Review of 2015 – EUR version We build for a better society Contents Group overview Skanska – 2015 in brief 1 Comments by the President and CEO 2 Promise and values 6 Business model 7 Business plan 2016 –2020 8 Financial targets 2016 –2020 9 Business plan 2016 –2020 – focus areas 12 – Great People 12 – Market Making 13 – Operational Excellence 14 Sustainability 16 Share data 20 Market overview 22 Business streams 24 Construction 26 Residential Development 30 Commercial Property Development 34 Infrastructure Development 38 UN contract completed 42 History 44 Financial information Report of the Directors 46 Corporate Governance Report 53 Consolidated income statement 66 Cover: Malmö now has a brand new, centrally-located city Consolidated statement of comprehensive income 67 district – Malmö Live, Malmö, Sweden. Malmö Symphony Consolidated statement of financial position 68 Orchestra’s new concert hall is here and its two halls have world-class acoustics. There is also a congress hall for 1,500 Consolidated statement of changes in equity 70 guests and a hotel with 444 rooms and two restaurants. The Consolidated cash flow statement 71 hotel’s sky bar on the 25th floor offers a panoramic view over Notes, table of contents 73 the city and the Öresund Strait. Malmö Live covers a total space of 54,000 sq m. Statement by the President and Chief Executive Officer 140 There are also offices, parking facilities and two residential Independent Auditor’s report 141 buildings containing 158 apartments. Skanska developed and constructed Malmö Live working in close cooperation with the City of Malmö from an early stage, thereby creating Senior Executive Team 144 lasting benefits for all parties involved. Board of Directors 146 Major orders, investments and divestments 148 Annual General Meeting 150 Investors 150 Addresses 151 The financial statements presented in this Review have been prepared in EUR (Euro) as the presentation currency. As the functional currency of the Parent Company is SEK (Swedish kronor), Skanska’s statutory Annual Report including the consolidated financial statements and the financial statements of the Parent Company has been prepared using Swedish kronor (SEK) as the presentation currency. For currency exchange rates, see page 122. Skanska Annual Report 2015 Follow-up and outcome 2011–2015 Financial targets 2011–2015 Outcome 2011–2015 Group Return on equity Return on equity for the period of % 50 40 18–20% 30 20 10 0 2011 2012 2013 2014 2015 Financial strength Net operating financial assets/liabilities Net operating financial assets/liabilities will be EUR bn 3 positive 2 1 0 2011 2012 2013 2014 2015 Construction Operating margin, Construction Average margin over a business cycle % 5 4 3.5–4.0% 3 2 1 0 2011 2012 2013 2014 2015 Return on capital employed, Project development operations Project Development operations 1 Annual return on capital employed for the % combined project development operations 20 15 10–15% 10 5 1 See definition on page 143. 0 2011 2012 2013 2014 2015 Qualitative targets 2011–2015 Follow-up of qualitative targets for 2011–2015 Industry leader in: Safety Worksite safety improvements plateaued during the period. A lost time accident rate (LTAR) of about 3.0 was short of the LTAR target of 1.0. Ethics Skanska still has ethical risks, and needs to continue training in this area. Green Skanska has green solutions in place, but there is varying interest in the markets. All Commercial Development projects are Green, and in Construction up to 75 percent of order bookings are Green. People development For people development, the programs and tools, leadership profile and employee ownership program are in place. There is a need for improvements within Diversity and Inclusion and in leadership. Risk management Industry-leading processes for risk management are in place, but there is still a need for improvements. Implementation continues at Business Unit level. Target reached Work underway, target not fully reached B Skanska Annual Report 2015 Skanska as an investment Skanska is one of the world’s leading construction and project develop- ment companies, focused on selected home markets in the Nordic region, other European countries and North America. Supported by global trends in urbanization and demographics, and by being at the forefront in sustain- ability, Skanska offers competitive solutions for both simple and the most complex assignments, helping to build a sustainable future for customers and communities. Sergels Torg at the heart of Stockholm is being renovated. This square is a busy intersection that stands on concrete structures from the 1950s. The green and safety aspects were a priority when Skanska was awarded the contract. Strong global trends Diversification Financial synergies With demographic changes and con tinued Skanska’s risk diversification across four The strong cash flow from Construction urbanization come an increased demand business streams with operations in sev- is invested in the Group’s own high-return for infrastructure, hospitals, schools, eral geographic markets and segments development projects. The investments homes and offices. Demand for Skanska’s helps ensure a balanced and diversified in project development will continue to expertise in green construction is signifi- risk profile. increase. cant in a world that is becoming increas- ingly aware of the human impact on the Strong cash flow Attractive total shareholder return planet. Through an attractive business model, Skanska has a competitive total share- Skanska is generating a strong cash flow holder return with more than 10 years of Leading market position which, combined with net cash, puts the increased or maintained dividends. Over Skanska holds a leading market position Group in a stable financial position. the past five years, Skanska’s share has in each of its home markets, and has set a had an average total yield of just over target for profitability and controlled growth 10 percent, compared to 11 percent on in the Construction business stream. the Stockholm Stock Exchange. Expected population in urbanized areas in Skanska’s home markets, 1990–2050 Dividend history Millions of people SEK % 500 12 10 9 10 400 8 8 7 300 6 6 5 200 4 4 3 100 2 2 1 0 0 0 1990 2015 2050 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 In Skanska’s home markets the number of people living in urbanized areas is Dividend, SEK Extra dividend, SEK Dividend yield, %1 expected to increase by 100 million in the period 2015–2050. 1 Dividend per share divided by the closing share price for each respective year. Source: UN Department of Economic and Social Affairs Skanska Review of 2015 – EUR version 1 Skanska – 2015 in brief Revenue, EUR 16.6 bn Operating income, EUR 840 M Capital employed, EUR 3.0 bn by geography, % 1 by business stream, % 1 in Project Development, by business stream, % • Nordic countries, 40 • Construction, 49 • Residential • Other European • Residential Development, 33 countries, 23 Development, 15 • Commercial Property • USA, 37 • Commercial Property Development, 60 Development, 25 • Infrastructure • Infrastructure Development, 7 16.6 840 Development, 11 3.0 1 Before Central and eliminations. In 2015, the Group’s 43,000 Construction Commercial Property Development employees delivered good • The performance in the Construction • 27 projects were sold, reaching a new results while also helping to business stream was stable in all alltime-high in divestment gains at Construction units except for the U.S. EUR 274 M. promote a sustainable society. operations which were burdened with • The number of ongoing property The ambition of growing in charges. projects was 44 at the end of the year, project development has resulted • Order bookings amounted to EUR 13.1 corresponding to an investment value in a record number of new com- billion. The major contracts included: upon completion of EUR 2.1 billion. – Slussen and the Stockholm Bypass mercial projects, more efficient • Most of the new investments are in – Welsh Water treatment plant in the UK the U.S. and Central Europe. residential development and a – Office, hospital and school projects in more stable expansion into the Sweden, Norway, the UK and the U.S. Infrastructure Development growing public private partner- • The construction projects in Latin • The operating income totaled ship market in the U.S. America have been completed, and the EUR 92 million. majority of the units within operations • Two hospitals in London sold for and maintenance have been sold. EUR 107 M. Residential Development • Net present value of projects • Sustained improved results, operating is EUR 525 M. margin of 9.5 percent. • Selected for expansion of LaGuardia • The number of homes sold and started Airport in New York, with a contract totaled 4,093 and 4,000 respectively. expected in 2016. • Efforts to reduce the number of unsold • Contract signed for the new Papworth completed units in Finland and Norway Hospital in the UK. continued during the year. Skanska’s home markets Sweden Skanska has operations in 11 countries Finland Sweden in Construction, Residential Development, Norway Finland USA Norway Commercial Property Development and USA Infrastructure Development. The Business Denmark Units in these business streams work Denmark together in various ways to create both United Kingdom Poland United Kingdom Czech RepublicPoland operational and financial synergies, Slovakia Czech Republic Hungary Slovakia leading to increased value creation. Romania Hungary Romania 2 Comments by the President and CEO Skanska Review of 2015 – EUR version Comments by the President and CEO 2015 was a very good year in terms of performance, with increasing revenue, improved profitability and a very strong financial position. Our strength moving forward was also demonstrated by a substantial increase in project development investments. We provided several signs of strength during the year: earnings per to EUR 866 M in 2004–2010. During the five-year period these share increased by 20 percent to EUR 1.28; cash flow from opera- business streams generated an average return on capital employed tions more than doubled to EUR 819 M; and we concluded the year of 10.6 percent a year.