Annual Report 2009 Contents Group overview Comments by the President and CEO 4 Mission, goals and strategy 6 Financial targets 10 Risk management 12 Employees 14 Share data 16 Business streams Construction 18 Residential Development 28 Commercial Development 36 Infrastructure Development 44 Sustainable development 52 Environmental agenda 54 Social agenda 56 Financial information Report of the Directors 59 Consolidated income statement 70 Consolidated statement of comprehensive income 71 Consolidated statement of financial position 72 Consolidated statement of changes in equity 74 Consolidated cash flow statement 75 Parent Company income statement 76 Parent Company balance sheet 77 Parent Company changes in equity 78 Parent Company cash flow statement 78 Notes, table of contents 79 Proposed allocation of earnings 146 Auditors’ Report 147 Corporate governance Corporate governance report 150 Senior Executive Team 156 Board of Directors 158 Major events during 2009 160 Definitions and abbreviations 164 More information about Skanska 165 Addresses 166 Annual Shareholders’ Meeting 167 Investors 167 This document is in all respects a translation of the Swedish original Annual Report. In the event of any differences between this translation and the Swedish original, the latter shall prevail. The Manhattan Bridge in New York City is one of the bridges that Skanska is renovating. About Skanska Skanska is one of the world’s Qualitative targets − the five zeros vision leading project development and construction groups, with expertise in construction, 0 Zero loss-making projects development of commercial and residential projects and public-private partnerships. Zero work site accidents Based on the company’s 0 global environmental expertise, Skanska aims to be the Zero environmental incidents customer’s first choice for 0 green projects. The Group currently has Zero ethical breaches 53,000 employees in selected 0 home markets in Europe, the United States and Latin America. Skanska’s revenue in 2009 Zero defects totaled SEK 137 billion. 0 Geografisk fördelning av intäkter Norway Finland Sverige, 19% • United Kingdom • Övriga Norden, 14% Estonia • Övriga Europa, 29% Denmark Sweden USA, 33% • Poland • Övriga marknader, 5% Czech Republic Slovakia Hungary United States Latin America Revenue by geographic areas • Sweden, 19% • Other Nordic countries, 14% • Other European countries, 29% • United States, 33% • Other markets, 5% The Skanska Group Senior Executive Team Skanska Financial Services Group Staff Units Construction Residential Development Commercial Development Infrastructure Development Skanska Sweden Skanska Residential Skanska Commercial Skanska Development Nordic Development Nordic Infrastructure Skanska Norway Development Skanska Finland Skanska Poland Skanska Commercial Development Europe Skanska Czech Republic Skanska UK Skanska USA Building Skanska Commercial Intäkter 130 792 Mkr Intäkter 6 487 Mkr IntäkterDevelopment USA4 148 Mkr Intäkter 151 Mkr Skanska USA Civil17 090 MUSD 848 MUSD 542 MUSD 20 MUSD 12 312 MEUR 611 MEUR 390 MEUR 14 MEUR Skanska Latin America Andel av koncernen 92% Andel av koncernen 5% Andel av koncernen 3% Andel av koncernen 0% Construction refers to building The Residential Development Commercial Development Infrastructure Development construction (both non- business stream initiates and initiates, develops, leases and develops, manages and divests residential and residential) and develops residential projects divests commercial property privately financed infrastructure civil construction. It is Skanska’s for sale. Housing units are projects, with a focus on office projects such as highways, largest business stream. adapted to selected customer buildings, shopping malls and hospitals, schools and power Rörelseresultat The Construction business5 047 Mkr Rörelseresultatcategories. Skanska, one151 of Mkr the Rörelseresultatlogistics properties. 836 Mkr Rörelseresultatgenerating plants. –115 Mkr stream operates through nine leading residential developers The business operates in The business stream focuses 659 MUSD 20 MUSD 109 MUSD –15 MUSD business units in selected home in the Nordic countries, also markets where Skanska has on creating new potential for markets − Sweden, Norway,475 MEUR has a sizeable presence14 in MEUR the construction business 79units MEUR in projects in markets where–11 MEUR AndelFinland av and koncernen Estonia, Poland,85 % AndelCzech avRepublic koncernen and Slovakia. 3% Andelthe Nordic av koncernen countries, Central14 % AndelSkanska av has koncernen construction negativ the Czech Republic and Slovakia, The business stream operates Europe and the United States, business units. It works through the United Kingdom, the in the Nordic countries, the as well as in Hungary and the Skanska Infrastructure United States and Latin America. Czech Republic and Slovakia. Denmark. Development business unit. Revenue SEK 130,792 M Revenue SEK 6,487 M Revenue SEK 4,148 M Revenue SEK 151 M USD 17,090 M USD 848 M USD 542 M USD 20 M EUR 12,312 M EUR 611 M EUR 390 M EUR 14 M Share of Group 92% Share of Group 5% Share of Group 3% Share of Group 0% Operating income SEK 5,047 M Operating income SEK 151 M Operating income SEK 836 M Operating income SEK –115 M USD 659 M USD 20 M USD 109 M USD –15 M EUR 475 M EUR 14 M EUR 79 M EUR –11 M Share of Group 85% Share of Group, 3% Share of Group 14% Share of Group negative The year in brief Shrinking market, strong earnings with a strong cash flow. Margins in several Construction business units showed record levels. Operating margin in Construction at a record level of 3.9 percent Successful risk management and well-executed projects were the main reasons for the good operating margin. Stable order bookings Order bookings increased by 2 percent compared to the year before, totaling SEK 128.8 (126.5) billion. Adjusted for currency rate effects, order bookings decreased by 3 percent. Resultat och utdelning Successful residential sales per aktie Sales of units in both completed and Kr 10 ongoing residential projects have developed well, and we are now 8 focusing on increasing the number 6 of new projects to meet demand. 4 Divestments and leasing of 2 commercial space 0 In Commercial Development, despite 2005 2006 2007 2008 20091) the prevailing market situation we • Resultat per aktie succeeded well both in terms of • Utdelning per aktie divestments and leasing. • Extrautdelning per aktie 1) Styrelsens förslag Three binding infrastructure contracts In Infrastructure Development, during the fourth quarter of 2009 we signed the year’s third binding contract related Key ratios Earnings and dividend per share to future projects, and we began the SEK SEK M EUR M USD M divestment process concerning our 10 3 3 stake in the Autopista Central toll Revenue 136,803 12,878 17,876 3 3 highway in Santiago, Chile. Operating income 5,222 492 682 8 Income after financial items 5,021 4733 6563 6 Earnings for the period per share, SEK/EUR/USD1 8.69 0.82 1.14 Strong financial position Return on equity, % 18.9 18.9 18.9 4 At the end of 2009, interest-bearing net Return on capital employed, % 21.2 21.2 21.2 2 3 3 2 receivables totaled SEK 12.5 (9.2) billion. Order bookings 128,783 12,123 16,828 Order backlog2 136,528 13,2584 18,9944 Cash flow before taxes, financing 0 2005 2006 2007 2008 20091 operations and dividends amounted to 1 Earnings for the period attributable to equity holders divided by the average number of shares outstanding after repurchases, conversion and dilution. Earnings per share SEK 7,033 M (1,422). 2 Refers to Construction operations. • 3 Average 2009 exchange rates: EUR 1 = SEK 10.62, USD 1 = SEK 7.65. • Dividend per share 4 Exchange rates on 2009 balance sheet date: EUR 1 = SEK 10.30, USD 1 = SEK 7.19. • Extra dividend per share Increased dividend 1 Proposed by the Board of Directors. The Board of Directors proposes a dividend of SEK 6.25 (5.25) per share, of which SEK 5.25 (5.25) per share as a The Empire State Building in New York City is a showcase for Skanska’s green construction. After a green regular dividend and SEK 1.00 (0.00) per retrofit, the 32nd floor − which houses the offices of Skanska USA − earned Leadership in Energy and share as an extra dividend for the 2009 Environmental Design (LEED) for Commercial Interiors Platinum certification, demonstrating that even financial year. 80-year-old buildings can be renewed. The retrofit reduced both energy use and environmental impact. ” We succeeded in securing an influx of new assignments – order bookings are at the level of prior years. Meanwhile we are focusing strongly on what is the core of our success: project execution and our employees. Johan Karlström, President and CEO ” Comments by the President and CEO Group overview We can sum up 2009 as a year of strong earnings. Our success was based on our highly skilled employees, strict risk management and improved execution in our projects. Everyone was adversely affected by the economic downturn, but we Improving our project execution acted quickly to safeguard our customer relationships and our strong Our construction work is also continuously getting better. More cash flow. As early as the autumn of 2008, as storm clouds gathered, thorough planning at early stages is yielding clear results by boosting we slammed on the brakes to new investments. We halted some profitability and reducing project losses. projects that were underway and postponed new residential and Meanwhile we must be humble, recalling that many of the con- commercial project start-ups. We focused entirely on selling residen- struction projects completed in 2009 were received when we stood tial units in already completed and ongoing projects. at the peak of economic expansion and there was greater potential Our systematic efforts to control risks have begun to pay off. We for good margins. have also succeeded in securing an influx of new assignments − order Interest rates fell to record-low levels and housing demand bookings are at the level of prior years.