATE GOVERNANCE

Corporate governance and the Code Governance of the Peab Group is based on the Company Act and other relevant laws, Peab’s Articles of Association, the regulations for Nasdaq OMX Stockholm issuers and the Swedish Code of Corporate Governance ”The Code”. The corporate governance report is not a part of the financial reports.

ASTRAZENECA Mölndal

THE CULTURE HOUSE Jönköping

THE TUREBERG CHURCH Sollentuna CORPORATE GOVERNANCE

The corporate governance report is not a part of the financial reports. The company’s auditors read the corporate governance report and acknowledge that a corporate governance report has been drawn up and that its legally stipulated information is consistent with the rest of the Annual Report and Group accounts.

The Annual General Meeting and the nomination procedure

The Annual General Meeting (AGM) was held on 10 May 2011 at Grevieparken, Grevie. It was attended by 529 shareholders, representing over 76 percent of the votes, either personally or through representatives. The procedure of preparing the nomination of members of Göran Grosskopf, Chairman of the Board of Directors the Board of Directors (and where appropriate the auditors) for the AGM follows the nomination procedure established at the previ- The Board of Directors and its work ous AGM. At the 2011 AGM the major shareholders recommended a According to Peab’s Articles of Association the Board of Directors nomination committee consisting of the Chairman of the Board of must be made up of no fewer than five and no more than nine Directors and an additional three to four members, of which two to members in addition to the statutory employee representatives. three members should represent the major shareholders and one The members of the Board of Directors are elected annually by to two members should represent smaller shareholders. The AGM the AGM. At the 2011 AGM the following persons were elected as elected Malte Åkerström, Göran Grosskopf, Erik Paulsson and members of the Board of Directors: Leif Franzon to act as Peab’s nomination committee with Malte Re-election New member Åkerström as Chairman. Leif Franzon passed away in the autumn Göran Grosskopf Anne-Marie Pålsson of 2011. The nomination committee decided not to replace Leif Karl Axel Granlund Franzon during the mandate period up until the AGM 2012. The Fredrik Paulsson nomination committee’s proposals will be presented to sharehold- Mats Paulsson ers in the notice to attend the 2012 AGM. An account of the work Svante Paulsson of the nomination committee will be available on Peab’s website. Annette Brodin Rampe Lars Sköld

Board meetings, attendance 2011 AGM elected members 15/2 16/3 24/3 4/4 10/5 10/5 10/51) 23/6 22/8 18/9 22/11 Göran Grosskopf • • • • • • • • • • Mats Paulsson • • • • • • • • • • • Anette Brodin Rampe • • • • • • • • • • Karl-Axel Granlund • • • • • • • • • • Fredrik Paulsson • • • • • • • • • • • Svante Paulsson • • • • • • • • • • • Anne-Marie Pålsson 2) • • • • • Lars Sköld • • • • • • • • • • •

Ordinary employee representatives Patrik Svensson • • • • • • • • • • • Kim Thomsen • • • • • • • • • • • Kent Ericsson 3) • • • David Karlsson 4) • • • • Lars Modin 5) • • 1) Constitutional meeting. 2) Elected 2011-05-01. 3) Left 2011-05-10 4) Joined 2011-05-10, 4) Left 2011-09-01. 5) Joined 2011-09-01.

• Present

90 PEAB ANNUAL REPORT 2011 CORPORATE GOVERNANCE

Election Shareholders Election Nomination Auditors Constitute the Annual Committee Information General Meeting Proposals

Election

Finance committee Information Board of Directors Remuneration committee Audit committee Goals Strategies Reports Governance mechanisms Internal audit

CEO and Group functions Executive management

Civil Construction Engineering Industry

Göran Grosskopf was appointed Chairman of the Board by the The Audit Committee AGM. At the 2011 AGM, the following employee representatives were appointed by the employee unions: Patrik Svensson, Kim Members in 2011 were, Göran Grosskopf, Chairman, Karl-Axel Thomsen and David Karlsson (members), Lars Bergman and Lars Granlund, Fredrik Paulsson, Mats Paulsson (from 2011-05-10), Modin (deputies). David Karlsson left his place when he left the Svante Paulsson, Anne-Marie Pålsson (from 2011-05-10), Lars company on 31 August 2011 and Lars Modin was elected a Board Sköld and Annette Brodin Rampe member. At the same time Monica Mattsson was elected a deputy The audit committee prepares the work of the Board of Direc- member. tors by ensuring the quality of company financial reports, estab- The Board of Directors held eleven meetings in 2011, of lishing guidelines for which other services besides auditing the which five were ordinary Board meetings (including the constitu- company may procure from the company accountant, maintaining tional meeting), six were additional Board meetings, one where regular contact with the company accountant regarding the scope they met physically, three were held per telephone and two were and focus as well as their view of company risks, evaluating the held per capsulam. auditing work and informing the nomination committee of the eval- Members of executive management have submitted reports uation and assisting the nomination committee in producing pro- at the meetings of the Board of Directors. The company auditor posals for auditors and remuneration for auditing work. The audit- was present at two of the ordinary meetings of the Board. The ing committee met once in 2011. All members of the committee Board’s work follows the work program adopted by the Board of attended, as well as the company accountants. The audit commit- Directors at the constitutional meeting. The Board evaluates its tee regularly reports to the Board of Directors. work on an annual basis. The members of the Board of Directors elected by the share- The Finance Committee holders are compensated in accordance with decisions taken by Members in 2011 were Göran Grosskopf, Chairman, Karl-Axel the AGM. Granlund and Mats Paulsson. Mats Paulsson, Peab’s CEO up to the AGM 2011, and who is The finance committee handles and makes decisions on also one of the company’s major shareholders, is a member of the financial matters in accordance with the Finance Policy estab- Board of Directors. The majority of the elected members of the lished by the Board of Directors. Executive management repre- Board of Directors (Göran Grosskopf, Karl-Axel Granlund and sentatives attend and submit reports to the finance committee Annette Brodin Rampe and Lars Sköld) are independent in rela- meetings. The finance committee met eight times during 2011. All tion to the company and executive management. They are also members attended all meetings. The finance committee regularly independent in relation to the company’s major owners. Mats reports to the Board of Directors. Paulsson, Fredrik Paulsson and Svante Paulsson are regarded as dependent in relation to the company and executive management.

PEAB ANNUAL REPORT 2011 91 CORPORATE GOVERNANCE

The Remuneration Committee CEO, a Deputy CEO responsible for strategy and HR, a Deputy CEO responsible for construction operations and a Deputy CEO Members in 2011 were Göran Grosskopf, Chairman, Karl-Axel responsible finance and treasury. Granlund, Mats Paulsson Executive management meetings are held once a month and The remuneration committee prepares guidelines and the address issues of strategy and tactics to improve operations. framework for Group executives regarding salaries and other Heads of Group staff teams and other officers are called to attend terms of employment. The remuneration committee met four times meetings when needed. Executive management, together with in 2011. Each time all members of the committee participated. the divisional managers, make up Group management. Repre- The remuneration committee regularly reports to the Board of sentatives of Group staff teams are called to Group management Directors. meetings when needed. Group management meets once a month to discuss matters pertaining to Peab’s operative business. Remuneration to executive Group staff, which supports the entire Peab Group, has been divided into the following teams since September 2011: management Strategy and HR The 2011 Annual General Meeting approved the Remuneration Finance and treasury Policy for executive management. The remuneration policy is Acquisitions and investments available on Peab’s website, www.peab.se. Information about Communication salaries and other remuneration to the CEO and members of Purchasing and logistics executive management can be found in note 8 in the Annual

Report, page 57, and on our website. Operations development

Incentive program Business area governance

Peab has no outstanding share or share-related incentive Executive management sets overriding goals and strategies for programs for the Board of Directors or the executive management. the business in the Group’s business plan. This is then broken down and worked with in the different business areas and divi- Auditors sions, companies and regions that set their own business plans. Peab’s organization is characterized by its clearly decentral- Under Peab’s articles of association one or two auditors with an ized production focus and delegation of authority and responsibil- equal number of deputies are elected by the AGM. At the AGM in ity in order to achieve efficient management and control in each 2009 the following certified public accountants were elected until business area. the AGM 2013: Control is ensured through a clear line of decision authority for every type of major decision. This includes the requirement for Accountants Alf Svensson, KPMG (re-election) special approval by executive management, or an organ dele- Thomas Thiel, KPMG (re-election) gated by it, for the acquisition of development property, busi- Deputy accountants Dan Kjellqvist, KPMG (re-election) nesses and other major investments, predetermined levels of bid- David Olow, KPMG (new member) ding for individual positions, all signing for the company which is centrally authorized and requires at least one person from either In addition to auditing, the accountants, deputy accountants and executive management or the limited circle approved by the KPMG have only provided services for Peab in the form of Board as authorized signatories. accounting and tax advisement and certain analyses in connection with acquisitions and divestments over the last three years. Ethical guidelines Group management Peab founded its ethical work on Peab’s core values reliable, personal, down-to-earth and developing many years ago. These Mats Paulsson was President and CEO until the Annual General core values form the basis of Peab’s ethical guidelines, estab- Meeting 2011. Jan Johansson (previously Vice President and lished by the executive management. We work continuously to CEO) was then elected President and CEO. spread and root Peab’s ethical guidelines throughout the organi- The President and CEO leads the company according to the zation. Over 3,000 leaders and other officers have gone through framework established by the Board of Directors and is responsible the program between 2009 – 2011, almost 2,000 of them in 2011. for the administration and control of the Group. Since the Annual General Meeting 2011 executive management consists of the

92 PEAB ANNUAL REPORT 2011 CORPORATE GOVERNANCE

The Board of Directors’ Explanation of the deviation This elected representation is believed capable of addressing the description of internal control interests of all shareholders in the company despite the fact that and risk management one independent member was unable to complete his term. concerning financial reporting CODE RULE 9:2 Peab’s Board of Directors is responsible for ensuring that there The Chairman of the Board may chair the remuneration committee. are efficient procedures for the management and control of the Other members elected by the AGM must be independent in Group regarding financial reporting. The CEO is responsible for relation to the company and Group Management. ensuring that internal control is organized and follows the guidelines laid down by the Board of Directors. There is a clear set of Deviation rules in the Group for the delegation of responsibility and authority Mats Paulsson, who is a member of the remuneration committee, which follows the Group’s operative structure. Financial steering is not independent in relation to the company and Group and control is performed by Group Finance & Treasury. Management. The Board of Directors’ guidelines for internal control concerning financial reporting were laid down in the Internal Explanation of the deviation Control Policy. This policy establishes the way in which the The Board wishes to take advantage of the long and unique internal control of financial reporting is organized, reviewed and experience in matters of compensation for senior officers that assessed based on the following factors: founder and former CEO of Peab, Mats Paulsson, has. The Control environment majority of the members of the remuneration committee are Risk assessment independent in relation to the company and Group management and this is believed to guarantee the objectivity and independence Information and communication of the remuneration committee. Control structure Evaluation/follow-up Auditors’ statement on the Executive management with the support of Group staff Group Finance and Treasury are responsible for ensuring that all business corporate governance report units in the Group follow the policy. The CEO is responsible for TO THE ANNUAL GENERAL MEETING OF PEAB AB ensuring that financial reporting is reported to the Board of (PUBL) Directors at the first ordinary meeting of the Board of Directors Company ID nr. 556061-4330 after the end of every financial year. The Board of Directors and the Chief Executive Officer are The Board of Directors has assessed the need for an internal responsible for the corporate governance report 2011 on pages auditing department and determined that the existing control 89-93 ant that it has been prepared according to the Annual structure together with the scope of the Group’s operations do not Accounts Act. motivate establishment of an internal auditing department. We have read the corporate governance report and based on this reading and our knowledge of the company and the Group we Deviations from the code believe we have sufficient grounds for our statement. This means Peab has elected to make the following deviations from the code: that our statutory review of the corporate governance report has a different focus and a much more narrow scope than compared to CODE RULE 2:3 the focus and scope of an audit according to the International The majority of the nomination committee’s member must be Standards on Auditing and the professional code for auditors in independent in relationship to the company and company Sweden. management. In our opinion a corporate governance report has been pre- Deviation pared, and its legal contents agree with the annual accounts and Peab’s nomination committee has four members. Two are inde- Group accounts. pendent and two are not. (Of the remaining members after the Förslöv, 2 April, 2012 death of one of the independent members in the autumn of 2011 of the remaining members one is independent and two are not). The majority of the nomination committee’s members are not independent in relationship to the company and company Alf Svensson Thomas Thiel management. Authorized Public Accountant Authorized Public Accountant

PEAB ANNUAL REPORT 2011 93 BOARD OF DIRECTORS

Board of Directors

Göran Grosskopf Karl-Axel Granlund Mats Paulsson Svante Paulsson Born 1945. Appointed 2004. Born 1955. Appointed 2000. Born 1944. Appointed 1992. Born 1972. Appointed 2003. Professor, LLD and Dr Econ MSc (economics), MSc Vice chairman of the Board of Project and Strategy Manager Chairman of the Board of Peab (engineering) Peab AB. Member of the of Backahill AB. Member of AB, Ingka Holding BV, ColoPlus Main owner and chairman of boards of Skistar AB, Mentor the boards of Fabege AB, Bilia AB, Mats Paulsson’s Foundation the board of Volito AB. Sverige AB, Mats Paulsson’s AB, Backahill AB, AB Cernelle Foundation and Medicon Villa- and Rögle BK. and Medicon Village AB. Member Holding: 17,912,000 B shares. of the boards of Appo Services ge AB. Formerly, various posi- Holding: 1,720,908 A shares, AG and Birgma International SA. tions in Peab since 1959. 1,350,705 B shares. Former professor of tax law and Holding: 9,754,910 A shares, working chairman of the board of 36,271,110 B shares. Tetra Laval Group. Holding: 460,000 B shares.

Annette Brodin Rampe Lars Sköld Fredrik Paulsson Anne-Marie Pålsson Born 1962. Appointed 2000. Born 1950. Appointed 2007. Born 1972. Appointed 2009. Born 1951. Appointed 2011. MSc (engineering) Chairman of the boards of Member of the board and MA University of Califonia, Senior Partner of Brunswick Kulturgastronomen AB, CEO of Kranpunkten i Skandi- Ph.D. Economics from Lund Group. Member of the boards Södertuna slotts drift AB and navien AB. Member of the University of Ernströmgruppen AB, IVA´s Södertuna Konferensslott AB. boards of Stichting INGKA Vice chairman of the board of Näringslivsråd and Bingocluster Holding: 15,000 B shares. Foundation, Stichting IKEA Länsförsäkringar Skåne. AB. Formerly, various positions Foundation and Stichting Member of the boards of GLB in E.ON Sverige AB, Exxon IMAS Foundation. AB and Länsförsäkringar AB. Chemical Inc and CEO of Holding: 4,261,430 A shares, Holding: 3,000 B shares. Senea AB. 6,002,154 B shares. Holding: 50,000 B shares.

Patrik Svensson Kim Thomsen Lars Modin Lars Bergman Monica Mattsson Born 1969. Appointed 2007. Born 1965. Appointed 2008. Born 1957. Appointed 2011. Born 1951. Appointed 2008. Born 1952. Appointed 2011. Foreman Construction Carpenter Construction Project Manager Construction Construction worker. Credit coordinator. Sweden. Sweden. Sweden. Employee representative Employee representative Employee representative. Employee representative. Employee representative. (deputy). (deputy). Holding: 1,800 convertibles. Holding: None. Holding: None. Holding: None. Holding: None.

The holdings reported were those on 29 February 2012. Holdings include those of spouses, children who are minors and private company holdings. Convertibles refer to the number of convertible promissory notes 2007/2012 at nominal SEK 68, see note 8, Convertible promissory notes 2007/2012.

94 PEAB ANNUAL REPORT 2011 EXECUTIVE MANAGEMENT AND AUDITORS

Executive management from January 2012

Jan Johansson Jesper Göransson Mats Johansson Tore Hallersbo CEO and President Peab AB Deputy CEO Peab AB Deputy CEO Peab AB Deputy CEO Peab AB Born 1959. CFO Ethics and Safety BA Manager Construction Employed since 1986. Born 1971. Born 1950. Born 1955. Member of the board of Employed since 1996. Employed since 2005. Employed since 2005. Catena AB. Holding: 412,000 B shares, Holding: 265,100 B shares, Holding: 1,800 convertibles. Holding: 351,200 B shares, 1,800 convertibles. 1,800 convertibles. 1,800 convertibles.

Tore Nilsson Karl-Gunnar Karlsson Tomas Anderson BA Manager Civil Engineering BA Manager Industry BA Manager Property Born 1950. Born 1956. Development Employed since 1986. Employed since 2003. Born 1956. Holding: 92,465 B shares, Holding: 16,450 B shares, Employed since 1996. 1,800 convertibles. 200 convertibles. Holding: 35,100 B shares, 1,800 convertibles.

Auditors

Alf Svensson Thomas Thiel Born 1949. Born 1947. Authorized public accountant, Authorized public accountant, KPMG. KPMG. Auditor in Peab AB since 2007. Auditor in Peab AB since 2009.

Deputy auditors Dan Kjellqvist, Authorized public accountant, KPMG and David Olow, Authorized public accountant, KPMG.

PEAB ANNUAL REPORT 2011 95 THE PEAB SHARE

A weak year on the stock market Peab’s B share is listed on the NASDAQ OMX Stockholm, LargeCap. As of 31 December 2012 the total market capital of Peab was SEK 10.3 billion (16.9).

Trading in the peab share Dividend

As of 31 December 2011 the closing price of the Peab share was A dividend of SEK 2.10 (2.60) per share is proposed for 2011. SEK 34.30, which was a 40 percent decrease during the year. The Calculated as a precentage of the Group’s reported profit after tax Swedish Stock Exchange, measured by the OMX Nordic Stock- the proposed dividend amounts to 66 percent (63), which is in line holm, decreased in 2011 by 18.4 percent. In 2011, the Peab share with company dividend policy. The direct return calculated on the was quoted at a maximum of SEK 59.20 and a minimum of SEK proposed dividend and at the closing price on 31 December 2011 26.60 and 111 million shares (149) were traded, which is equiva- is 6.1 percent (4.5). lent to 412,000 shares per trading day (590,000).

Shares and share capital

The total number of shares at the beginning of 2011 was Price trend of the Peab share 296,049,730 divided into 34,319,957 A shares with 10 voting rights 2 Januari 2011 – 29 February 2012

per share and 261,729,773 B shares with 1 voting right per share. 60 The share capital amounted to SEK 1,583.9 million. At the end of 2011 the number of A shares was 34,319,957 50 representing 11.6 percent (11.6) of capital and 56.7 percent (56.7) 40 of the votes and the number of B shares was 261,729,773 representing 88.4 percent (88.4) of capital and 43.3 percent (43.3) of 30 the votes.

Share capital development over time is available at www.peab. 20 com.

Holdings of own shares 0 JAN FEB MAR APR MAJ JUN JUL AUG SEP OKT NOV DEC JAN FEB 2011 2012 At the beginning of 2011 Peab’s own B share holding was Peab’s B Share No. of shares traded 9,308,220 which corresponds to 3.1 percent of the total number of OMX Stockholm PI (including after-hours trading) SX201030 Construction & Engineering PI shares. In order to neutralize the dilution effects of the convertible Source: SIX Telekurs programs, to use to finance acquisitions etc. and to adjust the

capital structure of the company. Peab’s Annual General Meeting Peab share, total return on 10 May 2011 resolved to authorise the Board to, during the 31 December 2006 – 31 December 2011 period until the next Annual General Meeting, acquire shares so 150 that the company would have at most 10 percent of the total 125 shares in Peab AB. During the year 360,000 B shares have been

repurchased for a purchase price of MSEK 16.Peab has sold 100 8,581,236 B shares to Ingvar Kamprad, corresponding to 2.9 percent of the capital. The disposal is a direct transaction between 75 the parties off-exchange. On 31 December 2011 Peab held 50 1,086,984 own B shares.

0 2006 2007 2008 2009 2010 2011 2012

Peab total return

SIXRX Source: SIX Telekurs

96 PEAB ANNUAL REPORT 2011 THE PEAB SHARE

List of shareholders on 29 February, 2012 Total Proportion Proportion number of of A shares B shares of shares capital, % votes, % Mats Paulsson with companies 9,754,910 34,398,610 44,153,520 14.9 21.8 Erik Paulsson with family and companies 12,207,615 11,918,299 24,125,914 8.1 22.2 Karl-Axel Granlund with family and companies 17,912,000 17,912,000 6.1 3.0 Anita Paulsson with family and companies 4,261,431 6,013,905 10,275,336 3.5 8.0 Fredrik Paulsson with family and companies 4,261,430 6,002,154 10,263,584 3.5 8.0 Kamprad family foundation uf 8,581,236 8,581,236 2.9 1.4 Peab’s profit share foundation 7,803,432 7,803,432 2.6 1.3 Folksam 6,900,000 6,900,000 2.3 1.1 Lannebo Funds 6,509,390 6,509,390 2.2 1.1 Handelsbanken Funds 4,288,386 4,288,386 1.4 0.7 Danica Pension 4,120,666 4,120,666 1.4 0.7 Swedbank Robur Funds 3,381,165 3,381,165 1.1 0.6 Länsförsäkringar Funds 3,347,101 3,347,101 1.1 0.6 SEB Investment Management 3,304,095 3,304,095 1.1 0.5 Svante Paulsson with family and companies 1,720,908 1,350,705 3,071,613 1.0 3.1 Sara Karlsson with family and companies 1,778,140 863,299 2,641,439 0.9 3.1 Foreign shareholders 36,714,373 36,714,373 12.4 6.1 Others 335,523 97,233,973 97,569,496 33.1 16.5 Number of outstanding shares 34,319,957 260,642,789 294,962,746 Peab AB 1,086,984 1,086,984 0.4 0.2 Number of registered shares 34,319,957 261,729,773 296,049,730 100.0 100.0

Data per share 2011 2010 Earnings and dividend per share 1), 2) Earnings, SEK 3.26 4.11 SEK SEK 8 4 – after dilution 3.26 4.10

Equity, SEK 26.94 26.76 6 3 – after dilution 28.10 27.93 4 2 Cashflow before financing, SEK –3.71 –1.09

– after dilution –3.60 –1.06 2 1 Share price at year-end, SEK 34.30 57.25 0 0 Share price/equity, % 127.3 213.9 2007 2008 2009 2010 2011 Dividend, SEK 1) 2.10 2.60 Earnings per share Dividend per share Direct return, % 2) 6.1 4.5 P/E-ratio 2) 11 14 Equity per share 2)

1) For 2011, Board of Director’s proposal to the AGM SEK 2) Based on closing price at year-end 30

25 Shares and votes per share class 1) 20 Number Proportion of Proportion of 15

Share class Number of votes capital, % votes, % 10

A 34,319,957 10 11.6 56.7 5

B 261,729,773 1 88.4 43.3 0 2007 2008 2009 2010 2011 Total 296,049,730 100.0 100.0 1) For 2011, Board of Directors’ proposal to the AGM. 2) Peab Industri not included 2007.

Allocation of shareholdings 1) Shareholder categories, Shareholder categories, 1) 1) Number Number of Proportion Proportion proportion of capital proportion of votes of shares shareholders of capital. % of votes.% 15% 7% 32% 1– 500 15,541 1.0 0.5 33% 501– 1,000 5,854 1.7 0.8 1,001– 5,000 8,315 6.9 3.4 5,001– 10,000 1,656 4.1 2.0 10,001– 15,000 740 3 1.5 42% 55% 15,001– 20,000 271 1.6 0.8 11% 5% 20,001– 765 81.7 91.0

33.142 100.0 100.0 Financial companies and trust funds Foregin shareholders 1) Per 2012-02-29 Other Swedish legal entities Swedish private persons

PEAB ANNUAL REPORT 2011 97 FIVE-YEAR REVIEW

GROUP MSEK 2011 2010 2009 1) 2008 1) 2) 2007 1) 2) Income statement items Net sales 43,539 38,045 34,868 34,132 31,977 Operating profit 1,505 1,503 1,573 1,349 1,261 Pre-tax profit 1,195 1,513 1,619 1,014 1,099 Profit for the year from continuing operations 943 1,190 1,301 1,093 774 Profit for the year 943 1,190 1,301 1,093 811

Balance sheet items Fixed assets 10,850 9,657 8,982 8,192 2,448 Current assets 20,499 17,923 17,632 17,500 12,904 Total assets 31,349 27,580 26,614 25,692 15,352

Equity 7,947 7,673 7,563 6,370 3,600 Non-controlling interests 0 0 43 92 6 Long-term liabilities 8,208 6,061 6,060 5,897 912 Current liabilities 15,194 13,846 12,948 13,333 10,834 Total equity and liabilities 31,349 27,580 26,614 25,692 15,352

Key ratios Operating margin, percent 3.5 4.0 4.5 4.0 3.9 Profit margin, percent 3.8 4.6 5.4 4.5 4.4 Return on equity, percent 12.1 15.6 18.7 21.9 23.6 Capital employed 17,094 14,712 15,440 13,277 4,674 Return on capital employed, percent 10.5 11.7 13.1 17.3 26.6 Equity/assets ratio, percent 25.4 27.8 28.6 25.2 23.5 Net assets (+)/Net debt (-) -6,626 -5,719 -4,571 -4,042 587 Debt/equity ratio, multiple 1.2 0.9 1.0 1.1 0.3 Interest coverage ratio, multiple 4.3 7.6 7.5 5.9 12.7

Capital expenditures Goodwill 79 -6 -23 -1,446 14 Other intangible assets 47 –1 266 232 –9

Byggnader och mark –234 46 896 969 139 Machinery and equipment 1,014 496 278 2,827 379 Shares and participations 231 773 576 -222 133 Project and development properties 259 789 518 914 670

Orders Orders received 37,986 34,764 30,393 32,269 37,529 Order backlog 28,378 27,063 24,487 24,233 26,299

Personnel Average numer of employees 14,560 13,541 13,633 11,945 11,480

Data per aktie Earnings, SEK 3.26 4.11 4.52 6.56 4.92 after completed subscription and conversion 3.26 4.10 4.52 6.45 4.77 Cash flow, SEK -3.71 -1.09 2.76 -7,59 8.70 after completed subscription and conversion -3.60 -1.06 2.68 -7,20 8.41 Equity, SEK 26.94 26.76 25.98 22.86 21.32 after completed subscription and conversion 28.10 27.93 27.13 24.13 20.27 Share price at year-end, SEK 34.30 57.25 46.00 21.6 66.75 Ordinary dividend, SEK 3) 2.10 2.60 2.50 2.25 2.25 Number of shares at year-end, millions 294.9 286.7 291.1 278.7 168.8 after completed subscription and conversion 303.8 295.5 299.9 287.5 177.8 Average number of outstanding shares, millions 288.9 288.6 286.7 166.6 165.0 after completed subscription and conversion 297.7 297.4 295.4 175.5 171.3

1) From 1 January 2010 Peab applies IFRIC 15, Agreements for the Construction of Real Estate, in reporting. As a result of the principle IAS 18, Revenue, will be applied to Peab’s housing projects in Finland and Norway as well as Peab’s own single homes in Sweden. Revenue from these projects will be recognised first when the home is handed over to the buyer. The comparable items for 2009 have been recalculated according to the changed accounting principle. 2008 and 2007 have not been recalculated. 2) Peab Industri was distributed to the shareholders in 2007. Peab Industri’s profit is therefore reported separately from the profit in continuing operation’s profit in the income statements for 2007. Peab Industri was repurchased in December 2008. Peab Industri is included in the balance sheet per 31 December 2008. Peab Industri is not included in the income statment for 2008. 3) For 2011, the Board of Director's proposal to the AGM

98 PEAB ANNUAL REPORT 2011 DEFINITIONS

Financial definitions Construction related definitions

Capital employed Contract amount Total assets at year-end less non-interest-bearing operating liabilities and The amount stated in the contract for contract work excluding VAT. provisions. Fixed price Cash flow per share Contract to be carried out for a fixed price without the contractor being Cash flow per share calculated as the total of the cash flow from current able to alter it, unless the client makes changes to the contract or makes operations and cash flow from investment activities divided by the average supplementary orders. number of outstanding shares during the year. General contract Debt/equity ratio Contract work where the contractor carries out construction and appoints Interest-bearing liabilities in relation to equity. and is responsible for subcontractors on the basis of documentation provided by the client. Direct return Dividend as a percentage of the share price at year-end. Peab Partnering A type of collaboration which is similar to Peab’s Trust-based contracts. Earnings per share The difference is that partnering requires whole-hearted collaboration by Profit for the period attributable to shareholders in parent company divided two or more equal partners during all phases of the construction process. by the average number of outstanding shares during the period. Partnering is suitable for customers who want to be, can and are actively involved from start to finish. Equity/assets ratio Equity as a percentage of total assets at year-end. Peab’s Trust-based contracts A type of collaboration between Peab and the customer involving collabo- Equity per share ration at an early stage, shared goals and decisions and complete open- Equity attributable to shareholders in parent company divided by the ness in processes and systems such as finance and purchasing. To start number of outstanding shares at the end of the period. with, the customer presents his/her requirements and then Peab comes up with a proposal. Customers are not as closely involved in the construc- Interest coverage ratio tion process in Peab’s Trust-based contracts as they are in Peab Partnering. Pre-tax profit items plus interest expenses in relation to interest expenses. PGS Net assets (+) / Net debt (-) PGS stands for Peab Gemensamt System (Peab’s Common System)and Interest-bearing liabilities including provisions for pensions less liquid and refers to standardized construction elements manufactured in Peab’s own interest-bearing assets. factories or by partners. PGS means industrial construction from fabrica- tion to final mounting. Operating margin Operating profit as a percentage of net sales. Project and development property Holdings of unimproved land and decontamination property for future Order backlog development, real estate with buildings for project development or The value of the remaining income in ongoing production plus orders improvement and thereafter sales within Peab’s normal operation cycle. recieved yet to be produced. Project development Orders received Finding project and development properties in the market and developing The sum of orders received during the year. these into complete projects.

P/E ratio Total contract Share price at year-end divided by earnings per share. Contract work where the contractor, in addition to building, is also responsible for planning the project. Profit margin Pre-tax profit items plus financial expenses as a percentage of net sales.

Return on capital employed Pre-tax profit items plus financial expenses as a percentage of average capital employed.

Return on equity Profit for the period attributable to shareholders in parent company divided by average equity attributable to shareholders in parent company.

PEAB ANNUAL REPORT 2011 99 ANNUAL GENERAL MEETING

Welcome to Peab’s Annual General Meeting

TIME AND LOCATION The Annual General Meeting of Peab AB will be held at 3 p.m. on Tuesday 15 May 2012, Grevieparken in Grevie, Sweden.

NOTIFICATION Notification of participation in the Annual General Meeting must proposed record day is Friday 13 May 2012. If the Annual General be submitted at the latest by 2 p.m. on Wednesday 9 May 2012. Meeting approves the proposals submitted, dividends will be Notification may be submitted by telephone to +46 431 893 50, by distributed from Euroclear Sweden AB on Wednesday 18 May mail to Peab AB, Annual General Meeting, SE-260 92 Förslöv, or 2012. via the company’s website at www.peab.se/stamma. To participate Dividends as a percent of profit in the Annual General Meeting shareholders must be registered in after tax 1), 2)

the share register kept by Euroclear Sweden AB by Wednesday 9 % 70 May 2011 at the latest. Shareholders who have registered their Goal >50% 60 shares in trust must have registered such shares in their own 50 names at the latest by this date. Shareholders should request 40 trustees to undertake such registering a few days in advance. 30 20 10 DIVIDEND 0 2008 2009 2010 2010 2011 The Board of Directors proposes to the Annual General Meeting 1) According to legal reporting an ordinary dividend of SEK 2.10 per share for 2011. The 2) For 2011, Board of Directors’ proposal

100 PEAB ANNUAL REPORT 2011 Rygg

SHARE HOLDER INFORMATION AND ADDRESSES

Share holder information Updated financial information

UPCOMPING REPORTS 2012 Peab publishes quarterly reports in Swedish and English about the company’s 2011 Annual Report April, 2012 development. Financial information and other company related information, can be downloaded from the Peab website, www.peab.com, or ordered by Annual General Meeting 15 May, 2012 contacting: Peab AB, Communication, SE-260 92 Förslöv, Sweden, Interim Report, January-March 15 May, 2012 Tel +46 431- 890 00, Fax +46 431- 45 19 75. Interim Report, January-June 21 August, 2012

Interim Report, January-September 14 November, 2012 ANALYSTS WHO FOLLOW PEAB Year-end Report 2012 14 February, 2013 Company Name Email ABG Sundal Collier Fredric Cyon [email protected] Carnegie Tobias Kaj [email protected] SHAREHOLDER CONTACT Danske Bank Peter Trigarszky [email protected] Jesper Göransson, CFO Peab Tfn +46 431-891 94, DNB Simen Mortensen [email protected] [email protected] Handelsbanken Albin Sandberg [email protected] Nordea Jonas Andersson [email protected] Fredrik Wahrolén, Head of Communication Tfn +46 733-37 10 07, SEB Enskilda Bengt Claesson [email protected] [email protected] Swedbank Niclas Höglund [email protected] Gösta Sjöström, Communication Peab Öhman David Zaudy [email protected] Tfn +46 733-37 10 10, [email protected]

Head office Peab AB SE-260 92 Förslöv, (Margretetorpsvägen 84), Sweden, Tel +46 431-890 00, Fax +46 431-45 17 00

Peab Sverige AB Peab Sverige AB Peab AS Business area Construction Business area Industry Postboks 93 Røa Box 808 SE-401 80 Göteborg NO-0701 Oslo SE-169 29 Solna Sweden Norway Sweden (Anders Personsgatan 2) (Sørkedalsveien 150A, 0754 Oslo) Tel +46 8-623 68 00 Tel +46 31-700 84 00 Tel +47 09 099 Fax +46 8-623 20 60 Fax +46 31-700 84 20 Fax +47 23 30 30 01

Peab Sverige AB Peab Sverige AB Peab Oy Business area Civil Engineering Business area Sentnerikuja 5 SE-260 92 Förslöv Property Development FIN-00440 Helsingfors Sweden Box 808 Finland (Margretetorpsvägen 84) SE-169 28 Solna Tfn +358 207 606 200 Tel +46 431-890 00 Sweden Fax +358 207 606 206 Fax +46 431-45 15 08 (Gårdsvägen 6) Tel +46 8-623 68 00 Fax +46 8-623 20 60

PEAB ANNUAL REPORT 2011 101 PEAB ANNUAL REPORT 2011

RHR Corporate Communication, Malmö

VICTORIA TOWER TOWER VICTORIA Kista www.peab.com Fax +46 431-45 17 00 Tel +46 431-890 00 Tel

SE-260 92 Förslöv

VICTORIA TOWER TOWER VICTORIA Kista Peab is the Nordic Community Builder with 15,000 employees and net is the Nordic Community Builder with 15,000 employees Peab strategically subsidiaries have Group’s SEK 40 billion. The sales exceeding registered officeThe and Finland. located offices Norway in Sweden, of Skåne in the south of share is listed Sweden. The the Group is in Förslöv, OMX Stockholm. on NASDAQ Peab AB (publ) Peab Peab.com