Annual Report • Mar 15, 2019
Annual Report
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THE YEAR IN FIGURES 1 REVIEW BY THE PRESIDENT 2 THIS IS NCC 6
REPORT OF THE BOARD OF DIRECTORS 8 BUSINESS AREAS 12 RISK 17 CONSOLIDATED INCOME STATEMENT 20 CONSOLIDATED BALANCE SHEET 22 PARENT COMPANY INCOME STATEMENT 24 PARENT COMPANY BALANCE SHEET 25 CHANGES IN SHAREHOLDERS' EQUITY 26 CASH FLOW STATEMENTS 28 NOTES 30 APPROPRIATION OF PROFITS 67 AUDITORS' REPORT 68 MULTI-YEAR REVIEW 72 QUARTERLY DATA 75
SUSTAINABILITY STRATEGY 76 SUSTAINABILITY GOVERNANCE 80 MATERIAL TOPICS 81 STAKEHOLDER DIALOG AND MATERIALITY ANALYSIS 89
CORPORATE GOVERNANCE REPORT 90 REPORT ON INTERNAL CONTROL 94 BOARD OF DIRECTORS AND AUDITORS 96 EXECUTIVE TEAM 98
FINANCIAL INFORMATION/CONTACTS 100 DEFINITIONS/GLOSSARY 101
NET SALES 57,346 SEK M
OPERATING PROFIT –764 SEK M
CASH FLOW FROM OPERATING ACTIVITIES
735 SEK M
RETURN ON EQUITY –18%
ORDERS RECEIVED
61,842 SEK M
Cover photo: Lund's new, environmentally classified District Court – nominated as Construction Project of 2019. The building fulfills the rigorous security requirements to which the District Court's activities are subject and is classified at Sweden Green Building Council Gold Level.
Since assuming the role as President and CEO in May, I have traveled around the organization and had many meetings with employees to discuss the operations. I have had meetings with all parts of the Group in all markets and have been strengthened by the expectations for change that exist in NCC. This adds power to the change process and is a platform for a strong future.
I spent my first two quarters gaining an impression of where NCC currently stands. By October, my analysis was ready and can be outlined as follows: NCC have a strong core. About two-thirds of the Group is performing well. We have successful operations in all countries and business areas, but we also have a number of operations that are not. One-third of the Group's operations are underperforming or operating at a loss. This is something we must change.
In October, I therefore presented an action plan aimed at strengthening profitability throughout the organization. The actions included:
We then launched the process of implementing these measures. We have already made considerable progress. The restructuring measures have begun. Several key recruitments have been made. A number of Danish, Finnish and Norwegian properties have been sold, and we have reduced the company's risk level by more cautious income recognizes of construction projects. We have closed down four unprofitable asphalt plants. ViaSafe, which accounts for road safety solutions, was divested in December. The sales process for the Road Service division is proceeding as planned.
These are key actions for creating a foundation for a strong future for NCC. But more has to be done. And it will take time before the measures gain their full effect. This will be a stable improvement journey with the long-term aim of ringing in and further improving the core operations. Rather than focus on rapid short-term changes, we are letting the process take time so that we will achieve the right objectives.
We are now entering the next stage of the change process. My mission is to further increase our focus on and proximity to our projects. We must be more meticulous in how we select projects, how we approach and implement them, and how we manage risks.
The market conditions in 2018 were generally good. The economies in the Nordic countries are stable. All of our business areas had a healthy level of orders received throughout the year. The order backlog was added to and totaled SEK 56.8 billion at yearend.
In the construction sector, a changed demography and expanding cities are driving the demand for schools, hospitals and retirement homes. The market for refurbishment is favorable in Denmark and Finland. Demand for newly produced tenant-owner apartments has weakened in Sweden and toward the end of the year also in Denmark but we have offset this by increasing orders in other segments where NCC's specialist expertise and experience are of great significance. Customer demand for long-term partnerships and early involvement is increasing throughout the contracting operations.
Public-sector infrastructure initiatives are fueling the Nordic infrastructure market and generating strong growth in Norway and Sweden. The share of projects in excess of SEK 100 M is increasing.
In the industrial segment, a strong civil engineering market is driving demand for asphalt and stone materials in Norway and Sweden. Sales of stone materials are being boosted by multiple infrastructure projects. The demand for asphalt is healthy, apart from in Denmark, driven by such factors as higher funding of roads and increased maintenance.
Transaction volumes for property development in the Nordic region are at a high level. Low yield requirements from investors and high demand for modern and sustainable new premises provide favorable market conditions.
The full-year result was a loss, due to provisions, revaluations, impairment losses and restructuring costs being charged against profit. The result was naturally a disappointment but the actions taken are necessary and create conditions for improving profitability.
NCC has the financial strength needed to drive and develop the business and, by the end of the year, we had also reduced the Group's risk level.
Although a company's success is measured in many ways, its financial performance is still the main ratio. When evaluating these performances, our focus is on three objectives and a dividend policy.
These objectives are reasonable and realistic. We are currently some way from achieving them but we are working determinedly to do so in the future.
The Nordic societies where NCC is active are facing major challenges and opportunities. NCC touches on large parts of society through projects where the countries' inhabitants reside, work,
live and move around. By being receptive to these needs, through smooth and professional implementation for both customers and the surrounding society, and its citizens, and by focusing on quality that ensures that what we build lives on and functions for a very long time, we make an impression.
We build attractive housing that more people can afford, and are at the forefront of efforts to increase efficiency and reduce construction costs while maintaining the quality of housing. The fact that demand for tenant-owner apartments is declining does not mean that the housing shortage in Sweden has disappeared. This can be met with cost-efficient, standardized housing products, for which NCC offers several alternatives. Sustainable refurbishment of older residential areas and development of inclusive city districts are other important features of our offering.
We develop, build and refurbish offices and other places of work that meet the highest sustainability standard. In the workplaces of tomorrow, we contribute both the physical and the social environment for the wellbeing of businesses and employees.
We bring together societies and join cities to land using intelligent, sustainable solutions for roads, railways, bridges, tunnels and efficient public transport solutions. Transportation must function well for the rest of society to work. As one of the largest Nordic operators, NCC is able to develop methods, techniques, materials and cooperative formats that lead infrastructure construction into the future.
We work to create a cost-effective healthcare environment where the focus is always on what is best for the patient and on helping to increase the wellbeing of those who work there. Early involvement of technical and medical expertise makes it possible to both find the best solutions and implement them optimally in important and sensitive environments.
We create environments that facilitate learning. I'm talking about both new builds and refurbishment of everything from preschools to universities, which we do in a dialog with municipalities, teachers and pupils. The building of schools and preschools will become even more important in the future.
We help to create meaningful leisure for people by offering everything from bike paths, sports and swimming facilities to inspiring environments for shopping and other recreation. It is also conceivable that park construction will also become more important. The changed role of the bicycle, the increase in physical fitness and the way the retail trade is changing are just a few trends that are impacting this development.
We also take responsibility for what cannot be seen but is essential for the smooth functioning of modern life. This involves things that are underground, in walls and in the air. We in the Nordic region were reminded in 2018 that even here water supply should not be taken for granted, but this can also involve heat, electricity, water and sewage, treatment plants and broadband. NCC also offers earth and groundworks, piling and sustainable stone materials, which ensure that buildings and transports stand on solid ground.
For this type of societal investment, the planning and preparation horizon is 15–20 years. There is already a great need for many such investments, such as in housing or in the infrastructure. A more long-term approach among all those involved would be good for the stability of residential construction and social infrastructure. It is also important not to view the various forms of construction as being separate from each other. Infrastructure construction, for example, is a prerequisite for office and residential construction.
Let's take a Swedish example. The whole of Sweden needs efficient flight connections to the capital. Today, Bromma Airport plays an important role. According to political agreements, the airport is to be closed in 2038. However, the decision on the airport's future, and how a possible phase-out is to be structured, cannot wait as long as that. If Arlanda or another airport is to be developed instead, the decision must be made shortly. Another example is the expansion of the metro system, which has a long planning horizon and cannot be shortsightedly dictated by today's conditions in the housing market. In this area, the time perspective for decisions must be very long term.
By maintaining quality and a high level of expertise, we can maintain our position at the cutting edge of the development of solutions in all of these areas. This is how NCC is involved in retaining the attractiveness of regions.
Being a professional partner to the customer is important in the construction industry. This is not only about being interested in and knowing the customers, but above all about understanding what they need. By partnering with our customers, we add value. This involves many different levels and also understanding technical requirements, views on time and the commercial prerequisites.
Difficulties in recruiting the right competencies are a challenge for the entire industry. Today, this is mainly about finding engineers, although skilled workers are also expected to ultimately become more difficult to recruit.
This is a challenge that I have been contemplating a lot for a long time. Why do we fail in communicating what exciting and enriching jobs exist in our industry?
Right from the start, employees get to conduct advanced tasks, in terms of business, technology and management. What the employee does will be of decisive importance to both the local community and society at large for a long time to come. There are opportunities to have a meaningful and lasting impression on society. This translates into incredible satisfaction.
In my own career, I started as an engineer. During my first few years at NCC, I focused on construction, technology and project management. Subsequently, in various roles, I have had other duties, where I have focused on and learned a lot about leadership, communication and business. But those who don't want to do that can continue to dig deeper into technology and have a decisive impact on the housing, workplaces, infrastructure and community building of tomorrow.
The entire construction industry must become better at explaining how enjoyable and stimulating it is to work in this industry. At NCC, we can make a contribution by leading the way and being a developmental and attractive organization that attracts and retains the best talents.
The purpose of NCC's sustainability work is to create conditions for people to work, reside, travel and live in a sustainable manner. And in so doing, we must increase value for our customers, employees and shareholders, and society at large.
Sustainability work encompasses considerations involving health and safety, social inclusion, materials and waste management, energy usage and climate adaptation, as well as ethics, compliance and the design of our product portfolio. Overall, the decisions we make and how we act in these areas form the foundation for NCC's future development.
A construction company has a special reason to highlight safety issues. In this context, the organization tests its ability to change behaviors and work methods. When we succeed, this benefits both employees and customers. NCC has a zero vision with respect to worksite accidents. The aim must always be to make worksites 100 percent safe.
We are unfortunately not quite there yet. Every accident is unfortunate, but what is most important is to reduce serious accidents. Although the serious accidents are not increasing, they are not decreasing either, so our focus must primarily be kept there.
Overall, our worksites are characterized by highly rigorous safety work. During 2018, 95 percent of them were completely free from accidents leading to absence from work.
Another important sustainability measure is naturally to reduce our environmental footprint. We can make a difference in many areas and are also doing so. In our industrial operations, for example, we have become much better at recycling asphalt and increasing numbers of asphalt plants are fueled with wood pellets rather than oil. In Sweden, NCC has converted 23 of a total of 28 asphalt plants for the use of biofuel.
However, the greatest impression that NCC can make in the environmental area is in its construction projects, by providing intelligent materials, energy and climate solutions. Construction is about satisfying customer requirements. Accordingly, customer requirements are key to conducting large-scale sustainability work. For us, this is about being able to offer sustainable solutions and demonstrating the potential that exists to our customers.
NCC supports the UN's Global Compact initiative and its ten principles involving human rights, labor conditions, the environment and anticorruption. In our annual communication concerning our progress, we describe the measures we are taking to integrate the Global Compact and its principles into our business strategy, culture and daily operations.
Since purchasing accounts for approximately 75 percent of NCC's sales, developing competitive and structured purchasing solutions is of key importance to the Group's finances. The focus is on utilizing our size through, for example, advantageous framework agreements and also on developing and accumulating knowledge and experience. This enables the projects to use the right type of supplier and solution, while also promoting efficient production, with freed-up time and lower total costs.
Our competitive edge is also sharpened by more purchases from our international supplier base. By establishing long-term relations with our key suppliers, we take control of production risks. We can more easily ensure that we live up to environmental and safety requirements, for example.
During the year, we developed a mobile user-friendly purchasing tool, NCC Webshop. Using this, standardized products, such as workwear and tools, can be simply and efficiently ordered directly at the worksite.
Every day, we see evidence of a more advanced and complex world. This moves us to adapt our work methods in all areas. Digitization is changing the construction and property industry, just like all other industries. NCC was one of the first companies to start using the modern digitized technologies. This has given us a high degree of maturity and an understanding of the value. We have reorganized our IT management and are involved at the cutting edge of development in our industry.
Digitization provides opportunities in multiple dimensions, both for internal efficiency and in our meetings with customers. Owning information and data will be key to success. An increasingly integrated and controlled information flow between processes in the construction projects will contribute to shorter leadtimes and more reliable quality.
In our civil engineering projects, we have long used GPS-based automated control for optimizing worksite logistics. Drones are used continuously to follow up and provide planning documentation. In a not too distant future, we will see robotization of heavy, repetitive and risky tasks at our worksites. We will be able to use sensors both during the implementation period and to be able to learn from building processes and deliver better solutions to our customers.
The creation and use of industry standards for digital processes enhances efficiency and quality and, in this context, we are leading the way and spearheading development. Major digital collaborations are also increasing awareness of information security and the risks of shared data.
After my initial period in the company, I see even more clearly that we must work according to a shared operational model. We have initiated the process to find this. However, it is not something that can be done overnight. It is a complex process with important considerations to be made for local conditions and different business models.
NCC has the right conditions to succeed in all of the areas I have described. I am incredibly impressed by our employees, who have taken on the change work by utilizing all of the knowledge and experience that they possess. We're on the right path. But it will take time before we reach our destination. It's a stable path and I am looking forward to the work.
Solna, March 2019
Tomas Carlsson President and CEO
» NCC is one of the leading construction and property development companies in the Nordic region, with sales of more than SEK 57 billion and 16,500 employees. NCC is active throughout the value chain in its efforts to create environments for work, living and communication.
NCC Infrastructure supplies entire infrastructure projects, from design and construction to production and service. Activities comprise projects of all sizes.
NCC Infrastructure
NCC Building Sweden builds sustainable housing, offices and public and commercial premises in Sweden. Healthcare buildings, schools, swimming centers and residential refurbishment are included as an increasingly important feature of the operation.
NCC Building Nordics builds and refurbishes sustainable public premises, hospitals, housing, offices and commercial properties for public and private customers in Denmark, Finland and Norway.
NCC Industry produces and sells stone materials and asphalt products, and performs asphalt paving and piling works in Sweden, Norway, Denmark and Finland.
NCC Property Development develops and sells sustainable office, commercial and logistics properties in prime locations in defined growth markets in the Nordic region.
SHARE SALES PER BUSINESS AREA
At NCC, there are multiple roles, operations and career paths to choose from. Working at NCC means becoming involved and taking decisions that improve the everyday life of people both today and tomorrow.
NCC is a value-guided company where the company's shared values of Honesty, Respect, Trust and Pioneering Spirit contribute to a culture that encourages cooperation and is based on respect for each other's competencies and experience. NCC works actively to increase diversity at all levels of the company, knowing that diversity contributes to a dynamic working climate and, ultimately, to more innovative solutions. NCC has zero tolerance for worksite accidents and works continuously to ensure that improvements are made to ensure safe and healthy workplaces.
The principal geographic markets comprise Sweden, Norway, Denmark and Finland. Sweden is NCC's largest market, accounting for 62 percent of consolidated sales. In 2018, sales in the Nordic construction market totaled about SEK 1,615 billion. NCC is one of the largest players, with a market share of 3 percent.
TOTAL CONSTRUCTION MARKET SALES IN THE NORDIC REGION
OF WHICH
MARKET SHARENCC 3%
Source: Euroconstruct, NCC
The Board of Directors and the President of NCC AB (publ), corporate registration number 556034-5174 and headquartered in Solna, hereby submit the Annual Report and the consolidated financial statements for the 2018 fiscal year.
From January 22, 2003 through May 20, 2016, NCC AB was a subsidiary of Nordstjernan AB, corporate registration number 556000-1421. At the end of 2018, Nordstjernan had a holding corresponding to 47 percent (47) of the voting rights in NCC AB, thus making NCC an associated company of Nordstjernan.
NCC is one of the leading Nordic construction and property development companies, with the Nordic region as its home market. NCC is active throughout the value chain – developing commercial properties and constructing housing, offices, industrial facilities and public buildings, roads, civil engineering structures and other types of infrastructure. NCC also offers input materials used in construction and accounts for paving. NCC creates future environments for working, living and communication based on responsible construction operations that result in sustainable interaction between people and the environment.
Market conditions were generally favorable in 2018. The economies in the Nordic countries are stable. In the construction sector, a changed demography and expanding cities are driving the demand for schools, hospitals and retirement homes. Demand for newly produced housing has weakened from a high level in Sweden and toward the end of the year also in Denmark. The market for refurbishment is favorable in Denmark and Finland.
Public-sector infrastructure initiatives are fueling the Nordic infrastructure market and generating strong growth in Norway and Sweden. The share of infrastructure projects in excess of SEK 100 M is increasing.
In the industrial segment, a strong civil engineering market is driving demand for asphalt and stone materials in Norway and Sweden.
Low yield requirements from investors and high demand for modern and sustainable new premises provide favorable market conditions in the Nordic property market.
The NCC Building business area was divided into two new business areas on October 1, 2018: NCC Building Sweden and NCC Building Nordics.
On January 3, 2018, NCC announced that Kenneth Nilsson had been appointed Business Area Manager of NCC Infrastructure and member of the Executive Team (ET). Kenneth Nilsson assumed his new position in April 2018, replacing Göran Landgren who had been Acting Business Area Manager since September 25, 2017.
Tomas Carlsson was appointed the new President and CEO of NCC on January 12, 2018. Tomas Carlsson had previously been president of the publicly traded Swedish architecture and engineering consultancy Sweco since the end of 2012. Prior to that, he worked at NCC for nearly 20 years, most recently as Head of NCC's construction operations in Sweden. Tomas Carlsson assumed his new position at NCC in May 2018.
On August 28, 2018, NCC announced changes in the ET. Susanne Lithander was appointed new CFO and Ylva Lagesson was appointed Head of Development & Operations Services. Susanne Lithander assumed her new position in November. She joined NCC from BillerudKorsnäs, where she had worked as CFO for seven years. Prior to that, Susanne Lithander had been CEO of Mercuri International and worked in several roles at Ericsson. NCC's former CFO, Mattias Lundgren, left the company at the end of October. Ylva Lagesson had previously held a number of executive positions at NCC, such as Deputy Division Manager of NCC Building and Head of Market and Operational Development at NCC Construction Sweden. She was also CEO of Nobelhuset AB during 2017-2018.
Since October 2018, the ET comprises the President and CEO, the CFO, the Head of Development & Operations Services and the Business Area Managers. The Senior Management Team also includes Harri Savolainen, Head of Purchasing; Marie Reifeldt, Head of Human Resources; Ann-Marie Hedbeck, Senior Legal Counsel; and Maria Grimberg, Head of Communication.
In conjunction with the management changes, Ann Lindell Saeby, Head of Corporate Relations, and Håkan Broman, Senior Legal Counsel, left the Group.
In connection with the announcement that NCC had decided to divide the NCC Building business area into NCC Building Sweden and NCC Building Nordics, Henrik Landelius was appointed Head of NCC
| ORDERS RECEIVED | ORDER BACKLOG | NET SALES | OPERATING PROFIT | |||||
|---|---|---|---|---|---|---|---|---|
| SEK M | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| NCC Infrastructure | 24,880 | 21,727 | 24,786 | 19,682 | 19,791 | 18,490 | –993 | –198 |
| NCC Building Sweden | 15,075 | 15,710 | 18,709 | 19,340 | 15,701 | 14,178 | 453 | 489 |
| NCC Building Nordics | 11,229 | 9,251 | 11,313 | 10,288 | 10,753 | 10,444 | –227 | –79 |
| NCC Industry | 12,943 | 12,522 | 3,092 | 3,059 | 12,968 | 12,393 | 350 | 577 |
| NCC Property Development | 2,157 | 2,567 | –181 | 601 | ||||
| Total | 64,128 | 59,211 | 57,901 | 52,369 | 61,369 | 58,073 | –597 | 1,389 |
| Other and eliminations | –2,286 | –2,434 | –1,064 | –635 | –4,023 | –3,631 | –166 | –314 |
| Group | 61,842 | 56,777 | 56,837 | 51,734 | 57,346 | 54,441 | –764 | 1,075 |
Building Sweden and thus a member of the ET, effective October 1. Henrik Landelius has long-standing experience of NCC, most recently as Division Manager of NCC Building Sweden within NCC Building and prior to that as Deputy President of NCC Construction Sweden. Klaus Kaae, former Head of NCC Building, was appointed Head of NCC Building Nordics and continued to be a member of the ET.
Ann-Marie Hedbeck had been acting Senior Legal Counsel since August 28 and was appointed permanent Senior Legal Counsel a month later.
In January 2019, Maria Grimberg was appointed permanent Head of Communication and a member of NCC's Senior Management Team. Also in January 2019, it was announced that Carola Lavén, Head of NCC Property Development and member of the ET, will leave her role during 2019 to take up a new position at the real estate company Castellum.
In 2018, orders received by the NCC Group totaled SEK 61,842 M (56,777). The increase during the year was mainly attributable to NCC Infrastructure and NCC Building Nordics.
Orders received by NCC Infrastructure amounted to SEK 24,880 M (21,727), with the increase attributable to the Civil Engineering Norway division. The railway segment accounted for the largest share of orders received. Norway's share of orders received was 44 percent (48).
Orders received by NCC Building Nordics amounted to SEK 11,229 M (9,251). The increase was primarily attributable to higher orders received in Finland. The refurbishment segment was the largest segment during the year.
However, orders received by NCC Building Sweden declined to SEK 15,075 M (15,710). The share of orders received for refurbishment and public buildings increased during the year.
Notable examples of projects included in orders received during the year: Project Centralen, commuter train station and railway tunneling at the West Link tunnel project in Gothenburg, order value about SEK 4.7 billion; The Venjar-Eidsvoll railway section, Norway, for Bane NOR, order value about SEK 1.7 billion; The Sandoy Tunnel in the Faroe Islands, order value about SEK 1.2 billion; Expansion of the Ångström Laboratory in Uppsala, order value about SEK 0.9 billion; Offices and hotels at Helsinki central station, order value about SEK 0.7 billion.
PROJECT SIZE OF ORDERS RECEIVED, 2018, NCC INFRASTRUCTURE, NCC BUILDING SWEDEN AND NCC BUILDING NORDICS
Projects exceeding SEK 300 M increased most during the year, while orders received for midsize projects of between SEK 50–300 M declined. Projects of between SEK 5–50 M accounted for a slight increase, while the very smallest projects (less than SEK 5 M) declined. The diagram reflects SEK 51 billion of the total orders received of SEK 62 billion. The Group's total orders received also include NCC Industry.
5–10 SEK M, 6 (5)% <5 SEK M, 4 (5)% 10–25 SEK M, 10 (10)% 25–50 SEK M, 11 (10)% 50–100 SEK M, 12 (14)% 100–300 SEK M, 19 (28)% 300–500 SEK M, 8 (7)% >500 SEK M, 30 (21)%
| Projects >SEK 500 M | NCC's share of order value |
Completion rate, Dec 31, 2018, % |
Estimated year of comple- tion |
|
|---|---|---|---|---|
| Railway section, West Link, Gothenburg |
SE | 4,695 | 5% | 2026 |
| Tunnel construction, Faroe Islands |
NO | 2,850 | 24% | 2021 |
| Production facility, Gruvön Mill |
SE | 2,840 | 92% | 2019 |
| Railway tunnel, Korsvägen, Örgryte |
SE | 2,290 | 4% | 2026 |
| National Highway 4, Hadeland |
NO | 1,729 | 98% | 2020 |
| Railway section Venjar–Eidsvall Nord, Eidsvoll |
NO | 1,670 | 2% | 2023 |
| Children's hospital extension, Gothenburg |
SE | 1,572 | 62% | 2020 |
| Hospital extension, Stockholm | SE | 1,488 | 92% | 2020 |
| University Hospital, Örebro | SE | 1,366 | 51% | 2021 |
| Tunnel construction, Sandvika–Wøyen |
NO | 1,277 | 97% | 2019 |
| Tunnel construction, Gvammen-Aarhus |
NO | 1,251 | 95% | 2020 |
| Railway section, Lund | SE | 1,062 | 23% | 2022 |
| Campus biotechnology research, Copenhagen |
DK | 1,037 | 95% | 2019 |
| University buildings, | ||||
| Uppsala University | SE | 853 | 6% | 2021 |
| Expansion of hospital, Ryhov | SE | 805 | 35% | 2021 |
| Cogeneration plant, Upplands-Bro |
SE | 800 | 77% | 2019 |
| Wind farm, Piteå | SE | 794 | 75% | 2019 |
| Interchange, Häggvik | SE | 774 | 26% | 2021 |
| Offices, Solna | SE | 770 | 98% | 2020 |
| Hospital project, Oulu | FI | 767 | 84% | 2022 |
| Housing refurbishment, Copenhagen |
DK | 741 | 97% | 2019 |
| Hotel and offices at Central Station, Helsinki |
FI | 735 | 6% | 2021 |
| Interchange, Gothenburg | SE | 713 | 81% | 2020 |
| Expansion of Falkoner Center, Fredriksberg |
DK | 701 | 70% | 2019 |
| Train maintenance depot, Hässleholm |
SE | 698 | 44% | 2020 |
| Earth and groundworks, Norvik |
SE | 677 | 93% | 2019 |
| Housing units, Tuborg Havn, Copenhagen |
DK | 660 | 16% | 2021 |
| Refurbishment of housing units, Copenhagen |
DK | 649 | 97% | 2019 |
| Interchange, Hjulsta | SE | 639 | 46% | 2020 |
| Housing, preschool & stores, Stockholm |
SE | 638 | 44% | 2020 |
| Hospital, Jönköping | SE | 626 | 75% | 2020 |
| Housing, Uppsala | SE | 605 | 5% | 2023 |
| Ice hockey facility, Oslo Redevelopment of |
NO | 586 | 46% | 2020 |
| Sergelhuset, Stockholm Refurbishment and extension, |
SE | 582 | 38% | 2020 |
| university, Gothenburg Expansion of gates, |
SE | 570 | 63% | 2020 |
| Landvetter Airport | SE | 542 | 30% | 2020 |
| Cultural district, Örebro | SE | 542 | 9% | 2021 |
Net sales
The NCC Group's net sales totaled SEK 57,346 M (54,441) during 2018. All business areas, apart from NCC Property Development, reported higher net sales. The increase in construction operations resulted from a high work-up rate in a number of major projects received in 2017.
Earth and groundworks, roads and railways jointly accounted for just over half of NCC Infrastructure's sales and Sweden accounted for nearly 80 percent of sales.
NCC Building Sweden's net sales were higher as a result of an increased work-up rate in a number of major projects. Housing was the single largest product segment, at 30 percent, even though this percentage was lower than in 2017, followed by renovation and refurbishment, at just over 20 percent.
NCC Building Nordics' net sales increased as a result of a higher work-up rate in Denmark, but were lower in Norway and Finland. The segments housing, which declined during the year, and renovation and refurbishment, which increased during the year, were equally large in 2018. The office segment also rose during the year.
Within NCC Industry, sales were higher in the asphalt operations, due to higher asphalt prices, driven by higher bitumen and energy costs. Sales were also higher in Norway and Denmark.
NCC Property Development's sales amounted to SEK 2,157 M (2,567) in 2018. Nine (five) projects were recognized in profit during the year, but at lower individual amounts than in 2017.
The NCC Group's operating result for 2018 was SEK –764 M (1,075). The full-year loss was mainly due to the provisions, revaluations and impairment losses totaling SEK 1,565 M that were carried out in the third quarter.
NCC Infrastructure's operating result was lower in all divisions, with Civil Engineering Norway recording the largest decline. A large part of the deterioration was due to the revaluations totaling SEK 727 M carried out in the third quarter, including revaluations of claims and warranties, impairment losses in the project portfolio and restructuring costs.
The operating result in NCC Building Sweden was slightly lower year-on-year. The result was charged with higher revaluations than in the preceding year, with most of the project adjustments impacting the third quarter but also to a certain extent the fourth quarter.
In the first quarter of 2018 both net sales and profit after financial items was lower than in the first quarter 2017, mainly as a consequence of lower net sales and profit in NCC Property Development. During the second quarter, sales increased while earnings declined slightly year-on-year. During the third quarter, a comprehensive analysis of operations resulted in revaluations that were charged against profit. During the fourth quarter, earnings improved as a result of transactions in NCC Property Development.
NCC Building Nordics' operating result was lower, primarily due to negative revaluations in the third quarter.
NCC Industry's operating result was lower in all divisions. Within the Asphalt division, improved results were noted in Sweden and Norway, while results in Finland and Denmark declined due to intensified competition. The results of stone materials operations were at a healthy level, excluding the revaluations posted in the third quarter. The results of foundation engineering were impacted not only by lower sales in Sweden but also by negative revaluations in the third quarter.
During the year, NCC Property Development recognized nine (five) projects were in profit, of which four in Finland, two in Sweden, two in Denmark and one in Norway. Earnings were affected by the revaluation of SEK 363 M of development properties in Norway, Denmark and Finland due to decisions taken in the third quarter of 2018 to discontinue these. One of these properties, Stavanger Business Park, was sold during the year at a price that exceeded the previously impaired carrying amount.
Other and eliminations amounted to SEK –166 M (–314). This item included SEK –187 M (–116) for NCC's Head Office and losses from minor subsidiaries and associated companies. It also included eliminations of inter-company gains of SEK 11 M (10). Other Group adjustments, essentially comprising the difference in accounting policies between segments and the Group (in part for pensions) as well as provisions amounted to SEK 10 M (–208).
Net financial items amounted to SEK –85 M (–91). Interest rate effects on loans and investments, lower credit margins and higher capitalization of interest rates for NCC Property Development had a positive effect, although this was offset by increased costs due to higher net debt during the year. After financial items, the result was SEK –849 M (983). The net result after tax for the year was SEK –750 M (877).
The return on shareholders' equity was –18 percent (17)
Capital employed at December 31, 2018 amounted to SEK 7,619 M (9,174), a decrease mainly due to higher interest-free liabilities. Comments on the consolidated balance sheet are presented on p. 22.
Net debt amounted to SEK 3,045 M (debt: 149). The year-on-year change was mainly due to lower cash flow and higher pension debt.
On December 31, 2018, the equity/assets ratio was 11 percent (19). The debt/equity ratio was a multiple of 1.0 (0.0).
Cash flow from operating activities in 2018 was SEK –375 M (2,158). The deterioration was mainly due to a lower operating result, increased investments in development properties and lower cash flow from sales of property projects. The preceding year included the sale of the Torsplan 2 property in Stockholm, which made a considerable contribution to cash flow. The revaluations implemented in 2018 had no material negative impact on cash flow during the year.
NCC Industry's operations and certain operations in NCC Building Sweden and NCC Building Nordics are impacted by seasonal variations due to cold weather. The first and final quarters are normally weaker than the rest of the year.
The Parent Company has branches in Norway, Denmark and Finland. However, no operations are conducted in the branches in Denmark and Finland.
The Group conducts operations subject to permit obligations under the Environmental Code in the Swedish Parent Company and the Swedish subsidiaries.
Of the Group operations subject to permit and reporting obligations, it is mainly the asphalt and gravel pit operations, plus a number of piling plants, conducted by NCC Industry that affect the external environment, as well as the construction and civil engineering operations conducted by NCC Building Sweden, NCC Building Nordics and NCC Infrastructure. Within NCC Industry, quarries and harbors are subject to permit obligations, while asphalt and piling production is generally subject to reporting obligations. Permits for quarries are renewed continuously. NCC Industry also conducts recycling operations that are subject to permit obligations. Some of these include landfills, which are also subject to permit obligations. The external environment is mainly impacted by emissions to air, waste generation and noise. No significant injunctions according to the Environmental Code exist.
In accordance with Chapter 6, Section 11 and Chapter 7, Sections 31 a-c of the Swedish Annual Accounts Act, NCC has decided to prepare the Parent Company's and the Group's statutory sustainability report as a separate report that is not part of the official annual accounts. The Sustainability Report encompasses all subsidiaries and is defined on page 89.
The average number of employees in the NCC Group in 2018 was 16,523 (17,762). This represents a decrease compared with 2017, due to a lower number of employees within all business areas, apart from NCC Property Development. NCC Infrastructure and NCC Industry accounted for the greatest decrease.
In all of our markets, NCC has collective agreements that regulate minimum wages, working hours and employees' rights in relation to the employer.
Like other companies in the industry, NCC uses subcontractors and consultants when required. Subcontractors are most prevalent in NCC Building Sweden and NCC Building Nordics but are also used in other business areas.
NCC is a value-guided company and the objective is that all employees will be able to take decisions and actions based on the Group's shared values: Honesty, Respect, Trust and Pioneering Spirit. Since NCC's business partners have an important role to play in the operations, they are also expected to respect and live up to NCC's values.
Together with NCC's values, NCC's policy for health and safety constitutes the foundation for creating a healthy and safe workplace.
Health and safety incidents are reported to Synergi, the Group's digital system, which functions as both a Web system and an app. The system is used to report accidents and close calls, as well as negative and positive observations. According to Synergi, injuries caused by slips and slides and the use of handheld equipment are the most prevalent accidents at NCC. Three areas at a high risk of serious injuries have been identified as focus areas in order to secure access to competencies, support and procedures in line with NCC's zero vision for accidents: working at heights, heavy lifts by construction cranes and work in heavily trafficked environments.
During 2018, the Group continued to implement and improve work methods and procedures in health and safety work that have been developed in recent years. These measures include safer behavior, safety equipment, work aids and tools. NCC did not experience any work-related fatality during 2018.
Diversity and equal opportunity are important elements of NCC's efforts to offer an inclusive worksite where employees thrive, perform and develop. This also constitutes a key issue in terms of satisfying NCC's recruitment and competency needs. NCC's female network Stella celebrated its 20th anniversary in 2018. The network works for more gender-equal norms in the construction industry and for an increase in female managers.
Orders received by NCC Infrastructure amounted to SEK 24,880 M (21,727), with the increase attributable to the Civil Engineering Norway division. The railway segment accounted for the largest share of orders received. Norway's share of orders received was 44 percent (48). Several large-scale projects were recognized in orders during the year, including the project Centralen, commuter train station and railway tunneling at the West Link project in Gothenburg, order value of about SEK 4.7 billion; the Venjar-Eidsvoll railway section, Norway, for Bane NOR, order value of about SEK 1.7 billion; and the Sandoy Tunnel in the Faroe Islands, order value of about SEK 1.2 billion.
Net sales totaled SEK 19,791 M (18,490), thanks to high activity in Sweden, through a number of major projects. Earth and groundworks, roads and railways jointly accounted for just over half of NCC Infrastructure's sales and Sweden accounted for nearly 80 percent of these sales. Sweden is NCC Infrastructure's largest market, accounting for 53 percent (57) of sales, followed by Norway with 18 percent (19).
The operating result declined to SEK –993 M (–198). Results were lower in all divisions, with Civil Engineering Norway recording the largest decline. A large part of the deterioration was due to the revaluations totaling SEK 727 M implemented in the third quarter, of which revaluations of claims and warranties accounted for SEK 458 M, impairment losses in the project portfolio for SEK 225 M, restructuring costs and revaluation of a property for SEK 8 M and other revaluations for SEK 36 M. The fourth quarter of 2018 was charged with restructuring costs of SEK 49 M. A decision has been made to divest the NCC Road Service division.
| SEK M | 2018 | 2017 |
|---|---|---|
| Orders received | 24,880 | 21,727 |
| Net sales | 19,791 | 18,490 |
| Operating profit | –993 | –198 |
| Operating margin, % | –5.0 | –1.1 |
| Average no. of employees | 5,286 | 5,992 |
| Cash flow before financing | –481 | –101 |
Orders received by NCC Building Sweden amounted to SEK 15,075 M (15,710). The share of orders received for refurbishment and public buildings increased during the year. One of the largest orders reported during the year was the expansion of the Ångström Laboratory in Uppsala with an order value of about SEK 0.9 billion. The residential segment's share of orders received declined during the year to 17 percent (37) of orders received.
Net sales during 2018 increased year-on-year to SEK 15,701 M (14,178). The increase in net sales was the result of a higher work-up rate in a number of major projects. Residential was the single largest product segment, at 33 percent of sales, followed by renovation and refurbishment, at just over 20 percent.
The operating result was SEK 453 M (489). The operating result was charged with higher revaluations than in the preceding year, with most of the project adjustments impacting the third quarter but also to a certain extent the fourth quarter. The third quarter included revaluations of claims and warranties in an amount of SEK 74 M and other revaluations of SEK 9 M.
| SEK M | 2018 | 2017 |
|---|---|---|
| Orders received | 15,075 | 15,710 |
| Net sales | 15,701 | 14,178 |
| Operating profit | 453 | 489 |
| Operating margin, % | 2.9 | 3.4 |
| Average no. of employees | 3,732 | 3,821 |
| Cash flow before financing | 385 | 787 |
Orders received by NCC Building Nordics amounted to SEK 11,229 M (9,251). The increase was primarily attributable to higher orders received in Finland. The refurbishment segment was the largest segment during the year. One of the largest projects included in orders received during the year was an office and hotel project at Helsinki Central Station, with an order value of about SEK 0.7 billion.
NCC Building Nordics' net sales increased as a result of a higher work-up rate in Denmark, but were lower in Norway and Finland. The segments residential, which declined during the year, and renovation and refurbishment, which increased during the year, were equally large in 2018. The office segment also increased during the year.
The operating result was SEK –227 M (–79). The deterioration was due primarily to negative revaluations in the third quarter, of which revaluations of claims and warranties accounted for SEK 117 M, restructuring costs for SEK 14 M and other revaluations for SEK 81 M. The fourth quarter was charged with restructuring costs of about SEK 95 M.
| SEK M | 2018 | 2017 |
|---|---|---|
| Orders received | 11,229 | 9,251 |
| Net sales | 10,753 | 10,444 |
| Operating profit | –227 | –79 |
| Operating margin, % | –2.1 | –0.8 |
| Average no. of employees | 2,722 | 2,829 |
| Cash flow before financing | 400 | 19 |
NCC Industry's net sales amounted to SEK 12,968 M (12,393). Sales were higher in the asphalt operations, due to higher asphalt prices, driven by higher bitumen and energy costs. Geographically, sales were higher in Norway and Denmark. Sales by stone materials operations were higher in all markets apart from Finland. Sold volumes of stone materials totaled 29,275 thousand tons (31,298). The decrease was due to lower volumes of sold stone materials in all markets apart from Denmark. Sales by asphalt operations were also higher year-onyear in Sweden, Norway and Denmark, but lower in Finland. Sold volumes of asphalt totaled 6,415 thousand tons (6,509). Sales by Hercules' foundation engineering operations were slightly lower year-on-year. Hercules' sales were higher in Denmark and Norway, but lower in Sweden.
The operating result was SEK 350 M (577). Earnings declined in all divisions. The asphalt operations in Sweden and Norway improved their results, while Finland and Denmark's results declined due to intensified competition. The results of stone materials operations were higher year-on-year, excluding the revaluations posted in the third quarter. The business area's results were impacted by negative revaluations in the third quarter totaling SEK 115 M. These revaluations pertained to claims and warranties of SEK 44 M, restructuring costs of SEK 3 M and other revaluations of SEK 68 M.
| SEK M | 2018 | 2017 |
|---|---|---|
| Net sales | 12,968 | 12,393 |
| Operating profit | 350 | 577 |
| Operating margin, % | 2.7 | 4.7 |
| Capital employed | 4,902 | 4,400 |
| Return on capital employed, % | 7.1 | 13.1 |
| Average no. of employees | 3,768 | 4,102 |
| Stone materials, 1,000 tons1) | 29,275 | 31,298 |
| Asphalt, 1,000 tons1) | 6,415 | 6,509 |
1) Sold volume
Sales for NCC Property Development amounted to SEK 2,157 M (2,567). The operating result declined year-on-year to SEK –181 M (601). Earnings were affected by the revaluation of development properties in Norway, Denmark and Finland in an amount of SEK 363 M due to decisions taken in the third quarter of 2018 to discontinue these. One of these properties, Stavanger Business Park, was sold during the year at a price that exceeded the previously impaired carrying amount.
During the year, nine (five) projects were recognized in profit, of which four in Finland, two in Sweden, two in Denmark and one in
Norway. The share of sales for the segments Retail and Other increased, while the Office segment's share was lower year-on-year. The operating net in 2018 amounted to SEK 38 M (50).
Five (eight) property projects were started during the year, which were all office projects. At the end of 2018, 18 projects (22) were ongoing or completed but not yet recognized in profit at a total project cost of SEK 2.7 billion (2.4), equal to a completion rate of 35 percent (45), while the leasing rate was 49 percent (60). Leases were signed for some 71,200 square meters (69,700) during the year.
| SEK M | 2018 | 2017 |
|---|---|---|
| Net sales | 2,157 | 2,567 |
| Operating profit | –181 | 601 |
| Operating margin, % | –8.4 | 23.4 |
| Capital employed | 4,314 | 4,086 |
| Return on capital employed, % | –3.9 | 15.7 |
| Average no. of employees | 94 | 92 |
At December 31, 2018, NCC's registered share capital comprised 13,337,895 Series A shares and 95,097,927 Series B shares, of which 402,050 were held in treasury. The shares have a quotient value of SEK 8.00 each.
To cover commitments according to the long-term performance-based incentive program LTI 2018, the AGM on April 11, 2018 authorized the Board, until the next AGM, to buy back a maximum of 867,487 Series B shares and to transfer a maximum of 300,000 Series B shares to participants in LTI 2018. The shares may be bought back on Nasdaq Stockholm at a price per share within the registered span of share prices at the particular time. It is also to be possible to transfer a maximum of 500,000 Series B shares via Nasdaq Stockholm to cover costs, mainly for compensation for dividends, social security fees and payments on the basis of the synthetic shares, pursuant to outstanding long-term performance-based incentive programs (LTI 2015, LTI 2016 and LTI 2017) and LTI 2018.
In 2018, NCC bought back 101,022 Series B shares at an average price of SEK 158.49, corresponding to 0.09 percent of the share capital, and sold 31,952 Series B shares at an average price of SEK 198.33, corresponding to 0.03 percent of the share capital. During the year, NCC also distributed 20,343 Series B shares, corresponding to 0.02 percent of the share capital, to participants in the long-term, performance-based incentive program from 2015. Thereafter, the company holds 402,050 Series B shares in treasury at an average price of SEK 198.33.
Series A shares carry 10 votes and Series B shares one vote each. All shares provide the same entitlement to participation in the company's assets and profit and to an equally large dividend. At the request of the holder, Series A shares can be converted into Series B shares. Such a request must be made in writing to the Board of Directors, which takes decisions on such matters on a continuous basis. After a conversion decision is made, this is reported to Euroclear Sweden AB for registration. Conversions become effective when the shares are registered. During the year, 48,373 Series A shares were converted to Series B shares.
The number of NCC shareholders at year-end was 48,863 (46,333), with Nordstjernan AB as the largest individual holder accounting for 17 percent (16) of the share capital and 47 percent (47) of the voting rights. No other shareholder accounts for more than 10 percent of the voting rights. The ten largest shareholders jointly accounted for 56 percent (48) of the share capital and 67 percent (64) of the voting rights.
NCC had a revolving credit facility with a volume of EUR 325 M at December 31, 2018. Should any major changes occur in NCC AB's ownership structure, meaning if a shareholder other than Nordstjernan AB acquires more than 30 percent of voting rights in NCC AB, or if NCC AB is delisted from Nasdaq Stockholm, the credit facility may be terminated by the lenders.
Ahead of the 2019 AGM, NCC's Nomination Committee comprises Viveca Ax:son Johnson (Chairman of the Board of Nordstjernan AB), Simon Blecher (Carnegie Funds) and Anders Oscarsson (AMF/AMF Fonder), with Viveca Ax:son Johnson as Chairman. Tomas Billing, Chairman of the NCC Board of Directors, is a co-opted member of the Nomination Committee but has no voting right.
The Corporate Governance Report is included as a separate section of NCC's 2018 Annual Report and does not constitute a feature of the formal annual report documentation; refer to the Corporate Governance section on pp. 90–99.
The Parent Company's net sales pertain to charges to Group companies. The average number of employees was 71 (74). In 2018, earnings were charged with costs totaling SEK 33 M for departing personnel. Impairment of shares and participations totaled SEK 644 M. The result after financial items was SEK –445 M (411). Total dividends to the shareholders in 2018 amounted to SEK 864 M.
The Board of Directors proposes a dividend for the 2018 fiscal year of SEK 4.00 per share. The dividend will be divided into two payment occasions. April 11, 2019 is proposed as the record date for the first payment of SEK 2.00 and November 5, 2019 for the second payment of SEK 2.00. If the AGM approves the Board's motion, it is estimated that the first dividend will be paid via Euroclear Sweden AB on April 16 and the second dividend on November 8, 2019. The Board's
statement regarding the proposed dividend and the buyback of NCC's own shares will be available on the company's website and be distributed to shareholders at the AGM.
Unless otherwise indicated, amounts are stated in SEK millions (SEK M). The period referred to is January 1 – December 31 for income-statement items and December 31 for balance-sheet items. Rounding-off differences may arise.
On January 14, 2019, it was announced that NCC's Nomination Committee will propose that Alf Göransson be elected to the NCC Board of Directors. Board member Carina Edblad has declined reelection. Reelection of the other existing seven members is proposed.
The Nomination Committee proposes that the Board of Directors, insofar as it is elected by the Annual General Meeting, comprise eight members with no deputies.
Alf Göransson served as CEO of Securitas between 2007 and 2018. Prior to that, he was President and CEO of NCC between 2001 and 2007. He is Chairman of the Board of Loomis and Board member of Sweco, Attendo, Hexpol, Melker Schörling AB, Axfast, Johnson Inc. and Sandberg Development Group.
On January 22, 2019, it was announced that Carola Lavén will be stepping down from her membership of ET and as the head of the NCC Property Development business area to become the Deputy CEO and Investment Director at real estate company Castellum. Carola Lavén will continue in her current position until July 22 at the latest.
A description of salary, compensation and terms of employment of the CEO and other employees in the company is presented in Note 5, Number of employees, personnel expenses and remuneration of senior executives, pp. 39-42.
The guidelines proposed to the 2019 AGM correspond with what was resolved by the 2018 AGM, except that the short-term variable remuneration payable to members of the ET, apart from the CEO, is capped at between 30 and 40 percent of fixed salary (assuming that the long-term performance-based incentive program is adopted), compared with the previous cap of 40 percent.
If the AGM resolves not to adopt a long-term performance-based incentive program, the remuneration of members of the ET, apart from the CEO, will be capped at between 40 and 50 percent of fixed salary, compared with 50 percent in the motion to the 2018 AGM.
The proposed guidelines to the 2019 AGM also mean that a member of the ET who terminates his/her employment at NCC's initiative is normally entitled to a six-month period of notice. Under the previously applicable guidelines, the period of notice was 12 months. Under certain employment contracts signed in 2018 or previously, a period of notice of 12 months applies.
In 2018, the Board of Directors exercised its right to disapply the guidelines in isolated cases and for specific reasons in that the President and CEO's maximum short-term variable remuneration exceeded the cap stated in the guidelines in effect when the employment contract was signed, that the President and CEO received a fixed bonus of 60 percent of the maximum variable remuneration and that he has a defined-contribution pension corresponding to 40 percent of basic monthly salary. For another senior executive, possible severance pay is not deductible from other remuneration. In both cases, the Board's rationale for disapplying the guidelines was to be able to recruit the candidates that the Board regarded as the most suitable for their respective positions.
The Board of Directors' motion concerning guidelines for determining salary and other remuneration of the President and Chief Executive Officer and other members of the Executive Team (ET)
The Board has evaluated the application of the guidelines for salary and other remuneration of the CEO and other members of the company's Executive Team (ET), as resolved by the 2018 AGM, and the applicable remuneration structures and remuneration levels in the company.
As a result of the evaluation of the total remuneration package for the company's ET, the Board proposes that the long-term performance-based incentive program be repeated for 2019 and, accordingly, that the short-term variable remuneration be reduced by 10 percentage points from the basic level. These guidelines encompass Senior Management Team, including the CEO, currently totaling 12 people.
The objective of the guidelines for salary and other remuneration of the ET is to enable NCC to offer market-aligned remuneration that facilitates the recruitment and retention of the best possible competencies within the NCC Group. The aim is that the total remuneration package will support NCC's long-term strategy. The amount payable to the ET comprises fixed remuneration, variable remuneration and the long-term performance-based incentive program as well as pension and other benefits.
Fixed remuneration. When determining fixed remuneration, the individual executive's sphere of responsibility, experience and achieved results are to be taken into account. The fixed salary is to be revised either annually or every second year.
Short-term variable remuneration. The short-term variable remuneration must be maximized and related to the fixed salary, as well as being based on the outcome in relation to established targets, with financial targets accounting for by far the greatest proportion. The reason for paying variable remuneration is to motivate and
reward value-generating activities that support achievement of NCC's long-term operational and financial objectives.
Assuming that the long-term performance-based incentive program is adopted by the 2019 AGM, the short-term variable remuneration for the CEO will be capped at 65 percent of fixed salary. For other members of the ET, it will be capped at between 30 and 40 percent of fixed salary. The variable short-term remuneration is to be revised annually. It is estimated that full utilization of the company's undertakings for the short-term incentive program in relation to the executives concerned will cost the company a maximum of about SEK 24 M including social security fees.
Should the AGM not vote in favor of a long-term performancebased incentive program, the variable remuneration payable to the CEO will be capped at 75 percent of fixed salary and that for other members of the ET will be capped at between 40 and 50 percent of fixed salary, which is estimated to correspond to a cost at maximum outcome of about SEK 29 M including social security fees.
Pensions and other benefits. NCC is endeavoring to move gradually towards defined-contribution solutions, which entail that NCC pays contributions that represent a specific percentage of the employee's salary. The President and CEO has a defined-contribution pension with a premium pledge of 40 percent of contractual fixed salary. Members of the ET who are active in Sweden and have an employment contract subject to Swedish terms and conditions, are entitled, in addition to basic pension, which is normally based on the ITP plan (the collectively bargained agreement on pension for white collar workers), to receive a defined-contribution supplementary pension of 30 percent of pensionable salary increments exceeding 30 income base amounts. Pensionable salary is defined in accordance with ITP, Department 2. The income base amount for 2019 is SEK 64,400. Members of the ET who have an employment contract according to the terms and conditions of another country are covered by pension solutions in accordance with local practices.
NCC aims to harmonize the retirement age of members of the ET at 65 years.
Other benefits. NCC provides other benefits to members of the ET in accordance with local practices. The combined amount of such benefits in relation to total remuneration may constitute only a limited value and correspond essentially to the costs normally arising in the market.
Periods of notice and severance pay. A member of the ET who terminates employment at NCC's initiative is normally entitled to a 6-month period of notice combined with severance pay corresponding 12 months of fixed salary. During the said 12 months, the severance pay is deductible from remuneration received from a new employer. The period of notice is normally six months if employment is terminated on the initiative of the employee.
These guidelines may be disapplied by the Board if there is special reason to do so in individual cases.
The Board proposes that the AGM resolve to introduce a long-term performance-based incentive program for Members of the ET, and for other senior executives and key personnel within the NCC Group (LTI 2019). The proposal essentially matches the long-term performance-based incentive programs adopted by the AGM in April 2018. A total of 174 executives are included in LTI 2018. The Board is of the opinion that incentive programs of this type benefit the company's long-term development. The purpose of LTI programs is to ensure a focus on the company's long-term profitability and to minimize the number of worksite accidents. It is proposed that LTI 2019 encompass a total of approximately 180 participants within the NCC Group.
More detailed information on the proposal and earlier long-term incentive programs is available at www.ncc.se. Also refer to Note 5, Number of employees, personnel expenses and remuneration of senior executives, on pp. 39-42.
Within NCC, the management of strategic, financial and operational risks is a significant feature of operations and a prerequisite for a stable and profitable company. NCC's risk management is designed to rapidly identify risks to be able to act and address them.
Four risks that have been identified as having the greatest impact on NCC's opportunities to achieve its objectives are described in the diagram. An assessment has been made of the probability of these risks occurring and the impact they are assessed to have should they occur.
| SENSITIVITY AND RISK ANALYSES The figures are based on the outcome in 2018. |
|||||
|---|---|---|---|---|---|
| Change | Result effect after net financial items, SEK M (annual basis) |
Effect on return on equity, (percentage points) |
Effect on return on capital employed (per- centage points) |
Comments | |
| NCC INFRASTRUCTURE | |||||
| Volume | +/–5% | 5 | 0.1 | 0.1 | For NCC Infrastructure, a one-percentage-point increase |
| Operating margin | +/–1 percent age point |
198 | 3.7 | 2.3 | in the margin has a significantly larger impact on earnings than a 5–percent increase in volume. This reflects the importance of pursuing a selective tendering policy and focusing on risk management in early project stages. |
| NCC BUILDING SWEDEN | |||||
| Volume | +/–5% | 53 | 1.0 | 0.6 | For NCC Building Sweden, a one-percentage-point |
| Operating margin | +/–1 percent age point |
157 | 2.9 | 1.8 | increase in the margin has a significantly larger impact on earnings than a 5–percent increase in volume. This reflects the importance of pursuing a selective tendering policy and focusing on risk management in early project stages. |
| NCC BUILDING NORDICS | |||||
| Volume | +/–5% | 24 | 0.5 | 0.3 | For NCC Building Nordics, a one-percentage-point |
| Operating margin | +/–1 percent age point |
108 | 2.0 | 1.2 | increase in the margin has a significantly larger impact on earnings than a 5–percent increase in volume. This reflects the importance of pursuing a selective tendering policy and focusing on risk management in early project stages. |
| NCC INDUSTRY | |||||
| Volume | +/– 5% | 41 | 0.8 | 0.5 | NCC Industry's operations are affected by such factors |
| Operating margin | +/–1 percent age point |
130 | 2.4 | 1.5 | as price levels and the volume of produced and paved asphalt, which is dependent on length of the season. |
| Capital rationalization | +/– 10% | 6 | 0.1 | –0.5 | |
| NCC PROPERTY DEVELOPMENT | |||||
| Sales volume, projects | +/–10% | 34 | 0.6 | 0.4 | NCC Property Development's earnings are predominantly |
| Sales margin, projects | +/–1 percent age point |
21 | 0.4 | 0.2 | determined by sales. Opportunities to sell property proj ects are largely affected by the leases signed with tenants, whereby an increased leasing rate facilitates a higher sales volume. The value of a property is also determined by the difference between operating expenses and rent levels, which means that a change in the rent levels or operating economy of ongoing projects could change the value of such projects. |
| GROUP | |||||
| Changed interest rate, net debt* |
+/–1 percent age point |
30 | 0.6 | At December 31, 2018, net debt totaled SEK 3,045 M (149), an increase on 2017, but net debt/EBITDA was a |
|
| Volume change, net debt | SEK 1,000 M | 13 | 0.2 | –1.0 | multiple of 1.6 at the end of 2018, which is better than |
| Change in equity/assets ratio | –5 percent age points |
–9.3 | the target of an upper limit of 2.5. | ||
| * Excluding pension debt according to IAS 19. |
| RISK AREA | DESCRIPTION | PROBABILITY | IMPACT | CONTROL ACTIVITIES |
|---|---|---|---|---|
| OPERATIONAL RISKS | ||||
| 1. SKILLS AND ACCESS TO HUMAN RESOURCES |
To a considerable extent, construction operations constitute a service activity, whereby the employees are a success factor. The competition for human resources is intensive and effective personnel provision is a prerequisite for achieving growth and profitability. From a strategic perspective, human resources provision is considered a risk factor in respect of achieving financial objectives. |
Probable | Substantial | The business areas have identified key competencies and work continu ously to retain, recruit and develop employees in these areas. NCC takes a Group-wide approach to strategic resource planning and to being an attractive employer, and sees oppor tunities to broaden the recruitment base. |
| 2. CONSTRUC TION CON TRACT AND PROJECT MANAGE MENT RISK |
Within contracting operations, the main operational risks are project selection and project management/production efficiency. In a growing market, there is a risk that a sharp increase in orders received will lead to a shortage of project management capacity. |
Possible | Substantial | NCC assigns priority to submitting tenders with identified risks that are manageable and calculable. Various contract formats and partnerships with customers facilitate the man agement of different risks. These operational risks are counteracted through NCC's project selection, assessment of tenders and opera tional control systems. |
| 3. ORGANIZA TIONAL AND CHANGE RISKS |
A decentralized operation undergoing organizational change can firstly lose customer focus and secondly lose effi ciency in implementing changes. |
Low probability | Substantial | Central focus and governance, as well as follow-up of actions taken in the operations, minimize the risk that changes are not implemented. |
| 4. SAFETY RISKS | Construction projects include many dan gerous aspects, such as work at heights, tools requiring the right handling and the lifting of heavy elements. |
Possible | Moderate | NCC works systematically to elimi nate accidents in order to realize its vision zero and to promote a safety culture, where everyone reacts and responds to vulnerabilities in the work environment and to disruptive or unsafe behaviors. |
| SUSTAINABILITY | ||||
| TRANSGRESSION OF THE CODE OF CONDUCT |
NCC is a player in society with a broad customer and supplier base. NCC employees have historically breached internal rules and restricted competition on a few occasions. |
Low probability | Substantial | NCC has been focusing continuously and actively for the past few years on the company's values and provides training in the Code of Conduct, NCC Compass, including ethical dilemmas, and in competition law within relevant operations. |
| SUPPLIER AND MATERIALS RESPONSIBILITY |
The supply chains in the construction sector represent a risk of having inade quate control of, for example, the employ ment conditions of subcontractors and suppliers. |
Possible | Moderate | NCC works systematically to assess and expand its control of the supply chain. At the same time, NCC works with systems designed to secure good work conditions, such as through its own staffing company NCC Montage. Tools for ensuring traceability include logbooks and digital standardized identification of construction products (GTIN). |
| PRODUCTION CONTROL |
Inefficient materials and energy con sumption result in unnecessarily high production costs and carbon emissions. Volatile weather conditions, such as increased rainfall or high temperatures, can lead to delays in projects, damage to materials and difficult work conditions. |
Possible | Moderate | NCC works in a targeted and system atic manner to reduce emissions and increase resource efficiency, with regular results follow-ups and by adapting measures to the sustain ability framework's target process. NCC takes into account such factors as long-term weather scenarios when planning relevant projects. |
| RISK AREA | DESCRIPTION | PROBABILITY | IMPACT | CONTROL ACTIVITIES |
|---|---|---|---|---|
| FINANCIAL RISKS & REPORTING | ||||
| INTEREST-RATE RISK |
The interest-rate risk is the risk that changes in market rates will adversely affect NCC's cash flow or the fair value of financial assets and liabilities. |
Very rare | Moderate | NCC's finance policy has been decided by NCC's Board of Directors and constitutes a framework for risk mandates and limits in the NCC Group. The Group's financial activi ties are organized centrally, thus providing an adequate overview of financial positions and risks. Refer also to Note 38. |
| EXCHANGE-RATE RISK |
The exchange-rate risk is the risk that exchange-rate changes will adversely affect NCC's income statement, balance sheet or cash flow statement. |
Possible | Moderate | See above |
| REFINANCING RISK |
Refinancing risk is the risk that opportu nities for financing will be limited and/or that the cost will be higher when expir ing loans have to be refinanced, which could adversely impact NCC's opera tions, earnings and financial position. |
Very rare | Moderate | See above |
| LIQUIDITY RISK | The liquidity risk refers to the risk that NCC does not have sufficient access to funds at a given time, which could adversely impact the Group's ability to fulfill its payment obligations. |
Very rare | Moderate | See above |
| CREDIT AND COUNTERPARTY RISKS IN FINANCIAL OPERATIONS |
Credit and counterparty risks in financial operations refers to the risk that NCC's financial counterparties are unable to ful fill their obligations to NCC. |
Very rare | Moderate | See above |
| CUSTOMER CREDIT RISK |
Customer credit risk refers to the risk that NCC's customers are unable to fulfill their payments to NCC for delivered goods and services. |
Very rare | Moderate | At NCC, customer credit risks are managed through Group-wide proce dures for identifying and assessing risks, both before agreements are reached with customers and continu ously in operational follow-ups. NCC's credit risk in relation to accounts receivable has a high degree of risk spreading through a large number of projects of varying sizes and types with a multitude of different customer categories. |
| PERCENTAGE-OF COMPLETION PROFIT RECOGNITION |
In assignments involving construction contracts, NCC applies percent age-of-completion profit recognition, whereby profit is calculated at the pace of completion. Should the anticipated profit from a project deteriorate during the project's production period, this could result in a need to reverse profit recog nized earlier. |
Possible | Substantial | By means of project control and con tinuous monitoring of production calculations, reconciliation of per formed work and final status fore casts, it is possible to ascertain that the information is correct. |
with comments
| SEK M Note |
2018 | 2017 |
|---|---|---|
| Net sales 1, 2, 3, 20, 35 |
57,346 | 54,441 |
| Production costs 5, 6, 8, 16, 25 |
–55,205 | –50,460 |
| Gross profit | 2,140 | 3,981 |
| Selling and administrative costs 5, 6, 7, 16, 17 |
–2,875 | –2,933 |
| Result from sales of owner-occupied properties 17 |
12 | 1 |
| Impairment loss and reversal of impairment losses, fixed assets 8, 16, 17 |
–82 | –7 |
| Capital gain from sales of Group companies 9 |
21 | |
| Result from participations in associated companies and joint ventures | 42 | 11 |
| Operating profit/loss 2, 3, 10 |
–764 | 1,075 |
| Financial income 12 |
36 | 39 |
| Financial expense 12 |
–121 | –130 |
| Net financial items 12 |
–85 | –91 |
| Profit/loss after financial items | –849 | 983 |
| Tax on net profit for the year 2, 24 |
99 | –106 |
| Net profit/loss for the year 13 |
–750 | 877 |
| Attributable to: | ||
| NCC's shareholders | –756 | 872 |
| Non-controlling interests | 6 | 5 |
| Net profit/loss for the year | –750 | 877 |
| Earnings per share | ||
| Before and after dilution | ||
| Profit/loss after tax, SEK 2 |
–7.00 | 8.07 |
| Number of shares, millions | ||
| Total number of issued shares | 108.4 | 108.4 |
| Average number of shares outstanding before and after dilution during the year | 108.1 | 108.1 |
| Total number of shares outstanding before dilution at year-end | 108.0 | 108.1 |
The NCC Group's net sales totaled SEK 57,346 M (54,441) during 2018. All business areas, apart from NCC Property Development, reported higher net sales. During the preceding year, a number of major projects were received that had a high work-up rate in 2018, which explains the increase in construction operations.
Earth and groundworks, roads and railways jointly accounted for just over half of NCC Infrastructure's sales and Sweden accounted for nearly 80 percent of sales.
NCC Building Sweden's net sales were higher as a result of an increased work-up rate in a number of major projects. Housing was the single largest product segment, at 30 percent, even though this percentage was lower than in 2017, followed by renovation and refurbishment, at just over 20 percent.
NCC Building Nordics' net sales increased as a result of a higher work-up rate in Denmark, but were lower in Norway and Finland. The segments housing, which declined, and renovation and refurbishment, which increased, were equally large in 2018. The office segment also rose during the year.
Within NCC Industry, sales were higher in the asphalt operations, due to higher asphalt prices, driven by higher bitumen and energy costs. Sales were also higher in Norway and Denmark.
NCC Property Development's sales amounted to SEK 2,157 M (2,567) in 2018. Nine (five) projects were recognized in profit during the year, but at lower amounts than in 2017.
The NCC Group's operating result for 2018 was SEK –764 M (1,075). The full-year loss was mainly due to the provisions, revaluations and impairment losses totaling SEK 1,565 M that were carried out in the third quarter.
NCC Infrastructure's operating result was lower in all divisions, with Civil Engineering Norway recording the largest decline. A large part of the deterioration was due to the revaluations carried out in the third quarter, including revaluations of ongoing claims and warranties, impairment losses in the project portfolio and restructuring costs.
The operating result in NCC Building Sweden was slightly lower year-on-year. The result was charged with higher revaluations than in the preceding year, with most of the project adjustments impacting the third quarter but also to a certain extent the fourth quarter.
NCC Building Nordics' operating result was lower, primarily due to negative revaluations in the third quarter.
NCC Industry's operating result was lower in all divisions.
with comments
| SEK M | Note | 2018 | 2017 |
|---|---|---|---|
| Net profit/loss for the year | –750 | 877 | |
| Items that were transferred or can be transferred to profit/loss for the year1) | |||
| Translation differences during the year in translation of foreign operations | 2 | 90 | 27 |
| Hedging of exchange-rate risk in foreign operations | –30 | –7 | |
| Tax attributable to hedging of exchange-rate risk in foreign operations | 24 | 6 | 1 |
| Fair value changes for the year in cash flow hedges | –19 | –19 | |
| Fair-value changes in cash flow hedges transferred to net profit for the year | –11 | 16 | |
| Tax attributable to cash flow hedges | 24 | 6 | 1 |
| 41 | 19 | ||
| Items that cannot be transferred to profit/loss for the year | |||
| Revaluation of defined-benefit pension plans | 31 | –818 | –250 |
| Tax attributable to items that cannot be transferred to profit/loss for the year | 175 | 55 | |
| –643 | –195 | ||
| Other comprehensive income during the year | –602 | –176 | |
| Comprehensive income for the year | –1,352 | 701 | |
| Attributable to: | |||
| NCC's shareholders | –1,358 | 696 | |
| Non-controlling interests | 6 | 5 | |
| Total comprehensive income during the year | –1,352 | 701 |
1) Also see the specification of the item Reserves in shareholders' equity, p. 27.
The asphalt operations in Sweden and Norway improved their results, while Finland and Denmark's results declined due to intensified competition. The results of stone materials operations were at a healthy level, excluding the revaluations posted in the third quarter. The results in foundation engineering were impacted not only by lower sales in Sweden but also by negative revaluations in the third quarter.
During the year, NCC Property Development recognized nine (5) projects were in profit, of which four in Finland, two in Sweden, two in Denmark and one in Norway. The result was affected by the revaluation of development properties in Norway, Denmark and Finland in an amount of SEK 363 M due to decisions taken in the third quarter of 2018 to discontinue these.
Other and eliminations amounted to an expense of SEK –166 M (– 314). This item included an expense of SEK –187 M (–116) for NCC's Head Office and losses from minor subsidiaries and associated companies. It also included eliminations of inter-company gains of SEK 11 M (10). Other Group adjustments, essentially comprising the difference in accounting policies between segments and the Group (in part for pensions) as well as restructuring provisions amounted to SEK 10 M (–208). The result after financial items was SEK –849 M (983).
Net financial items amounted to an expense of SEK –85 M (–91). Interest rate effects on loans and investments, lower credit margins and higher capitalization of interest rates for NCC Property Development had a positive effect, although this was offset by increased costs due to higher net indebtedness during the year.
The effective tax rate for NCC was 12 (11) percent. Also refer to Note 24, Tax on net profit for the year, deferred tax assets and deferred tax liabilities.
The change in other comprehensive income derived mainly from the net result for the year, and a revaluation of defined-benefit pension plans, for which a reduction in the discount interest rate and higher inflationary assumptions resulted in an increase in the pension liability in 2018. Any tax effects from the above transactions are recognized separately; refer also to Note 24, Tax on net profit for the year, deferred tax assets and deferred tax liabilities.
Net sales were higher in 2018 because NCC secured a large number of major projects in 2017 that had a high work-up rate in 2018. The loss for 2018 was mainly due to the provisions, revaluations and impairment losses totaling SEK 1,565 M that were carried out in the third quarter.
Profit/loss after financial items, SEK M
with comments
| SEK M | Note | 2018 | 2017 | 2016 |
|---|---|---|---|---|
| ASSETS Fixed assets |
1, 20, 35 | |||
| Goodwill | 16 | 1,861 | 1,848 | 1,851 |
| Other intangible assets | 16 | 339 | 335 | 275 |
| Owner-occupied properties | 17 | 915 | 880 | 814 |
| Machinery and equipment | 17 | 3,052 | 2,712 | 2,569 |
| Long-term holdings of securities | 19, 21 | 119 | 129 | 125 |
| Long-term interest-bearing receivables | 23 | 195 | 575 | 361 |
| Other long-term receivables | 119 | 26 | 62 | |
| Deferred tax assets | 2, 24 | 531 | 338 | 163 |
| Total fixed assets | 38 | 7,133 | 6,843 | 6,220 |
| Current assets | ||||
| Properties held for future development | 25 | 1,633 | 1,696 | 1,780 |
| Ongoing property projects | 25 | 2,292 | 1,039 | 1,440 |
| Completed property projects | 25 | 308 | 870 | 808 |
| Properties held for future development, housing | 25 | 16 | ||
| Participations in associated companies | 25 | 226 | ||
| Materials and inventories | 26 | 902 | 764 | 713 |
| Tax receivables | 146 | 241 | 42 | |
| Accounts receivable | 38 | 9,629 | 8,882 | 7,682 |
| Worked-up, non-invoiced revenues | 27 | 1,276 | 1,554 | 1,704 |
| Prepaid expenses and accrued income | 1,418 | 1,170 | 1,061 | |
| Current interest-bearing receivables | 163 | 167 | 152 | |
| Other receivables | 23 | 608 | 687 | 446 |
| Short-term investments | 21, 37 | 72 | 41 | 190 |
| Cash and cash equivalents | 37 | 1,197 | 3,063 | 3,093 |
| Total current assets | 38 | 19,868 | 20,174 | 19,128 |
| TOTAL ASSETS | 27,001 | 27,018 | 25,348 |
NCC impairment tests goodwill annually or when there are indications of changes in value. Impairment losses were posted for that part of goodwill pertaining to NCC Infrastructure's operations in Norway. Despite the impairment losses, goodwill increased as a result of positive exchange-rate effects. Also refer to Note 16, Intangible assets.
Machinery and equipment increased during the year. Investments in machinery primarily occurred in NCC Industry.
The value of property development projects increased as a result of a higher work-up rate in ongoing projects and fewer projects recognized in profit. Also refer to Note 25, Properties classified as current assets.
Accounts receivable increased primarily as a result of lower worked-up, non-invoiced revenues and a rise in advance invoicing within NCC Infrastructure.
Cash and cash equivalents were lower year-on-year because these funds were used to finance firstly the negative cash flow before financing and secondly the payment of dividends and loan repayments. The negative cash flow before financing was primarily an effect of increased investments in property development projects within NCC Property Development.
Long-term interest-bearing liabilities Long-term interest-bearing liabilities declined because long-term liabilities became current during the year.
Provisions for pensions increased during the year. When calculating the pension liability, assumptions regarding the discount interest rate were reduced and assumptions regarding inflation were increased, resulting in an increased liability.
Other long-term provisions increased through warranty commitments in the NCC Infrastructure, NCC Building Sweden and NCC Building Nordics business areas.
Current interest-bearing liabilities Current interest-bearing liabilities increased marginally despite redemption of loans because long-term liabilities became current during the year.
Invoiced revenues, non-worked-up revenues increased, primarily because of increased advance invoicing within the NCC Infrastructure business area.
Other current liabilities increased, primarily due to higher advance payments from customers within NCC Infrastructure.
Consolidated balance sheet, cont'd.
| EQUITY | 1 | |||
|---|---|---|---|---|
| Share capital | 28 | 867 | 867 | 867 |
| Other capital contributions | 1,844 | 1,844 | 1,844 | |
| Reserves | –72 | –113 | –125 | |
| Earnings brought forward including profit/loss for the year | 292 | 2,571 | 2,748 | |
| Shareholders' equity | 2,931 | 5,168 | 5,334 | |
| Non-controlling interests | 17 | 12 | 13 | |
| Total equity | 2,948 | 5,179 | 5,346 | |
| LIABILITIES | 1 | |||
| Long-term liabilities | ||||
| Long-term interest-bearing liabilities | 29, 34 | 1,342 | 1,669 | 2,288 |
| Other long-term liabilities | 32 | 8 | 54 | 54 |
| Provisions for pensions and similar obligations | 31 | 2,279 | 1,407 | 1,008 |
| Deferred tax liabilities | 24 | 297 | 438 | 407 |
| Other provisions | 30 | 2,563 | 1,889 | 1,686 |
| Total long-term liabilities | 38 | 6,488 | 5,456 | 5,443 |
| Current liabilities | ||||
| Current interest-bearing liabilities | 29, 34 | 1,051 | 919 | 723 |
| Accounts payable | 5,164 | 5,179 | 4,427 | |
| Tax liabilities | 95 | 115 | ||
| Invoiced revenues, not worked up | 2, 27 | 6,311 | 5,905 | 4,608 |
| Accrued expenses and deferred income | 33 | 3,452 | 3,207 | 3,205 |
| Provisions | 30 | 68 | 24 | 21 |
| Other current liabilities | 32 | 1,520 | 1,052 | 1,460 |
| Total current liabilities | 38 | 17,566 | 16,382 | 14,558 |
| Total liabilities | 24,054 | 21,838 | 20,001 | |
| TOTAL EQUITY AND LIABILITIES | 27,001 | 27,018 | 25,348 |
NCC Industry has the largest share of capital employed, followed closely by NCC Infrastructure and NCC Property Development. NCC Building Sweden and NCC Building Nordics have a relatively slightly lower share. The allocation in 2018 was essentially the same as in 2017.
During 2018, a review of the operations was conducted to generate better conditions to boost profitability. The return on equity declined in 2018 due mainly to provisions, revaluations and restructuring costs, as well as impairment losses on projects and lower sales in construction operations.
with comments
| SEK M | Note | 2018 | 2017 |
|---|---|---|---|
| Net sales | 1, 2 | 174 | 188 |
| Gross profit | 174 | 188 | |
| Selling and administrative costs | 5, 6, 7, 8 | –376 | –403 |
| Operating profit/loss | –202 | –215 | |
| Result from financial investments | |||
| Result from participations in Group companies | 8, 9 | –208 | 629 |
| Result from other financial fixed assets | 12 | 12 | |
| Result from financial current assets | 4 | ||
| Interest expense and similar items | 11 | –47 | –19 |
| Profit/loss after financial items | –445 | 411 | |
| Appropriations | 14 | 545 | 582 |
| Tax on net profit for the year | 24 | –101 | –90 |
| NET PROFIT FOR THE YEAR | –1 | 903 |
| SEK M | 2018 | 2017 |
|---|---|---|
| Net profit/loss for the year | –1 | 903 |
| Total comprehensive income during the year | –1 | 903 |
The Parent Company consists primarily of head office functions plus a branch in Norway. There are two branches in Denmark and Finland, but no operations are conducted in them. The Parent Company income statement differs from the consolidated income statement in terms of presentation and designations of certain items, because the Parent Company's income statement is prepared in accordance with the Annual Accounts Act while the Group complies with IFRS.
Net sales amounted to SEK 174 M (188) and pertained to invoicing of Group companies. The average number of employees was 71 (74). In 2018, earnings were charged with costs totaling SEK 33 M for departing personnel. The value of shares and participations was impaired by SEK 644 M during the year.
with comments
| ASSETS 1 |
||
|---|---|---|
| Fixed assets | ||
| Intangible fixed assets | ||
| Development expenses 16 |
38 | |
| Total intangible fixed assets | 38 | |
| Tangible fixed assets | ||
| Machinery and equipment 17 |
24 | 8 |
| Total tangible fixed assets | 24 | 8 |
| Financial fixed assets | ||
| Participations in Group companies 18 |
5,518 | 4,678 |
| Other long-term holdings of securities | 45 | 45 |
| Deferred tax assets 24 |
8 | 6 |
| Total financial fixed assets 22, 38 |
5,571 | 4,729 |
| Total fixed assets | 5,595 | 4,774 |
| Current assets | ||
| Current receivables | ||
| Accounts receivable | 1 | 1 |
| Receivables from Group companies | 745 | 222 |
| Other current receivables | 3 | 1 |
| Tax receivables | 110 | 160 |
| Prepaid expenses and accrued income | 17 | 18 |
| Total current receivables | 875 | 402 |
| Cash and bank balances 37 |
1,100 | |
| Balance in NCC Treasury AB 37 |
161 | 863 |
| Total current assets 38 |
1,036 | 2,365 |
| TOTAL ASSETS | 6,631 | 7,139 |
| SEK M | Note | 2018 | 2017 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | 1 | ||
| Shareholders' equity | |||
| Restricted shareholders' equity | |||
| Share capital | 28 | 867 | 867 |
| Statutory reserve | 174 | 174 | |
| Total restricted shareholders' equity | 1,041 | 1,041 | |
| Unrestricted shareholders' equity | |||
| Earnings brought forward | 1,850 | 1,824 | |
| Net profit/loss for the year | –1 | 903 | |
| Total unrestricted shareholders' equity | 1,850 | 2,727 | |
| Total shareholders' equity | 2,891 | 3,768 | |
| Provisions | |||
| Provisions for pensions and similar obligations | 31 | 1 | 1 |
| Other provisions | 30 | 7 | 8 |
| Total provisions | 8 | 9 | |
| Long-term liabilities | |||
| Liabilities to Group companies | 29 | 1,044 | 1,044 |
| Other liabilities1) | 29 | 1,001 | 1,004 |
| Total long-term liabilities | 38 | 2,045 | 2,049 |
| Current liabilities | |||
| Accounts payable | 25 | 33 | |
| Liabilities to Group companies | 29 | 1,232 | 1,192 |
| Tax liabilities | 7 | ||
| Other liabilities | 355 | 5 | |
| Accrued expenses and deferred income | 33 | 75 | 76 |
| Total current liabilities | 38 | 1,687 | 1,313 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES |
6,631 | 7,139 |
1) Of which, SEK 1,000 M pertains to reborrowing from the NCC Group's Pension Foundation.
The Parent Company balance sheet differs from the consolidated balance sheet in terms of presentation and certain designations of items, because the Parent Company's balance sheet is prepared in accordance with the Annual Accounts Act while the Group complies with IFRS.
Financial fixed assets increased because participations in Group companies were higher year-on-year.
Total approved dividends to the shareholders amounted to SEK 864 M, of which SEK 432 M was to be paid in April and SEK 432 M in November 2018.
with comments
| SEK M | Share capital | Other capital contributions |
Reserves | Earnings brought for ward |
Total | Non-controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|
| Opening equity, Jan 1, 2017 | 867 | 1,844 | –125 | 2,967 | 5,553 | 13 | 5,566 |
| Adjustment for amended accounting policy: IFRS 15 Revenue from Contracts with Customers |
–220 | –220 | –220 | ||||
| Adjusted opening balance, January 1 | 867 | 1,844 | –125 | 2,747 | 5,333 | 13 | 5,346 |
| Net profit/loss for the year | 872 | 872 | 5 | 877 | |||
| Other comprehensive income | 19 | –195 | –176 | –176 | |||
| Total comprehensive income | 19 | 677 | 696 | 5 | 701 | ||
| Sale/Acquisition of company shares | –4 | –4 | –4 | ||||
| Performance-based incentive program | 5 | 5 | 5 | ||||
| Dividend | –865 | –865 | –6 | –871 | |||
| Total transactions with the Group's shareholders | –864 | –864 | –6 | –869 | |||
| Equity on Dec 31, 2017 | 867 | 1,844 | –113 | 2,569 | 5,167 | 12 | 5,179 |
| Net profit/loss for the year | –756 | –756 | 6 | –750 | |||
| Other comprehensive income | 41 | –643 | –602 | –602 | |||
| Total comprehensive income | 41 | –1,399 | –1,358 | 6 | –1,352 | ||
| Sale/Acquisition of company shares | –11 | –11 | –11 | ||||
| Performance-based incentive program | –4 | –4 | –4 | ||||
| Dividend | –864 | –864 | –864 | ||||
| Total transactions with the Group's shareholders | –879 | –879 | –879 | ||||
| Equity on Dec 31, 2018 | 867 | 1,844 | –72 | 292 | 2,931 | 17 | 2,948 |
If the earlier policies for recognition of pensions according to IAS 19 had been applied, shareholders' equity would have been SEK 2,817 M higher and net debt SEK 2,279 M lower at December 31, 2018.
Equity is divided into equity attributable to the Parent Company's shareholders and non-controlling interests. Transfer of value in the form of dividends from the Parent Company and the Group is to be based on a statement prepared by the Board of Directors concerning the proposed dividend. This statement must take into account the prudence regulation contained in the Act, in order to avoid dividends being paid in an amount that exceeds what there is coverage for.
The change in equity derives primarily from comprehensive income for the year, transactions with non-controlling interests and dividends to shareholders.
In the Parent Company, the changes are in all significant respects attributable to comprehensive income for the year and dividends to shareholders.
On December 31, 2018, the registered share capital amounted to 13,337,895 Series A shares and 95,097,927 Series B shares. The shares have a quotient value of SEK 8.00 each. Series A shares carry ten votes each and Series B shares one vote each.
Pertains to shareholders' equity contributed by the owners.
The translation reserve includes all exchange-rate differences that arise from the translation of the financial statements of foreign operations that have compiled their reports in a currency other than that in which the consolidated financial statements are presented, in NCC's case, SEK. The translation reserve also includes exchange-rate differences that arise from the revaluation of liabilities and currency forward contracts entered into as instruments to hedge net investments in foreign operations.
The fair value reserve includes the accumulated net change in the fair value of available-for-sale financial assets up to the time that such assets have been sold or their value impaired.
The hedging reserve includes the effective portion of the accumulated net change in the fair value of Cash flow hedging instruments attributable to hedging transactions that have not yet occurred.
The revaluation reserve arises from gradual acquisitions, multi-stage acquisitions, meaning an increase in the fair value of previously owned portions of net assets resulting from gradual acquisitions.
| RESTRICTED SHAREHOLDERS' EQUITY |
UNRESTRICTED SHAREHOLDERS' EQUITY |
||||
|---|---|---|---|---|---|
| SEK M | Share capital | Statutory reserves |
Earnings brought forward |
Net profit/loss for the year | Total sharehold- ers' equity |
| Opening shareholders' equity, Jan 1, 2017 | 867 | 174 | 1,330 | 1,306 | 3,677 |
| Appropriation of profits | 1,306 | –1,306 | |||
| Total comprehensive income during the year | 903 | 903 | |||
| Merger gain | 53 | 54 | |||
| Sale/Acquisition of company shares | –4 | –4 | |||
| Dividend, cash | –865 | –865 | |||
| Performance-based incentive program | 5 | 5 | |||
| Shareholders' equity on Dec 31, 2017 | 867 | 174 | 1,824 | 903 | 3,768 |
| Appropriation of profits | 903 | –903 | |||
| Total comprehensive income during the year | –1 | –1 | |||
| Sale/Acquisition of company shares | –11 | –11 | |||
| Dividend, cash | –864 | –864 | |||
| Performance-based incentive program | –4 | –4 | |||
| Shareholders' equity on Dec 31, 2018 | 867 | 174 | 1,850 | –1 | 2,891 |
This item includes funds earned by the Parent Company and its subsidiaries, associated companies, joint ventures and joint operations.
The aim of the NCC Group's strategy is to generate a healthy return to shareholders under financial stability. The strategy is reflected in the financial objectives, which were as follows in 2018:
A return on equity after tax of 20 percent. In 2018, the return on equity was –18 percent.
Net debt is not to exceed 2.5 times EBITDA. At December 31, 2018, net debt, excluding the pension liability, was 1.6 times EBITDA.
NCC's subsidiary, NCC Försäkrings AB, as an insurance company, must have investment assets that cover technical liabilities for own account. In 2018 and 2017, these requirements were fulfilled. Otherwise, there were no other Group companies subject to external capital requirements.
For further information on NCC Group's financial objectives and dividend policy, see pages 7.
| GROUP | 2018 | 2017 |
|---|---|---|
| Translation reserve | ||
| Translation reserve, January 1 | –109 | –128 |
| Translation differences during the year in translation of foreign operations |
90 | 25 |
| Gain/loss on hedging of exchange-rate risk in foreign operations |
–30 | –7 |
| Tax attributable to hedging of exchange-rate risk in for eign operations |
1 | |
| Translation difference attributable to divested operations | 6 | |
| Translation reserve, December 31 | –43 | –109 |
| Fair value reserve | ||
| Fair value reserve, January 1 | 5 | |
| Fair value changes on available-for-sale financial assets recognized in profit/loss |
–5 | |
| Fair value reserve, December 31 | 0 | 0 |
| Hedging reserve | ||
| Hedging reserve, January 1 | –7 | –4 |
| Fair value changes for the year in cash flow hedges | –18 | –19 |
| Fair-value changes in cash flow hedges transferred to profit or loss |
–11 | 16 |
| Tax attributable to cash flow hedges | 6 | 1 |
| Hedging reserve, December 31 | –29 | –7 |
| Revaluation reserve | ||
| Revaluation reserve, January 1 | 2 | 2 |
| Transfer to earnings brought forward | –1 | |
| Revaluation reserve, December 31 | 1 | 2 |
| Total reserves | ||
| Reserves, January 1 | –113 | –125 |
| Change in reserves during the year | ||
| – Translation reserve | 66 | 19 |
| – Fair value reserve | –5 | |
| – Hedging reserve | –23 | –2 |
| – Revaluation reserve | –1 | |
| Reserves, December 31 | –72 | –113 |
with comments
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| SEK M | Note | 2018 | 2017 | 2018 | 2017 |
| OPERATING ACTIVITIES | |||||
| Profit/loss after financial items, remaining operations | –849 | 983 | –445 | 411 | |
| Adjustments for items not included in cash flow: | |||||
| – Depreciation/amortization | 6 | 663 | 628 | 2 | 1 |
| – Impairment losses and reversal of impairment losses | 8 | 453 | 7 | 682 | |
| – Exchange-rate differences | –17 | 131 | |||
| – Result from sales of fixed assets | –148 | –82 | 73 | ||
| – Changes in provisions | 30 | 711 | 419 | –1 | 1 |
| – Group contributions | –55 | ||||
| – Other | –25 | 10 | –1 | ||
| Total items not included in cash flow | 1,637 | 1,112 | 683 | 21 | |
| Tax paid | –53 | –432 | –59 | –351 | |
| Cash flow from operating activities before changes in working capital | 735 | 1,664 | 179 | 81 | |
| Cash flow from changes in working capital | |||||
| Sales of property projects | 1,436 | 1,630 | |||
| Investments in property projects | –2,602 | –1,152 | |||
| Reversal of commission relationship | –1,284 | ||||
| Other changes in working capital | 55 | 17 | –9 | –125 | |
| Cash flow from changes in working capital | –1,110 | 494 | –9 | –1,409 | |
| Cash flow from operating activities | –375 | 2,158 | 169 | –1,328 | |
| INVESTING ACTIVITIES | |||||
| Acquisition of subsidiaries/operations | 37 | –59 | –96 | –1,488 | –305 |
| Sale of subsidiaries | 37 | 75 | |||
| Acquisition of buildings and land | 17 | –100 | –52 | ||
| Sale of buildings and land | 35 | 14 | |||
| Acquisition of other financial fixed assets | –5 | ||||
| Sale of other financial fixed assets | 47 | 6 | |||
| Acquisition of other fixed assets | –929 | –825 | –18 | –10 | |
| Sale of other fixed assets | 150 | 160 | |||
| Cash flow from investing activities | –782 | –797 | –1,506 | –315 | |
| Cash flow before financing | –1,157 | 1,361 | –1,337 | –1,643 | |
| FINANCING ACTIVITIES | |||||
| Dividend paid | –864 | –865 | –864 | –865 | |
| Acquisition/sale of company shares | –11 | –4 | –11 | –4 | |
| Group contributions received | 55 | 373 | |||
| Loans raised | 68 | 52 | 385 | 999 | |
| Amortization of loans | –263 | –488 | |||
| Increase (-) / Decrease (+) in long-term interest-bearing receivables | 380 | –214 | |||
| Increase (-) / Decrease (+) in current interest-bearing receivables | –26 | 134 | –30 | 895 | |
| Increase (+) in non-controlling interests, etc. | –6 | ||||
| Cash flow from financing activities | –717 | –1,392 | –466 | 1,399 | |
| Cash flow for the year | –1,874 | –31 | –1,802 | –245 | |
| Cash and cash equivalents, January 1 | 37 | 3,063 | 3,093 | 1,963 | 5,835 |
| Less cash and cash equivalents on January 1 due to the terminated commission relationship |
–3,628 | ||||
| Cash and cash equivalents on January 1, excluding commission relationship | 2,207 | ||||
| Exchange-rate difference in cash and cash equivalents | 8 | 1 | |||
| Cash and cash equivalents, December 31 | 37 | 1,197 | 3,063 | 161 | 1,963 |
| Short-term investments with a maturity exceeding three months | 72 | 41 | |||
| Total cash and cash equivalents at year-end | 1,269 | 3,104 | 161 | 1,963 |
Cash flow from operating activities totaled SEK –375 M (2,158) in 2018. Cash flow was negatively impacted by the result of operations and investments in property development projects in NCC Property Development. Other net changes in working capital were on a par with the preceding year. Positive adjustments for non-cash items essentially comprise higher provisions for warranties and loss-making projects, reversal of depreciation/amortization and impairment losses on fixed assets, as well as revaluation of properties classed as current assets.
| GROUP | ||
|---|---|---|
| SEK M | 2018 | 2017 |
| Increase (-) / Decrease (+) in inventories | –127 | –77 |
| Increase (-) / Decrease (+) in receivables | –573 | –2,288 |
| Increase (+) / Decrease (-) in liabilities | 755 | 2,383 |
| Other changes in working capital | 55 | 17 |
Cash flow from investing activities amounted to SEK –782 M (–797). Investments in machinery and equipment primarily occurred in NCC Industry.
Cash flow from financing activities was SEK –717 M (–1,392). The lower year-on-year level was due primarily to lower loan repayments and lower long-term financial receivables in NCC Property Development, following the sale of the shares in Mölndals Galleria.
Total cash and cash equivalents including short-term investments with a maturity exceeding three months amounted to SEK 1,269 M (3,104).
Net indebtedness (interest-bearing liabilities less cash and cash equivalents less interest-bearing receivables) on December 31, 2018 amounted to SEK –3,045 M (–149). The year-on-year increase in net debt was due mainly to a negative cash flow before financing in 2018 and changes in the pension liability. The average maturity period for interest-bearing liabilities, excluding pension debt according to IAS 19, was 34 months (34) at year-end. NCC's unutilized committed lines of credit at year-end amounted to SEK 3.6 billion (3.5), with an average remaining maturity of 33 (44) months.
| GROUP, SEK M | 2018 Jan–Dec |
2017 Jan–Dec |
|---|---|---|
| Net debt, January 1 | –149 | –222 |
| Cash flow before financing | –1,157 | 1,361 |
| Acquisition/sale of company shares | –11 | –4 |
| Change in pension debt | –872 | –399 |
| Exchange-rate difference in cash and cash equivalents | 8 | –20 |
| Dividend paid | –864 | –865 |
| Net debt, closing balance | –3,045 | –149 |
The year's cash flow before financing in the Parent Company was lower than in 2017 and amounted to SEK –1,337 M (–1,643). The year's cash flow was charged with capital contributions, essentially to NCC Norge AS and NCC Sverige AB. Cash flow from changes in working capital had a positive effect.
Net debt is normally affected by seasonal variations. More capital is normally tied up during the second and third quarters due to high activity in asphalt and civil engineering operations, as well as in parts of NCC Building. The spinoff of Bonava during the second quarter of 2016 reduced the debt in remaining operations. At the end of 2018, net debt amounted to SEK 3,045 M (149). The change was mainly the result of lower cash flow and higher pension debt.
| Note | 1 | Accounting policies | 30 |
|---|---|---|---|
| Note | 2 | Transitional effects regarding 2017 due to IFRS15 | 37 |
| Note | 3 | Order backlog and distribution of external net sales |
37 |
| Note | 4 | Reporting by operating segments | 38 |
| Note | 5 | Number of employees, personnel expenses and remuneration of senior executives |
39 |
| Note | 6 | Depreciation/amortization | 42 |
| Note | 7 | Fees and remuneration to audit firms | 42 |
| Note | 8 | Impairment losses | 42 |
| Note | 9 | Result from participations in Group companies | 43 |
| Note | 10 | Operating expenses by nature of expenses | 43 |
| Note | 11 | Interest expense and similar items | 43 |
| Note | 12 | Net financial items | 43 |
| Note | 13 | Effects on profit or loss of exchange-rate changes |
43 |
| Note | 14 | Appropriations | 43 |
| Note | 15 | Acquisition of operations | 43 |
| Note | 16 | Intangible assets | 44 |
| Note | 17 | Tangible fixed assets | 46 |
| Note | 18 | Participations in Group companies | 47 |
| Note | 19 | Participations in associated companies and joint ventures |
47 |
| Note | 20 | Participations in joint operations | 47 |
| Note | 21 | Financial investments | 48 |
| Note | 22 | Financial fixed assets | 48 |
| Note | 23 | Long-term interest-bearing receivables and other receivables |
49 |
| Note | 24 | Tax on net profit for the year, deferred tax assets and deferred tax liabilities |
49 |
| Note | 25 | Properties classed as current assets | 51 |
| Note | 26 | Materials and inventories | 51 |
| Note | 27 | Construction contracts | 51 |
| Note | 28 | Share capital | 52 |
| Note | 29 | Interest-bearing liabilities | 52 |
| Note | 30 | Other provisions | 53 |
| Note | 31 | Pensions | 53 |
| Note | 32 | Other liabilities | 55 |
| Note | 33 | Accrued expenses and deferred income | 55 |
| Note | 34 | Leasing | 56 |
| Note | 35 | Related-party transactions | 56 |
| Note | 36 | Pledged assets, sureties, guarantees and contingent liabilities |
57 |
| Note | 37 | Cash flow statement | 57 |
| Note | 38 | Financial instruments and financial risk management |
58 |
| Note | 39 | Information about the Parent Company | 66 |
| Note | 40 | Events after the balance-sheet date | 66 |
| Note | 41 | Appropriation of the company's profit | 66 |
The NCC Group applies the International Financial Reporting Standards (IFRS) adopted by the EU and the interpretive statements issued by the IFRS Interpretations Committee (IFRIC). The Group also applies the Swedish Annual Accounts Act (1995:1554), recommendation RFR 1, Additional Accounting Regulations for Groups and statements issued by the Swedish Financial Reporting Board. The Annual Report and the consolidated financial statements were approved for issue by the Board of Directors on March 8, 2019. The consolidated income statement and balance sheet and the Parent Company's income statement and balance sheet will be presented to the Annual General Meeting for adoption on April 9, 2019.
The Group applied IFRS 15 and IFRS 9 for the first time as of January 1, 2018. Other amendments of IFRSs that are to be applied as of January 1, 2018 have had no material impact on the consolidated financial statements.
IFRS 15 Revenue from Contracts with Customers replaces IAS 18 Revenues and IAS 11 Construction Contracts, including associated interpretations. NCC applies IFRS 15 retrospectively, with the overall effect recognized in shareholders' equity at January 1, 2017. Refer to Note 2, where the impact in 2017 is shown of the transition to IFRS 15, which relates to the NCC Infrastructure, NCC Building Sweden and NCC Building Nordics business areas.
According to IFRS 15, revenue is recognized when the customer gains control over the sold goods or services. This differs from the former basis of revenue being recognized when risks and benefits associated with ownership were transferred to the customer. Determining the timing for the transfer of control, meaning a certain date or over a period of time, requires accounting judgements. However, this difference in approach has not had any essential impact on NCC's revenue recognition in respect of revenue recognized over time (percentage of completion) or at a point in time.
NCC has identified two revenue streams where IFRS 15 has or could have a material impact on NCC's financial statements.
The first revenue stream concerns contract modifications related to change orders and contract claims for shortcomings in tender specifications and similar items, which mainly affect the NCC Building Sweden, NCC Building Nordics and NCC Infrastructure business areas. The requirements for being able to recognize revenue from contract modifications are more rigorous under IFRS 15 than under the former IAS 11 in terms of both the documented right to, and probability of, payment from the customer. A contractual modification exists even if the parties dispute the scope and/or the price of the modification. When assessing whether the modifications are enforceable, NCC must take all relevant facts and circumstances into account. If the parties fail to agree on the price, the revenue is only to be recognized insofar as it is highly probable that a material reversal of accumulated recognized revenues will not arise when the parties reach agreement. According to IAS 11, revenues in such cases would be recognized when it is regarded as probable that they will be approved by the customer.
The other revenue stream refers to the NCC Property Development business area's revenues from sales of commercial property projects before completion. The question is whether the revenue is to be recognized over time (percentage of completion) or as previously at a specific time (when the property has been completed and handed over to the customer). According to IFRS 15, the revenue is to be recognized over time (percentage-of-completion) unless NCC has an alternative use for the sold property and NCC is entitled to payment from the customer for work completed to date. If one of these criteria is not fulfilled, the revenue, as before, is to be recognized at a point in time – on completion and handover to the customer. Since NCC always agrees on delivery of a certain property to the customer, and it cannot be sold to anyone else, NCC, according to the definition in IFRS 15, never has an alternative use for the sold property. Concerning whether NCC is entitled to payment, certain legislation contains factors that indicate that NCC has such an entitlement, while other legislation indicates that this is not the case. Moreover, legal praxis has not been developed in this context. NCC's overall assessment is that in normal cases the uncertainty concerning NCC's entitlement to payment is so great that the revenue, as before, should be recognized at a point in time, on completion of the property and handover to the customer.
IFRS 9 replaces IAS 39 Financial Instruments. IFRS 9 establishes principles for recognition and measurement of financial assets, financial liabilities and certain contracts in respect of purchases and sales of non-financial instruments. In addition, the Group applies consequential amendments in IFRS 7 Financial Instruments: Disclosures that are applied to disclosures for 2018 but that have not yet been generally applied to comparative data.
IFRS 9 introduces new rules on areas such as the recognition and measurement of financial instruments, impairment of financial instruments and hedge accounting. NCC's analysis of the effects of IFRS 9 shows that the new rules do not impact the Group's financial position since IFRS 9 does not significantly impact the measurement. Nor does IFRS 9 entail any material impact on NCC's hedge accounting or NCC's provisions for credit losses.
In respect of the classification and measurement of financial assets and financial liabilities, IFRS 9 includes new categories that replace those stipulated in IAS 39. A table in Note 38 shows the categories of NCC's assets and liabilities that are classified according to IAS 39 and IFRS 9 but, as is apparent, they do not impact carrying amounts.
In respect of impairment losses, IFRS 9 replaces the "incurred credit loss model" from IAS 39 with an "expected credit loss model". The new impairment model is applied for financial assets measured at amortized cost and contract assets or debt instruments measured at FVTOCI, but not for investments in equity instruments. This had no impact on NCC's financial statements since the effect is not regarded as material.
In respect of hedge accounting, NCC has decided to apply a new general hedge accounting model in accordance with IFRS 9. This requires that the Group ensures that relationships within the hedge accounting comply with the risk management objectives and strategy and that the Group applies a more qualitative and forward-looking approach for determining the effectiveness of hedges.
The Group uses currency forward contracts to hedge the variation in cash flows that arises through changes in exchange rates related to foreign currency loans, receivables and sales and purchases of products. The Group identifies fair value changes for the forward component of currency forward contracts used as the hedging instrument in cash flow hedging relationships. The effective component of changes in the fair value of the hedging instrument is accumulated in the cash flow hedging reserve as a separate component of shareholders' equity.
According to IAS 39, changes in fair value attributable to the forward component of currency forward contracts (swap points) are to be recognized directly in profit or loss. Under IFRS 9, however, the Group has decided to switch to including the swap points in the hedging relationship and thus the entire change in the fair value of currency forward contracts is recognized in other comprehensive income and accumulated in the hedging reserve as a separate component of shareholders' equity. For an explanation of how the Group applies hedge accounting in accordance with IFRS 9, see Note 38.
The following new IFRSs do not become effective until the 2019 fiscal year and have not been applied in the preparation of the financial statements for 2018.
The new standard IFRS 16 Leases will be applied as of January 1, 2019. IFRS 16 replaces the previous standard IAS 17. NCC will implement the standard according to the modified retrospective approach, which entails that identified leases will not be restated retrospectively; i.e. no impact on comparative figures for periods prior to 2019.
For lessees, IFRS 16 entails that the terms financial and operating leases cease to exist and instead the lessee is to recognize a right-of-use asset and a lease liability for all leases, with the exception of leases with a leasing term of a maximum of 12 months or leases applying to low-value assets. The right-of-use asset represents a right to use the underlying asset and the lease liability represents an obligation to pay leasing fees.
The NCC Group will recognize right-of-use assets with associated liabilities for vehicles, heavy production machinery, leased premises and ground leases. The costs for these leases will be recognized as depreciation of right-of-use assets and as interest expense for lease liabilities. Based on available information NCC estimates that lease liabilities will increase by SEK 1,7 billion at January 1, 2019 due to the switch to IFRS 16. Analysis and quality assurance is ongoing and the final amount will be communicated in conjunction with the interim-report for the first quarter.
Other amendments to IFRSs
Other amended IFRSs that will start to be applied from 2019 and later years are expected to have no or only a minor impact on NCC's financial statements.
The Parent Company has prepared its annual report in accordance with the Annual Accounts Act (1995:1554) and recommendation RFR 2 Accounting for Legal Entities issued by the Swedish Financial Reporting Board, as well as statements issued by the Swedish Financial Reporting Board. The Parent Company recognizes Group contributions received and granted as appropriations, which is in accord with the alternative rule in RFR 2. For tax reasons, the Swedish Financial Reporting Board has granted exemption from the requirement that listed parent companies must report certain financial instruments at fair value. NCC applies the exemption rules and has thus refrained from reporting certain financial instruments at fair value.
Within the areas described below, the Parent Company's accounting policies differ from the Group's.
The differences are presented under the respective headings below.
The consolidated financial statements include the Parent Company and the companies and operations in which the Parent Company, directly or indirectly, has a controlling interest, as well as joint arrangements and associated companies.
Business combinations are recognized in accordance with the purchase method. This method entails that the acquisition of a subsidiary is regarded as a transaction whereby the Group indirectly acquires the subsidiary's assets and takes over its liabilities. The fair value on the date of acquisition of the acquired identifiable assets and assumed liabilities, as well as any non-controlling interests, is determined in the acquisition analysis.
In the event of a business combination in which transferred compensation, any non-controlling interests and the fair value of previously owned interests (in connection with gradual acquisitions) exceed the fair value of the acquired assets and assumed liabilities that are recognized separately, the difference is recognized as goodwill. When the difference is negative, what is known as a bargain acquisition, this is recognized directly in profit or loss.
Acquired and divested companies are included in the consolidated income statement, balance sheet and cash flow statement during the holding period.
Companies in which the Parent Company has a controlling influence, normally through a direct or indirect holding carrying more than 50 percent of the voting rights, are consolidated in their entirety. Controlling influence is defined as power over the investee, exposure or the right to variable returns from its involvement with the investee and the ability to exercise its power over the investee to affect the investor's returns. Shares in subsidiaries are recognized in the Parent Company at acquisition value (cost). Should the recoverable value of shares in subsidiaries fall below the fair value, an impairment loss is recognized. Dividends received are recognized as revenue. For information on NCC's subsidiaries, refer to Note 18, Participations in Group companies.
In companies that are not wholly owned subsidiaries, non-controlling interests are recognized as the share of the subsidiaries' equity held by external shareholders. This item is recognized as part of the Group's equity. Non-controlling interests are recognized in profit or loss. Information about the share of profit attributable to non-controlling interests is disclosed in conjunction with the consolidated income statement.
The effects of transactions with non-controlling interests are recognized in equity if they do not give rise to a change in controlling influence.
Associated companies are defined as companies in which the Group controls 20–50 percent of the voting rights. Companies in which the Group owns less than 20 percent of voting rights but exercises a significant influence are also classified as associated companies. For information on the Group's participations in associated companies, refer to Note 19.
Participations in associated companies are consolidated in accordance with the equity method.
NCC's share in associated companies relates to their operations and its share in the results of associated companies is recognized in profit or loss as "Result from participation in associated companies," which is part of operating profit. Amounts are recognized net after taxes.
In the Parent Company, associated companies are recognized at acquisition value less any impairment losses. Dividends received are recognized as revenue.
Joint arrangements are defined as projects conducted in forms similar to those of a consortium, meaning subject to joint control. This could take the form of, for example, jointly owned companies that are governed jointly. Joint arrangements are divided into joint ventures, which are consolidated according to the equity method, or into joint operations, which are consolidated according to the proportional method. For additional information, see Note 19, Participations in associated companies and joint ventures, and Note 20, Participations in joint operations.
In the Parent Company, joint arrangements are recognized at acquisition value less any impairment losses. Dividends received are recognized as revenue.
Receivables, liabilities, revenues and costs, as well as unrealized gains and losses, that arise when a Group company sells goods or services to another Group company are eliminated in their entirety. Unrealized losses are eliminated in the same way as unrealized gains, but only insofar as there are no impairment requirements. This also applies to joint arrangements and associated companies, in an amount corresponding to the Group's holding. Refer to Note 35, Related-party transactions.
Market prices are applied for transactions between Group entities.
Foreign subsidiaries, associated companies and joint arrangements are recognized using the functional currency and are translated to the reporting currency. For NCC, the functional currency is defined as the local currency used in the reporting entity's accounts. The Parent Company's functional currency is SEK. The reporting currency is defined as the currency in which the Group's overall accounting is conducted, in NCC's case SEK.
NCC's revenues are recognized according to IFRS 15 Revenue from Contracts with Customers. According to IFRS 15, revenues are to be recognized when the customer gains control over the sold goods or services. NCC's revenues essentially comprise:
Revenues from construction contracts and similar assignments The construction contracts mean that NCC performs work on land belonging to the customer and thus creates an asset that is controlled by the customer in pace with the asset's completion. In turn this means that NCC recognizes revenues over time by applying percentage-of-completion profit recognition.
Application of the percentage-of-completion recognition of revenue and profit entails that profit is recognized in pace with completion of the project. To determine the amount of income worked up at a specific point in time, the following components are required:
The fundamental condition for revenue recognition based on percentage of completion is that estimate-at-completion of total project revenues and costs can be quantified reliably. As a consequence of revenue recognition based on the percentage-of-completion method, the trend of earnings of ongoing projects is reflected immediately in the financial statements. Percentage-of-completion revenue recognition is subject to a component of uncertainty. Due to unforeseen events, the final profit of the projects may occasionally be higher or lower than expected. It is particularly difficult to anticipate profit at the beginning of the project period and for technically complex projects or projects that extend over a long period. For projects that are difficult to forecast, revenue is recognized in an amount corresponding to the worked-up cost, meaning that zero earnings are entered until the profit can be reliably estimated. As soon as this is possible, the project switches to the percentage-of-completion method.
Provisions posted for potential loss-making contracts are charged against profit for the relevant year. Provisions for losses are posted as soon as they become known.
Contract modifications covering change orders and contract claims for shortcomings in tender specifications and similar items are recognized when the modifications are enforceable; meaning when there is a legal right to payment for them.
Balance-sheet items such as "worked up, non-invoiced revenues" and "invoiced revenues not yet worked up" are recognized in gross amounts on a project-by-project basis. Projects for which worked-up revenues exceed invoiced revenues are recognized as current assets, while projects for which invoiced revenues exceed worked-up revenues are recognized as a current interest-free liability. Refer to Note 27 Construction contracts. The customer is normally invoiced on account during the term of the project.
The following example illustrates how the percentage-of-completion method is applied. On January 1 of Year 1, NCC receives a contract regarding the construction of a building. The project is estimated to take two years to complete. The contract price is 100 and the anticipated profit from the project is 10. On December 31 of year 1, NCC's costs for the project amount to 45, in line with expectations. Since NCC has completed half of the work and the project is proceeding as planned, NCC recognizes half of the anticipated profit of 10, that is 5, in the accounts for Year 1. Revenue recognition on completion means that profit is not recognized until the end of Year 2, or the beginning of Year 3, depending on when the final financial settlement with the customer was agreed.
| Profit | Year 1 | Year 2 |
|---|---|---|
| Income recognition on completion | 0 | 10 |
| According to percentage-of-completion | 5 | 5 |
For agreements that contain both a contract and an operation and maintenance service, the revenue must be allocated to the various parts. Depending on how the payment is to be made, NCC may either receive a financial asset in accordance with a predetermined payment plan or an intangible asset providing the right to possible payment. The payments must be discounted. The part of the agreement that pertains to the contract-related service is recognized on a percentage-of-completion basis. Due to the above classification, the operation and maintenance part is recognized as revenue on an even basis over the term of the contract or when the benefits are transferred to NCC.
NCC's sales include revenues from sales of properties classed as current assets. Sales include both land and the building constructed by NCC on the land.
Normally, the sale of land and construction of a building constitute a performance obligation and are to be recognized jointly. Payment is normally received in conjunction with date of occupancy. In rare cases, depending on the terms and conditions of the agreements, the sale of land (or land with construction under way) constitutes one performance obligation and construction of a building another.
Revenues are recognized at the point in time when control is transferred to the purchaser. Control is transferred over time (on a percentage-of-completion basis) unless NCC has an alternative use for the sold property and NCC is entitled to payment from the customer for work completed to date, in which case the revenue is recognized by applying percentage-of-completion profit recognition. If one of the above criteria is not fulfilled, the revenue is to be recognized at a point in time – on completion and handover to the customer. Since NCC always contractually agrees on delivery of a certain property to the customer, and the property cannot be sold to anyone else, NCC never has an alternative use for the sold property. Concerning the question of whether NCC is entitled to payment, certain legislation contains factors that indicate that NCC has such an entitlement, while other legislation indicates that this is not the case. Moreover, legal praxis has not been developed in this context. NCC's overall assessment is that in normal cases the uncertainty concerning NCC's entitlement to payment is so great that the
revenue, as before, should be recognized at a point in time, on completion of the property and handover to the customer.
It could also be the case that property projects are sold with guarantees of certain leasing to tenants or with a stipulation that a supplementary purchase consideration be paid when a certain leasing rate has been achieved. In connection with the date of sale, any rental guarantees are recognized as prepaid income, which is then recognized as revenue as rental activity progresses. The supplementary purchase consideration is recognized as revenue when the agreed leasing rate has been achieved.
Revenues from sales of asphalt, stone materials, etc.
Revenues from sales of asphalt, stone materials, etc. are recognized at a point in time, which is the point in time of delivery to the customer.
Straight-line depreciation according to plan is applied in accordance with the estimated useful life, with due consideration for any residual values at the close of the period, or after confirmed depletion of net asset value in those cases when the asset does not have an indefinite life. Goodwill and other assets that have an indefinite life are not amortized but subject to systematic impairment testing. NCC applies so-called component depreciation, whereby each asset with a considerable value is divided into a number of components that are depreciated on the basis of their particular useful life.
Depreciation/amortization rates vary in accordance with the table below:
| Usufructs | In line with confirmed depletion of net asset value |
|---|---|
| Software | 12.5–33 percent |
| Other intangible assets | 10–33 percent |
| Tangible fixed assets | |
| Owner-occupied properties | 1.4–10 percent |
| Land improvements | 3,7–5 percent |
| Pits and quarries | In line with confirmed depletion of net asset value |
| Fittings in leased premises | 14–20 percent |
| Plant and equipment | 5–33 percent |
The distribution of the depreciation/amortization posted in profit or loss and balance sheet is presented in Comments to the income statement, Note 6, Depreciation, Note 16, Intangible assets and Note 17, Tangible fixed assets.
This section does not apply to impairment of inventories, assets that arise during the course of a construction assignment, deferred tax assets, financial instruments, assets connected to pensions or assets classified as investments available for sale, since the existing standards for these types of assets contain specific requirements regarding recognition and valuation.
When necessary, although at least once a year, NCC conducts impairment testing. An impairment requirement arises when the recoverable amount is less than the carrying amount. The distribution of impairment losses in the income statement and balance sheet is described in comments to the income statement, Note 8, Impairment losses, Note 16, Intangible assets, and Note 17, Tangible fixed assets.
The term impairment is also used in connection with revaluations of properties classed as current assets. Valuations of these properties are based on the lowest value principle and comply with IAS 2 Inventories.
In the consolidated financial statements, leasing is classified as either financial or operational. Financial leasing exists if the financial risks and benefits associated with ownership are essentially transferred to the lessee. All other cases are regarded as operational leasing.
Assets leased in accordance with financial leasing agreements are capitalized in the consolidated balance sheet as of the date on which the agreement was concluded and the asset delivered. Corresponding obligations are entered as long-term and current liabilities.
Operational leasing is recognized in profit or loss. Leasing fees are distributed on the basis of use, which could differ from the leasing fee paid during the year under review. For further information on leasing, refer to Note 34. In the Parent Company, all leasing agreements are recognized according to the rule for operational leasing.
Income taxes comprise current tax and deferred tax. Taxes are recognized in profit or loss, except when the transactions are recognized in other comprehensive income, with the relating tax effect recognized in comprehensive income. Current tax is tax that is to be paid or received during the current fiscal year. This also includes adjustments of current tax attributable to prior periods.
Deferred tax is recognized on the basis of temporary differences between recognized and taxable values of assets and liabilities and for carry-forward of unused tax losses. For information on tax on current-year profit and deferred tax assets and liabilities, refer to Note 24.
Deferred tax assets and liabilities are calculated based on the tax rate determined for the following year in each particular country. When changes occur in tax rates, the change is recognized in profit or loss in the consolidated financial statements or in other comprehensive income for the tax items included there.
In the Parent Company, untaxed reserves are recognized that consist of the taxable temporary difference arising because of the relationship between reporting and taxation in the legal entity. Untaxed reserves are recognized gross in the balance sheet and the change is recognized gross in profit or loss, as an appropriation. Group contributions received and paid are recognized in the Parent Company's profit or loss as appropriations.
An operating segment is part of the Group that conducts business operations from which it generates revenues and incurs costs and for which independent financial information is available. Furthermore, the earnings of an operating segment are followed up by the chief operating decision maker, who in NCC's case is the President, for evaluation of results and for allocating resources to the operating segment. The reporting of operating segments concurs with the reports presented to the President. Also refer to Note 4 Reporting by operating segment.
The calculation of earnings per share is based on the Group's net profit for the year attributable to Parent Company shareholders and on the weighted average number of shares outstanding during the year. The calculation of earnings per share is not affected by preferred shares or convertible debentures, since the Group has no such items. Share awards in the long-term incentive program, LTI, can give rise to dilution.
Intangible fixed assets are recognized at acquisition cost less accumulated impairment losses and amortization.
Goodwill arises from acquisitions of companies and operations. Goodwill is not amortized but is impairment tested annually. Goodwill in foreign operations is valued in the particular functional currency and is converted from this functional currency to the Group's reporting currency at the exchange rates prevailing on the balance-sheet date.
Usufructs consist primarily of the right to utilize rock pits and gravel quarries, which are depreciated in parallel with confirmed depletion of net asset value based on volumes of extracted stone and gravel. For the distribution of value, also refer to Note 16 Intangible assets.
Properties classed as current assets are held for development and sale as part of operations. The principles applied for the categorization, valuation and profit recognition of properties classed as current assets are presented under the Current assets section below.
Owner-occupied properties are held for use in the Company's own operations for the purpose of production, the provision of services or administration. They are recognized at cost less accumulated depreciation and any impairment losses. Land is not depreciated. Also refer to Note 17, Tangible fixed assets.
Machinery and equipment is recognized at acquisition value less accumulated depreciation and any impairment losses.
Financial fixed assets are recognized at fair value or accrued acquisition value. Impairment losses are posted if the fair value is less than the acquisition cost. Also see the "Financial instruments" section below. For information on the value and type of assets, refer to Note 22 Financial fixed assets. The Parent
Company recognizes shares in Group companies at acquisition cost and, where applicable, taking into account write-ups or impairment losses.
Group property holdings recognized as property projects are valued as inventories when the intention is to sell the properties on completion. Property projects are measured at the lower of cost and net realizable value. Cost includes a reasonable share of indirect costs. Property projects are defined as properties held for development and sale in NCC Property Development.
Property projects within NCC Property Development are divided as follows: • Properties held for future development
For a distribution of values, refer to Note 25, Properties classed as current assets.
Properties held for future development consist of NCC's holding of land and development rights intended for future property development and sale. Properties comprising leased buildings are classified as properties held for future development in cases where the intention is to demolish or refurbish the buildings.
Properties held for future development are classified as ongoing property projects when a definitive decision is taken about a building start and when the activities required in order to complete the property project have been initiated. An actual building start is not necessary.
Ongoing property projects include properties under construction, extension or refurbishment.
Ongoing property projects are classified as completed property projects when the property is ready for occupancy, excluding adjustments to tenant requirements in those properties whose premises are not fully leased. The reclassification is effective not later than the date of approved final inspection. If a project is divided into phases, each phase must be reclassified separately. The smallest unit that can be classified is an entire building that can be sold separately.
Completed property projects can only be derecognized from the balance sheet due to a sale.
The acquisition value of commercial property projects includes expenditure for the acquisition of land and for building design/property development, as well as expenditure for construction, extension or refurbishment. Expenditure for borrowing costs related to ongoing projects is capitalized. Other borrowing costs are expensed on a current account basis. Property development means that the input of the developer – NCC Property Development – is concentrated to the activities that do not pertain to actual construction. These activities are evaluation of project concepts, acquisition of land, work on the detailed development plan, project development, leasing and sale. These activities are conducted by the company's own employees and by external architects and other technical consultants. Development expenditure is capitalized when it pertains to land or properties owned by NCC or over which it has control.
Commercial property projects are recognized continuously in the balance sheet at the lower of acquisition value and net realizable value, which is the selling value (market value) less estimated costs for completion and direct selling costs.
The market value of completed property projects is calculated in accordance with the yield method, which means that the continuous yield (operating net) on the property at full leasing is divided by the project's estimated yield requirement. Unleased space in excess of normal vacancy is taken into account in the form of a deduction from the value based on the assumed leasing rate.
The market value of ongoing property projects is calculated as the value in completed condition, as described above, less the estimated remaining cost of completing the project.
Properties held for future development that are included in the project portfolio, meaning ones that are held for development and sale, are normally valued in the same manner as ongoing projects, as described above. Other properties held for future development are valued on the basis of a value per square meter of development right or a value per square meter of land.
Inventories are measured at the lower of acquisition value and net realizable value. For a distribution of inventory values, refer to Note 26 Materials and inventories.
Acquisitions and divestments of financial instruments are recognized on the date of transaction, meaning the date on which the company undertakes to acquire or divest the asset.
Financial instruments recognized on the asset side of the balance sheet include cash and cash equivalents, loan receivables, accounts receivable, financial investments and derivatives. Accounts payable, loan payables and derivatives are recognized under liabilities. Financial guarantees such as sureties are also included in financial instruments.
A financial asset or financial liability is recognized in the balance sheet when the company becomes a party to the instrument's contractual terms and conditions. Accounts receivable are recognized in the balance sheet when invoices have been sent. Accounts payable are recognized when invoices have been received.
A financial asset is derecognized from the balance sheet when the contractual rights have been realized or extinguished. The same applies to portions of financial assets. A financial liability is derecognized from the balance sheet when the contractual obligation has been fulfilled or otherwise terminated. This also applies to part of the financial liability.
Financial instruments are classified in the following categories for measurement:
When entered for the first time, a financial instrument is classified on the basis of the purpose for which the instrument was acquired. A financial asset is classified on the basis of NCC's business model for managing the financial asset and the character of the expected cash flows. Financial assets are only reclassified if the business model for the asset has been modified.
This category includes the Group's derivatives with a positive fair value and interest-bearing securities whose purpose is to maximize the return on the asset within given risk limits. Changes in fair value are recognized among net financial items in profit or loss. A derivative instrument that is an identified and effective hedging instrument is not included in this category. For accounting of hedging instruments, see Derivatives used in hedge accounting below.
These include accounts receivable and loan receivables, as well as investments in interest-bearing securities where the objective of the holding is to receive contractual cash flows up to maturity. These cash flows are received at predetermined points in time and solely comprise payment of principals and interest on the outstanding principals. Investments in interest-bearing securities held to maturity with a remaining maturity exceeding 12 months after the balance-sheet date are recognized as long-term interest-bearing receivables. Other investments are recognized as short-term investments.
Holdings of shares and participations that are not recognized as subsidiaries, associated companies or joint arrangements are recognized here. These assets are measured at fair value. Impairment losses are posted when testing shows that impairment is required.
This category includes the Group's derivatives with a negative fair value, with the exception of derivatives that function as an identified and effective hedging instrument; see Derivatives used in hedge accounting below. Changes in fair value are recognized among net financial items.
Derivatives used in hedge accounting are recognized at fair value in the balance sheet. The change in value of an effective hedging instrument is recognized in the hedging reserve in shareholders' equity through other comprehensive income.
Loans and other financial liabilities, such as accounts payable, are included in this category. Liabilities are recognized at amortized cost.
NCC assesses expected loan losses based on prospective information for those financial assets recognized at amortized cost and FVOCI. A loss reserve is established in one of the following ways:
A loss risk reserve for the entire life of the asset is established if, on the reporting date, the credit risk for the financial asset has risen significantly since initial recognition and, if this is not the case, a loss risk reserve is established within 12 months.
For accounts receivable and contract assets with or without a significant financing component, a loss risk reserve for the entire life of the asset is always established. Although each invoice is measured individually, provisions are noted for invoices that are more than 60 days overdue unless special circumstances apply.
NCC applies hedge accounting in the following categories: hedging of exchangerate risk in transaction flows, hedging of the Group's interest maturities and hedging of the price risk associated with bitumen and electricity. If the hedge no longer fulfills the criteria for hedge accounting or the hedging instrument is sold, matures, is settled or redeemed, hedge accounting ceases prospectively. When the hedge accounting of cash flow hedges has ceased, the amount that has been accumulated in the hedging reserve is kept in shareholders' equity until:
If the hedged cash flow is no longer expected to arise, the amount that has been accumulated in the hedging reserve is reclassified immediately to profit or loss.
During 2018, NCC ceased to hedge net investments and all hedges were terminated; see below.
Currency exposure associated with future flows is hedged by using currency forward contracts. The currency forward contract that hedges this cash flow is recognized at fair value in the balance sheet. When hedge accounting is applied, the change in fair value attributable to changes in the forward rate of currency forward contracts is recognized in other comprehensive income, after taking tax effects into account and being accumulated in the hedging reserve. Any ineffectiveness is recognized in profit or loss. Transfers of amounts from the hedging reserve to reflect the carrying amount of the purchase are effected so that this is recognized at the forward rate. The hedged flows can be both contracted and forecast transactions.
Group companies have currency hedged their net investments in foreign subsidiaries within NCC Property Development. The hedges were closed during 2018. The amounts that were accumulated in the translation reserve remain in shareholders' equity until the net investment in the foreign operation is divested.
Interest-rate derivatives are used to manage the interest-rate risk. Hedge accounting occurs where effective hedging relationships can be proved. Changes in value, after income tax considerations, are recognized in other comprehensive income and accumulated in the hedging reserve. Any ineffectiveness is recognized in net financial items. What NCC achieves by hedging interest rates is that the variable interest on parts of the Group's financing becomes fixed interest.
By entering into oil forwad contracts, NCC Industry hedges its price risk for bitumen when major contracts are to be performed later than two months following receipt of the order. These oil forward contracts are classified as cash flow hedges and fulfill effectiveness requirements, whereby all changes resulting from changed prices are recognized in other comprehensive income and accumulated in the hedging reserve.
To level off the variations in the Swedish electricity market, NCC has elected, through electricity derivatives entered into gradually over a period of three years, to accumulate the volume of electricity to the particular date of delivery. Changes in effective hedges are recognized in other comprehensive income and accumulated in the hedging reserve, and, in the event of ineffectiveness, the changes are recognized in operating profit.
Receivables and liabilities in foreign currency
Receivables and liabilities in foreign currency are restated at the exchange rates prevailing on the balance-sheet date.
Exchange differences arising from the translation of operational receivables and liabilities are recognized in operating profit, while exchange differences arising from the translation of financial assets and liabilities are recognized in net financial items.
Financial instruments in the Parent Company are recognized at acquisition value less any impairment losses and taking into account earnings effects accrued up to fiscal year-end. In respect of the qualitative and quantitative risk information, reference is made to the disclosures made for the Group above, since Group-wide risk management is applied for the Group.
Cash and cash equivalents consist of cash, bank balances and short-term investments with a maturity of less than three months at the date of acquisition.
Recognition of Group and shareholder contributions
Group contributions and shareholder contributions in the Parent Company are recognized in accordance with their financial impact. Group contributions received and granted are recognized as appropriations. Shareholder contributions granted are recognized as a part of the investment in the subsidiary and are thus subject to customary impairment testing.
The repurchase of shares (treasury shares), including repurchase costs, has been charged directly against retained earnings. Similarly, the sale of such shares results in an increase in retained earnings. Refer to Note 28 Share capital, for more information on treasury shares.
Instrument issued under the NCC Group's share-based remuneration plan comprise share awards and synthetic (cash-settled) shares.
The fair value of allotted share awards is recognized as a personnel cost accompanied by a corresponding increase in shareholders' equity. The fair value is estimated at the date of allotment by means of an adjustment of the discounted value of the future dividends for which the plan participants will not qualify.
Synthetic shares give rise to an undertaking to the employee, which is measured at fair value and recognized as a cost accompanied by a corresponding increase in liabilities. The fair value of the synthetic shares comprises the market price of the Series B NCC share at the particular financial report occasion adjusted by the discounted value of the future dividends for which the plan participants will not qualify.
At each financial report occasion, the Parent Company makes an assessment of the probability of whether the performance targets will be achieved. Costs are calculated on the basis of the number of shares and synthetic shares that are estimated to be settled at the close of the vesting period.
When settlement of the share awards and synthetic shares occurs, social security fees have to be paid for the value of the employees' benefit. These vary in the different countries in which NCC is active. During the period in which the services are performed, provisions are also posted for these calculated social security fees based on the fair value of the share awards and the synthetic shares, respectively, on the reporting date.
To satisfy NCC AB's undertakings in accordance with the option programs, NCC AB has bought back Series B shares. These are recognized as treasury shares and thus reduce shareholders' equity.
For a description of the NCC Group's share-based remuneration program, refer to Note 5.
NCC differentiates between defined-contribution pension plans and defined-benefit pension plans. Defined-contribution plans are pension plans for which the company pays fixed fees to a separate legal entity and does not assume any obligations for payments of additional fees, even if the legal entity lacks sufficient assets to pay benefits accrued for employment up to and including the balance-sheet date. Other pension plans are defined-benefit plans.
| Country | Defined-benefit pension obligations |
Defined-contribtion pension obligations |
|---|---|---|
| Sweden | ||
| Denmark | ||
| Finland | ||
| Norway | ||
| Other countries |
There are several defined-contribution and defined-benefit pension plans in the Group, some of which are secured through assets in dedicated foundations or similar funds. The pension plans are financed through payments made by the various Group companies. Calculations of defined-benefit pension plans are based on the Projected Unit Credit Method, whereby each term of employment is considered to create a future unit of the total final obligation. All units are computed separately and, combined, represent the total obligation on the balance-sheet date. The principle is intended to provide linear expensing of pension payments during the term of employment. The intention of the principle is to expense pension payments straight line during the term of employment. The calculation is made annually by independent actuaries. When there is a difference between how pension costs are established in the legal entity and in the Group, a provision or receivable for Swedish pension plans is recognized for the payroll tax based on this difference. Accordingly, the value of the defined-benefit liability is the present value of anticipated future disbursements using a discount rate that corresponds to the interest stated in Note 31 Pensions. The interest rate on first-class housing bonds is used as the basis for calculating the discount interest rate. Swedish defined-benefit pension obligations are funded in the NCC Group's Pension Foundation. For funded plans, the fair value of plan assets reduces the computed obligation. Changes in plan assets and obligations stemming from experience-based adjustments and/or changes in actuarial assumptions, known as actuarial gains and losses, are recognized directly in other comprehensive income in the period in which they arise.
This reporting method is applied for all identified defined-benefit pension plans in the Group. The Group's disbursements related to defined-benefit pension plans are recognized as an expense during the period in which the employees perform the services covered by the fee.
The Parent Company is covered by the ITP plan, which does not require any payments by the employees. The difference, compared with the principles applied by the Group, pertains mainly to how the discounting rate is determined, the fact that the calculation of defined-benefit obligations is based on the current salary level without assuming future pay rises and the fact that all actuarial gains and losses are recognized in profit or loss when they arise.
In conjunction with notice of employment termination, a provision is posted only if the company is contractually obliged to terminate an employment position before the normal time, or when payments are made as an offering to encourage voluntary termination. For cases in which the company implements personnel cutbacks, a detailed plan is prepared that covers at least the workplace concerned, positions, and the approximate number of affected employees and disbursements for every personnel category or position, as is a time schedule for the plan's implementation.
Provisions differ from other liabilities in that there is a degree of uncertainty concerning when payment will occur or concerning the size of the amount required to settle the provision. Provisions are recognized in the balance sheet when a legal or informal commitment exists due to an event that has occurred, it is probable that an outflow of resources will be required to settle the commitment and the amount can be estimated reliably.
Provisions for future costs arising due to guarantee commitments are recognized at the estimated amounts required to settle the commitment on the balance-sheet date. The computation is based on calculations, executive management's appraisal and experience from similar transactions.
Provisions for restoration costs are posted when such obligations arise. Provisions are posted for that portion of restoration that arises for start-up of a quarry and construction of plants at pits and quarries, and on current account when activities are related to additional extractions at pits and quarries.
A provision for restructuring is recognized when a detailed or formal restructuring plan has been established and the restructuring has either started or been announced publicly. No provisions are posted for future operating expenses.
Borrowing costs attributable to qualifying assets are capitalized as a portion of the capitalized asset's acquisition value when the borrowing costs total a significant amount. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale, which in NCC's case is more than a year. For NCC, the capitalization of borrowing costs is most relevant in the construction of property projects. Other borrowing costs are expensed on current account in the period in which they are incurred. In the Parent Company, borrowing costs are expensed in their entirety in the period in which they are incurred.
NCC recognizes collateral pledged for company or Group liabilities and/or obligations as pledged assets. These may be liabilities, provisions included in the balance sheet or obligations not included in the balance sheet. The collateral may be related to assets entered in the balance sheet or mortgages. Assets are recognized at the carrying amount and mortgages at nominal value. Shares in Group companies are recognized at their value in the Group.
For information on types of collateral, refer to Note 36, Pledged assets, sureties, guarantees and contingent liabilities.
The cash flow statement is prepared using the indirect method, pursuant to IAS 7, Statement of Cash Flows. The recognized cash flow includes only transactions that involve cash payments and disbursements. For information on the effects on cash flow from acquired and divested subsidiaries, refer to Note 37 Cash flow statement.
Estimates and assessments that affect the Group's accounting records have been made on the basis of what is known when the Annual Report was issued. These estimates and assessments, by definition, will rarely correspond to the actual outcome. Particular attention must be paid to this during economic conditions characterized by major uncertainty in terms of the construction market and the global financial market, which has been the case during recent years. The assessments that are most critical to NCC are reported below.
A fundamental condition for being able to estimate percentage-of-completion profit recognition is that estimate-at-completion of project revenues and project costs can be established reliably. This reliability is based on such factors as compliance with NCC's systems for project control and that project management has the necessary skills.
The assessment of project revenues and project costs is based on a number of estimates and assessments that depend on the experience and knowledge of project management in respect of project control, training and the prior management of projects. The assessment component means that the final result may differ from the profit accrued based on percentage-of-completion. For the reported data, refer to Note 27 Construction contracts.
Property sales are recognized at the point in time when control is transferred to the purchaser. The point in time primarily depends on the assessment of at which point in time NCC will be entitled to payment. This normally does not occur until completion and handover to the customer, at which time the revenue is recognized in full. However, assessments must be made on a contract-by-contract basis.
NCC's properties classed as current assets are recognized at the lower of cost and net realizable value.
The assessment of net realizable value is based on a series of assumptions such as sales prices, production costs, the price of land, rent levels and yield requirements plus the possible timing of production start and/or sale. NCC continuously monitors developments in the market and tests the assumptions made on an ongoing basis.
In some cases, the difference between the carrying amount and the estimated net realizable value is of a minor value. A change in the assumptions made could give rise to an additional impairment requirement.
Several assumptions and estimations are made concerning future conditions, which are taken into account when calculating the discounted cash flow upon which the estimated recoverable amount has been based. Important assumptions include expected growth, margins and weighted average cost of capital. If these assumptions change, the value of the remaining goodwill could be affected; refer to Note 16 Intangible assets, for information on the assumptions and estimations made.
NCC's accounts receivable, including receivables for sold property projects, are measured at amortized cost, meaning the amount expected to be received less an amount for doubtful receivables. Also see the Financial instruments/impairment losses section above and to Note 38.
Provisions for future costs arising due to guarantee commitments are recognized at the estimated amounts required to settle the commitment on the balance-sheet date. This estimate is based on calculations, assessments by company management and experiences gained from past transactions; refer to Note 30, Other provisions.
Recognized amounts are affected by changes in the actuarial assumptions that form the basis for calculations of the plan assets and pension obligations. These actuarial assumptions are described in Note 31 Pensions, as is a sensitivity analysis.
Within the framework of its regular business operations, NCC occasionally becomes a party to disputes or legal processes. In such cases, an assessment is made of NCC's obligations and the probability of a negative outcome for NCC. NCC's assessment is based on information and knowledge currently possessed by the company. In several cases, these are difficult assessments and the final outcome could differ from the current estimation.
| SEK M | Jan-Dec 2017 | Change | According to IFRS 15 Jan-Dec 2017 |
|---|---|---|---|
| Net sales | 54,608 | –167 | 54,441 |
| Operating profit | 1,242 | –167 | 1,075 |
| Tax | –141 | 35 | –106 |
| STATEMENT OF COMPREHENSIVE INCOME | ||||||
|---|---|---|---|---|---|---|
| Translation differences for the period | 25 | 2 | 27 | |||
| Earnings per share before and after dilution | 9.29 | –1.22 | 8.07 |
| SEK M | Dec 31, 2017 | Change | According to IFRS 15 Dec 31, 2017 |
Jan 1, 2017 | Change | According to IFRS 15 Jan 1, 2017 |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Deferred tax assets | 239 | 99 | 338 | 97 | 66 | 163 |
| Worked-up, non-invoiced revenues | 1,671 | –117 | 1,554 | 1,737 | –33 | 1,704 |
| Total assets | 27,035 | –17 | 27,018 | 25,315 | 33 | 25,348 |
| SHAREHOLDERS' EQUITY | ||||||
| Shareholders' equity | 5,516 | –349 | 5,168 | 5,553 | –220 | 5,334 |
| Total shareholders' equity | 5,528 | –349 | 5,179 | 5,566 | –220 | 5,346 |
| LIABILITIES | ||||||
| Invoiced revenues, not worked up | 5,574 | 331 | 5,905 | 4,355 | 253 | 4,608 |
| Total equity and liabilities | 27,035 | –17 | 27,018 | 25,315 | 33 | 25,348 |
| NCC Building Sweden | NCC Building Nordics | NCC Infra- structure | Subtotal, construction and civil engineering |
NCC Industry | NCC Property Development |
Other and eliminations |
Group | |
|---|---|---|---|---|---|---|---|---|
| Order backlog, December 31, 2018 | 18,709 | 11,313 | 24,786 | 54,808 | 3,092 | –1,064 | 56,837 | |
| External net sales 2018 | 14,800 | 9,861 | 19,347 | 44,008 | 11,209 | 2,113 | 15 | 57,346 |
| External net sales 2017 | 13,646 | 9,887 | 18,053 | 41,586 | 10,343 | 2,505 | 7 | 54,441 |
| POINT IN TIME FOR REVENUE RECOGNITION | ||||||||
| Over time (percentage-of-completion) | ||||||||
| Specific point in time |
Revenues from construction and civil engineering operations are recognized successively over time, on a percentage-of-completion basis (recognized costs in relation to estimated total project costs). Invoicing is conducted on an ongoing basis according to agreement over the course of the project. This also applies to parts of NCC Industry's operations. However, most of NCC Industry's revenues are recognized at a point in time in conjunction with delivery to the customer of asphalt and stone materials, which is reflected in customer payments. For NCC Property Development too, revenues are normally recognized
at a point in time (completion of the property), which normally coincides with the receipt of payment from the customer.
In all significant respects, the order backlog in construction and civil engineering operations is expected to be recognized as revenue during the coming 24 months, mainly in the coming year. In all significant respects, NCC Industry's order backlog is expected to be recognized as revenue during the coming year. For information regarding NCC Property Development's performance commitments, see note 25.
NCC's business operations are divided into five operating segments based on the parts of the organization monitored by the President and CEO, who is the chief operating decision maker. Each operating segment has a president who is responsible for the daily operations and regularly reports on the results of the segment's performance to the Executive Management Team. Since the segment division has been changed compared with prior years, comparative figures have been recalculated. The following segments were identified based on this reporting procedure:
NCC Building Sweden and NCC Building Nordic primarily build housing and offices, but also construct such public premises as schools and hospitals and such commercial premises as stores and warehouses.
NCC Infrastructure supplies entire infrastructure projects (such as tunnels, roads and railways), from design and construction to production and service.
NCC Industry, whose operations are based on production of stone materials and asphalt, as well as piling works and paving.
NCC Property Development develops and sells commercial properties in metropolitan regions in Sweden, Norway, Denmark and Finland.
All transactions between the various segments were conducted on a purely commercial basis.
The segment report also recognizes Swedish pension costs using Swedish accounting standards and adjustments of IFRS in "Other and eliminations." Occasionally, "Other and eliminations" may also recognize certain items, primarily impairment losses and provisions attributable to the activities conducted in the segments.
| GROUP, 2018 | NCC Building Sweden | NCC Building Nordics | NCC Infra- structure | NCC Industry | NCC Property Development |
Total segments |
Other and eliminations |
Group |
|---|---|---|---|---|---|---|---|---|
| External net sales | 14,800 | 9,861 | 19,347 | 11,209 | 2,113 | 57,331 | 15 | 57,346 |
| Internal net sales | 900 | 891 | 444 | 1,758 | 45 | 4,038 | –4,038 | |
| Total net sales | 15,701 | 10,753 | 19,791 | 12,968 | 2,157 | 61,369 | –4,023 | 57,346 |
| Depreciation/amortization | –31 | –21 | –245 | –439 | –6 | –742 | –43 | –785 |
| Impairment losses and reversed impairment losses |
–44 | –2 | –368 | –413 | –39 | –453 | ||
| Share in associated company profits |
–1 | 6 | 36 | 42 | 42 | |||
| Operating profit | 453 | –227 | –993 | 350 | –181 | –597 | –166 | –764 |
| Net financial items | –85 | |||||||
| Profit after financial items | –849 | |||||||
| Capital employed | 4,902 | 4,314 |
| GROUP, 2017 | NCC Building Sweden |
NCC Building Nordics |
NCC Infra structure |
NCC Industry | NCC Property Development |
Total segments |
Other and eliminations |
Group |
|---|---|---|---|---|---|---|---|---|
| External net sales | 13,646 | 9,887 | 18,053 | 10,343 | 2,505 | 54,434 | 7 | 54,441 |
| Internal net sales | 532 | 557 | 437 | 2,050 | 62 | 3,638 | –3,638 | |
| Total net sales | 14,178 | 10,444 | 18,490 | 12,393 | 2,567 | 58,073 | –3,631 | 54,441 |
| Depreciation/amortization | –23 | –14 | –225 | –403 | –4 | –669 | –49 | –718 |
| Impairment losses and reversal of impairment losses |
–1 | –6 | –7 | –7 | ||||
| Share in associated company profits |
3 | 10 | –2 | 11 | 11 | |||
| Operating profit | 489 | –79 | –198 | 577 | 601 | 1,389 | –314 | 1,075 |
| Net financial items | –91 | |||||||
| Profit after financial items | 983 | |||||||
| Capital employed | 4,400 | 4,086 |
| OTHER AND ELIMINATIONS | EXTERNAL NET SALES | OPERATING PROFIT | |||
|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | ||
| NCC's Head office, results from minor subsidiaries and associated companies, as well as the remaining portions of NCC International |
15 | 7 | –187 | –116 | |
| Eliminations of inter-company gains | 11 | 10 | |||
| Other Group adjustments (essentially comprising the difference in accounting policies between segments and the Group pertaining to such items as pensions)1) |
10 | –208 | |||
| Total | 15 | 7 | –166 | –314 |
1) For 2017, this item includes a provision for restructuring.
| ORDERS RECEIVED | ORDER BACKLOG NET SALES |
FIXED ASSETS1) | ||||||
|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |
| Sweden | 38,218 | 38,702 | 36,501 | 34,715 | 35,489 | 34,761 | 2,628 | 2,365 |
| Denmark | 5,939 | 6,152 | 4,496 | 6,100 | 8,062 | 6,179 | 1,621 | 1,507 |
| Finland | 8,512 | 5,976 | 7,661 | 4,999 | 6,989 | 6,932 | 413 | 360 |
| Norway | 9,173 | 5,947 | 8,179 | 5,919 | 6,807 | 6,568 | 1,480 | 1,496 |
| St. Petersburg | 27 | 47 |
1) Pertains to fixed assets that are not financial instruments, deferred tax assets, assets pertaining to post-employment remuneration and rights arising in accordance with insurance agreements.
Note 5 Number of employees, personnel expenses and remuneration of senior executives
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| Number of employees1) |
of whom, men1) |
Number of employees |
of whom men |
||
| Parent Company | |||||
| Sweden | 71 | 36 | 74 | 40 | |
| Subsidiaries | |||||
| Sweden | 9,826 | 8,502 | 10,804 | 9,666 | |
| Norway | 2,190 | 1,984 | 2,431 | 2,222 | |
| Finland | 1,796 | 1,482 | 1,939 | 1,599 | |
| Denmark | 2,256 | 1,962 | 2,259 | 1,967 | |
| Poland | 351 | 340 | 243 | 235 | |
| Other countries | 33 | 28 | 12 | 5 | |
| Total in subsidiaries | 16,452 | 14,298 | 17,688 | 15,694 | |
| Group total | 16,523 | 14,334 | 17,762 | 15,734 |
1) As of 2018, based on the average value of four measurements during the year; total number of hours worked divided by a standard figure was previously used.
| Percentage of women, % | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| Distribution of company management by gender | ||||||
| Group total, including subsidiaries | ||||||
| – Boards of Directors | 55.5 | 47.0 | ||||
| – Other senior executives | 16.1 | 13.8 | ||||
| Senior executives in the Group pertain to the senior executives in the Parent Company together with Presidents of subsidiaries with employees. |
||||||
| Parent Company |
| – Board of Directors | 45.5 | 40.0 |
|---|---|---|
| – AGM-elected Board members | 62.5 | 57.0 |
| – Other senior executives | 66.7 | 40.0 |
| 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|
| Board of Directors and senior executives (of which, bonus) |
Other employees |
Total | Board of Directors and senior executives (of which, bonus) |
Other employees |
Total | ||
| Parent Company | |||||||
| Sweden | 46 | 62 | 108 | 48 | 51 | 99 | |
| (0.3) | |||||||
| Social security expenses | 70 | 70 | |||||
| – of which, pension costs | 8 | 21 | 29 | 8 | 32 | 39 | |
| Pension commitment | 6 | 7 | |||||
| Group | 102 | 9,726 | 9,828 | 86 | 9,116 | 9,202 | |
| (4.1) | (4.8) | ||||||
| Social security expenses | 2,968 | 2,724 | |||||
| – of which, pension costs | 950 | 715 | |||||
| Pension commitment | 15 | 14 |
1) The senior executives category comprises four individuals (6) in the Parent Company and 27 individuals (23) in subsidiaries.
EMPLOYMENT CONDITIONS AND REMUNERATION OF SENIOR EXECUTIVES
The Chairman of the Board and other Board members elected by the AGM receive director fees only in an amount resolved by the AGM. No pensions are paid to Board members. No fee is payable for membership of the Nomination Committee or Board committees, apart from work on the Audit Committee and on the Project Committee in 2018 for which fees are paid.
Remuneration for the CEO is proposed by the Chairman of the Board and decided by the Board. Remuneration of other senior executives in the Executive Management Team (EMT) is proposed by the CEO and approved by the Chairman of the Board.
Remuneration of the CEO and other senior executives consists of fixed and variable remuneration, other benefits and pensions. The term "other senior executives" refers to the people who together with the CEO constitute the EMT.
During 2018, President and CEO Tomas Carlsson received a basic monthly salary of SEK 750,000 as of May 7, 2018. Håkan Broman held the position of Acting President and CEO until May 6, 2018. During every started calendar month that Håkan Broman served as Acting President and CEO, he received a monthly salary supplement in addition to his monthly salary as Chief Legal Counsel. The salary supplement was neither pensionable nor served as a basis for bonus payments.
The maximum variable remuneration payable to President and CEO Tomas Carlsson is capped at 75 percent of his basic monthly salary. For 2018, a fixed bonus was paid, according to contract, of 45 percent (60 percent of maximum variable remuneration of 75 percent) of fixed salary received during the time that the President and CEO had been employed. For Acting CEO Håkan Broman, variable remuneration was capped at 40 percent of his basic salary, excluding the salary supplement in his capacity as Acting CEO. However, no short-term variable remuneration was paid to Håkan Broman in respect of 2018. Variable remuneration for other senior executives in 2018 could have corresponded to a maximum of 40 to 50 percent of basic remuneration. The maximum percentages above for the Acting President and CEO and other senior executives are adjusted downward by 10 percentage points for those persons who participated in LTI 2018. The provision posted for other senior executives in 2018 corresponded to 0–30 percent (0–28) of basic remuneration.
Tomas Carlsson took office as President and CEO of NCC Group on May 7, 2018 and was covered during the year by a pension pledge with a premium limit corresponding to 40 percent of his agreed fixed monthly remuneration. Tomas Carlsson's retirement age is 65 years. During the period January 1 - May 6, 2018, Acting President and CEO Håkan Broman was covered by a defined-benefit ITP pension plan which, in accordance with NCC's policy for senior executives, was supplemented by a defined-contribution pension agreement for which premiums amounted to 30 percent of pensionable remuneration exceeding 30 income base amounts.
Other senior executives employed in Sweden are covered by a defined-benefit ITP plan with a retirement age of 65, and, in accordance with the current policy, of a supplementary defined-contribution pension obligation of 30 percent of pensionable remuneration exceeding 30 income base amounts. For other senior executives employed outside Sweden, the various pension conditions in those countries of employment will apply.
President and CEO Tomas Carlsson has a period of notice of six months from NCC and six months should he resign at his own request. Severance pay is payable for 18 months. The severance pay is not pensionable and does not entitle to vacation pay or other benefits. For a period of six months following the period of notice, the President and CEO, should NCC so demand, is required to observe a ban on working for competitors. During such a period, the President and CEO receives remuneration corresponding to basic monthly salary. Remuneration is not payable for periods when the President and CEO receives severance pay. During 2018, severance payments for the former Acting President and CEO were expensed in the form of 12 months' termination salary and 12 months of severance pay plus a pension and LTI. Other senior executives are subject to six to 12 months' notice from NCC, or six months' notice if the senior executive resigns of his/her own accord.
If employment is terminated by NCC, severance pay is normally payable for 12 months. Subject to one exception, remuneration is to be reduced by an amount corresponding to any remuneration received from a new employer or own business.
The prerequisites and conditions for allotment are listed below.
The AGM in April 2018 resolved, in accordance with the Board's motion, to establish a long-term performance-based incentive plan for senior executives and key personnel within the NCC Group (LTI 2018). The purpose of LTI 2018 is to ensure a focus on the company's long-term profitability and growth, to minimize the number of worksite accidents and create prerequisites for retaining and recruiting key personnel.
LTI 2018 is a three-year performance-based plan under which the participants were allotted, free of charge, performance-based share awards providing entitlement to Series B shares and to performance-based synthetic shares providing entitlement to cash remuneration. In view of the introduction of LTI 2018, the maximum short-term variable remuneration payable to the participants was adjusted downwards by five or ten percentage points of their basic salary. LTI 2018 runs parallel in all significant respects to the LTI program adopted by the 2017 AGM.
The number of shares and the cash amount that will finally be allotted/disbursed depends on the extent to which certain predetermined targets are achieved in the performance period (January 1, 2018 through December 31, 2020).
| Total remuneration | of which, | of which, variable |
of which, provision for share-based |
Pension commitment |
|
|---|---|---|---|---|---|
| 500 | |||||
| 591 | |||||
| 573 | |||||
| 625 | |||||
| 500 | |||||
| 675 | |||||
| 454 | |||||
| 9,145 | 55 | 2,643 | 270 | 2,400 | 181 |
| 4,138 | 22 | –255 | 412 | ||
| 9,700 | 131 | 731 | –1,154 | 2,384 | 5,808 |
| 17,556 | 208 | 2,660 | |||
| 45,590 | 417 | 3,373 | –1,139 | 7,856 | 5,989 |
| 22,524 | 393 | 2,066 | –570 | 3,484 | 1,285 |
| 68,114 | 810 | 5,439 | –1,709 | 11,340 | 7,274 |
| and benefits1) 1,134 |
benefits | remuneration2, 9) | payment3) | Pension cost |
1) Remuneration and benefits pertain to vacation compensation, reduced working hours, company cars and, where appropriate, severance pay.
2) Variable remuneration pertains to the amounts expensed for each fiscal year.
3) Amounts reserved/reversed during the year for the ongoing LTI programs 2015, 2016, 2017 and 2018.
4) Angela Langemar Olsson was elected at the AGM on April 11, 2018.
5) Håkan Broman held the position of Acting President and CEO through May 6, 2018. Tomas Carlsson assumed the position of President and CEO on May 7, 2018.
6) This includes the positions of Chief Financial Officer for the whole of 2018 and the Head of Development & Operations Services as of October 8. The positions of Senior Legal Counsel, Head of Corporate Relations and Head of Purchasing are included up to August 28.
7) Pertains to the former Senior Legal Counsel, the Chief Financial Officer and the Head of Corporate Relations.
8) This includes for the entire year the positions of Head of NCC Building Nordics (and previously NCC Building), NCC Industry, NCC Infrastructure and NCC Property Development. The position of Head of NCC Building Sweden is included as of October 1, 2018. One of the executives worked on a consultancy basis and the stated remuneration comprises a consulting fee.
9) Five other senior executives received a discretionary bonus in 2018 regarding their performance during 2017.
Note 5 Number of employees, personnel expenses and remuneration of senior executives, cont'd.
| REMUNERATION, PROVISIONS AND OTHER BENEFITS IN 2017 | |
|---|---|
| REMUNERATION, PROVISIONS AND OTHER BENEFITS IN 2017 SEK 000s |
Total remuneration and benefits1) |
of which, benefits |
of which, variable remuneration2) |
of which, provision for share-based payment3) |
Pension cost | Pension commitment |
|---|---|---|---|---|---|---|
| Chairman of the Board Tomas Billing | 1,225 | |||||
| Member of the Board Geir Magne Aarstad11) | 370 | |||||
| Member of the Board Viveca Ax:son Johnson | 500 | |||||
| Member of the Board Carina Edblad | 500 | |||||
| Member of the Board Sven-Olof Johansson10) | 130 | |||||
| Member of the Board Mats Jönsson11) | 495 | |||||
| Member of the Board Ulla Litzén | 675 | |||||
| Member of the Board Birgit Nørgaard11) | 370 | |||||
| Member of the Board Christoph Vitzthum10) | 130 | |||||
| Acting President and CEO Håkan Broman13) | 2,305 | 7 | 23 | 190 | ||
| Former CEO Peter Wågström | 6,322 | 71 | 2,219 | 719 | ||
| Former CEO Peter Wågström's severance package | 17,476 | 1,550 | 1,313 | |||
| Other senior executives (five individuals)12) | 17,783 | 376 | 278 | 613 | 4,052 | 5,875 |
| Total Parent Company | 48,281 | 454 | 278 | 2,186 | 7,774 | 6,594 |
| Other senior executives employed by subsidiaries (three individuals) | 13,988 | 243 | 1,586 | 514 | 2,857 | 709 |
| Total senior executives | 62,269 | 697 | 1,864 | 2,700 | 10,631 | 7,303 |
10) Sven-Olof Johansson and Christoph Vitzthum stepped down at the AGM on April 5, 2017.
11) Geir Magne Aarstad, Mats Jönsson and Birgit Norgaard (new election) were elected at the AGM on April 5, 2017.
12) Håkan Broman is included as Senior Legal Counsel through October 30, 2017, following which Ann-Marie Hedbeck is included as Acting Senior Legal Counsel. Svante Hagman is included as Business Area Manager for NCC Infrastructure through September 24, 2017.
The targets that have been set for LTI 2018 comprise profitability and growth during the vesting period, and a reduction in the number of worksite accidents as at the end of 2020. In respect of the financial objective, 100 percent is awarded/disbursed if the overall operating margin reaches or exceeds 4.0 percent. Target fulfillment is measured for a three-year period (2018-2020). 0 percent is awarded/disbursed if target fulfilment does not reach an overall operating margin of 2.5 percent. Within the target range, allotment/payment will occur linearly. For assessment of the second target, an established benchmark figure for the industry will be used based on the number of occupational accidents resulting in one day's absence or more from ordinary work per million working hours.
At the end of 2018, NCC's benchmark was 9.5. Allotment/disbursement of 100 percent will occur if the ratio for 2020 is less than 4.5, while 0 percent will be allotted/disbursed if it exceeds 7.0. Within the range of 4.5 and 7.0, allotment/payment will occur linearly. Another prerequisite for any payment from LTI 2018 is that the NCC Group reports a pretax profit during the program period of 2018-2020 and during the final year of the program (meaning 2020).
The participants are divided into three categories: CEO; other members of the Executive Management Team, business area management; and other key personnel. The allotment value is 50 percent of annual salary for the CEO, 30 percent of annual salary for other members of the Executive Management Team and either 15 percent or a maximum of 30 percent of annual salary for other key personnel.
The share price that is to form the basis for calculating the number of share awards and synthetic shares is to correspond to the average last price paid during a period of the first ten trading days after the AGM.
Assuming a share price of SEK 157.30 and the maximum outcome, meaning full achievement of the performance targets in terms of both shares and cash amount, it is estimated that the cost of LTI 2018, including costs for social security fees, will be approximately SEK 75.9 M, corresponding to the value of about 0.4 percent of the total number of shares.
The value that a participant may receive at maximum allotment of Series B shares and cash payment is capped at an amount per share that corresponds to 400 percent of the share price, calculated on the basis of the average price paid during a period of the first ten trading days after the AGM.
In order to cover commitments in accordance with LTI 2018, meaning to cover costs for securing delivery of Series B shares, including costs for social security fees and payments on the basis of the synthetic shares, the AGM resolved to authorize the Board to make decisions on one or several occasions during the period up to the following AGM to buy back a maximum of 867,487 Series B
Göran Landgren took office as acting Business Area Manager on a consultancy basis on September 25, 2017.
13) NCC's pension commitments for Håkan Broman are recognized on the row Other senior executives because Håkan Broman will not retire in the capacity of Acting CEO.
shares. The shares are to be acquired on Nasdaq Stockholm and may only be acquired at a price within the registered span of share prices at the particular time, by which is meant the span between the highest price paid and the lowest asked price. The shares are to be paid for in cash. The Board decided to buy back Series B shares to cover obligations under the company's long-term incentive program and 101,022 Series B shares were bought back in the second quarter of 2018.
To secure delivery of Series B shares under LTI 2018, the AGM resolved to permit the transfer of no more than 300,000 Series B shares to the participants of LTI 2018. The prerequisites and conditions for allotment are listed above, according to which all share awards are regulated through physical delivery of the shares. The AGM also resolved to permit the transfer of a maximum of 500,000 Series B shares to cover costs, mainly for dividend compensation, social security fees and payments on the basis of the synthetic shares, arising from previously outstanding long-term performance-based incentive programs (LTI 2015, LTI 2016 and LTI 2017) as well as LTI 2018.
The performance period for LTI 2015 expired on December 31, 2017. Shares and synthetic shares were delivered as planned in May 2018 to the remaining participants in the program. A total of 20,343 shares were delivered/disbursed and 20,343 synthetic shares, while SEK 1,054,526 was paid as cash compensation for the participants, primarily in Denmark, that do not receive shares but only cash compensation as well as SEK 17,088 in cash compensation for dividend payment. Delivery was made to 126 participants. The share price on the exercise date was SEK 161.65.
The performance period for LTI 2016 was from January 1, 2016 through December 31, 2018. The performance pertaining to the predetermined targets will be evaluated and reported in conjunction with the 2019 AGM.
The performance period for LTI 2017 was from January 1, 2017 through December 31, 2019. The performance pertaining to the predetermined targets will be evaluated and reported in conjunction with the 2020 AGM.
A new LTI program was launched in 2018 in accordance with an AGM resolution. The program is essentially the same as previous LTI programs. The overall operating margin and annual growth for the period is used as the financial performance objective. The performance period for LTI 2018 is from January 1, 2018 through December 31, 2020.
Note 5 Number of employees, personnel expenses and remuneration of senior executives, cont'd.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| Number | Share awards |
Synthetic options |
Share awards |
Synthetic options |
| Outstanding at the beginning of the period |
286,881 | 286,881 | 63,346 | 63,346 |
| Allocated during the period | 157,358 | 157,358 | 157,358 | 157,358 |
| Exercised during the period | –20,343 | –20,343 | –4,435 | –4,435 |
| Transferred to Group companies | 7,190 | 7,190 | ||
| Forfeited during the period | –119,064 | –119,064 | –175,919 | –175,919 |
| Outstanding at the end of the period |
304,832 | 304,832 | 47,540 | 47,540 |
| Puttable at the end of the period | 0 | 0 | 0 | 0 |
All shares and synthetic options have a redemption price of SEK 0.
Outstanding share awards and synthetic shares have a remaining contract term of two and a half years to a half year, respectively.
| 2018 | 2017 | |||
|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
|
| Fair value on date of valuation, SEK 000s |
0 | 0 | 4,348 | 1,013 |
| Share price, SEK | 195.23 | 195.23 | 195.23 | 195.23 |
| Redemption price, SEK | 0 | 0 | 0 | 0 |
| Options duration, year | 0.5 | 0.5 | 1.5 | 1.5 |
| Risk-free interest rate, % | 1.67 | 1.67 | 1.72 | 1.72 |
| SHARE AWARDS LTI 2017 | 2018 | 2017 | ||
|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
|
| Fair value on date of valuation, SEK 000s |
3,081 | 318 | 2,995 | 646 |
| Share price, SEK | 225.48 | 225.48 | 225.48 | 225.48 |
| Redemption price, SEK | 0 | 0 | 0 | 0 |
| Options duration, year | 1.5 | 1.5 | 2.5 | 2.5 |
| Risk-free interest rate, % | 1.67 | 1.67 | 1.72 | 1.72 |
| Group | Parent Company |
|
|---|---|---|
| Fair value on date of valuation, SEK 000s |
||
| 1,546 | 270 | |
| Share price, SEK | 157.30 | 157.30 |
| Redemption price, SEK | 0 | 0 |
| Options duration, year | 2.5 | 2.5 |
| Risk-free interest rate, % | 1.67 | 1.67 |
Dividend has been calculated as a five-year average of NCC AB's dividends. All fair values and assumptions are the same for all participants in the program.
| 2018 | 2017 | |||
|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
|
| Share awards | –4 | –1 | 4 | 1 |
| Synthetic shares | –3 | –2 | 1 | 0 |
| Social security expenses | –2 | –1 | 1 | 0 |
| Total personnel expenses for share-based remunerations |
–9 | –4 | 7 | 2 |
| Total carrying amount pertaining to liability for synthetic shares |
8 | 1 | 19 | 7 |
| Total real value of the liability pertaining to vested benefits |
8 | 1 | 19 | 7 |
| Note 6 | Depreciation/amortization | ||||
|---|---|---|---|---|---|
| GROUP | PARENT COMPANY | ||||
| 2018 | 2017 | 2018 | 2017 | ||
| Intangible assets | –65 | –65 | |||
| Owner-occupied properties | –40 | –31 | |||
| Machinery and equipment1) | –681 | –621 | –2 | –1 | |
| Total depreciation/amortiza tion |
–785 | –718 | –2 | –1 |
1) of which, depreciation of leased equipment in the Group amounted to SEK 122 M (89).
| Note 7 | Fees and remuneration to audit firms | ||||
|---|---|---|---|---|---|
| GROUP | PARENT COMPANY | ||||
| 2018 | 2017 | 2018 | 2017 | ||
| Audit firms | |||||
| PwC | |||||
| Auditing assignments | 18 | 14 | 7 | 4 | |
| Audit in addition to the audit assignment |
0 | 0 | 0 | ||
| Tax consultations | 0 | 0 | |||
| Other services | 1 | 1 | 0 | 0 | |
| Other auditors | |||||
| Auditing assignments | 0 | 0 | |||
| Audit in addition to the audit assignment |
0 | ||||
| Tax consultations | 0 | 0 | |||
| Other services | |||||
| Total fees and remuneration to auditors and audit firms |
19 | 15 | 7 | 4 |
During 2018, PricewaterhouseCoopers AB received nearly SEK 0.5 M for non-audit services. The services pertained to other services but not taxation or valuation services.
| Note 8 | Impairment losses | ||||
|---|---|---|---|---|---|
| GROUP | PARENT COMPANY | ||||
| 2018 | 2017 | 2018 | 2017 | ||
| Impairment losses on current assets |
|||||
| Properties held for future development |
–130 | ||||
| Completed properties | –240 | ||||
| Total impairment losses on current assets |
–370 | ||||
| Impairment losses on participa tions in subsidiaries |
|||||
| Shares in subsidiaries | –644 | ||||
| Total impairment losses on participations in subsidiaries |
–644 | ||||
| Impairment losses on other fixed assets |
|||||
| Owner-occupied properties | –3 | –3 | |||
| Machinery and equipment | –2 | –1 | |||
| Goodwill in NCC Infrastructure | –36 | ||||
| Other intangible assets | –41 | –3 | –38 | ||
| Impairment losses on other fixed assets |
–82 | –7 | –38 | ||
| Total impairment losses | –453 | –7 | –682 | 0 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Dividend | 435 | 629 | ||
| Capital gain/loss on sale | 21 | |||
| Impairment losses | –644 | |||
| Total | 0 | 21 | –208 | 629 |
Note 10 Operating expenses by nature of
expenses
| GROUP | 2018 exchange rates 20171) |
2018 | Exchange rate effect |
|---|---|---|---|
| Net sales | 56,269 | 57,346 | 1,077 |
| Operating profit | –718 | –764 | –46 |
| Profit after financial items | –901 | –849 | 52 |
| Net profit for the year | –711 | –750 | –39 |
1) Figures for 2018 converted at 2017 exchange rates.
Note 14 Appropriations
| AVERAGE EXCHANGE RATE JAN–DEC |
YEAR-END RATE | |||||
|---|---|---|---|---|---|---|
| Country | SEK | Currency | 2018 | 2017 | 2018 | 2017 |
| Denmark | 100 | DKK | 137.61 | 129.53 | 137.41 | 132.05 |
| Euro Area | 1 | EUR | 10.26 | 9.64 | 10.26 | 9.83 |
| Norway | 100 | NOK | 106.83 | 103.30 | 102.70 | 100.14 |
| Russia | 1 | RUR | 0.14 | 0.15 | 0.13 | 0.14 |
| Note 11 | Interest expense and similar items | ||||
|---|---|---|---|---|---|
| PARENT COMPANY | 2018 | 2017 | |||
| Interest expense, Group companies | –1 | –1 | |||
| Interest expense to credit institutions | –17 | –18 | |||
| Financial portion of pension cost | –3 | –2 | |||
| Interest expense, others | 0 | –1 | |||
| Other financial items | –25 | 3 | |||
| Total | –47 | –19 |
1) Interest payments of SEK 29 M (15) have been capitalized.
The Building Nordics business area acquired the construction company Jakobsen & Blindkilde via NCC Danmark A/S on April 1, 2018 and thereby gained a stronger position in Jutland but also in the rest of Denmark. The company has 75 employees and annual sales of about SEK 460 M.
The acquisition had no material impact on earnings or financial position in 2018.
Acquisition-related expenditure amounted to SEK 4 M. These expenses have been recognized as other operating expenses in consolidated profit and loss.
| SEK M | 2018 |
|---|---|
| Cash and cash equivalents | 56 |
| Purchase considerations | 56 |
| PARENT COMPANY | |||||
|---|---|---|---|---|---|
| ACQUIRED INTANGIBLE ASSETS | |||||
| 2018 | Goodwill | Usufructs | Other | Total other | Development expenses |
| Recognized cost on January 1 | 2,041 | 292 | 478 | 770 | 38 |
| Investments | 4 | 74 | 78 | ||
| Increase through acquisitions | 46 | 46 | |||
| Divestment and scrappage | –45 | –9 | –54 | ||
| Reclassifications | 7 | 7 | |||
| Translation differences during the year | 51 | 6 | 5 | 11 | |
| Recognized cost on December 31 | 2,092 | 264 | 594 | 858 | 38 |
| Accumulated amortization on January 1 | –1 | –171 | –246 | –417 | |
| Divestment and scrappage | 8 | 8 | 16 | ||
| Reclassifications | 8 | 8 | |||
| Translation differences during the year | –2 | –3 | –5 | ||
| Amortization according to plan during the year |
–12 | –53 | –65 | ||
| Accumulated amortization on December 31 | –1 | –170 | –294 | –464 | |
| Accumulated impairment losses on January 1 | –191 | –16 | –2 | –18 | |
| Divestment and scrappage | 2 | 2 | |||
| Translation differences during the year | –2 | 1 | 1 | ||
| Impairment losses for the year | –36 | –40 | –40 | –38 | |
| Accumulated impairment losses on December 31 |
–229 | –15 | –40 | –56 | –38 |
| Residual value on January 1 | 1,848 | 105 | 230 | 335 | 38 |
| Residual value on December 31 | 1,861 | 79 | 260 | 339 | 0 |
| GROUP | PARENT COMPANY | |||||
|---|---|---|---|---|---|---|
| ACQUIRED INTANGIBLE ASSETS | ||||||
| 2017 | Goodwill | Usufructs | Other | Total other | Goodwill | Development expenses |
| Recognized cost on January 1 | 2,043 | 287 | 448 | 735 | 2 | 275 |
| Investments | 4 | 55 | 59 | 5 | ||
| Increase through acquisitions | 73 | 73 | ||||
| Divestment and scrappage | –2 | –1 | –97 | –98 | ||
| Discontinued operations | –2 | –242 | ||||
| Translation differences during the year | 1 | –1 | ||||
| Recognized cost on December 31 | 2,041 | 292 | 478 | 770 | 0 | 38 |
| Accumulated amortization on January 1 | –1 | –157 | –201 | –358 | –1 | –81 |
| Divestment and scrappage | 1 | 8 | 8 | |||
| Less termination of commission relationship | 1 | 81 | ||||
| Translation differences during the year | –1 | –1 | –2 | |||
| Amortization according to plan during the year |
–14 | –51 | –65 | |||
| Accumulated amortization on December 31 | –1 | –171 | –246 | –417 | 0 | 0 |
| Accumulated impairment losses on January 1 | –191 | –13 | –90 | –103 | –88 | |
| Divestment and scrappage | 1 | 88 | 88 | |||
| Less termination of commission relationship | 88 | |||||
| Reclassifications | –3 | 3 | ||||
| Translation differences during the year | –2 | |||||
| Impairment losses for the year | –3 | –3 | ||||
| Accumulated impairment losses on December 31 |
–191 | –16 | –2 | –18 | 0 | 0 |
| Residual value on January 1 | 1,851 | 117 | 158 | 275 | 1 | 107 |
| Residual value on December 31 | 1,848 | 105 | 230 | 335 | 0 | 38 |
IMPAIRMENT TESTING OF GOODWILL IN CASH-GENERATING UNITS Goodwill in NCC's balance sheet is distributed as follows among NCC's business areas:
| Operating segments | 2018 | 2017 |
|---|---|---|
| NCC Infrastructure | 255 | 286 |
| NCC Building Sweden | 233 | 233 |
| NCC Building Nordics | 334 | 323 |
| NCC Industry | 1,039 | 1,005 |
| The NCC Group | 1,861 | 1,848 |
In respect of NCC Industry and NCC Building Sweden, NCC, as part of its internal governance, monitors goodwill at a business area level and goodwill is impairment tested at this level. In respect of NCC Infrastructure and NCC Building Nordics, goodwill is monitored and impairment tested at a lower organization level, which in most cases corresponds to division level. Annual impairment testing is conducted in conjunction with the third quarter based on the future Cash flow of the units, taking into account the market's yield requirement and their risk profile. In most cases, the impairment risk is adjudged to be low and, in these cases, testing occurs using a simplified model, whereby the following assumptions have been used.
Long-term growth: In all cases, a long-term sustainable growth rate of 2.0 (2.0) percent has been assumed when the forecast period is over, which reflects anticipated long-term growth in the market.
Operating margin: Forecast operating margin has been set at a three-year average.
Working capital and reinvestment requirement: The requirement has been assumed to match the figure for 2018, with a growth rate equal to the sustainable long-term growth rate.
Discount interest rate: The weighted average cost of capital (WACC) is calculated for the various units on the basis of beta value, and local conditions in respect of market interest rates and tax, as well as a market-based capital structure for the various operations. The latter is based on the operational risk and the opportunities to leverage the operation. Although the discount interest rates vary among the different cash-generating units, in NCC's scenario they correspond to 7.3 percent (9.7) percent before and 6.1 percent (7.6) after tax.
The risk of impairment is adjudged to be greatest in the Norwegian operations within NCC Building Nordics and NCC Infrastructure. In connection with the year's impairment testing, goodwill regarding the acquisition of Carl C Fon AS, which is part of NCC Infrastructure, was impaired by SEK 36 M, due to updated forecasts concerning the company's future operations.
The remaining goodwill relates to NCC Building Nordics (SEK 196 M) and NCC Infrastructure (SEK 28 M). For these entities, impairment testing was based on cash flow forecasts for 2020–2022.
The average growth rate during the forecast period corresponds to about 2 percent for NCC Building Nordics and about 5 percent for NCC Infrastructure. Beyond the forecast period, a growth rate of 2 percent has been used. The operating margin in both cases was cautiously assumed to be zero for 2019 and to gradually increase to 3 percent at the end of the forecast period. The discount interest rate used was 7.6 percent after tax.
An increase in the discount interest rate by half a percentage point would not result in any impairment requirement for NCC Building Nordics' operations (not even an increase by 2 percentage points), while for NCC Infrastructure the entire goodwill amount would have to be impaired. A decrease in the operating margin by half a percentage point during the forecast period would have the same effects.
Usufructs include the right to use gravel and rock pits for a determined period. The periods may vary but the rights normally pertain to long periods.
Amortization of quarries occurs in pace with confirmed depletion of net asset value, based on the volume of extracted rock and gravel. The Other item consists mainly of software and licenses.
The periods of use range from three to five years and amortization is applied on a straight-line basis.
| GROUP | |||
|---|---|---|---|
| 2018 | 2017 | ||
| Production costs | –65 | –65 | |
| Selling and administrative expenses | |||
| Total | –65 | –65 |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2018 | Owner-occupied properties |
Machinery and equipment |
Total | Machinery and equipment |
Total |
| Recognized cost on January 1 | 1,445 | 8,301 | 9,745 | 63 | 63 |
| Investments | 100 | 1,114 | 1,214 | 18 | 18 |
| Increase through acquisitions | 14 | 14 | |||
| Divestment and scrappage | –42 | –771 | –813 | ||
| Reclassifications | –5 | –1 | –7 | ||
| Translation differences during the year | 26 | 131 | 157 | ||
| Recognized cost on December 31 | 1,524 | 8,787 | 10,311 | 81 | 81 |
| Accumulated impairment losses and depreciation on January 1 | –565 | –5,610 | –6,175 | –55 | –55 |
| Divestment and scrappage | 18 | 623 | 641 | ||
| Reclassifications | –8 | 0 | –8 | ||
| Translation differences during the year | –12 | –85 | –97 | ||
| Impairment losses for the year1) | –3 | –2 | –6 | ||
| Depreciation during the year | –40 | –681 | –720 | –2 | –2 |
| Accumulated impairment losses and depreciation on December 311) | –609 | –5,756 | –6,364 | –57 | –57 |
| Accumulated write-ups at beginning of the year | 21 | 21 | |||
| Accumulated write-ups at end of year | 21 | 21 | |||
| Residual value on January 1 | 880 | 2,712 | 3,592 | 8 | 8 |
| Residual value on December 31 | 915 | 3,052 | 3,968 | 24 | 24 |
| Carrying amount of financial leasing | 4932) | 493 | |||
| 1) Accumulated impairment losses on December 31 | –23 | –46 | –69 |
2) Of which, acquisition value of SEK 849 M, accumulated depreciation of SEK –356 M.
| GROUP | PARENT COMPANY | |||||
|---|---|---|---|---|---|---|
| 2017 | Owner-oc cupied properties |
Machinery and equipment |
Total | Owner-oc cupied properties |
Machinery and equipment |
Total |
| Recognized cost on January 1 | 1,379 | 7,994 | 9,373 | 19 | 527 | 547 |
| Investments | 52 | 1,004 | 1,056 | 6 | 6 | |
| Increase through acquisitions | 6 | 43 | 49 | |||
| Less termination of commission relationship | –19 | –470 | –489 | |||
| Divestment and scrappage | –55 | –659 | –715 | |||
| Reclassifications | 54 | –29 | 25 | |||
| Translation differences during the year | 9 | –52 | –43 | |||
| Recognized cost on December 31 | 1,445 | 8,301 | 9,745 | 0 | 63 | 63 |
| Accumulated impairment losses and depreciation on January 1 | –564 | –5,446 | –6,010 | –9 | –452 | –461 |
| Divestment and scrappage | 39 | 460 | 499 | |||
| Less termination of commission relationship | 9 | 398 | 407 | |||
| Reclassifications | –25 | –25 | ||||
| Translation differences during the year | –4 | 23 | 19 | |||
| Impairment losses for the year1) | –3 | –1 | –4 | |||
| Depreciation during the year | –31 | –621 | –652 | –1 | –1 | |
| Accumulated impairment losses and depreciation on December 311) | –565 | –5,610 | –6,175 | 0 | –55 | –56 |
| Accumulated write-ups at beginning of the year | 21 | 21 | ||||
| Accumulated write-ups at end of year | 21 | 21 | ||||
| Residual value on January 1 | 814 | 2,569 | 3,383 | 11 | 75 | 86 |
| Residual value on December 31 | 880 | 2,712 | 3,592 | 0 | 8 | 8 |
| Carrying amount of financial leasing | 4182) | 418 | ||||
| 1) Accumulated impairment losses on December 31 | –19 | –45 | –64 |
2) Of which, acquisition value of SEK 733 M, accumulated amortization of SEK 315 M.
| PARENT COMPANY | AMOUNT | CARRYING | ||
|---|---|---|---|---|
| Name of company, Corp. Reg. No., Regis tered office |
Owner ship share, %1) |
No. of participa- tions2) |
2018 | 2017 |
| Real estate companies: | ||||
| NCC Property Development Nordic AB, 556743-6232, Solna |
100 | 1 | 962 | 962 |
| Total participations in real estate companies |
962 | 962 | ||
| Other companies: | ||||
| Eeg-Henriksen AB, 556399-2642, Stockholm |
100 | 5 | 1 | 1 |
| JCC Johnson Construction Company AB, 556113-5251, Solna |
100 | 1 | ||
| NCC Danmark A/S, 69 89 40 11, Denmark |
100 | 400 | 116 | 117 |
| NCC Norge AS, 911 274 426, Norway |
100 | 17,500 | 1,119 | 625 |
| NCC Sverige AB, 556613-4929, Solna |
100 | 500 | 412 | 63 |
| NCC Försäkrings AB, 516401-8151, Solna |
100 | 500 | 78 | 78 |
| NCC Industries AB, 556001-8276, Stockholm |
100 | 15 | 22 | 22 |
| NCC International AB, 556033-5100, Solna |
100 | 1,000 | 41 | 41 |
| NCC Nordic Construction Company AB, 556065-8949, Solna |
100 | 3,809 | 1,018 | 1,018 |
| NCC Purchasing Group AB, 556104-9932, Stockholm |
100 | 2 | 1 | 1 |
| NCC Soumi Oy, 1765514-2, Finland |
100 | 4 | 94 | 94 |
| NCC Industry Nordic AB, 556144-6732, Solna |
100 | 275 | 1,640 | 1,641 |
| NCC Skakt Aps, 36 95 64 88, Denmark3) |
5 | 3 | ||
| NCC Treasury AB, 556030-7091, Solna |
100 | 120 | 16 | 16 |
| Total participations in other companies |
4,557 | 3,716 | ||
| Total participations in Group companies |
5,518 | 4,678 | ||
1) The ownership share corresponds to the shareholding.
2) Number of shares in thousands.
3) The remaining shares are held by subsidiaries of the NCC Group.
NCC essentially owns 100 percent of all subsidiaries, whereby these are consolidated in their entirety according to the purchase method. NCC's assessment is that it has no controlling influence over any holdings in which the ownership share amounts to 50 percent or less.
Only directly owned subsidiaries have been specified. The number of indirectly owned subsidiaries is 132 (133). Companies for which ownership shares and number of shares have not been specified were divested, merged or liquidated during the year, or alternatively became indirectly owned subsidiaries in NCC's current structure.
| GROUP | CARRYING AMOUNT |
|||
|---|---|---|---|---|
| Name of company, Corp. Reg. No., Registered office |
Owner ship share, %1) |
No. of partici pations2) |
2018 | 2017 |
| Asfalt & Maskin AS, 960 585 593, Norway |
50 | 7 | 6 | |
| Hercules-Trevi Foundation AB, 556185-3788, Stockholm |
50 | 1 | 10 | 9 |
| Oraser AB, 556293-2722, Stockholm |
50 | 1 | 5 | 5 |
| Sjaellands Emulsionsfabrik I/S, 18004968, Roskilde |
50 | 7 | 6 | |
| SHH Hyresproduktion AB, 556889-3746, Stockholm |
50 | 1 | 8 | 8 |
| Östhammarkrossen KB, 916673-1365, Uppsala |
50 | 5 | 2 | |
| Other NCC-owned associated companies 10 (12) |
1 | 1 | ||
| Total | 42 | 37 |
1) The ownership share corresponds to the proportion of votes for the total number of shares. 2) Number of shares in thousands.
The consolidated financial statements include the items below that constitute the Group's interests in the joint ventures' net sales, costs, assets and liabilities.
| GROUP | 2018 | 2017 |
|---|---|---|
| Revenue | 465 | 116 |
| Expenses | –478 | –104 |
| Profit | –13 | 12 |
| Fixed assets | 2 | 1 |
| Current assets | 494 | 377 |
| Total assets | 496 | 378 |
| Long-term liabilities | 7 | 3 |
| Current liabilities | 406 | 215 |
| Total liabilities | 413 | 218 |
| Net assets | 83 | 160 |
The joint venture category also includes partly owned contracts, for which NCC has a contractual joint influence together with the other partners.
| GROUP | Shareholding, % |
|---|---|
| Arandur OY | 33 |
| ARC konsortiet | 50 |
| Fløng-2 Konsortiet | 50 |
| Fortis DPR, konsortie | 50 |
| Handelsbolag NCC-DPR Data Centre | 50 |
| HNB Fjernvarme | 70 |
| Holding Big Apple Housing Oy | 50 |
| Kiinteistö Oy Polaristontti 2 | 50 |
| Kiinteistö Oy Polaristontti 3 | 50 |
| Milman Miljömuddring | 50 |
| NCC-LHR Gentofte Konsortiet | 65 |
| NCC-OHL Lund-Arlöv, four tracks | 50 |
| NCC-SMET konsortiet | 50 |
| NCC-SMET konsortiet Østerbro Tunnel Konsortiet | 50 |
| NCC-W&F West Link Contractors | 60 |
| NFO konsortiet I/S | 50 |
| Polaris Business Park Oy | 50 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Financial investments classified as fixed assets | ||
| Fair value through other comprehensive income, equity instruments |
||
| Unlisted securities | 77 | 91 |
| Total | 77 | 91 |
| Short-term investments classified as current assets | ||
| Financial assets measured at amortized cost |
||
| Interest-bearing securities | 72 | 10 |
| Investments held to maturity | ||
| Interest-bearing securities | 30 | |
| Total | 72 | 41 |
Investments held to maturity had an established interest rate ranging from –0.4 percent (–0.4) to 0.7 percent (1.7), and had due dates ranging from 22 to 56 months.
During the year, financial fixed assets were impaired by SEK 0 M (0).
| PARENT COMPANY, 2018 | Participations in Group companies |
Participations in associated companies and joint ventures |
Other long-term securities |
Other long-term receivables1) |
Total |
|---|---|---|---|---|---|
| Recognized cost on January 1 | 12,440 | 0 | 45 | 6 | 12,491 |
| Assets added | 1,484 | 2 | 1,486 | ||
| Recognized cost on December 31 | 13,924 | 0 | 45 | 8 | 13,977 |
| Accumulated write-ups at beginning of the year | |||||
| Accumulated write-ups on December 31 | |||||
| Accumulated impairment losses on January 1 | –7,762 | –7,762 | |||
| Impairment losses for the year | –644 | –644 | |||
| Accumulated impairment losses on December 31 | –8,406 | –8,406 | |||
| Residual value on December 31 | 5,518 | 0 | 45 | 8 | 5,571 |
| PARENT COMPANY, 2017 | Participations in Group companies |
Participations in associated companies and joint ventures |
Other long-term securities |
Other long-term receivables1) |
Total |
|---|---|---|---|---|---|
| Recognized cost on January 1 | 12,313 | 19 | 52 | 139 | 12,523 |
| Assets added | 308 | 308 | |||
| Assets removed | –9 | –9 | |||
| Less termination of commission relationship | –172 | –19 | –7 | –133 | –331 |
| Recognized cost on December 31 | 12,440 | 0 | 45 | 6 | 12,491 |
| Accumulated write-ups at beginning of the year | |||||
| Accumulated write-ups on December 31 | |||||
| Accumulated impairment losses on January 1 | –7,906 | –12 | –6 | –2 | –7,926 |
| Less termination of commission relationship | 144 | 12 | 6 | 2 | 164 |
| Accumulated impairment losses on December 31 | –7,762 | –7,762 | |||
| Residual value on December 31 | 4,678 | 0 | 45 | 6 | 4,729 |
1) The item also includes deferred tax assets.
| GROUP | 2018 | 2017 |
|---|---|---|
| Long-term interest-bearing receivables classified as fixed assets |
||
| Receivables from associated companies and joint ventures |
429 | |
| Interest-bearing securities | 184 | 131 |
| Other long-term receivables | 11 | 15 |
| Long-term interest-bearing receivables classified as fixed assets |
195 | 575 |
| Other receivables classified as current assets | ||
| Receivables from associated companies and joint ventures |
11 | 15 |
| Receivables from divested property and housing projects | 45 | 102 |
| Advance payments to suppliers | 1 | 1 |
| Derivative instruments held for hedging | 160 | 80 |
| Other current receivables | 390 | 489 |
| Other receivables classified as current assets | 608 | 687 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Tax on net profit for the year | ||||
| Current tax cost | –48 | –194 | –102 | –91 |
| Deferred tax revenue/cost | 147 | 88 | 2 | 1 |
| Total recognized tax on net profit for the year |
99 | –106 | –101 | –90 |
| GROUP | PARENT COMPANY | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | ||||||
| Effective tax | Tax, % | Profit | Tax, % | Profit | Tax, % | Profit | Tax, % | Profit | |
| Pretax profit | –849 | 983 | 100 | 993 | |||||
| Tax according to company's current tax rate | –22% | 187 | –22% | –216 | –22% | –22 | –22% | –218 | |
| Effect of other tax rates for non-Swedish com panies |
–1% | 10 | 1% | 8 | |||||
| Changed tax rate in Sweden in 2018, in Norway in 2018 and 2017 |
2% | –17 | –2% | –15 | |||||
| Other non-tax-deductible costs | 16% | –140 | –3% | –33 | –157 | –4 | |||
| Non-taxable revenues | –12% | 101 | 18% | 175 | 100% | 100 | 14% | 143 | |
| Tax effect resulting from non-capitalized tax loss carryforwards |
0% | –3 | 2% | 2 | |||||
| Tax attributable to prior years | 5% | –38 | –3% | –25 | –24% | –24 | –1% | –11 | |
| Other | 0% | –2 | |||||||
| Recognized tax | –12% | 99 | –11% | –106 | –101% | –101 | –9% | –90 |
Current tax has been calculated based on the nominal tax prevailing in the country concerned. Insofar as the tax rate for future years has been amended, the changed rate is used for calculating deferred tax.
Note 24 Tax on net profit for the year, deferred tax assets and deferred tax liabilities, cont'd.
| GROUP | |||
|---|---|---|---|
| 2018 | 2017 | ||
| Current tax in hedging instruments | 6 | 1 | |
| Deferred tax on cash flow hedging | 6 | 1 | |
| Deferred tax attributable to the revaluation of defined-benefit pension plans |
175 | 55 | |
| Total | 187 | 57 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Opening carrying amount | –100 | –310 | 6 | 124 |
| Effect of transition to IFRS 15 | 99 | |||
| Less termination of commission relationship |
–119 | |||
| Acquisition of subsidiaries | 13 | |||
| Recognized tax on net profit for the year |
164 | 68 | 2 | 1 |
| Changed tax rate in Sweden in 2018, in Norway in 2018 and 2017 |
–17 | –15 | ||
| Tax items recognized in other comprehensive income |
6 | 2 | ||
| Tax item, revaluation of defined-benefit pension plans recognized in other comprehensive income |
175 | 55 | ||
| Translation differences | –8 | –17 | ||
| Other | 1 | 18 | ||
| Closing carrying amount | 234 | -100 | 8 | 6 |
| ASSETS | LIABILITIES | NET | |||||
|---|---|---|---|---|---|---|---|
| GROUP | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |
| Tangible fixed assets | –12 | –32 | –12 | –32 | |||
| Financial fixed assets | –1 | –1 | –1 | –1 | |||
| Non-completed projects | –989 | –802 | –989 | –802 | |||
| Properties held for future development | –1 | –34 | –1 | –34 | |||
| Untaxed reserves | –187 | –206 | –187 | –206 | |||
| Provisions | 462 | 263 | 462 | 263 | |||
| Personnel benefits/pension provisions | 500 | 323 | 500 | 323 | |||
| Loss carryforwards1) | 411 | 352 | 411 | 352 | |||
| Other | 70 | 73 | –19 | –36 | 51 | 37 | |
| Deferred tax assets/Deferred tax liabilities | 1,443 | 1,011 | –1,209 | –1,111 | 234 | –100 | |
| Offsetting | –912 | –673 | 912 | 673 | |||
| Net deferred tax assets/deferred tax liabilities | 531 | 338 | –297 | –438 | 234 | –100 |
1) Of the Group's deferred tax assets concerning loss carryforwards totaling SEK 411 M (352), SEK 398 M (347) pertains to operations in Norway. The loss carryforwards may be utilized against future profits, with no time limitations, and NCC's assessment is that there are factors that convincingly indicate that this will be the case. The businesses have a track record of operating at a profit, market conditions are favorable and the losses incurred are a function of structural and project-specific difficulties. To manage these, NCC has initiated a comprehensive action program that is proceeding as planned.
| ASSETS | LIABILITIES | NET | ||||
|---|---|---|---|---|---|---|
| PARENT COMPANY | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Provisions | 4 | 5 | 4 | 5 | ||
| Other | 4 | 1 | 4 | 1 | ||
| Net deferred tax asset/tax liability | 8 | 6 | 8 | 6 |
Temporary differences between the carrying amount and the taxable value of directly owned participations do not normally arise for participations held as business assets in Swedish companies. Nor is this the case for the other participations owned by NCC companies in other countries.
| GROUP, 2018 | Properties held for future development |
Ongoing property projects |
Completed property projects |
Total property projects 1) |
Completed housing units |
Participations in associated companies |
Total |
|---|---|---|---|---|---|---|---|
| Recognized cost on January 1 | 1,693 | 1,039 | 916 | 3,649 | 150 | 3,797 | |
| Investments | 670 | 1,652 | 55 | 2,378 | 224 | 2,602 | |
| Divestment and scrappage | –219 | –190 | –1,260 | –1,668 | –91 | –1,760 | |
| Reclassifications | –430 | –210 | 647 | 7 | 2 | 9 | |
| Translation differences during the year | 36 | 11 | 45 | 92 | 4 | 96 | |
| Recognized cost on December 31 | 1,751 | 2,303 | 403 | 4,457 | 63 | 226 | 4,745 |
| Accumulated impairment losses on January 1 | 3 | –46 | –43 | –150 | –193 | ||
| Divestment and scrappage | 3 | 193 | 196 | 91 | 287 | ||
| Reclassifications | –5 | –5 | –5 | ||||
| Translation differences during the year | –2 | –2 | –4 | –6 | |||
| Impairment losses for the year | –119 | –11 | –240 | –370 | –370 | ||
| Accumulated impairment losses on December 31 | –118 | –11 | –95 | –225 | –63 | 0 | –287 |
| Residual value on January 1 | 1,696 | 1,039 | 870 | 3,605 | 0 | 0 | 3,605 |
| Residual value on December 31 | 1,633 | 2,292 | 308 | 4,233 | 0 | 226 | 4,459 |
1) Pertains primarily to properties classified as current assets recognized in NCC Property Development.
| GROUP, 2017 | Properties held for future development |
Ongoing property projects |
Completed property projects |
Total property projects 1) |
Properties held for future development, housing |
Completed housing units |
Total housing projects |
Total |
|---|---|---|---|---|---|---|---|---|
| Recognized cost on January 1 | 1,777 | 1,440 | 853 | 4,070 | 16 | 148 | 164 | 4,234 |
| Investments | 183 | 951 | 18 | 1,152 | 1,152 | |||
| Divestment and scrappage | –57 | –1,123 | –422 | –1,602 | –4 | 2 | –2 | –1,604 |
| Reclassifications | –218 | –229 | 463 | 16 | –16 | –16 | ||
| Translation differences during the year | 8 | 1 | 4 | 13 | 4 | 3 | 16 | |
| Recognized cost on December 31 | 1,693 | 1,039 | 916 | 3,649 | 0 | 150 | 150 | 3,797 |
| Accumulated impairment losses on January 1 | 3 | –45 | –42 | 0 | –148 | –148 | –190 | |
| Divestment and scrappage | 3 | 3 | 3 | |||||
| Translation differences during the year | –1 | –1 | –3 | –2 | –4 | –6 | ||
| Accumulated impairment losses on December 31 | 3 | 0 | –46 | –43 | 0 | –150 | –150 | –193 |
| Residual value on January 1 | 1,780 | 1,440 | 808 | 4,028 | 16 | 0 | 16 | 4,044 |
| Residual value on December 31 | 1,696 | 1,039 | 870 | 3,605 | 0 | 0 | 0 | 3,605 |
1) Pertains primarily to properties classified as current assets recognized in NCC Property Development.
Ongoing property projects comprise 13 projects, three of which, with a carrying amount of SEK 413 M, have been sold but are not yet recognized in profit. Profit will be recognized in 2019 on completion and handover to the customer. Sales revenue from the sold projects totals nearly SEK 620 M. The carrying amount of SEK 413 M will rise in connection with additional costs up to completion.
| Note 26 Materials and inventories |
||||||||
|---|---|---|---|---|---|---|---|---|
| GROUP | 2018 | 2017 | ||||||
| Stone materials | 581 | 438 | ||||||
| Building materials | 140 | 170 | ||||||
| Other | 181 | 156 | ||||||
| Total | 902 | 764 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Worked-up revenues from ongoing contracts | 26,683 | 26,139 |
| Invoicing for ongoing contracts | –25,407 | –24,585 |
| Total | 1,276 | 1,554 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Invoicing for ongoing contracts | 53,494 | 44,337 |
| Worked-up revenues from ongoing contracts | –47,182 | –38,432 |
| Total | 6,311 | 5,905 |
Worked-up revenues from ongoing projects including recognized gains less recognized loss reserves amounted to SEK 73,865 M (64,965).
Revenues recognized in 2018 that emanate from work performed in 2017 or earlier are not estimated to amount to material sums.
In all significant respects, invoiced non-worked-up revenues from December 31, 2017 or earlier are adjudged to have been worked-up in 2018.
| Changes in share capital | Number of shares |
Share capital, SEK M |
|
|---|---|---|---|
| 1988 | Start of year | 6,720,000 | 672 |
| Split, 1:4 | 20,160,000 | ||
| Directed placement in connection with the acquisition of ABV |
16,259,454 | 407 | |
| 1991 | Conversions of debentures | 1,449,111 | 36 |
| 1993 | Conversions of debentures | 468,928 | 11 |
| Directed placements in connection with purchase of minority-held NK shares |
1,838,437 | 46 | |
| 1994 | New issue | 19,841,991 | 496 |
| Conversions of debentures | 13,394,804 | 335 | |
| 1997 | Directed placements, in connection with the acquisition of Siab |
28,303,097 | 708 |
| 2004 | Reduction of share capital1) | –1,844 | |
| 2017 | End of year | 108,435,822 | 867 |
1) The quotient value was changed from SEK 25.00 to SEK 8.00.
| Holding of Series B shares | Number of shares |
|
|---|---|---|
| 2000 | Repurchases | 2,775,289 |
| 2001 | Repurchases | 699,300 |
| 2002 | Repurchases | 2,560,800 |
| 2003 | Repurchases | 3 |
| 2005 | Sales | –4,840,998 |
| 2006 | Sales | –843,005 |
| 2007 | Sales | –330,251 |
| 2011 | Sales | –21,138 |
| 2012 | Repurchases | 415,500 |
| 2013 | Repurchases | 177,000 |
| 2015 | Repurchases | 68,000 |
| 2015 | Distribution of shares to participants in incentive programs |
–92,446 |
| 2016 | Sales | –483,947 |
| 2016 | Distribution of shares to participants in incentive programs |
–84,107 |
| 2016 | Repurchases | 362,222 |
| 2017 | Sales | –37,987 |
| 2017 | Distribution of shares to participants in incentive programs |
–25,144 |
| 2017 | Repurchases | 54,232 |
| 2018 | Sales | –31,952 |
| 2018 | Distribution of shares to participants in incentive programs |
–20,343 |
| 2018 | Repurchases | 101,022 |
| 2018 | End of year | 402,050 |
The share capital is divided into 108,435,822 shares with a quotient value of SEK 8 each. During the year, 48,373 Series A shares (1,105,635) were converted into Series B shares.
The shares are distributed into the following classes:
| Series A | Series B | Total | |
|---|---|---|---|
| Number | 13,337,895 | 95,097,927 108,435,822 |
Series A shares carry ten voting rights each and Series B shares one voting right.
A specification of changes in shareholders' equity is presented on p. 26.
| SERIES A AND B SHARES | Series A | Series B | Total Series A and Series B |
|---|---|---|---|
| No. of shares on Dec. 31, 1999 |
63,111,682 | 45,324,140 | 108,435,822 |
| Conversion of Series A to Series B shares 2000–2016 |
–48,619,779 | 48,619,779 | |
| Share buybacks 2000–2016 | –7,058,114 | –7,058,114 | |
| Sale of treasury shares 2005– 2016 |
6,519,339 | 6,519,339 | |
| Distribution of shares to partici pants in incentive programs, 2015 |
92,446 | 92,446 | |
| Distribution of shares to partici pants in incentive programs, 2016 |
84,107 | 84,107 | |
| No. of shares on Dec. 31, 2016 |
14,491,903 | 93,581,697 | 108,073,600 |
| Conversion of Series A to Series B shares 2017 |
–1,105,635 | 1,105,635 | |
| Share buybacks 2017 | –54,232 | –54,232 | |
| Sale of treasury shares 2017 | 37,987 | 37,987 | |
| Distribution of shares to partic ipants in incentive programs, |
|||
| 2017 | 25,144 | 25,144 | |
| No. of shares on Dec. 31, 2017 |
13,386,268 | 94,696,231 | 108,082,499 |
| Conversion of Series A to Series B shares 2018 |
–48,373 | 48,373 | |
| Share buybacks 2018 | –101,022 | –101,022 | |
| Sale of treasury shares 2018 | 31,952 | 31,952 | |
| Distribution of shares to partici pants in incentive programs, 2018 |
20,343 | 20,343 | |
| No. of shares on Dec. 31, 2018 |
13,337,895 | 94,695,877 | 108,033,772 |
| Number of voting rights | 133,378,950 | 94,695,877 | 228,074,827 |
| Percentage of voting rights | 58 | 42 | 100 |
| Percentage of share capital | 12 | 88 | 100 |
| Closing price, Dec. 31, 2018 | 138.00 | 137.80 | |
| Market capitalization, SEK M | 1,841 | 13,049 | 14,890 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Long-term liabilities | ||
| Liabilities to credit institutions and investors1) | 1,006 | 1,374 |
| Financial lease liabilities | 321 | 272 |
| Other long-term loans | 15 | 23 |
| Total | 1,342 | 1,669 |
| Current liabilities | ||
| Current portion of liabilities to credit institutions and investors |
778 | 588 |
| Liabilities to associated companies | 25 | 31 |
| Financial leasing, current portion | 173 | 146 |
| Other current liabilities | 75 | 154 |
| Total | 1,051 | 919 |
| Total interest-bearing liabilities | 2,393 | 2,588 |
1) Including reloaning of SEK 1,000 M (1,000) from the NCC Group's Pension Foundation.
For repayment schedules and terms and conditions, see Note 38 Financial instruments and financial risk management.
Interest-bearing long-term liabilities pertaining to pensions recognized in the balance sheet under Provisions for pensions and similar obligations.
Note 29 Interest-bearing liabilities, cont'd.
For information on payment schedules for financial leasing liabilities, also see Note 34 Leasing.
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Long-term liabilities | ||
| Reloaning from the NCC Group's Pension Foundation | 1,000 | 1,000 |
| Total | 1,000 | 1,000 |
| Current liabilities | ||
| Group companies | 1,231 | 1,192 |
| Other current liabilities | 350 | |
| Total | 1,581 | 1,192 |
| Total interest-bearing liabilities | 2,581 | 2,192 |
For repayment schedules and terms and conditions, see Note 38 Financial instruments and financial risk management.
| Note 30 Other provisions |
|||
|---|---|---|---|
| GROUP, 2018 | Guaran- tees | Other | Total |
| On January 1 | 1,078 | 835 | 1,913 |
| Provisions during the year | 541 | 762 | 1,303 |
| Amount utilized during the year | –298 | –291 | –589 |
| Reversed, unutilized provisions | –3 | –18 | –21 |
| Translation differences | 18 | 8 | 26 |
| On December 31 | 1,335 | 1,296 | 2,631 |
| GROUP, 2017 | Guaran tees |
Other | Total |
| On January 1 | 1,199 | 509 | 1,708 |
| Provisions during the year | 349 | 500 | 849 |
| Amount utilized during the year | –333 | –187 | –520 |
| Reversed, unutilized provisions | –125 | –6 | –131 |
| Reclassifications | –20 | 20 | |
| Translation differences | 8 | –1 | 7 |
| On December 31 | 1,078 | 835 | 1,913 |
| Guaran |
| PARENT COMPANY, 2017 | Guaran- tees | Other | Total |
|---|---|---|---|
| On December 31 | 0 | 7 | 7 |
| Amount utilized during the year | –1 | –1 | |
| On January 1 | 0 | 8 | 8 |
| PARENT COMPANY, 2018 | tees | Other | Total |
| On January 1 | 540 | 28 | 568 |
|---|---|---|---|
| Provisions during the year | 1 | 1 | |
| Changed commission relationship | –540 | –21 | –561 |
| On December 31 | 0 | 8 | 8 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Restoration reserve | 200 | 179 | ||
| Restructuring costs | 68 | 24 | –1 | |
| Other | 1,028 | 632 | 8 | 8 |
| Other provisions | 1,296 | 835 | 7 | 8 |
| Guarantee commitments | 1,335 | 1,078 | ||
| Total | 2,631 | 1,913 | 7 | 8 |
Guarantee provisions pertain to anticipated future costs. To estimate a future guarantee cost, individual assessments are made from project to project. Standard percentage rates are used for the calculation of the size of the future cost, whereby the standard percentage is varied depending on the nature of the project. In order to eliminate various risks, a provision for guarantee claims is posted at the rate at which the risks are expected to arise after having been identified. Initially, the guarantee cost is posted for each project. This means that the cost can be recognized and booked gradually for each project. The longest maturity for a guarantee provision is ten years, while most of them have maturities of approximately two to three years.
The restoration reserve is attributable to NCC Industry. The provisions are intended to cover future costs for restoring quarries used to mine aggregates and stone. The provisions are posted continuously, once the future costs have been identified. Accordingly, the reserves are utilized at the same rate as restoration occurs.
The provisions comprise additional costs plus uncertainty in projects as well as outstanding disputes and legal matters. Part of the provisions is intended to cover project losses arising in operations and is utilized gradually as the project is worked up.
The NCC Group has defined–benefit pension plans in Sweden and Norway. In Sweden, NCC's pension commitment comprise largely the ITP plan that covers employees born prior to 1979. The plan provides retirement pension based on the final salary and is funded in NCC Group's Pension Foundation. The number of paid–up holders and pensioners is about 77 percent of the total portfolio. In addition, there are five small defined–benefit plans, of which several are blocked from new earnings. Four of these plans are funded in NCC Group's Pension Foundation and the fifth is insured in a life insurance company.
The Board of Directors of NCC Group Pension Foundation consists of an equal number of representatives for the NCC Group and employees covered by the ITP plan. The Board holds meetings four times per year and addresses the Foundation's quarterly accounts, investment strategy, reference portfolio and sensitivity analyses. Under certain conditions, the NCC Group can request compensation from the Foundation for pension payments. There are no minimum funding requirements for the IPT2 plan.
The risks associated with the Swedish pension plans are:
In Norway, the commitment comprises two small pension systems pertaining to supplementary pensions that are not funded and where no new vesting occurs. Since the plans are small, with no new vesting, the risks in these plans are significantly smaller than described above.
| GROUP | 2018 | 2017 |
|---|---|---|
| Defined–benefit plans: | ||
| Current service cost | 226 | 204 |
| Interest expense | 160 | 148 |
| Estimated return on plan assets | –129 | –126 |
| Total cost of defined–benefit plans | 257 | 226 |
| Total cost of defined–contribution plans | 693 | 489 |
| Payroll taxes and yield tax | –167 | –77 |
| Total cost of post–employment remuneration | 783 | 638 |
Current service cost is recognized in operating profit and the interest–rate component, with the anticipated return on plan assets, in net financial items.
NCC secures commitments for disability pensions and family pensions for white–collar employees in Sweden through insurance in Alecta. According to a statement from the Swedish Financial reporting Board, UFR 10, Recognition of ITP2 Pension Plan financed through insurance in Alecta, this constitutes a multi–employer defined–benefit plan. For the 2018 fiscal year, NCC did not have access to the type of information required for reporting its proportional share of the plan's commitment, plan assets and costs, which makes it impossible to report these plans as defined–benefit plans. Accordingly, the ITP (individual supplementary pension) plans that are secured through insurance in Alecta are recognized as a defined–contribution plan. The NCC Group's share of the total savings premium for ITP2 in Alecta is 0.20 percent (0.19).
The collective solvency rate consists of the market value of Alecta's assets as a percentage of its insurance obligations, calculated in accordance with Alecta's actuarial accounting methods and assumptions, which do not comply with IAS 19. The collective solvency rate is normally allowed to vary between 125 and 155 percent. If Alecta's collective solvency rate falls below 125 percent or exceeds 155 percent, measures must be taken to create conditions for returning the solvency rate to the normal interval. In the event of low solvency, one measure could be to raise the agreed price for new subscriptions and increase existing benefits. In the event of high solvency, one measure can be to introduce premium reductions. At the end of 2018, Alecta's surplus in the form of its collective solvency rate was 142 percent (154).
| GROUP | 2018 | 2017 |
|---|---|---|
| Obligations secured in full or in part in funds: | ||
| Present value of defined–benefit obligations | 7,044 | 6,388 |
| Fair value of plan assets | 5,207 | 5,254 |
| Net value of obligations funded in full or in part | 1,837 | 1,134 |
| Special payroll tax/employer contributions | 442 | 272 |
| Net amount in balance sheet (obligation +, asset –) | 2,279 | 1,407 |
| Net amount is recognized in the following balance– sheet items: |
||
| Provisions for pensions and similar obligations | 2,279 | 1,407 |
| Net amount in balance sheet (obligation +, asset –) | 2,279 | 1,407 |
| Net amount is distributed among plans in the following countries: |
||
| Sweden | 2,264 | 1,395 |
| Norway | 15 | 11 |
| Net amount in balance sheet (obligation +, asset –) | 2,279 | 1,407 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Obligation for defined benefit plans on January 1 | 6,388 | 5,855 |
| Benefits paid | –188 | –183 |
| Current service cost plus interest expense | 386 | 352 |
| Actuarial gains and losses on changed demographic assumptions |
102 | 131 |
| Actuarial gains and losses on changed financial assump tions |
355 | 234 |
| Exchange–rate differences | –1 | |
| Obligation for defined benefit plans on December 31 | 7,044 | 6,388 |
The weighted average maturity for the plans is 22 years (22).
| GROUP | 2018 | 2017 |
|---|---|---|
| Fair value of plan assets on January 1 | 5,254 | 5,043 |
| Contribution by employer | 44 | 2 |
| Compensation | –18 | –81 |
| Estimated return | 129 | 126 |
| Actuarial gains and losses | –201 | 164 |
| Fair value of plan assets on December 31 | 5,208 | 5,254 |
| The plan assets comprise: | ||
| Swedish stock market, listed | 741 | 671 |
| International stock market, listed | 1,134 | 1,286 |
| Hedge funds, listed | 726 | 807 |
| Interest–bearing securities, listed | 1,593 | 1,476 |
| Interest–bearing securities, unlisted | 1,013 | 1,014 |
| Fair value of plan assets on December 31 | 5,208 | 5,254 |
There is no effect of the lowest funding requirements or asset ceiling.
| GROUP | 2018 | 2017 |
|---|---|---|
| Discount interest rates, % | 2.35 | 2.45 |
| Future salary increases, % | 3.00 | 3.00 |
| Anticipated inflation, % | 2.00 | 1.75 |
| Useful life assumption at 65 years, years | 22.4 | 22.4 |
| GROUP | Increase, % | Decrease, % |
|---|---|---|
| Discount interest rate, 0.5 percentage points change | –9.6 | 8.4 |
| Future salary increases, 0.5 percentage points change | 2.9 | –3.2 |
| Anticipated inflation, 0.5 percentage points change | 6.4 | –7.3 |
| Useful life assumption at 65 years, 1 year change | 4.0 | –4.0 |
The above sensitivity analysis does not constitute a forecast from the company but only a mathematical calculation.
The sensitivity analysis is based on a change in an assumption, while all other assumptions remain constant. In practice, it is not probable that this will occur and any changes in the assumptions could be correlated. When calculating the sensitivity analysis, the same method is used as in the calculation of the pension liability in the balance sheet.
The Group estimates that SEK 36 M will be paid in 2019 to funded and unfunded defined–benefit plans.
Note 31 Pensions, cont'd..
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Proprietary pension payments | ||
| Proprietary costs, excluding interest expense | 10 | 185 |
| Interest expense | 3 | 2 |
| Cost of proprietary pension payments | 13 | 187 |
| Pension payments through insurance | ||
| Insurance premiums | 21 | 23 |
| Subtotal | 34 | 210 |
| Special payroll tax on pension costs | 4 | 8 |
| Pension costs during the year | 38 | 218 |
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Capital value of pension obligations pertaining to pro prietary pension payments on January 1 |
177 | 3,378 |
| Cost, excluding interest expense, charged against profit | 10 | 185 |
| Interest expense | 3 | 2 |
| Pension payments | –9 | –10 |
| Benefits/obligations transferred to NCC Sverige AB | –3,378 | |
| Capital value of pension obligations pertaining to proprietary pension on December 31 |
181 | 177 |
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Fair value of especially detached assets on January 1 | 218 | 4,443 |
| Return on especially detached assets | 8 | 218 |
| Payment from pension foundations | –10 | |
| Benefits transferred to NCC Sverige AB | –4,443 | |
| Fair value of especially detached assets on December 31 | 216 | 218 |
| Fair value of especially detached assets distributed as: | ||
| Shares | 78 | 80 |
| Funds | 30 | 33 |
| Interest–bearing receivables | 108 | 105 |
| Fair value of especially detached assets on December 31 | 216 | 218 |
The NCC Group's Pension Foundation has an interest–bearing receivable of SEK 1,000 M (1,000) from NCC AB.
Otherwise, the pension foundations have no financial instruments issued by the company or assets used by the company.
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Capital value of pension obligations pertaining to proprietary pension on December 31 |
181 | 177 |
| Fair value of especially detached assets on December 31 |
216 | 218 |
| Surplus on especially detached assets | 36 | 42 |
| Net recognized pension obligation | 1 | 1 |
| PARENT COMPANY | 2018 | 2017 |
|---|---|---|
| Discount interest rate on December 31 | 2.35 | 4.00 |
The pension calculations are based on the salary and pension level on the balance–sheet date.
| Note 32 | Other liabilities |
|---|---|
| GROUP | 2018 | 2017 |
|---|---|---|
| Other long-term liabilities | ||
| Derivative instruments held for hedging | 5 | 18 |
| Other long-term liabilities | 3 | 35 |
| Total | 8 | 54 |
| Other current liabilities | ||
| Advances from customers | 536 | 143 |
| Liabilities to associated companies | 5 | 4 |
| Derivative instruments held for hedging | 50 | 40 |
| Liabilities, property acquisitions | 2 | 14 |
| Other current liabilities | 926 | 850 |
| Total | 1,520 | 1,052 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Payroll–related costs | 2,111 | 2,195 | 60 | 61 |
| Financial expense | 1 | 2 | ||
| Prepaid rental revenues | 3 | 9 | ||
| Prepaid revenues from rental guar antees |
47 | 13 | ||
| Project–related costs | 912 | 626 | ||
| Administrative costs | 23 | 4 | 8 | 6 |
| Operating and sales costs | 302 | 304 | 3 | 5 |
| Other expenses | 52 | 55 | 4 | 3 |
| Total | 3,452 | 3,207 | 75 | 76 |
In Sweden, there are framework agreements for the financial leasing of cars and trucks, with some related administrative services. The agreements are based on variable interest rates. NCC recommends purchasers and has the opportunity to extend leasing agreements.
In Finland, Norway and Denmark, framework agreements have been reached for the operational leasing of cars and trucks, including related administrative services. The agreements are based on variable interest rates. A separate agreement is required for the acquisition of leased objects and the extension of leasing agreements.
Industry, Building and Infrastructure have framework agreements concluded for the operational leasing of production equipment. The agreements are based on variable interest rates and pertain to Sweden, Norway, Denmark and Finland.
| GROUP | 2018 | 2017 |
|---|---|---|
| Financial lessee | ||
| Leasing contracts that expire: | ||
| Within one year | 59 | 58 |
| Later than one year but earlier than five years | 435 | 360 |
| Future minimum leasing fees | ||
| Within one year | 174 | 147 |
| Later than one year but earlier than five years | 328 | 274 |
| Present value of future minimum leasing fees | ||
| Within one year | 173 | 146 |
| Later than one year but earlier than five years | 321 | 272 |
| Reconciliation of future leasing fees and their present value: |
||
| Future minimum leasing fees | 502 | 421 |
| Less interest charge | –8 | –2 |
| Present value of future minimum leasing fees | 494 | 419 |
| Variable fees included in net profit for the year: | ||
| Interest on leased machinery and equipment | 3 | 2 |
| Total | 3 | 2 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Operational lessor | ||||
| Future minimum leasing fees – lessor (leased premises) |
||||
| Distributed by maturity period: | ||||
| Within one year | 17 | 23 | 47 | 46 |
| Later than one year but earlier than five years |
78 | 68 | 63 | 107 |
| Later than five years | 12 | 42 | ||
| Operational lessee | ||||
| Future minimum leasing fees – lessee |
||||
| Leasing contracts that expire: | ||||
| Within one year | 448 | 380 | 52 | 52 |
| Later than one year but earlier than five years |
1003 | 886 | 70 | 122 |
| Later than five years | 161 | 134 | ||
| The year's cost for operational leas ing amounts to |
694 | 580 |
The companies that are closely related to the NCC Group are primarily the Nordstjernan Group (including the associated company Bonava), associated companies and joint arrangements.
The Parent Company has a related party relationship with its subsidiaries; see Note 18, Participations in Group companies. For information on NCC's senior executives, see Note 5, Number of employees, personnel expenses and remuneration of senior executives. For transactions pertaining to NCC Group's Pension Foundation, see Notes 31 and 38.
Transactions involving NCC's associated companies and joint ventures were of a production nature. The transactions were conducted on normal market terms.
| GROUP | 2018 | 2017 |
|---|---|---|
| Transactions with associated companies and joint ventures |
||
| Sales to associated companies and joint ventures | 45 | 81 |
| Purchases from associated companies and joint arrangements |
18 | 65 |
| Dividend from associated companies | 1 | |
| Long-term receivables from associated companies and joint ventures |
429 | |
| Current receivables from associated companies and joint ventures |
24 | 42 |
| Interest-bearing liabilities to associated companies and joint ventures |
25 | 31 |
| Operating liabilities to associated companies and joint ventures |
9 | 16 |
| Transactions with the Nordstjernan Group | ||
| Sales to the Nordstjernan Group | 1,728 | 2,844 |
| Purchases from the Nordstjernan Group | 3 | 158 |
| Current receivables from the Nordstjernan Group | 178 | 187 |
| PARENT COMPANY | 2018 | 2017 |
| Transactions with Group companies | ||
| Purchases from Group companies | 58 | 72 |
| Interest income from Group companies | 1 | 4 |
| Interest expense to Group companies | 1 | 1 |
| Dividend from Group companies | 435 | 629 |
| Current receivables from Group companies | 906 | 1,085 |
| Interest-bearing liabilities to Group companies | 1,226 | 1,187 |
| Operating liabilities to Group companies | 1,050 | 1,050 |
| Contingent liabilities to Group companies | 19,309 | 18,911 |
| Transactions with the Nordstjernan Group | ||
| Purchases from the Nordstjernan Group | 1 |
Note 36 Pledged assets, sureties, guarantees and contingent liabilities
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |
| Assets pledged | ||||
| For own liabilities: | ||||
| Assets subject to liens, etc. | 493 | 418 | ||
| Restricted bank funds | 1 | |||
| Total | 493 | 419 | ||
| Other pledged assets | 9 | 10 | ||
| Total assets pledged | 502 | 429 | ||
| Contingent liabilities Own contingent liabilities: |
||||
| Sureties on behalf of Group companies |
19,309 | 18,912 | ||
| Other guarantees and contingent liabilities |
455 | 450 | 368 | 368 |
| Held jointly with other companies: |
||||
| Liabilities in consortiums, trading companies and limited partnerships |
147 | 60 | ||
| Total guarantees and guarantee obligations1) |
602 | 510 | 19,678 | 19,280 |
1) Since sureties for former wholly owned subsidiaries of NCC AB in the Bonava Group have not been eliminated, sureties still remaining as outstanding in NCC AB on behalf of Bonava companies have been included in this item (for the Group 367 (367) and for the Parent Company 367 (367)). The remaining volume, which includes collateral for agreements concerning future development and has beneficiaries in the form of municipalities and private-sector companies, will continue to be managed during 2019. As a result of agreements between NCC AB and Bonava AB, however, NCC AB has been indemnified by Bonava AB for all undertakings. In addition, NCC AB has received guarantees from credit insurance companies for the remaining outstanding commitments on behalf of now wholly owned Bonava companies.
Pertains to leased equipment in the form of vehicles and trucks.
Sureties on behalf of Group companies have mainly been issued as collateral for: • utilized guarantee limits with banks and insurance companies
In its continuous business operations, NCC occasionally becomes a party to disputes or legal processes. Within the framework of particularly its contracting operations, NCC makes what it considers to be justifiable claims against clients but the clients may partially or fully contest such claims. In many cases, the client may make counterclaims. In other cases, clients may direct claims against NCC for, inter alia, alleged shortcomings in NCC's execution of the ordered work. The aggregated amounts are substantial. NCC's financial statements reflect NCC's best assessment of the outcome but it cannot be excluded that the final outcome could in certain cases differ significantly from the currently made assessments.
In the wake of the Finnish asphalt cartel (1994-2002), which was finally concluded in respect of competition-infringement fees in 2009, former customers have directed claims of about EUR 71 M against NCC jointly with other construction companies. In Helsinki District Court's 2013 verdict in five of the cases, NCC was ordered to pay about EUR 1 M. In 2016, the Finnish Court of Appeal in Helsinki changed this verdict, whereby NCC will not have to pay damages. In a number of cases, the counterparties have applied for leave to appeal to the Supreme Court (SC), which has announced that it will hear one of the cases in which NCC is the defendant. The hearing will be restricted to addressing matters pertaining to statutory limitation and whether the principle of financial succession will be applied in respect of the right to damages. The SC has requested an opinion from the EU Court of Justice. In the Advocate-General's draft determination issued in February 2019, it is stated that damages may be sought from companies that have continued to have financial operations in a
cartel member. The EU Court of Justice's ruling is expected in March 2019 and the SC's verdict is expected later in 2019. NCC has recognized what it adjudges to be necessary provisions. However, it cannot be excluded that the final outcome could differ from the amount of provisions.
NCC conducts operations subject to permit obligations in the form of, for example, asphalt and gravel pit operations, plants and landfills. NCC occasionally engages in a dialog with the authorities concerned regarding compliance with the terms and conditions for conducting the operations. Such matters are handled within the framework of the operating activities. In the unlikely event that NCC is found to have breached the applicable permits without being able to take necessary actions, this could result in considerable costs.
| GROUP | 2018 | 2017 |
|---|---|---|
| Cash and bank balances | 1,197 | 3,063 |
| Total cash and cash equivalents | 1,197 | 3,063 |
| Short-term investments with a maturity exceeding three months |
72 | 41 |
| PARENT COMPANY | 2018 | 2017 |
| Cash and bank balances | 1,100 | |
| Balance in NCC Treasury AB | 161 | 863 |
| Total according to cash flow statement | 161 | 1,963 |
Short-term investments have been classified as cash and cash equivalents/cash in bank based on the following considerations:
One asset acquisition was completed during the year. For additional information, see Note 15.
According to the acquisition analyses, the value of acquired assets and liabilities was as follows:
| GROUP | 2018 | 2017 |
|---|---|---|
| Intangible fixed assets | 46 | 74 |
| Buildings and land | 6 | |
| Tangible fixed assets | 14 | 43 |
| Inventories | 3 | |
| Other current receivables | 2 | |
| Long-term liabilities | 23 | |
| Accounts payable and other current liabilities | 5 | 7 |
| Purchase considerations | 56 | 96 |
| Impact on the Group's cash and cash equivalents | 56 | 96 |
Group
Acquisitions of intangible and tangible fixed assets during the year, excluding assets acquired via financial leasing, amounted to SEK 1,089 M (957), of which SEK 0 M (0) was financed through loans.
Acquisitions of non-controlling interests totaled SEK 3 M (0), of which SEK 0 M (0) had no effect on cash flow. Sales of subsidiaries and non-controlling interests amounted to SEK 75 M (0), of which SEK 0 M (0) had no effect on cash flow.
Acquisitions of intangible and tangible fixed assets during the year amounted to SEK 18 M (10), of which SEK 0 M (0) was financed through loans.
Since the Parent Company has only insignificant amounts of cash and cash equivalents in foreign currency, no exchange-rate differences in cash and cash equivalents arose during the year.
Interest received during the year amounted to SEK 14 M (21). Interest paid during the year amounted to SEK 128 M (120).
Interest received during the year amounted to SEK 1 M (4). Interest paid during the year amounted to SEK 21 M (21).
| GROUP | 2018 | 2017 |
|---|---|---|
| Operating activities | 81 | 107 |
| Change in working capital | 163 | 44 |
| Investing activities | –2 | |
| Financing activities | –135 | –118 |
| Total cash flow | 107 | 33 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Restricted bank funds | 1 | |
| Cash and cash equivalents in joint operations | 154 | 47 |
| Total cash and cash equivalents unavailable for use | 154 | 48 |
| GROUP | 2018 | 2017 |
|---|---|---|
| Acquisition of assets through promissory notes | 8 | |
| Acquisition of assets through financial leasing | 227 | 280 |
| GROUP | CB 2017 | Cash flow | New leases | Interest indexing |
Exchange-rate differences |
CB 2018 |
|---|---|---|---|---|---|---|
| Interest-bearing liabilities | 2,223 | –196 | –119 | 1,908 | ||
| Interest-bearing receivables | –783 | 354 | –429 | |||
| Lease liabilities | 419 | 75 | –3 | 493 | ||
| Total liabilities, financing activities | 1,859 | 158 | 75 | –3 | –119 | 1,972 |
| Dividend | –864 | |||||
| Buyback of company shares | –11 | |||||
| Cash flow from financing activities | –717 |
| PARENT COMPANY | CB 2017 | Cash flow | Group contributions 2018 |
Exchange-rate differences/other |
CB 2018 |
|---|---|---|---|---|---|
| Interest-bearing liabilities | 2,188 | 389 | 2,577 | ||
| Long-term interest-free liabilities | 1,049 | –4 | 1,045 | ||
| Total liabilities in financing activities | 3,237 | 385 | 3,622 | ||
| Interest-bearing receivables | –222 | 22 | –545 | 1 | –744 |
| Total financing activities | 3,015 | 407 | –545 | 1 | 2,878 |
Through its business operations, the Group is exposed to financial risks. These financial risks are defined as refinancing, liquidity, interest-rate, exchange-rate, credit, counterparty risks and guarantee capacity risks. NCC's finance policy for managing financial risks has been decided by NCC's Board of Directors and constitutes a framework of guidelines and rules in the form of risk mandates and limits for finance activities.
Within the NCC Group's decentralized organization, financial activities are centralized to the NCC Group's Finance Department, NCC Group Treasury, partly in order to monitor the Group's overall financial risk positions, and partly to achieve cost-effectiveness and economies of scale and to accumulate expertise, while protecting Group-wide interests. Within NCC, risks associated with the Group's interest and exchange rates, credit, refinancing, counterparty, liquidity and price risks associated with oil-based products are managed by NCC's internal bank, NCC Treasury AB. Price risks associated with electrical products and customer credit risks are handled within each business area.
NCC is subject to a debt/equity covenant that is associated with the syndicated credit facility of EUR 325 M (325) that was signed with a group of banks and has a remaining term to maturity of about three years. NCC satisfies the financial covenants.
The refinancing risk is defined as the risk that NCC will not be able to obtain financing at a given time or that creditors will have difficulty in fulfilling their commitments. NCC strives to spread its risk among various sources of financing (market-financing programs, bank loans and other loan structures) in order to secure the Group's long-term access to borrowed capital.
NCC's policy for its refinancing risk is to ensure that the company's debt portfolio1) has a maturity structure that minimizes the Group's exposure from the perspective of the refinancing risk. The maturity periods must be well-diversified over time. The norm concerning distribution is that the weighted average remaining maturity must be at least 18 months. At December 31, the maturity period for loans was 34 months (34) in respect of the company's debt portfolio1) of SEK 2,392 M (2,588).
1) NCC's borrowing portfolio: Interest-bearing liabilities excluding pension debt according to IAS 19.
| 2018 | 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| INTEREST-BEARING LIABILITIES | ||||||||||
| Matures | Amount | Propor tion, % |
Amount | Propor tion, % |
||||||
| 2018 | 919 | 35 | ||||||||
| 2019 | 1,051 | 44 | 493 | 19 | ||||||
| 2020 | 146 | 6 | 105 | 4 | ||||||
| 2021 | 112 | 5 | 39 | 2 | ||||||
| 20222) | 55 | 2 | 1,032 | 40 | ||||||
| 2023-2) | 1,029 | 43 | ||||||||
| Total | 2,392 | 100 | 2,588 | 100 |
1) Excluding pension debt according to IAS 19.
2) Of which, reborrowing of SEK 1,000 M (1,000) from the NCC Group's Pension Foundation is included in 2023 (2022).
NCC has established the following investor-related market financing programs:
| Limit | Utilized nom SEK M |
|
|---|---|---|
| Commercial paper (CP) program in Finland | EUR 300 M | |
| Commercial paper (CP) program in Sweden | SEK 4,000 M | 400 |
| Medium Term Note (MTN) in Sweden1) | SEK 5,000 M | 279 |
| Total | 679 |
1) Of which a nominal amount of SEK 79 M listed on Nasdaq Stockholm.
Of NCC's total interest-bearing liability, excluding pension debt according to IAS 19, investor-related loans accounted for 28 percent (26).
The liquidity risk refers to the risk that NCC does not have sufficient payment capacity at a given time, which could adversely impact the Group's ability to fulfill its payment obligations. To achieve adequate flexibility and cost-effectiveness, while ensuring that future financing requirements are satisfied, NCC's finance policy states that the Group's payment capacity must correspond to at least 7 percent of annual consolidated sales, with at least 5 percent of this in the form of unutilized committed lines of credit. Payment capacity is defined as the Group's cash and cash equivalents, short-term investments and unutilized committed lines of credit, less market financing programs with a remaining maturity of less than three months. At the end of the year, the volume of unutilized committed lines of credit was SEK 3,587 M (3,460), with a remaining average maturity of 2.8 years (3.7). Available cash and cash equivalents are invested in banks or in interest-bearing instruments with good credit ratings and a liquid secondary market. At December 31, the Group's cash and cash equivalents, including short-term investments, amounted to SEK 1,268 M (3,104). Payment capacity on December 31 corresponded to 8 percent (12) of sales.
The table below shows the Group's financial liabilities (including interest payments) and net settled derivative instruments classified as financial liabilities. For financial instruments carrying variable interest rates, the interest rate pertaining on the balance-sheet date has been used. Amounts in foreign currency have been translated to SEK based on the exchange rate applying on the balance-sheet date. The amounts in the tables are the contractual undiscounted cash flows.
| 2018 | 2017 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | <3 months | 3 months - 1 year |
1–3 years | 3–5 years | Total | <3 months | 3 months - 1 year |
1–3 years | 3–5 years | ||
| Reborrowing from the NCC Group's Pension Foundation |
1,090 | 18 | 36 | 1,036 | 1,085 | 17 | 34 | 1,034 | |||
| Interest-bearing liabilities | 903 | 621 | 261 | 21 | 1,188 | 172 | 615 | 396 | 5 | ||
| Financial lease liabilities | 502 | 176 | 241 | 85 | 424 | 1 | 148 | 208 | 67 | ||
| Interest-rate swaps | 2 | 2 | 15 | 2 | 11 | 2 | |||||
| Oil forward contracts | 8 | 2 | 6 | ||||||||
| Accounts payable | 5,164 | 5,164 | 5,179 | 5,179 | |||||||
| Total | 7,669 | 5,789 | 461 | 298 | 1,121 | 7,891 | 5,354 | 791 | 640 | 1,106 |
1) Excluding pension debt according to IAS 19.
The table below shows the Group's gross settled derivatives. The amounts in the table are the contractual undiscounted cash flows.
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Total | <3 months | 3 months - 1 year |
>1 year | Total | <3 months | 3 months - 1 year |
>1 year | |
| Currency forward contracts | ||||||||
| - outflow | –6,064 | –4,205 | –1,714 | –145 | –6,765 | –4,285 | –1,771 | –709 |
| - inflow | 6,148 | 4,277 | 1,729 | 142 | 6,778 | 4,305 | 1,772 | 701 |
| Net flow from gross settled derivatives | 84 | 72 | 15 | –3 | 13 | 20 | 1 | –8 |
The interest-rate risk is the risk that changes in market rates will adversely affect NCC's cash flow or the fair value of financial assets and liabilities. NCC's main financing sources are shareholders' equity, cash flow from operating activities and borrowing. NCC's finance policy for the interest-rate risk is that the weighted average remaining maturity of borrowing portfolio1) when exposure is reduced by the maturity for cash and cash equivalents2) should normally be 12 months subject to a mandate to deviate from this figure by +/– 6 months, and that the interest-rate maturity structure of the borrowing portfolio should be adequately spread over time. If the available borrowing vehicles are not compatible with the desired interest-rate structure for the loan portfolio, interest swaps are the main instruments used to adapt the structure. In the financial statements, hedge accounting is applied when there is an effective connection between the hedged loan and interest-rate swaps. When assessing effectiveness, NCC ensures that the financial correlation between interest-rate swaps and underlying loans has been fulfilled by having the interest-rate swaps denominated in the same currency, and ensuring that durations, the timing of interest payments, nominal amounts and interest-rate bases correspond with underlying loans. Interest-rate swaps have the same quantity as underlying loans. Ineffectiveness may arise if the points in time for the cash flow in the interest-rate swaps do not fully match those of underlying loans.
The average interest rate maturity of the company's borrowing portfolio1) reduced by interest-rate exposure associated with cash and cash equivalents2) was 5 months (7), including interest-rate swaps linked to the borrowing portfolio. Cash and cash equivalents2) amounted to SEK 1,268 M (3,104) and the average interest-rate maturity for these assets was 2 months (0.2).
At the end of 2018, NCC's interest-bearing gross debt excluding pension debt according to IAS 19 amounted to SEK 2,392 M (2,588) and the average interest-rate maturity was 6 months (8).
On December 31, 2018, NCC had interest-rate swaps linked to the borrowing portfolio with a nominal value of SEK 100 M (500). At the same date, the interest-rate swaps had a fair value of SEK –2 M (–14) net, comprising receivables of SEK 0 M (0), other long-term liabilities of SEK 0 M (2) and other current liabilities SEK 2 M (12). The interest-rate swaps have expiration dates ranging from 0.2 (0.7) to 0.2 (1.2) years with an average fixed interest rate of 1.58 percent. An increase in interest rates by one percentage point would result in a change of SEK –2 M (18) in net profit for the year, based on the interest-bearing assets and liabilities existing on the balance-sheet date, excluding the pension debt according to IAS 19. An increase in interest rates by one percentage point would result in a change of SEK 0 M (0) in net profit for the year and a positive change of SEK 0 M (2) in other comprehensive income resulting from a change in fair value of the Group's interest-rate swaps.
1) The company's borrowing portfolio: Interest-bearing liabilities excluding pension debt according to IAS 19, including interest-rate swaps linked to the borrowing portfolio. 2) Cash and cash equivalents and short-term investments.
| 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|
| INTEREST-BEARING LIABILITIES, INCL. INTEREST-RATE SWAPS | |||||||
| Matures | Amount | Proportion, % | Amount | Proportion, % | |||
| 2018 | 2,456 | 95 | |||||
| 2019 | 2,368 | 99 | 100 | 4 | |||
| 2020 | |||||||
| 2021 | 24 | 1 | 33 | 1 | |||
| Total | 2,392 | 100 | 2,588 | 100 |
1) Excluding pension debt according to IAS 19.
The exchange-rate risk is the risk that changes in exchange rates will adversely affect the consolidated income statement, balance sheet or cash flow statement.
In accordance with the finance policy, transaction exposure must be eliminated as soon as it becomes known. Contractual and probable forecast flows are hedged, mainly by using currency forward contracts. Contracted gross exposure in each currency is hedged at a rate of 100 percent. Contractual gross exposure in each currency is hedged at a rate of 100 percent. Forecast exposure is hedged successively over time, which entails that the quarters that are closest in time are hedged to a greater extent than the following quarters. Accordingly, each quarter is hedged on several occasions and is covered by several hedged contracts that have been entered into at different times. The target is to hedge 90 percent of the forecast for the current quarter and 70 percent of the forecast for the following quarter, followed by 50, 30 and 10 percent, respectively, in the following quarters. In the financial statements, hedge accounting is applied when the requirements for hedge accounting are fulfilled. The currency forward contract that hedge the cash flow are denominated in the same currency, are in the same amount and have the same due date as the hedged cash flow. Ineffectiveness may arise if a change occurs in the point of time for when the future cash flow will arise or if there is a change in the contractual or forecast cash flow.
The following table shows the sum total of the Group's gross inflows and gross outflows of various currencies, the portion hedged during the year and the currency risk for each currency in the unhedged currency flows. The currency risk shows the change in profit for the year should the SEK exchange rate change by 5 percent in relation to every single currency due to losses from the translation of unhedged accounts payable/accounts receivable.
| 2018 | 2017 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M | Gross in and outflows |
Of which, expired hedges |
Hedged portion, % |
Currency risk 5% after tax on unhedged share |
Gross in and outflows |
Of which, expired hedges |
Hedged portion, % |
Currency risk 5% after tax on unhedged share |
||||
| EUR | 2,210 | 1,607 | 73 | 24 | 1,633 | 1,119 | 69 | 20 | ||||
| DKK | 269 | 54 | 20 | 8 | 258 | 60 | 23 | 8 | ||||
| NOK | 245 | 101 | 41 | 6 | 266 | 118 | 44 | 6 | ||||
| PLN | 153 | 142 | 93 | 0 | 153 | 127 | 83 | 1 | ||||
| Other | 42 | 38 | 89 | 0 | 52 | 25 | 49 | 1 | ||||
| Total | 2,919 | 1,942 | 67 | 38 | 2,361 | 1,450 | 61 | 36 |
The forward contracts used to hedge contracted and forecast transactions are classified as cash flow hedges. During 2018, no cash flow hedges were closed, because it was no longer probable that the expected cash flow would be achieved.
The table below shows forecast currency flows during 2019 (2018) through the first quarter of 2020 (Q1 2019), the outstanding hedge position at year-end and the hedged portion.
| Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | TOTAL | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M (2018) |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
| EUR | 226 | 203 | 90 | 219 | 153 | 70 | 181 | 91 | 50 | 139 | 42 | 30 | 139 | 14 | 10 | 904 | 503 | 56 |
| Target value % | 90 | 70 | 50 | 30 | 10 |
| Q1 2018 Q2 2018 |
Q3 2018 Q4 2018 |
Q1 2019 | TOTAL | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M (2017) |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
Net out flow |
Hedge position |
Hedged portion, % |
| EUR | 219 | 204 | 93 | 242 | 169 | 70 | 266 | 133 | 50 | 250 | 75 | 30 | 167 | 17 | 10 | 1,143 | 598 | 52 |
| Target value % | 90 | 70 | 50 | 30 | 10 |
The table below shows the outstanding hedge position at year-end for the sum total of contractual gross inflows and gross currency outflows.
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M | Total | <3 months | 3 months– 1 year |
>1 year | Total | <3 months | 3 months– 1 year |
>1 year |
| EUR | 662 | 147 | 438 | 77 | 57 | 11 | 19 | 27 |
| NOK | 349 | 298 | 51 | 410 | 205 | 205 | ||
| PLN | 71 | 45 | 26 | 96 | 29 | 23 | 44 | |
| Other | 6 | 4 | 2 | |||||
| Total | 1,082 | 490 | 464 | 128 | 569 | 249 | 44 | 276 |
The hedges fulfill effectiveness requirements, meaning that all changes resulting from changed exchange rates are recognized in other comprehensive income. The net fair value of currency forward contracts used for hedging transaction exposure amounted to SEK –32 M (–19). Of this amount, other longterm receivables of SEK 0 M (3), other receivables of SEK 9 M (11), other longterm liabilities of SEK 5 M (16) and other current liabilities of SEK 37 M (17) have been recognized in the balance sheet.
The table below shows the total outstanding hedge position in respect of forecast and contractual currency flows at year-end and average forward rates per currency in SEK.
| 2018 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M | Total | <3 months | 3 months – 1 year |
>1 year | |||||||
| Total hedge position | 1,585 | 693 | 750 | 142 | |||||||
| Average forward rate in SEK | |||||||||||
| EUR currency forward contracts | 10.07 | 10.07 | 10.05 | 10.22 | |||||||
| NOK currency forward contracts | 1.06 | 1.06 | 1.07 | ||||||||
| PLN currency forward contracts | 2.26 | 2.29 | 2.20 |
According to NCC's Finance Policy, Group assets are to be financed in local currency. External and internal borrowing in the NCC Group occurs mainly through the central treasury unit and is then transferred to the business areas and subsidiaries in the form of internal loans. Lending is denominated in local currency, while external financing largely occurs in SEK and EUR. Parts of the Group's loans and liquidity are converted through currency derivatives into the currencies of the Group's assets.
The following tables illustrate NCC's financing and the currency swap agreements for financing. The stated values include underlying capital amounts.
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| Counter-value in SEK M | Amount | Proportion, % | Amount | Proportion, % | ||
| EUR | 24 | 1 | 86 | 3 | ||
| NOK | 105 | 4 | 284 | 11 | ||
| SEK | 2,263 | 95 | 2,218 | 86 | ||
| Total | 2,392 | 100 | 2,588 | 100 |
1) Excluding pension debt according to IAS 19.
| Counter-value in SEK M | 2018 | 2017 |
|---|---|---|
| Buy +/ Sell – DKK | 337 | |
| Buy +/ Sell – EUR | 421 | –432 |
| Buy +/ Sell – NOK | –2,876 | –3,245 |
| Buy +/ Sell – RUB | –32 | –57 |
| Net | –2,150 | –3,734 |
1) Currency swaps.
The main rule of NCC's finance policy is that the Group's translation exposure should not be hedged. Exceptions have been made for the development operations of NCC Property Development. During 2018, NCC discontinued the hedging of translation exposure for NCC Property Development. Previously, not more than 90 percent of foreign net assets were hedged, without taking the tax effect into account.
Net assets were hedged through the raising of loans and/or through currency forward contracts. The carrying amount of loans and currency forward contracts (including underlying capital amounts) used as hedging instruments at December 31, was SEK 0 M (556), of which SEK 0 M (0) for loans and SEK 0 M (556) for currency forward contracts. Hedge accounting was applied when the criteria for hedge accounting were met. An exchange-rate difference of SEK –30 M (–7) before tax has been recognized in other comprehensive income. The hedges during the year fulfilled effectiveness requirements, meaning that all changes resulting from changed exchange rates are recognized in other comprehensive income.
The table below shows the Group's net investments in foreign subsidiaries and hedging positions per currency, plus the hedged portion both with and without taking tax effects into account, as well as the exchange-rate risk associated with unhedged translation exposure. At December 31, 2018, unhedged translation exposure resulting from a 5-percent depreciation of the SEK in relation to other currencies would result in a change in shareholders' equity for the respective currency according to the table below and a change of SEK 0 M (0) in net profit for the year. Because hedging of translation exposure was discontinued in 2018, there were no outstanding hedging positions at year-end.
| 2018 | 2017 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M | Net investment |
Hedge position before tax |
Hedged portion before tax % |
Hedge position after tax |
Hedged portion after tax % |
Exchange rate risk, 5% of unhedged share |
Net investment |
Hedge position before tax |
Hedged portion before tax % |
Hedge position after tax |
Hedged portion after tax % |
Exchange rate risk, 5% of unhedged share |
| DKK | 1,339 | 67 | 1,523 | 271 | 18 | 211 | 14 | 63 | ||||
| EUR | 283 | 14 | 513 | 167 | 33 | 130 | 25 | 17 | ||||
| NOK | 499 | 25 | 445 | 118 | 27 | 92 | 21 | 16 | ||||
| RUB | -3 | 0 | 10 | 1 | ||||||||
| Total | 2,118 | 0 | 0 | 0 | 0 | 106 | 2,491 | 556 | 22 | 434 | 17 | 97 |
The table below shows the Group's net investments in NCC Property Development and hedging positions per currency, plus the hedged portion both with and without taking tax effects into account. Because hedging of translation exposure was discontinued in 2018, there were no outstanding hedging positions at year-end.
| 2018 | 2017 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Counter-value in SEK M | Net investment |
Hedge posi tion before tax |
Hedged por tion before tax % |
Hedge position after tax |
Hedged por tion after tax % |
Net investment |
Hedge posi tion before tax |
Hedged por tion before tax % |
Hedge position after tax |
Hedged por tion after tax % |
| DKK | 282 | 302 | 271 | 90 | 211 | 70 | ||||
| EUR | 104 | 199 | 167 | 84 | 130 | 65 | ||||
| NOK | 114 | 142 | 118 | 83 | 92 | 65 | ||||
| Total | 499 | 0 | 0 | 0 | 0 | 643 | 556 | 86 | 434 | 67 |
Since a large part of NCC Industry's sales of paving contracts are subject to indexed prices, NCC Industry is not exposed to any risk in the event of a change in the price of bitumen. However, there are cases of fixed price contracts that are not indexed, whereby NCC Industry is exposed to a risk should the price of bitumen change. The price risk is managed by NCC Treasury through oil forward contracts. The policy is to hedge purchases of bitumen pertaining to larger customer contracts when the work is to be performed later than two months from the ordering date. NCC ensures that the oil derivative is priced using the same underlying index as the price of bitumen and that the number of purchased tons of bitumen per month exceeds the number of hedged tons of bitumen per month. The hedged quantity of purchases of bitumen corresponds
with the derivative's quantity. Ineffectiveness may arise if the point in time of the purchases of bitumen deviates from the derivative's maturity date.
The table below shows the Group's purchases of bitumen and the portion hedged via oil forward contracts during the year.
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| Tons | Purchases bitumen |
Of which, expired hedges |
Portion hedged via oil for ward con tracts, % |
Purchases bitumen |
Of which, expired hedges |
Portion hedged via oil for ward con tracts, % |
| Total | 310,057 | 41,676 | 13 | 324,850 | 57,387 | 18 |
The following table shows the Group's forecast volume of purchases of bitumen, the outstanding hedging position at year-end and the portion hedged via oil forward contracts. The hedges fulfill effectiveness requirements, meaning that all changes from changed prices are recognized in other comprehensive income. The forward contracts used to hedge forecast purchases of bitumen are classified as cash flow hedges.
| 2018 | 2017 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Total | <3 months | 3 months - 1 year |
>1 year | Total | <3 months | 3 months - 1 year |
>1 year | ||
| Forecast volume of purchases of bitumen (tons) | 649,701 | 7,859 | 316,992 | 324,850 | 974,551 | 7,859 | 316,992 | 649,700 | |
| Hedge position through oil forward contracts (tons) | 29,719 | 2,960 | 22,146 | 4,613 | 44,786 | 0 | 28,863 | 15,923 | |
| Hedged portion, % | 5 | 38 | 7 | 1 | 5 | 0 | 9 | 2 | |
| Hedge position counter-value, SEK M | 79 | 11 | 58 | 10 | 65 | 0 | 31 | 34 | |
| Hedged price per ton (average price in SEK) | 2,663 | 3,585 | 2,629 | 2,233 |
The net fair value of oil forward contracts used for hedging the price risk related to bitumen was SEK -4 M (24). Of this amount, other long-term receivables of SEK 0 M (6), other receivables of SEK 3 M (18), other long-term liabilities of SEK 1 M (0) and other current liabilities of SEK 7 M (0) have been recognized in the balance sheet.
Given outstanding oil forward contracts on the balance-sheet date, a 10-percent increase in the price of bitumen at December 31, 2018 would give rise to a change of SEK 5 M (10) in shareholders' equity and of SEK 0 M (0) in profit. The sensitivity analysis assumes that all other factors remain unchanged.
As part of efforts to ensure calculable costs for electricity, NCC has elected to use electricity derivatives to level off price variations occurring in the electricity market. NCC progressively hedges the price for up to three years and is building up the volume of electricity contracts at the particular delivery date.
The hedges fulfill effectiveness requirements, meaning that all changes from changed prices are recognized in other comprehensive income. The forward contracts used to hedge contracted purchases of electricity are classified as cash flow hedges.
At year-end, the outstanding volume of electricity derivatives amounted to SEK 43 M (34), of which SEK 4 M (3) will fall due within three months, SEK 18 M (16) in three-12 months and SEK 21 M (15) after one year.
The net fair value of electricity derivatives used for hedging the price risk related to electricity was SEK 21 M (5). Of this amount, other receivables of SEK 21 M (5) and liabilities of SEK 0 M (0) have been recognized in the balance sheet.
Credit and counterparty risks in financial operations
NCC's investment regulations for financial credit risks are revised continuously and characterized by caution. Transactions are only entered into with creditworthy counterparties with credit ratings of at least A (Standard & Poor's) or the equivalent international rating, as well as local banks with a minimum rating equal to the creditworthiness of the country in which NCC has operations. ISDA's (International Swaps and Derivatives Association) framework agreement on netting is used with all counterparties with respect to derivative trading. The investment regulations specify maximum credit exposures and maturities for various counterparties.
Total counterparty exposure with respect to derivative trading, calculated as the net receivable per counterparty, amounted to SEK 210 M (156) at the end of 2018. The net receivable per counterparty is calculated in accordance with the market valuation method, i.e. the market value of the derivative plus a supplement for the change in risk (1% of the nominal amount). Calculated gross exposure to counterparty risks pertaining to cash and cash equivalents and shortterm investments amounted to SEK 1,268 M (3,104).
Credit risks in accounts receivable
The risk that the Group's customers will not fulfill their obligations, meaning that payment is not received from the customers, is a credit risk. The credit rating of the Group's customers is checked, whereby information on the customers' financial position is obtained from various credit information companies. For major accounts receivable, the risk of credit losses is limited through various types of collateral, such as bank guarantees, blocks on building loans, Parent Company guarantees and other payment guarantees.
| 2018 | 2017 | |||
|---|---|---|---|---|
| GROUP | Gross | Reserve for doubtful receivables |
Gross | Reserve for doubtful receivables |
| Not due accounts receivable | 6,960 | 7,383 | ||
| Past-due accounts receivable 1-30 days |
1,020 | 475 | ||
| Past-due accounts receivable 31-60 days |
310 | 91 | 5 | |
| Past-due accounts receivable 61-180 days |
280 | 6 | 169 | 8 |
| Past-due accounts receivable > 180 days |
2,437 | 1,230 | 1,768 | 889 |
| Total | 11,007 | 1,236 | 9,886 | 902 |
Collateral for accounts receivable was received in an amount of SEK 0 M (0). Receivables expired >180 days are essentially caused by ongoing discus-
sions/disputes with the client and are not connected to a question about the client's creditworthiness.
| GROUP | 2018 | 2017 |
|---|---|---|
| On January 1 | 902 | 154 |
| Provision for the year | 371 | 854 |
| Reversal of previously posted impairment losses | –34 | –106 |
| Translation differences | –4 | |
| On December 31 | 1,236 | 902 |
NCC applies IFRS 9 as of January 1, 2018. The carrying amount and fair value of financial instruments, and the change in measurement categories between IAS 39 and IFRS 9, are presented in the tables below. In NCC's balance sheet, mainly short-term investments (held for trading) and derivatives are measured at fair value. Short-term investments are measured according to prices quoted on a well-functioning secondary market for the same instruments.
The measurement to fair value of currency-forward contracts, oil forward contracts and electricity forward contracts is based on customary models with observable input data such as interest rates, exchange rates and commodity prices. The measurement of interest-rate swaps is based on forward interest rates prepared based on observable yield curves. The discount has no significant impact on the measurement of derivatives.
For financial instruments recognized at amortized cost – accounts receivables, current interest-bearing receivables, other receivables, cash and cash equivalents, accounts payable and other interest-free liabilities – the fair value does not materially deviate from the carrying amount. For long-term holdings of securities (long-term interest-bearing receivables) and short-term investments held to maturity, the fair value is based on the prices listed in a well-functioning secondary market. For short and long-term bond loans listed on Nasdaq Stockholm, the fair value was calculated according to prices listed in a well-functioning secondary market. The fair value for unlisted long-term bonds and long-term liabilities to credit institutions, was calculated by discounting future cash flows with current market rates for similar financial instruments. The assessment is that the fair value of other long-term and current interest-bearing liabilities did not materially deviate from the carrying amount.
The following table explains the original measurement categories according to IAS 39 and the new measurement categories under IFRS 9 for each class of the Group's financial assets and financial liabilities at January 1, 2018.
| SEK M | Original classification according to IAS 39 | New classification in accordance with IFRS 9 | Original carrying amount according to IAS 39 |
New carrying amount according to IFRS 9 |
|---|---|---|---|---|
| Financial assets | ||||
| Long-term holdings of securities, equity instruments |
Available-for-sale financial assets | Fair value through other comprehensive income, equity instruments |
91 | 91 |
| Long-term interest-bearing receivables | Accounts and loan receivables | Amortized cost | 445 | 445 |
| Long-term interest-bearing receivables | Held-to-maturity investments | Amortized cost | 131 | 131 |
| Other long-term receivables, derivatives | Derivatives used in hedge accounting | Derivatives used in hedge accounting | 8 | 8 |
| Accounts receivable | Accounts and loan receivables | Amortized cost | 8,882 | 8,882 |
| Current interest-bearing receivables | Accounts and loan receivables | Amortized cost | 167 | 167 |
| Other receivables, derivatives | Financial assets measured at fair value through profit or loss. Held for trading |
Mandatory as fair value through profit and loss |
43 | 43 |
| Other receivables, derivatives | Derivatives used in hedge accounting | Derivatives used in hedge accounting | 37 | 37 |
| Other receivables | Accounts and loan receivables | Amortized cost | 117 | 117 |
| Short-term investments | Financial assets measured at fair value through profit or loss. Held for trading |
Mandatory as fair value through profit and loss |
10 | 10 |
| Short-term investments | Held-to-maturity investments | Amortized cost | 30 | 30 |
| Cash and cash equivalents | Accounts and loan receivables | Amortized cost | 3,063 | 3,063 |
| Total financial assets | 13,023 | 13,023 | ||
| Financial liabilities | ||||
| Long-term interest-bearing liabilities | Other liabilities | Other liabilities | 1,669 | 1,669 |
| Other long-term liabilities, derivatives | Derivatives used in hedge accounting | Derivatives used in hedge accounting | 18 | 18 |
| Other long-term liabilities, derivatives | Financial liabilities measured at fair value through profit and loss. Held for trading |
Mandatory as fair value through profit or loss |
1 | 1 |
| Other long-term liabilities | Other liabilities | Other liabilities | 35 | 35 |
| Provisions for pensions and similar obli gations |
Other liabilities | Other liabilities | 1,407 | 1,407 |
| Current interest-bearing liabilities | Other liabilities | Other liabilities | 919 | 919 |
| Accounts payable | Other liabilities | Other liabilities | 5,179 | 5,179 |
| Accrued expenses and deferred income | Other liabilities | Other liabilities | 2 | 2 |
| Other current liabilities, derivatives | Derivatives used in hedge accounting | Derivatives used in hedge accounting | 38 | 38 |
| Other current liabilities, derivatives | Financial liabilities measured at fair value through profit and loss. Held for trading |
Mandatory as fair value through profit or loss |
2 | 2 |
| Other current liabilities | Other liabilities | Other liabilities | 19 | 19 |
| Total financial liabilities | 9,288 | 9,288 |
The carrying amount and fair value of financial instruments are presented in the following table.
| GROUP, 2018 | Financial assets at fair value through profit or loss1) |
Derivatives used in hedge accounting |
Financial assets measured at amor tized cost |
Financial assets measured at fair value through other comprehen sive income, equity instruments |
Financial liabilities measured at fair value through profit and loss1) |
Other liabilities |
Total carrying amount |
Total fair value |
|---|---|---|---|---|---|---|---|---|
| Long-term holdings of securities | 77 | 77 | 77 | |||||
| Long-term interest-bearing receivables | 195 | 195 | 196 | |||||
| Other long-term receivables | 0 | 96 | 96 | 96 | ||||
| Accounts receivable | 9,629 | 9,629 | 9,629 | |||||
| Prepaid expenses and accrued income | 1 | 1 | 1 | |||||
| Current interest-bearing receivables | 163 | 163 | 163 | |||||
| Other receivables | 127 | 33 | 56 | 216 | 216 | |||
| Short-term investments | 72 | 72 | 72 | |||||
| Cash and cash equivalents | 1,197 | 1,197 | 1,197 | |||||
| Total assets | 199 | 34 | 11,337 | 77 | 11,647 | 11,647 | ||
| Long-term interest-bearing liabilities2) | 1,342 | 1,342 | 1,343 | |||||
| Other long-term liabilities | 5 | 3 | 8 | 8 | ||||
| Provisions for pensions and similar obligations | 2,279 | 2,279 | 2,279 | |||||
| Current interest-bearing liabilities | 1,051 | 1,051 | 1,051 | |||||
| Accounts payable | 5,164 | 5,164 | 5,164 | |||||
| Other current liabilities | 46 | 4 | 8 | 58 | 58 | |||
| Total liabilities | 51 | 4 | 9,846 | 9,902 | 9,902 |
1) Mandatory measured at fair value.
2) Reborrowing of 1,000 M from NCC's Pension Foundation is included.
| GROUP, 2017 | Financial assets at fair value through profit or loss1) |
Derivatives used in hedge accounting |
Accounts and loan receiv ables |
Held-to-maturity investments |
Available-for-sale financial assets |
Financial liabilities measured at fair value through profit or loss1) |
Other liabilities |
Total carrying amount |
Total fair value |
|---|---|---|---|---|---|---|---|---|---|
| Long-term holdings of securities | 91 | 91 | 91 | ||||||
| Long-term interest-bearing receiv ables |
445 | 131 | 575 | 575 | |||||
| Other long-term receivables | 8 | 8 | 8 | ||||||
| Accounts receivable | 8,882 | 8,882 | 8,882 | ||||||
| Current interest-bearing receivables | 167 | 167 | 167 | ||||||
| Other receivables | 43 | 37 | 117 | 196 | 196 | ||||
| Short-term investments | 10 | 30 | 41 | 41 | |||||
| Cash and cash equivalents | 3,063 | 3,063 | 3,063 | ||||||
| Total assets | 53 | 45 | 12,673 | 161 | 91 | 13,023 | 13,023 | ||
| Long-term interest-bearing liabilities2) |
1,669 | 1,669 | 1,676 | ||||||
| Other long-term liabilities | 18 | 1 | 35 | 54 | 54 | ||||
| Provisions for pensions and similar obligations |
1,407 | 1,407 | 1,407 | ||||||
| Current interest-bearing liabilities | 919 | 919 | 925 | ||||||
| Accounts payable | 5,179 | 5,179 | 5,179 | ||||||
| Accrued expenses and deferred income |
2 | 2 | 2 | ||||||
| Other current liabilities | 38 | 2 | 19 | 59 | 59 | ||||
| Total liabilities | 55 | 3 | 9,230 | 9,288 | 9,301 |
1) Held for trading.
2) Reborrowing of SEK 1,000 M from NCC's Pension Foundation is included.
| PARENT COMPANY, 2018 | Financial assets measured at amor tized cost |
Financial assets measured at fair value through other comprehensive income, equity instruments |
Other liabilities | Total carrying amount |
Total fair value |
|---|---|---|---|---|---|
| Other long-term holdings of securities | 45 | 45 | 45 | ||
| Accounts receivable | 1 | 1 | 1 | ||
| Current receivables from Group companies | 745 | 745 | 745 | ||
| Balance in NCC Treasury AB | 161 | 161 | 161 | ||
| Total assets | 907 | 45 | 952 | 952 | |
| Long-term liabilities to credit institutions1) | 1,000 | 1,000 | 1,000 | ||
| Long-term liabilities to Group companies | 1,044 | 1,044 | 1,044 | ||
| Other long-term liabilities | 1 | 1 | 1 | ||
| Accounts payable | 25 | 25 | 25 | ||
| Current liabilities to Group companies | 1,232 | 1,232 | 1,232 | ||
| Other current liabilities | 350 | 350 | 350 | ||
| Total liabilities | 3,652 | 3,652 | 3,652 | ||
1) Reborrowing of SEK 1,000 M from the NCC Group's Pension Foundation is included.
| PARENT COMPANY, 2017 | Accounts and loan receivables |
Available-for-sale financial assets |
Other liabilities | Total carrying amount |
Total fair value |
|---|---|---|---|---|---|
| Other long-term holdings of securities | 45 | 45 | 45 | ||
| Accounts receivable | 1 | 1 | 1 | ||
| Current receivables from Group companies | 222 | 222 | 222 | ||
| Other current receivables | 1 | 1 | 1 | ||
| Cash and bank balances | 1,100 | 1,100 | 1,100 | ||
| Balance in NCC Treasury AB | 863 | 863 | 863 | ||
| Total assets | 2,187 | 45 | 2,232 | 2,232 | |
| Long-term liabilities to credit institutions1) | 1,000 | 1,000 | 1,000 | ||
| Long-term liabilities to Group companies | 1,044 | 1,044 | 1,044 | ||
| Other long-term liabilities | 4 | 4 | 4 | ||
| Accounts payable | 33 | 33 | 33 | ||
| Current liabilities to Group companies | 1,192 | 1,192 | 1,192 | ||
| Total liabilities | 3,274 | 3,274 | 3,274 |
1) Reborrowing of SEK 1,000 M from NCC's Pension Foundation is included.
The classification categories Financial assets measured at fair value through profit and loss and Financial liabilities measured at fair value through profit and loss are not applicable for the Parent Company. No reclassification of financial assets and liabilities among the above categories was effected during the year. It has been determined that the fair value of the Parent Company's financial instruments did not materially deviate from the carrying amount.
When determining fair value, assets have been divided into three levels. No transfers were made between the levels during the period and no significant changes were made with respect to measurement methods, data or assumptions used.
In the tables below, disclosures are made concerning how fair value was determined for the financial instruments that are continuously measured at fair value and the financial instruments not recognized at fair value in NCC's balance sheet.
Level 1: in accordance with prices quoted on an active market for the same instruments. This category does not apply for the Parent Company. Level 2: on the basis of directly or indirectly observable market data that is not included in Level 1. This category does not apply for the Parent Company. Level 3: on the basis of input data that is not observable in the market.
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| GROUP | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
| Financial assets measured at fair value | ||||||||
| Financial assets measured at fair value through profit or loss | ||||||||
| Securities held for trading | 10 | 10 | ||||||
| Short-term investments | 72 | 72 | ||||||
| Derivative instruments | 127 | 127 | 43 | 43 | ||||
| Derivative instruments used in hedge accounting | 34 | 34 | 45 | 45 | ||||
| Available-for-sale financial assets | 91 | 91 | ||||||
| Financial assets measured at fair value through other comprehensive income |
||||||||
| Equity instruments | 77 | 77 | ||||||
| Financial assets not recognized at fair value | ||||||||
| Held-to-maturity investments | 161 | 161 | ||||||
| Long-term interest-bearing receivables | 196 | 196 | ||||||
| Total assets | 268 | 161 | 77 | 506 | 171 | 88 | 91 | 350 |
| Financial liabilities measured at fair value | ||||||||
| Financial liabilities measured at fair value through profit and loss | ||||||||
| Derivative instruments | 4 | 4 | 3 | 3 | ||||
| Derivative instruments used in hedge accounting | 51 | 51 | 55 | 55 | ||||
| Financial liabilities not recognized at fair value | ||||||||
| Other interest-bearing liabilities | 79 | 2,315 | 2,394 | 482 | 2,119 | 2,601 | ||
| Total liabilities | 79 | 2,370 | 0 | 2,449 | 482 | 2,177 | 0 | 2,659 |
NCC has binding netting arrangements (ISDA agreements) with all counterparties for derivative trading, whereby NCC can offset receivables and liabilities should a counterparty become insolvent or in another event. The following table sets out the gross financial assets and liabilities recognized and the amounts available for offsetting. NCC has not offset any amounts in the balance sheet.
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| GROUP | Financial assets | Financial liabilities |
Financial assets | Financial liabilities |
|
| Recognized gross amount1) | 161 | 55 | 88 | 58 | |
| Amount included in the net ting agreement |
–52 | –52 | –54 | –54 | |
| Net amount after netting agreement |
109 | 3 | 34 | 4 |
1) The gross carrying amount of financial assets includes SEK 127 M (43) for derivatives measured at fair value through profit or loss in other receivables, SEK 0 M (8) for derivatives used in hedge accounting for other long-term receivables and SEK 33 M (37) in other receivables.
The gross carrying amount of financial liabilities includes derivatives measured at fair value through profit or loss in other long-term liabilities in an amount of SEK 0 M (1), other current liabilities of SEK 4 M (2), derivatives used in hedge accounting of other long-term liabilities of SEK 5 M (18) and other current liabilities of SEK 46 M (38).
The Parent Company has no derivatives outstanding.
NCC AB, Corporation Registration Number 556034-5174, is a limited liability company registered in Sweden, with its Head Office in Solna. NCC AB's shares are listed on the Stockholm Exchange (Nasdaq Exchange Stockholm/Large Cap List).
The address of the head office is NCC AB, Vallgatan 3, SE-170 80 Solna, Sweden
The consolidated financial statements for 2018 relate to the Parent Company and its subsidiaries, jointly designated the Group. The Group also includes shareholdings in associated companies and joint ventures.
At December 31, 2018, Nordstjernan AB accounted for 16.8 percent of the share capital and 47.4 percent of the voting rights in NCC AB. Nordstjernan AB, Corporate Registration Number 556000-1421, has its registered Head Office in Stockholm.
On January 14, 2019, NCC announced that NCC's Nomination Committee will propose that Alf Göransson be elected to the NCC Board of Directors. Board member Carina Edblad has declined re-election. Reelection of the other seven members is proposed. The Nomination Committee proposes that the Board of Directors, insofar as it is elected by the Annual General Meeting, comprise eight members with no deputies. Alf Göransson served as CEO of Securitas between 2007 and 2018. Prior to that, he was CEO of NCC between 2001 and 2007. He is Chairman of the Board of Loomis and Board member of Sweco, Attendo, Hexpol, Melker Schörling AB, Axfast, Axel Johnson Inc. and Sandberg Development Group.
On January 22, 2019, it was announced that Carola Lavén will be stepping down from her membership of EMT and as the head of NCC's Property Development business area to become the Deputy CEO and Investment Director at property company Castellum. Carola Lavén will continue in her current position until July 22 at the latest.
| Note 41 | Appropriation of the company's profit | ||||||
|---|---|---|---|---|---|---|---|
| be appropriated as follows: | The Board of Directors proposes that the available funds | 1,849,685,885 | |||||
| Ordinary dividend to shareholders of SEK 4 per share1) | 432,135,088 | ||||||
| To be carried forward 1,417,550,797 |
|||||||
| Total, SEK | 1,849,685,885 |
1) The total amount of the proposed dividend is calculated based on the number of outstanding shares on March 8, 2019.
| The Board of Directors proposes that the available funds | 1,849,685,885 |
|---|---|
| be appropriated as follows: | |
| Ordinary dividend to shareholders of SEK 4.00 per share1) | 432,135,088 |
| To be carried forward | 1,417,550,797 |
| Total, SEK | 1,849,685,885 |
1) The total amount of the proposed dividend is calculated based on the number of outstanding shares on March 8, 2019.
The Board of Directors and the CEO hereby give their assurance that the Annual Report and the consolidated financial statements have been compiled in compliance with the European Parliament's and Council of Europe's Regulation (EC) No. 1606/2002 dated July 19, 2002 regarding the application of international accounting standards and with generally acceptable accounting practices and thus provide a fair and accurate impression of the financial position and earnings of the Group and the Parent Company. The Reports of the Board of Directors for both the Group and the Parent Company accurately
review the Group's and the Parent Company's operations, financial positions and earnings and describe the significant risks and uncertainties facing the Parent Company and the companies included in the Group.
The Annual Report and the consolidated financial statements were approved for issue by the Board of Directors on March 8, 2019. The consolidated income statement and balance sheet and the Parent Company's income statement and balance sheet will be presented to the Annual General Meeting for adoption on April 9, 2019.
Solna, March 8, 2019
Chairman of the Board Board member Board member
Tomas Billing Geir Magne Aarstad Viveca Ax:son Johnson
Carina Edblad Mats Jönsson Angela Langemar Olsson Board member Board member Board member
Ulla Litzén Birgit Nørgaard Board member Board member
Karl-Johan Andersson Karl G Sivertsson Harald Stjernström Board member Board member Board member Employee representative Employee representative Employee representative
Tomas Carlsson President and CEO
Our audit report was submitted on March 13, 2019
PricewaterhouseCoopers AB
Håkan Malmström Ann-Christine Hägglund Authorized Public Accountant Authorized Public Accountant Auditor in Charge
To the general meeting of shareholders of NCC AB (publ), corporate identity number 556034-5174
We have audited the annual accounts and consolidated accounts of NCC AB (publ) for the year 2018. The annual accounts and consolidated accounts of the company are included on pages 8-67 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company as of 31 December 2018 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2018 and its financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and the balance sheet for the parent company and the group.
Our opinions in this report on the annual accounts and the consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, to the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We designed our audit by determining materiality and assessing the risk of material misstatement in the financial statements. We tailored our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the NCC group, the accounting processes and controls, and the industry in which NCC operates.
In a business such as NCC's, our risk assessment is particularly influenced by the impact of the Board of Directors' and management's estimates and judgements on the financial statements. We have assessed the highest risk for misstatements in the financial statements to be the percentage-of-completion revenue recognition in some of the ongoing projects in NCC Building Sweden, NCC Building Nordics and NCC Infrastructure. In addition, we have identified a number of other risks that also reflect components of estimates and judgements, e.g, warranty provisions and disputes. As in all of our audits, we also addressed the risk of the Board of Directors' and management overriding internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Based on the risk assessment the central audit team developed an audit strategy according to which the group audit mirrors NCC's organisation and which starts in an audit of the five business areas. As a part of this strategy the audit has focused on the largest units within each business area, which are subject to a so-called full audit.
The central audit team performs the audit of the parent company and the consolidated accounts and issues, based on the audit strategy, instructions to the audit teams for each business area. We also perform a centralised audit of, e.g., selected controls in the financial processes handled by NCC's group common shared service centre as well as of relevant controls over NCC's group common information systems. The results of these examinations are shared with local audit teams.
The scope of our audit is influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and the consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and the consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
2018 revenue in NCC's construction and civil engineering operations amount to approximately SEK 44 billion. In all material respects revenue is related to construction projects and is recognised over time, i.e., applying percentage-of-completion. This means that
recognised revenue and costs in construction projects are based on assumptions and estimates on future outcome as documented in the project forecasts. These forecasts include estimates of costs for, e.g., labour, material, subcontractors and warranty obligations. From time to time, the latter may require updated estimates also for completed projects. As applicable, forecasts also include assessments of claims on customers relating to, e.g, change or additional orders and deficiencies in tender conditions.
The elements of assumptions and estimates means that final results may deviate from those now reported. During 2018 NCC has recognised considerable revaluations in primarily NCC Infrastructure, but also in NCC Building Nordics and NCC Building Sweden.
The size of the amounts involved combined with the elements of assumptions and estimates makes this a key audit matter.
Refer to the sections " Revenue from construction and similar projects", " Critical estimates and assessments" (subsections " Percentage-of-completion profit recognition of projects" , "Guarantee commitments" and "Guarantee obligations, legal disputes, etc") in note 1 Accounting Policies as well as note 3 Order stock and distribution of external net sales, note 27 Construction contracts, note 30 Other provisions and note 36 Pledged assets, sureties, guarantees and contingent liabilities (subsection "Contingent liabilities etc").
We have evaluated and on a sample basis tested selected key controls in so-called tollgates in NCC's project process, from calculation to current project reporting. We have also evaluated processes, routines and methodology for project completion.
We have performed analytical reviews of revenue and margins reported and evaluated management's routines for follow-up of the projects financial results and also discussed the latter with management.
On a sample basis, we have examined revenue and the recognised project costs on which the determination of completion ratio is based. We have also tested the mathematical accuracy of the percentage-of-completion profit calculation.
In NCC Infrastructure and NCC Building Sweden, we have made site visits on certain projects.
We have discussed with NCC the principles, methods and assumptions on which estimates are based, including those forming the basis for warranty provisions for projects already completed.
For selected projects, we have performed more in-depth procedures including, e.g., reading contract excerpts, review of project forecasts and discussions with project leaders and controllers on judgements, assumptions and estimates. We have also obtained opinions from NCC's legal advisers on selected disputes.
We have kept a dialogue also with group management and the audit committee on NCC's estimates and the principles, methods and assumptions on which these are based. Our overall view is that NCC's assumptions and estimates lie within an acceptable range. However, we have communicated that many times these are difficult judgemental matters and that final outcome may deviate from the current assumptions, estimates and judgments.
Other information than the annual accounts and the consolidated accounts
Other information than the annual accounts and the consolidated accounts
This document also contains other information than the annual accounts and the consolidated accounts and is found on pages 1-7, 72-89 and 100-101. The Board of Directors and the President are responsible for this other information.
Our opinion on the annual accounts and the consolidated accounts does not cover this other information and we do not express any form of assurance conclusion on this other information.
In connection with our audit of the annual accounts and the consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and the consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the President are responsible for the preparation of the annual accounts and the consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the President are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and the consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the President are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the President intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The audit committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and the consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and the consolidated accounts is available on Revisorsinspektionen's website www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.
In addition to our audit of the annual accounts and the consolidated accounts, we have also audited the administration of the Board
of Directors and the President of NCC AB (publ) for the year 2018 and the proposed appropriations of the company's profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Presidents be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibility section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The President shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfil the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the President in any material respect:
• has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.
PricewaterhouseCoopers AB, 113 97 Stockholm, was appointed auditor of NCC AB by the general meeting of shareholders on 9 April 2018 and has been the company's auditor since 5 April 2017.
Stockholm 13 March 2019 PricewaterhouseCoopers AB
Authorized Public Accountant Authorized Public Accountant Auditor-in-charge
Håkan Malmström Ann-Christine Hägglund
| INCOME STATEMENT, SEK M | 2011 | 2012 | IAS 19 2012 |
2013 | 2014 | 2015 | Excluding Bonava 2015 |
2016 | 2017 | IFRS 15 2017 |
2018 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | 52,535 | 57,227 | 57,227 | 57,823 | 56,867 | 62,495 | 53,116 | 52,934 | 54,608 | 54,441 | 57,346 |
| Production costs | –47,721 | –51,724 | –51,731 | –52,027 | –51,176 | –56,009 | –48,683 | –48,484 | –50,460 | –50,460 | –55,205 |
| Gross profit | 4,814 | 5,503 | 5,495 | 5,796 | 5,691 | 6,486 | 4,432 | 4,450 | 4,148 | 3,981 | 2,140 |
| Selling and administrative costs | –2,774 | –2,978 | –2,988 | –3,130 | –3,117 | –3,405 | –2,765 | –2,912 | –2,933 | –2,933 | –2,875 |
| Result from sales of owner occupied properties |
7 | 3 | 3 | 6 | 20 | 7 | 7 | –10 | 1 | 1 | 12 |
| Impairment losses on fixed assets |
–38 | –2 | –2 | 7 | –40 | –39 | –97 | –7 | –7 | –82 | |
| Capital gain from sales of Group companies |
3 | 6 | 6 | 3 | 2 | 21 | 21 | ||||
| Result from participations in associated companies |
5 | 5 | 5 | 1 | 8 | –9 | 26 | 20 | 11 | 11 | 42 |
| Operating profit/loss | 2,017 | 2,537 | 2,519 | 2,679 | 2,604 | 3,039 | 1,661 | 1,453 | 1,242 | 1,075 | –764 |
| Financial income | 76 | 74 | 74 | 75 | 46 | 50 | 39 | 26 | 39 | 39 | 36 |
| Financial expense | –284 | –348 | –315 | –354 | –416 | –433 | –78 | –138 | –130 | –130 | –121 |
| Net financial items | –208 | –274 | –241 | –279 | –370 | –383 | –39 | –112 | –91 | –91 | –85 |
| Profit/loss after financial items | 1,808 | 2,263 | 2,277 | 2,400 | 2,234 | 2,656 | 1,623 | 1,341 | 1,150 | 983 | –849 |
| Tax on profit for the period | – 496 | –364 | –367 | –411 | –396 | –536 | –302 | –225 | –141 | –106 | 99 |
| Profit for the period | 1,312 | 1,899 | 1,910 | 1,989 | 1,838 | 2,120 | 1,321 | 1,116 | 1,009 | 877 | –750 |
| Attributable to: | |||||||||||
| NCC's shareholders | 1,310 | 1,894 | 1,905 | 1,986 | 1,835 | 2,113 | 1,315 | 1,113 | 1,004 | 872 | –756 |
| Non-controlling interests | 2 | 5 | 5 | 3 | 3 | 6 | 6 | 3 | 5 | 5 | 6 |
| Profit for the period | 1,312 | 1,899 | 1,910 | 1,989 | 1,838 | 2,120 | 1,321 | 1,116 | 1,009 | 877 | –750 |
2014: Operating profit/loss was strong but not as high as in 2013. Continued favorable housing sales in NCC Housing, higher earnings in all Construction units and NCC Roads were offset by weaker profit for NCC Property Development. However, activity was lower in our commercial property development operations, particularly compared with 2013, which was somewhat of a record year with several major completed projects.
2015: A strong end to the year enabled NCC to report what was its best ever full-year earnings. Continued favorable housing sales in NCC Housing and profit-recognized property projects in Property Development, at the same time as the trend for Construction Denmark and Construction Finland was positive. The Norwegian operation reported weaker earnings due to impairment losses on projects and NCC Roads noted reduced earnings from its stone materials operations. Net profit/loss for the year was adversely impacted by costs for the cartel case in Norway and costs for NCC's reorganization. Orders received during the year remained buoyant, thus strengthening the order backlog.
2016: Operating profit/loss declined within the all business areas apart from NCC Industry. This was mainly due to impairment losses on projects and resolved disputes within NCC Infrastructure and NCC Building. NCC Property Development's operating profit developed negatively because fewer property projects were recognized in profit and the profit margin was lower. Net financial items declined year-on-year due to higher average net debt, because Bonava received capital contributions in April 2016.
2017: NCC's operating result was lower than in 2016, primarily because of impairment losses on projects and provisions in NCC Infrastructure, which had a negative impact. Although NCC Building improved its earnings despite impairment losses on projects in Finland and provisions in Denmark, there is some way to go before it attains its financial objectives. NCC Industry delivered its best earning ever thanks to higher sales volumes and improved profitability. NCC Property Development improved its earnings and achieved its financial objectives.
2018: A full-year operating loss was reported, which was primarily due to the provisions, revaluations and impairment losses slightly exceeding SEK 1.5 billion that were carried out in the third quarter. Of the business areas, NCC Infrastructure, NCC Building Nordics and NCC Property Development incurred full-year operating losses, while NCC Building Sweden and NCC Industry reported operating profits.
AMENDED ACCOUNTING POLICIES – IAS 19. COMPARATIVE FIGURES FOR 2012 HAVE BEEN RECALCULATED.
Changes have occurred in the reporting of employee benefits, for which the revised IAS 19 has been applied since January 1, 2013. Comparative figures for 2012 have been recalculated. In brief, the amendment of IAS 19 meant that the opportunity to utilize the corridor method has been discontinued, entailing that actuarial gains and losses arising must be recognized directly against Other comprehensive income in the period they arise. Furthermore, the return on plan assets must be calculated using the same rate as the discount rate for the pension commitment. The interest-rate component in the pension commitment and the anticipated return on plan assets is now recognized in net financial items.
– IFRS 15, COMPARATIVE FIGURES FOR 2017 HAVE BEEN RECALCULATED.
In the Annual Report, comparative figures for 2017 been recalculated due to the application of IFRS 15 as of January 1, 2018. This applies for all tables and figures pertaining to 2017, unless otherwise stated. The amendment entails briefly that the requirements have been sharpened in respect of recognizing revenues deriving from contract modifications related to alterations and supplementary work, compensation for shortcomings in tender specifications and similar items. The changes affect the Building Sweden, Building Nordics and Infrastructure business areas.
| Excluding | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE SHEET, SEK M | 2011 | 2012 | IAS 19 2012 |
2013 | 2014 | 2015 | Bonava 2015 |
2016 | 2017 | IFRS 15 2017 |
2018 |
| ASSETS | |||||||||||
| Fixed assets | |||||||||||
| Goodwill | 1,607 | 1,827 | 1,827 | 1,802 | 1,865 | 1,792 | 1,770 | 1,851 | 1,848 | 1,848 | 1,861 |
| Other intangible assets | 167 | 204 | 204 | 267 | 389 | 439 | 377 | 275 | 335 | 335 | 339 |
| Owner-occupied properties | 596 | 662 | 662 | 704 | 774 | 826 | 776 | 814 | 880 | 880 | 915 |
| Machinery and equipment | 2,209 | 2,395 | 2,395 | 2,502 | 2,487 | 2,417 | 2,356 | 2,569 | 2,712 | 2,712 | 3,052 |
| Long-term holdings of securities | 97 | 92 | 125 | 129 | 129 | 119 | |||||
| Long-term interest-bearing receivables | 354 | 271 | 361 | 575 | 575 | 195 | |||||
| Other long-term receivables | 307 | 203 | 62 | 26 | 26 | 119 | |||||
| Deferred tax assets | 204 | 97 | 239 | 338 | 531 | ||||||
| Participations in associated companies | 8 | 9 | 9 | 9 | 52 | ||||||
| Other long-term holdings of securities | 173 | 158 | 158 | 131 | 156 | ||||||
| Long-term receivables | 1,750 | 1,859 | 615 | 496 | 671 | ||||||
| Total fixed assets | 6,511 | 7,114 | 5,870 | 5,910 | 6,395 | 6,435 | 5,845 | 6,154 | 6,743 | 6,843 | 7,133 |
| Current assets | |||||||||||
| Properties held for future development | 2,050 | 2,050 | 1,780 | 1,696 | 1,696 | 1,633 | |||||
| Ongoing property projects | 2,013 | 2,013 | 1,440 | 1,039 | 1,039 | 2,292 | |||||
| Completed property projects | 367 | 367 | 808 | 870 | 870 | 308 | |||||
| Properties held for future development, | |||||||||||
| housing | 3,749 | 16 | 226 | ||||||||
| Capitalized project development costs | 969 | ||||||||||
| Ongoing proprietary housing projects | 6,987 | ||||||||||
| Completed housing units | 583 | ||||||||||
| Property projects | 4,475 | 5,321 | 5,321 | 5,251 | 5,059 | ||||||
| Housing projects | 9,860 | 11,738 | 11,738 | 12,625 | 13,246 | ||||||
| Materials and inventories | 557 | 655 | 655 | 673 | 746 | 696 | 691 | 713 | 764 | 764 | 902 |
| Tax receivables | 33 | 13 | 42 | 241 | 241 | 146 | |||||
| Accounts receivable | 7,265 | 7,725 | 7,725 | 7,377 | 7,178 | 7,083 | 6,619 | 7,682 | 8,882 | 8,882 | 9,629 |
| Worked-up, non-invoiced revenues | 910 | 782 | 782 | 918 | 1,066 | 1,400 | 1,394 | 1,737 | 1,671 | 1,554 | 1,276 |
| Prepaid expenses and accrued income | 1,114 | 1,544 | 1,544 | 1,325 | 1,415 | 1,262 | 936 | 1,061 | 1,170 | 1,170 | 1,418 |
| Current interest-bearing receivables | 106 | 1,752 | 152 | 167 | 167 | 163 | |||||
| Other receivables | 1,151 | 1,277 | 1,277 | 1,024 | 1,048 | 1,301 | 901 | 446 | 687 | 687 | 608 |
| Short-term investments | 285 | 168 | 168 | 143 | 242 | 190 | 190 | 190 | 41 | 41 | 72 |
| Cash and cash equivalents | 796 | 2,634 | 2,634 | 3,548 | 2,592 | 4,177 | 3,592 | 3,093 | 3,063 | 3,063 | 1,197 |
| Total current assets | 26,414 | 31,844 | 31,844 | 32,883 | 32,592 | 32,967 | 20,518 | 19,161 | 20,292 | 20,174 | 19,868 |
| TOTAL ASSETS | 32,924 | 38,958 | 37,713 | 38,793 | 38,987 | 39,402 | 26,363 | 25,315 | 27,035 | 27,018 | 27,001 |
| EQUITY | |||||||||||
| Shareholders' equity | 8,286 | 8,974 | 7,634 | 8,658 | 8,847 | 9,691 | 4,962 | 5,553 | 5,516 | 5,168 | 2,931 |
| Non-controlling interests | 11 | 15 | 15 | 17 | 20 | 23 | 20 | 13 | 12 | 12 | 17 |
| Total equity | 8,297 | 8,988 | 7,649 | 8,675 | 8,867 | 9,714 | 4,982 | 5,566 | 5,528 | 5,179 | 2,948 |
| LIABILITIES | |||||||||||
| Long-term liabilities | |||||||||||
| Long-term interest-bearing liabilities | 3,850 | 7,102 | 7,102 | 7,029 | 6,957 | 5,887 | 3,865 | 2,288 | 1,669 | 1,669 | 1,342 |
| Other long-term liabilities | 643 | 841 | 841 | 299 | 548 | 609 | 158 | 54 | 54 | 54 | 8 |
| Deferred tax liabilities | 669 | 725 | 436 | 414 | 268 | 322 | 456 | 407 | 438 | 438 | 297 |
| Provisions for pensions and | |||||||||||
| similar obligations | 6 | 9 | 393 | 125 | 585 | 338 | 338 | 1,008 | 1,407 | 1,407 | 2,279 |
| Other provisions | 2,619 | 2,435 | 2,435 | 2,070 | 2,017 | 1,970 | 1,612 | 1,686 | 1,889 | 1,889 | 2,563 |
| Total long-term liabilities | 7,788 | 11,113 | 11,208 | 9,937 | 10,376 | 9,126 | 6,429 | 5,443 | 5,456 | 5,456 | 6,488 |
| Current liabilities | |||||||||||
| Current interest-bearing liabilities | 1,585 | 2,141 | 2,141 | 2,515 | 2,526 | 3,154 | 1,900 | 723 | 919 | 919 | 1,051 |
| Accounts payable | 4,131 | 4,659 | 4,659 | 4,096 | 3,960 | 4,694 | 4,176 | 4,427 | 5,179 | 5,179 | 5,164 |
| Tax liabilities | 60 | 122 | 122 | 58 | 117 | 287 | 135 | 115 | 95 | 95 | |
| Invoiced revenues, not worked up | 4,176 | 4,241 | 4,241 | 4,264 | 4,408 | 4,244 | 4,239 | 4,355 | 5,574 | 5,905 | 6,311 |
| Accrued expenses and deferred | |||||||||||
| income | 3,277 | 3,748 | 3,748 | 3,888 | 3,952 | 4,012 | 3,172 | 3,205 | 3,207 | 3,207 | 3,452 |
| Provisions | 59 | 59 | 21 | 24 | 24 | 68 | |||||
| Other current liabilities | 3,611 | 3,945 | 3,945 | 5,360 | 4,782 | 4,112 | 1,270 | 1,460 | 1,052 | 1,052 | 1,520 |
| Total current liabilities | 16,839 | 18,855 | 18,856 | 20,181 | 19,745 | 20,562 | 14,951 | 14,306 | 16,051 | 16,382 | 17,566 |
| Total liabilities | 24,627 | 29,968 | 30,063 | 30,118 | 30,120 | 29,688 | 21,380 | 19,749 | 21,507 | 21,838 | 24,054 |
| TOTAL EQUITY AND LIABILITIES | 32,924 | 38,958 | 37,713 | 38,793 | 38,987 | 39,402 | 26,363 | 25,315 | 27,035 | 27,018 | 27,001 |
2014: Total assets were slightly higher than in 2013. Tied-up capital continued to increase in housing operations through investments in housing projects in NCC Housing. Strong cash flow in the final quarter reduced net debt and the debt/equity ratio was a multiple of 0.8.
2015: During the year, the item housing projects was reduced by the many delivered and paid for housing units. An increase in profit-recognized property projects also reduced capital tied-up. NCC's positive cash flow increased cash and cash equivalents. All financial objectives were achieved and net debt was reduced by a total of SEK 2.3 billion.
2016: During the year, the number of property projects declined, due mainly to the profit recognition of five property projects, sales of land and a lower work-up rate in ongoing projects following a delay in project starts. Cash and cash equivalents declined year-on-year.
During the year, long-term interest-bearing loans of SEK 1.6 billion and bonds valued at SEK 1.3 billion became due for repayment. Net debt was reduced by SEK 4.3 billion.
2017: The Group's total assets increased primarily due to higher accounts receivable within NCC Industry and NCC Building. The item property projects declined when five property projects were recognized in profit. The Group's strong cash flow led to a reduction in net debt to SEK –149 M (–222). NCC was essentially debt free and had a solid financial position.
2018: Cash flow from operating activities was lower, primarily due to a lower operating result, to increased investments in development properties and to lower earnings from sales of property projects. The lower cash flow and an increased pension debt led to the Group's net debt increasing by SEK 3 billion. The Group's total assets were essentially unchanged compared with 2017.
| Excluding | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| KEY PERFORMANCE INDICATORS | 2011 | 2012 | IAS 19 2012 |
2013 | 2014 | Bonava in 2015 |
2016 | 2017 | IFRS 15 2017 |
2018 |
| Financial statements, SEK M | ||||||||||
| Net sales3) | 52,535 | 57,227 | 57,227 | 57,823 | 56,867 | 53,116 | 52,934 | 54,608 | 54,441 | 57,346 |
| Operating profit/loss/loss3) | 2,017 | 2,537 | 2,519 | 2,679 | 2,604 | 1,661 | 1,453 | 1,242 | 1,075 | –764 |
| Profit after financial items3) | 1,808 | 2,263 | 2,277 | 2,400 | 2,234 | 1,623 | 1,341 | 1,150 | 983 | –849 |
| Profit for the year3) | 1,312 | 1,899 | 1,910 | 1,989 | 1,838 | 1,321 | 1,116 | 1,009 | 877 | –750 |
| Investments in fixed assets | 1,257 | 1,345 | 1,345 | 1,055 | 987 | 1,092 | 1,406 | 1,238 | 1,238 | 1,669 |
| Investments in property projects | 2,333 | 2,692 | 2,692 | 3,890 | 2,255 | 1,858 | 1,612 | 1,152 | 1,152 | 2,602 |
| Investments in housing projects1) | 7,529 | 8,997 | 8,997 | 7,912 | 9,712 | 9,725 | 3,154 | |||
| Cash flow, SEK M | ||||||||||
| Cash flow from operating activities | –1,547 | –26 | –26 | 2,532 | 1,345 | 4,061 | 1,170 | 2,158 | 2,158 | –375 |
| Cash flow from investing activities | –857 | –906 | –906 | –870 | –771 | –730 | –1,181 | –797 | –797 | –782 |
| Cash flow before financing | –2,404 | –932 | –932 | 1,661 | 574 | 3,331 | –11 | 1,361 | 1,361 | –1,157 |
| Cash flow from financing activities | 491 | 2,774 | 2,774 | –741 | –1,515 | –1,713 | –1,087 | –1,392 | –1,392 | –717 |
| Change in cash and cash equivalents | –1,916 | 1,838 | 1,838 | 914 | –956 | 1,586 | –1,084 | –30 | –30 | –1,866 |
| Profitability ratios | ||||||||||
| Return on equity, %6) | 17 | 23 | 28 | 26 | 22 | 26 | 19 | 18 | 17 | –18 |
| Return on equity, %7) | 17 | 23 | 28 | 26 | 22 | 26 | 118 | 18 | 17 | –18 |
| Return on capital employed, %6) | 16 | 15 | 17 | 15 | 14 | 17 | 13 | 13 | 12 | –9 |
| Return on capital employed, %7) | 16 | 15 | 17 | 15 | 14 | 17 | 63 | 13 | 12 | –9 |
| Financial ratios at year-end, SEK M | ||||||||||
| EBITDA %6) | 5.6 | 5.6 | 5.9 | 5.8 | 6.2 | 4.7 | 3.6 | 3.3 | 0.8 | |
| EBITDA %7) | 5.6 | 5.6 | 5.9 | 5.8 | 6.2 | 17.0 | 3.6 | 3.3 | 0.8 | |
| Interest coverage ratio, multiple6) | 7.4 | 7.0 | 7.5 | 7.8 | 6.4 | 7.1 | 6.6 | 9.8 | 8.5 | –6.0 |
| Interest coverage ratio, multiple7) | 7.4 | 7.0 | 7.5 | 7.8 | 6.4 | 7.1 | 31.1 | 9.8 | 8.5 | –6.0 |
| Equity/assets ratio, % | 25 | 23 | 20 | 22 | 23 | 25 | 22 | 20 | 19 | 11 |
| Interest-bearing liabilities/total assets, % | 17 | 24 | 26 | 25 | 26 | 24 | 16 | 15 | 15 | 17 |
| Net cash +/Net debt – | –3,960 | –6,061 | –6,467 | –5,656 | –6,836 | –4,552 | –222 | –149 | –149 | –3,045 |
| Debt/equity ratio, multiple | 0.5 | 0.7 | 0.8 | 0.7 | 0.8 | 0.5 | 0.0 | 0.0 | 0.0 | 1.0 |
| Capital employed at year-end | 13,739 | 18,241 | 17,285 | 18,345 | 18,935 | 19,093 | 9,585 | 9,523 | 9,174 | 7,619 |
| Capital employed, average | 13,101 | 16,632 | 15,755 | 18,005 | 18,531 | 18,672 | 13,474 | 9,418 | 9,138 | 8,780 |
| Capital turnover rate, multiple | 4.0 | 3.4 | 3.6 | 3.2 | 3.1 | 3.3 | 4.1 | 5.8 | 6.0 | 6.5 |
| Share of risk-bearing capital, % | 27 | 25 | 21 | 23 | 23 | 25 | 24 | 22 | 21 | 12 |
| Closing interest rate, %2) | 4.2 | 3.6 | 3.6 | 3.3 | 2.8 | 2.8 | 2.6 | 2.0 | 2.0 | 1.3 |
| Average period of fixed interest, years2) | 0.8 | 1.1 | 1.1 | 1.2 | 1.1 | 0.9 | 0.9 | 0.6 | 0.6 | 0.5 |
| Order status, SEK M | ||||||||||
| Orders received3) | 57,867 | 55,759 | 55,759 | 56,979 | 61,379 | 51,492 | 56,506 | 56,990 | 56,777 | 61,842 |
| Order backlog3) | 46,314 | 45,833 | 45,833 | 47,638 | 54,777 | 41,538 | 47,940 | 51,806 | 51,734 | 56,837 |
| Per share data, SEK | ||||||||||
| Profit/loss after taxes, before and after dilution6) | 12.08 | 17.51 | 17.62 | 18.40 | 17.01 | 19.59 | 11.61 | 9.29 | 8.07 | –7.00 |
| Profit/loss after taxes, before and after dilution7) | 12.08 | 17.51 | 17.62 | 18.40 | 17.01 | 19.59 | 73.81 | 9.29 | 8.07 | –7.00 |
| Cash flow from operating activities, after dilution | –14.27 | –0.24 | –0.24 | 23.46 | 12.47 | 37.65 | 10.88 | 19.97 | 19.97 | –3.47 |
| Cash flow before financing, after dilution | –22.17 | –8.61 | –8.61 | 15.40 | 5.32 | 30.88 | –0.05 | 12.59 | 12.59 | –10.71 |
| P/E ratio, before dilution6) | 10 | 8 | 8 | 11 | 15 | 13 | 19 | 17 | 19 | –20 |
| P/E ratio, before dilution7) | 10 | 8 | 8 | 11 | 15 | 13 | 3 | 17 | 19 | –20 |
| Dividend, ordinary | 10.00 | 10.00 | 10.00 | 12.00 | 12.00 | 3.00 | 8.00 | 8.00 | 8.00 | 4.004) |
| Dividend yield, % | 8.3 | 7.3 | 7.3 | 5.7 | 4.9 | 1.1 | 3.5 | 5.1 | 5.1 | 2.9 |
| Shareholders' equity, before and after dilution | 76.41 | 82.97 | 70.58 | 80.24 | 82.04 | 89.85 | 51.39 | 51.04 | 47.81 | 27.13 |
| Share price/shareholders' equity, % | 158 | 164 | 193 | 262 | 301 | 293 | 439 | 308 | 329 | 508 |
| Share price at year-end, NCC B | 121.00 | 136.20 | 136.20 | 209.90 | 246.80 | 263.00 | 225.40 | 157.30 | 157.30 | 137.80 |
| Number of shares, millions | ||||||||||
| Total number of issued shares5) | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 | 108.4 |
| Treasury shares at year-end | 0.4 | 0.4 | 0.6 | 0.6 | 0.6 | 0.4 | 0.4 | 0.4 | 0.4 | |
| Total number of shares outstanding | ||||||||||
| before dilution at year-end | 108.4 | 108.0 | 108.0 | 107.8 | 107.8 | 107.9 | 108.1 | 108.1 | 108.1 | 108.0 |
| Average number of shares outstanding | ||||||||||
| before dilution for the period | 108.4 | 108.2 | 108.2 | 107.9 | 107.8 | 107.9 | 108.1 | 108.1 | 108.1 | 108.1 |
| Market capitalization before dilution, SEK M | 13,136 | 14,706 | 14,706 | 22,625 | 26,574 | 28,369 | 24,325 | 16,997 | 16,997 | 14,896 |
| Personnel | ||||||||||
| Average number of employees | 17,459 | 18,175 | 18,175 | 18,360 | 17,669 | 17,872 | 16,793 | 17,762 | 17,762 | 16,523 |
1) This includes investments in the unsold share of ongoing proprietary housing projects and costs incurred before project starts.
6) When calculating the key figure, the impact on profit of SEK 6,724 M that arose from the spinoff of Bonava has been excluded. 7) When calculating the key figure, the impact on profit of SEK 6,724 M that arose from the
2) Excluding liabilities attributable to Swedish tenant-owner associations and Finnish housing companies, as well as pension debt according IAS 19.
3) As of 2015, Bonava has been excluded.
4) Dividend for 2018 pertains to the Board of Directors' motion to the AGM.
5) All shares issued by NCC are common shares.
Figures for 2011 are not IAS 19 adjusted, Employee benefits.
For definitions of key figures, see page 101.
spinoff of Bonava has been included.
| QUARTERLY AMOUNTS, 2018 | FULL YEAR |
QUARTERLY AMOUNTS, 2017 | FULL YEAR |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | Q1 | Q2 | Q3 | Q4 | 2018 | Q1 | Q2 | Q3 | Q4 | 2017 |
| Group | ||||||||||
| Orders received | 17,521 | 13,834 | 12,738 | 17,750 | 61,842 | 11,431 | 16,385 | 12,738 | 16,223 | 56,777 |
| Order backlog | 58,851 | 58,741 | 56,587 | 56,837 | 56,837 | 49,386 | 52,239 | 52,175 | 51,734 | 51,734 |
| Net sales | 10,894 | 14,349 | 14,269 | 17,832 | 57,346 | 11,748 | 13,345 | 13,075 | 16,273 | 54,441 |
| Operating profit/loss | –364 | 452 | –1,108 | 256 | –764 | 244 | 510 | 364 | –43 | 1,075 |
| Profit/loss after financial items | –372 | 427 | –1,133 | 229 | –849 | 225 | 484 | 339 | –65 | 983 |
| Profit after tax | –296 | 341 | –955 | 160 | –750 | 193 | 405 | 283 | –4 | 877 |
| Earnings per share after dilution, SEK | –2.73 | 3.12 | –8.87 | 1.47 | –7.00 | 1.80 | 3.72 | 2.59 | –0.04 | 8.07 |
| Cash flow before financing | –815 | –1,710 | –574 | 1,942 | –1,157 | 1,737 | –2,062 | 443 | 1,244 | 1,361 |
| Equity/assets ratio, % | 18 | 15 | 11 | 11 | 11 | 22 | 18 | 18 | 19 | 19 |
| Net cash +/Net debt – | –1,011 | –3,084 | –4,169 | –3,045 | –3,045 | 1,519 | –1,232 | –884 | –149 | –149 |
| NCC Infrastructure | ||||||||||
| Orders received | 9,497 | 3,740 | 5,423 | 6,220 | 24,880 | 4,996 | 4,483 | 5,158 | 7,090 | 21,727 |
| Order backlog | 25,195 | 24,118 | 24,923 | 24,786 | 24,786 | 17,957 | 18,019 | 18,792 | 19,682 | 19,682 |
| Net sales | 4,294 | 4,990 | 4,515 | 5,992 | 19,791 | 3,365 | 4,539 | 4,472 | 6,115 | 18,490 |
| Operating profit/loss | –11 | 51 | –883 | –150 | –993 | –66 | 70 | –65 | –137 | –198 |
| Operating margin, % | –0.3 | 1.0 | –19.6 | –2.5 | –5.0 | –2.0 | 1.5 | –1.4 | –2.2 | –1.1 |
| NCC Building Sweden | ||||||||||
| Orders received | 3,677 | 3,111 | 2,394 | 5,893 | 15,075 | 2,351 | 7,095 | 3,232 | 3,032 | 15,710 |
| Order backlog | 19,367 | 18,422 | 17,435 | 18,709 | 18,709 | 16,953 | 20,457 | 20,781 | 19,340 | 19,340 |
| Net sales | 3,649 | 4,057 | 3,380 | 4,614 | 15,701 | 3,206 | 3,591 | 2,908 | 4,473 | 14,178 |
| Operating profit/loss | 111 | 147 | 86 | 109 | 453 | 93 | 103 | 107 | 186 | 489 |
| Operating margin, % | 3.0 | 3.6 | 2.6 | 2.4 | 2.9 | 2.9 | 2.9 | 3.7 | 4.2 | 3.4 |
| NCC Building Nordics | ||||||||||
| Orders received | 1,915 | 3,349 | 2,488 | 3,477 | 11,229 | 1,380 | 1,917 | 2,306 | 3,648 | 9,251 |
| Order backlog | 10,384 | 11,501 | 11,110 | 11,313 | 11,313 | 10,205 | 9,670 | 9,577 | 10,288 | 10,288 |
| Net sales | 2,299 | 2,571 | 2,720 | 3,162 | 10,753 | 2,451 | 2,518 | 2,411 | 3,065 | 10,444 |
| Operating profit/loss | 11 | 34 | –193 | –78 | –227 | –55 | 3 | –18 | –11 | –79 |
| Operating margin, % | 0.5 | 1.3 | –7.1 | –2.5 | –2.1 | –2.2 | 0.1 | –0.8 | –0.4 | –0.8 |
| NCC Industry | ||||||||||
| Orders received | 2,867 | 4,106 | 2,913 | 3,058 | 12,943 | 3,248 | 3,614 | 2,584 | 3,077 | 12,522 |
| Order backlog | 4,855 | 5,380 | 3,940 | 3,092 | 3,092 | 5,053 | 5,251 | 3,781 | 3,059 | 3,059 |
| Net sales | 1,165 | 3,625 | 4,301 | 3,876 | 12,968 | 1,087 | 3,416 | 4,051 | 3,839 | 12,393 |
| Operating profit/loss | –411 | 324 | 283 | 155 | 350 | –310 | 336 | 409 | 142 | 577 |
| Operating margin, % | –35.3 | 8.9 | 6.6 | 4.0 | 2.7 | –28.5 | 9.8 | 10.1 | 3.7 | 4.7 |
| Capital employed | 4,456 | 5,733 | 5,540 | 4,902 | 4,902 | 3,901 | 4,855 | 4,825 | 4,400 | 4,400 |
| NCC Property Development | ||||||||||
| Net sales | 285 | 115 | 397 | 1,361 | 2,157 | 2,173 | 185 | 168 | 42 | 2,567 |
| Operating profit/loss | 16 | –16 | –326 | 144 | –181 | 593 | 65 | –9 | –48 | 601 |
| Capital employed | 4,591 | 4,985 | 4,383 | 4,314 | 4,314 | 3,320 | 3,727 | 3,836 | 4,086 | 4,086 |
| Operating margin, % | 5.5 | –13.9 | –82.1 | 10.6 | –8.4 | 27.3 | 35.2 | –5.1 | –116.7 | 23.4 |
The asphalt and civil-engineering operations of NCC Industry and certain activities within NCC Building Sweden, NCC Building Nordics and NCC Infrastructure are affected by seasonal variations in their production caused by cold weather conditions. The first quarter is normally weaker than the rest of the year.
NCC is one of the leading construction and property development companies in the Nordic region and is active throughout the value chain in its efforts to create environments for work, living and communication.
NCC develops commercial properties and constructs housing, offices, industrial facilities and public buildings, roads, civil engineering structures and other types of infrastructure. NCC also offers input materials used in construction, such as aggregates and asphalt, and accounts for paving, operation and maintenance of roads.
NCC aims to be a leading player in the markets the company serves and to proactively contribute to reduce the use of non-renewable materials, increase societal value and develop new technical solutions, products and work methods that promote sustainable development for the customers, the Group and society at large. For NCC, this involves taking into account the needs of current and future generations, increasing its competitiveness and ability to generate profitable growth and taking long-term responsibility in its daily operations.
Our vision is to renew the industry and provide superior sustainable solutions.
In the Nordics' largest brand study on sustainability, Sustainable Brand Index B2B, customers in the construction sector named NCC the Sustainability Industry Leader 2018.
"This is confirmation that the sustainable solutions NCC delivers make a difference and meet our customers' needs. Clear examples of this are our more environmental production method NCC Green Asphalt, and
on sustainability has driven business-centric innovation with the customer in focus," says Christina Lindbäck, SVP Corporate Sustainability at NCC.
NCC's sustainability work constitutes the foundation for NCC's future development. The purpose of NCC's sustainability work is to use NCC's offerings to create conditions for people to work, reside, travel and live in a sustainable manner, and to increase value for shareholders, customers and society as a whole. The framework clarifies the principal areas of NCC's sustainability work – Health and Safety, Social inclusion, Materials and Waste, Climate and Energy, Compliance and Portfolio performance. NCC has set sustainability targets for the strategy period of 2016–2020 for all areas in the framework. The targets and outcomes for the year are reported on pp. 78-79.
For each area, there are also long-term directions in sustainability that relate to the long-term changes in market conditions, outline the path ahead and provide a direction for the Group's long-term sustainability work, beyond the strategy period.
These long-term targets have also been supplemented by a selection of the UN Sustainable Development Goals. Agenda 2030 and the global goals help to ensure that NCC's business strategies create long-term value for the company and for the societies in which the
company is active by enabling change where it is needed the most.
NCC has selected four global goals that NCC has the greatest potential to contribute to through the Group's societal solutions, and another 11 targets that are fundamental to NCC's operations and offerings. Supplementing these, some 50 sub-targets have been selected as being relevant and guiding for NCC in its work to achieve the global goals. NCC intends to continue to implement the global goals in its operations, in part by developing new solutions and involving more functions in the Group. Read more at: www.ncc.group/ globalgoals.
NCC's expertise, knowledge and solutions will be imperative to the achievement of sustainable development at places where people work, reside, travel and live. Accordingly, NCC plays an important role in the Nordic contribution to achieve global goals 7, 9, 11 and 12. This includes building housing and infrastructure that everyone can afford and that remove physical and mental barriers in cities; i.e.
inclusive societies. It also involves being resource-efficient by creating circular material flows and independence from fossil fuels. As the pace of climate change increases, NCC must help to build resilient societies that can cope with heavy rain and extreme heat.
For long, NCC has been proactive in the work to formulate offerings and work methods that improve the situation for people and the environment. Accordingly, NCC regards global goals 3, 6, 13, 14 and 15 as fundamental to its operations and a prerequisite for long-term access to the natural resources needed by NCC. In addition, people's health and well-being can be promoted through intelligent buildings and sustainable infrastructure. By integrating green areas into urban environments, NCC also contributes to improving biodiversity and sustainable ecosystems. Although the Nordic region currently has relatively favorable access to water, NCC considers it important to contribute to the achievement of global goals 6 and 14, for example,
through ecosystem services and water efficiency throughout the value chain.
NCC is a company guided by its values and our merits, products, services and people are the foundation for how we do business. NCC raises knowledge and expertise in society through the schools we build and the education we provide to both young people and employees, which contributes to achieving global goal 4. NCC complies with principles for equality, reduced inequality and decent labor standards and economic growth, which are directly linked to global goals 5, 8 and 10. By 2030, the company will also continue to promote employment for young people, ensure a safe work environment and proactively work to end discrimination of women. Cooperation and partnerships with various stakeholders are fundamental to transform to a sustainable world by 2030, as reflected in global goals 16 and 17.
| FOCUS AREA | DESCRIPTION AND EXAMPLES OF AREAS | LONG-TERM SUSTAINABILITY OBJECTIVE |
|---|---|---|
| Health and Safety | • Safe and secure worksites • Design and choices of materials that promote good health for all stakeholders in the value chain |
We work in a zero accident environment |
| Social inclusion | • Better quality of life for workers, customers and society • Diversity and equality of workforce • Increased social sustainability in procurement processes • Empower local communities |
We are an empowering partner in an inclusive society |
| Materials and Waste | • Non-hazardous materials • Circular supplies • Resource efficiency and waste reduction |
We close the loop |
| Climate and Energy | • Less energy used and less greenhouse gases • Climate adaptation • Biodiversity as an asset |
We are climate neutral |
| Compliance | • Fair business and no corruption • Supply chain control and transparency • Sustainable purchasing |
We are a trustworthy partner acting with high ethical standards and transparency |
| Portfolio performance | • Provide superior sustainable solutions to our customers and the society |
We provide superior sustainable solutions |
Target, diversity: The team should mirror society.
Outcome 2018 45%
reduction in number of accidents compared with 2015.
3.5 *Worksite accidents resulting in one day or more of absence from work per million worked hours.
The construction industry at large, including NCC, has experienced an increase in workrelated injuries due to the high rate of construction in recent years. The work environment and health constitute one of our foremost focus areas for 2019 and our long-term aim of halving accidents between 2015 and 2020 stands firm.
During 2018, a higher number of management teams had achieved the gender target. NCC also noted positive development during the year in terms of ethnical diversity.
The amount of building and construction waste per SEK 1 M of sales declined during 2018, from 1.64 tons/SEK M in 2015 to 1.17 tons/SEK M in 2018. The recycling rate increased but certain of the actions taken have yet to generate any effect. Work is proceeding to ensure that the rate of waste sorting continues to increase up to 2020.
Emissions of greenhouse gases from its own operations per turnover SEK M CO2e (tonnes)/SEK M
2015 2016 2017 2018
Ton waste/SEK M turnover decreases
*Management teams
Target, gender: No gender should represent a higher share of a team* than 70%. Outcome 2018 66%
SEK M
0 0.5 1.0 1.5 2.0
Target for 2020 50% reduction in CO2 emissions by 2020, compared with 2015.
of NCC's building and construction waste is reused or material recycled by 2020. The number of tons of building and construction waste per SEK M of turnover decreases.
Outcome 2018 32%
Outcome 2018 50%
NCC continued to work to replace fossil fuels with renewable fuels, to switch to only purchasing electricity from renewable sources and increasing energy efficiency. This is generating results: relative to sales, NCC's greenhouse gas emissions from own operations have been reduced by 32 percent since 2015.
standards and transparency CULTURE Our aim is to have strong compliance culture in NCC, and very active compliance work. PERCEPTION We track all employees' perception of our compliance culture in the employee survey, NCC Pulse, with the aim of significantly increasing the index score during the strategy period. Transparency We disclose our number of Tell Me matters and Ask Me questions in our Annual Report.
76 High rating 75–100 Average rating 60–74 Low rating 0–59
Index rating in NCC Pulse
sustainable solutions OUR VISION A prerequisite for achieving our vision – "to renew our industry and provide superior sustainable solutions" – is to transform the conventional operations in a more sustainable direction. NCC has therefore decided to measure how the company's portfolio of sustainable products is developing by tracking net sales of sustainable products, services and concepts. Work is under way to develop a governing follow-up process for sustainable offerings.
No age group (≤34 years, 35–49 years, ≥50 years) should represent a higher share of a business area than 70 percent.
Target for 2020 70%
The target has been fulfilled at business area level. NCC is also striving to meet the target for age diversity in all operational teams, which the various business areas are monitoring.
Sustainability work in NCC is governed by the Group's framework for sustainability, the Code of Conduct and other policies, such as a sustainability policy featuring an environmental policy, a health and safety policy and a diversity policy.
NCC supports the UN's Global Compact initiative and has thus taken a stance in relation to issues involving human rights, labor conditions, the environment and anti-corruption. NCC also complies with the UN declaration on human rights, the ILO's declaration on fundamental principles and rights at work, the OECD's principles and norms for multinational companies and the Rio Declaration on the precautionary approach, which entails that NCC undertakes to prevent and minimize risks in the environmental area.
NCC's Code of Conduct describes the expected conduct of all parties concerned – employees, managers, Board members and business partners – and is based on NCC's values and the voluntary initiatives undertaken by the Group, such as the World Economic Forum's Partnering Against Corruption Initiative (PACI) and the UN Global Compact. Principles for human rights, work methods, the environment and anti-corruption are stated in these initiatives. All employees receive regular training in the Code of Conduct's fundamentals and are expected to comply with these principles in their daily work.
NCC's Executive Management Group is responsible for compliance with the Code of Conduct, which is continuously followed up within the framework of operating activities. Knowledge of the Code of Conduct at NCC is very high. According to NCC's employee survey, NCC Pulse, employees believe to a great extent that NCC's values and Code of Conduct provide guidance in their work.
NCC Compass is a support to employees in their daily work, and makes it easier for them to make the right decisions. The tool is easily accessible on the company's intranet and, in addition to guidelines and general advice, also features an "Ask Me" and a "Tell Me" function.
The Ask Me function was created to assist employees in always making the right decisions. It is managed by 58 specially trained employees, known as navigators, who are available throughout the company to answer questions in the local language. All questions are documented and followed up to enable procedures and guidelines to be clarified and developed wherever uncertainty prevails.
The Tell Me function is a whistleblower function through which employees and other stakeholders, anonymously if they so wish, can report their suspicions about behaviors and actions that contradict the Code of Conduct. All reports are investigated in an impartial and thorough manner by specially trained internal resources jointly with external expertise, to guarantee legally secure treatment.
The Ask Me function received 55 questions (52) during the year, in line with 2017. Many questions were about business entertainment and gifts. Frequently asked questions are compiled in NCC Compass. In 2018, 27 (16) cases were reported in the Tell Me function, representing an increase compared with last year. A number of incidents were also reported in other ways, which resulted in a total of 44 (41) cases that warranted investigation. The incidents involved such matters as fraud and theft, conflicts of interests and other transgressions from NCC's Code of Conduct. Of the matters closed during the year, four led to dismissal and 19 to other actions, such as the employees deciding to resign, to changes in procedures and processes or to targeted communication measures.
Matters related to personal data and integrity, in line with the EU's General Data Protection Regulation (GDPR), were added to NCC Compass during the year. Information on how the Group manages personal data and any inquiries and incidents is available on both NCC's external website and intranet.
In recent years, extensive training initiatives have been implemented to establish and facilitate understanding of the issues addressed by NCC Compass. During 2018, the main focus was on training NCC employees in matters related to the handling of personal data. All employees whose work involves the new Data Protection Regulations have been offered web-based training in the area. Certain occupational groups received additional training on the basis of their existing knowledge and duties.
The CEO is ultimately responsible for NCC's sustainability efforts. Sustainability work is governed by the Group's SVP Corporate Sustainability in cooperation with the sustainability managers of each business area. The group meets regularly and sets shared targets, while following up on the sustainability work. The SVP Corporate Sustainability is responsible for implementation and has a staff that works daily with sustainability issues. Operational sustainability work is performed in NCC's business areas. The unit cooperates with other functions in the organization, such as representatives of purchasing and HR functions. NCC's compliance efforts are conducted via the NCC Group Compliance Officer together with selected representatives in each business area and Group staff.
| Area | Anti-corruption | The environment | Social issues incl. HR and human rights |
|---|---|---|---|
| Policies | Code of Conduct | Code of Conduct Sustainability policy featuring an environmental policy |
Code of Conduct Health and safety policy Diversity policy |
| Main areas | • Business ethics • Compliance and tools for busi ness ethics |
• Environmental responsibility • Product and service development • Precautionary approach |
• Human rights • Occupational health and safety • Recruitment • Training and education |
NCC is a large employer. In all of our markets, NCC has collective agreements that regulate minimum wages, working hours and employees' rights in relation to the employer. 92 percent of NCC's employees are covered by collective agreements. In Sweden and Norway, all employees are covered by collective agreements. In Denmark and Finland, fewer are covered by collective agreements; local agreements are applied instead.
Like other companies in the industry, NCC uses subcontractors and consultants when required. Subcontractors are most prevalent in NCC Building Sweden and NCC Building Nordics but are also used in other business areas. NCC, together with the company Infobric, has designed Subcontractor Chain, a digital service that makes it easier to track all the subcontractors active at construction sites, and who has been commissioned for what. During 2018, the service was tested in the construction of NCC's new office Navet in Uppsala and in the expansion of the Ryhov County Hospital in Jönköping. Following the pilot period, it could be stated that the service works well, despite being put into operation in the middle of ongoing projects with a number of subcontractors already on site. The value is expected to
become even greater when the EU requirement for subcontractor chains applies at an early stage of projects, and are included in construction contracts. The service is currently being used in some ten projects around Sweden. NCC continues to be involved in close dialog with Infobric and will continue its work on implementation the function during 2019.
Employee data pertains to the number of employees at the end of 2018 and was collected from the Group's HR and payroll system.
| PERMANENT EMPLOYMENT |
TEMPORARY EMPLOYMENT |
|||
|---|---|---|---|---|
| Number of employees | Men | Women | Men | Women |
| Sweden | 8,036 | 1,314 | 328 | 66 |
| Norway | 1,481 | 159 | 52 | 18 |
| Denmark | 1,953 | 301 | 21 | 11 |
| Finland | 1,247 | 290 | 24 | 5 |
| Total, NCC | 12,717 | 2,064 | 425 | 100 |
Material topics under GRI: Occupational health and safety, Training and education.
Health and safety include both a safe and secure worksite for the Group's employees and subcontractors and good employment conditions and a healthy work-life balance. Health and safety also pervades the products and services provided by NCC, such as healthier buildings, improved indoor climate and well-planned outdoor environments.
Health and safety work at NCC's worksites is governed by the Group's Health and Safety Policy. Health and safety incidents are reported to Synergi, the Group's digital system. The system is used to report accidents and incidents, as well as negative and positive observations. By following up all accidents, incidents and their causes, the most common causes and the most serious causes can be identified and actions taken. This information further improves the ability to conduct safety-enhancing efforts and thus to prevent worksite accidents. Synergi is available as both a web-based system and an app.
According to Synergi, injuries caused by slips, slides, cuts and the use of handheld equipment are the most prevalent accidents at NCC. Since the introduction of Synergi, a substantial increase in the reporting of incidents, as well as negative and positive observations, has been noted, which is leading to more accurate analyses and to actions being taken where the need is the greatest. Three areas at a high risk of serious injuries have been identified as focus areas in order to secure access to competencies, support and procedures in line with NCC's zero vision for accidents: working at heights, heavy lifts by construction cranes and work in heavily trafficked environments. NCC has also identified three high-risk areas for illness among the Group's employees and subcontractors: working with asbestos, strain injuries and working with quartzite dust.
Every year, NCC implements a number of activities to increase occupational health and safety, including the Awareness Day and the Health and Safety Week. The aim is to highlight inspiring activities that enhance occupational health and safety awareness.
In September 2018, the Awareness Day was held for the eighth consecutive year and the theme for the year was to reflect on our behaviors and how health and safety can continue to be a natural part of NCC's culture. Tools were downed at 9:00 a.m. at all worksites in all NCC markets. A Group-wide discussion was held at the worksite, giving everyone the opportunity to put forward thoughts and ideas on how the worksite can be made even safer and what each individual can do to help foster a safety culture.
During the year's Health and Safety Week, NCC's 3,000 projects reserved time for various exercises, lectures, rescue training and health and safety walks at NCC's production facilities. The focus at offices throughout the Nordic region was primarily on the organizational and social work environment.
During 2018, the Group continued to implement and improve work methods and procedures in health and safety work that have been developed in recent years. These measures include safe behavior, safety equipment, work aids and tools and have led to favorable results. NCC did not experience any work-related fatality during 2018. Unfortunately, the construction industry at large, including NCC, has experienced an increase in work-related injuries due to the high rate of building production in recent years. Health, safety and work environment efforts are included in the workshops implemented within the framework of the value-based work launched in the Group during the year. Read more on p. 83.
| ABSENTEE RATE1), NCC EMPLOYEES |
Sickness leave, % All types of illness and poor health |
Lost day rate2) Sickness absence due to injuries |
|||
|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | ||
| Sweden | 3.7 | 3.7 | 21.63 | 27.74 | |
| Norway | 4.8 | 5.4 | 16.52 | 5.82 | |
| Denmark | 4.1 | 3 | 38.54 | 23.38 | |
| Finland | 3.6 | 2.8 | 59.59 | 34.24 | |
| Total | 3.8 | 3.6 | 27.44 | 24.07 |
| Number of days | 2018 | 2017 |
|---|---|---|
| Sweden | 6,494 | 3,508 |
| Norway | 5,012 | 4,495 |
| Denmark | 8,385 | 7,005 |
| Finland | 14,412 | 19,834 |
| Total | 34,303 | 34,842 |
1) Collected through Synergi and payroll systems.
2) Number of lost working days during the year per 100 full-time employees.
Since the introduction of the Synergi reporting and analysis system, reporting of incidents and negative and positive observations has improved. To date, NCC Finland has succeeded best in securing sound and qualitative reporting of positive observations.
| Injuries1) Injuries resulting in one day or more of sickness absence |
Injury frequency Injuries per million worked hours |
Work related fatalities | |||||
|---|---|---|---|---|---|---|---|
| Number | 2018 2017 |
2018 | 2017 | 2018 | 2017 | ||
| Sweden | NCC employees | 148 | 143 | 9.5 | 8.4 | 0 | 1 |
| Subcontractors | 113 | 81 | 12.8 | 2.7 | 0 | 0 | |
| Norway | NCC employees | 20 | 10 | 5.4 | 3.1 | 0 | 0 |
| Subcontractors | 10 | 0 | 2.8 | 0 | 0 | 0 | |
| Denmark | NCC employees | 44 | 26 | 13.4 | 6.9 | 0 | 0 |
| Subcontractors | 32 | 27 | 9.5 | 7.7 | 0 | 0 | |
| Finland | NCC employees | 34 | 25 | 11.6 | 7.7 | 0 | 0 |
| Subcontractors | 39 | 51 | 14.5 | 15.5 | 0 | 0 | |
| Total | NCC | 257 | 204 | 9.5 | 7.5 | 0 | 1 |
| Subcontractors | 238 | 164 | 11.9 | 4.0 | 0 | 0 |
1) Crushing and cuts are the most common injuries.
NCC, like the construction industry at large, has recently experienced an increased number of injuries of a minor nature, which is strongly linked to the boom in the construction sector and the consequential high rate of employee turnover.
Recruitment and ensuring that the right expertise will be available in the future are key issues for the industry. The construction industry is facing a generation shift over the next few years, and NCC is working on multiple fronts to contribute to skills development in the industry. Employees are offered continuous skills development in the form of traditional courses, e-learning or mentorship, all adapted to the requirements and needs of the individual. In Sweden, for example, NCC's training catalog offers more than 350 courses.
NCC also started a special project management training course for large projects during the year as a first step in a wider effort to strengthen the competency of key individuals at various levels. The program is a one-year Nordic initiative arranged in cooperation with the Royal Swedish Institute of Technology.
Sustainability training is a high-priority area and, since its launch in spring 2017, some 4,000 white collar employees at NCC have completed or started a digital interactive course in sustainability comprising the six components of NCC's sustainability framework. During 2018, the course was made downloadable, thereby also enabling blue collar employees without access to a computer with internet connection at the worksite, to also take part in the training program. In spring 2018, a successful pilot project featuring courses for blue collar employees that have been adapted with a clearer local focus, such as on the sorting of waste and the effect of leaving engines idling, was conducted at a number of worksites. An analysis is under way to determine whether that training program can be rolled out on a broad front in coming years.
Due to technical difficulties in collecting data, the reported statistics below do not encompass parts of NCC's local training programs and certain interactive courses.
HOURS OF TRAINING, SWEDEN
| Men | Women | Total | 2017 | |
|---|---|---|---|---|
| White-collar employees |
41.1 | 17.5 | 34.8 | 40.8 |
| Blue-collar employees |
10.7 | 17.6 | 10.8 | 13.7 |
1) Includes compulsory training programs implemented in 2018 for new employees before their employment at NCC commenced.
HOURS OF TRAINING, NORDIC REGION
| 2018 | 2017 | |
|---|---|---|
| White-collar employees | 27.5 | 28.8 |
| Blue-collar employees | 8.7 | 14.5 |
Material topics under GRI: Diversity and equal opportunity, Non-discrimination.
NCC is a major player in the industry and endeavors to be a driving force in efforts to achieve an inclusive society. By means of cooperation with other players in society and via increased dialog with citizens, NCC enables the construction of healthy, safe/secure and inclusive environments. One example is NCC's Sustainable Refurbishment holistic concept, which results in profitable synergies between refurbishment, energy-efficiency and maintenance.
Diversity and equal opportunity are important elements of NCC's efforts to offer an inclusive worksite where employees thrive, perform and develop. This also constitutes a key issue in terms of satisfying NCC's recruitment and competency needs. The guiding framework for efforts to promote diversity and equality are the Group's diversity policy, and associated diversity targets for the strategy period (read more on p. 79), NCC's Code of Conduct and NCC Compass.
NCC's diversity policy is based on the conviction that diversity contributes to workplace satisfaction and increased business value, and that NCC will become a better business partner for customers if the company reflects the society that NCC is involved in building. The Code of Conduct and NCC Compass clarify how NCC supports and respects international human rights conventions. Equal treatment and providing the same opportunities must apply regardless of gender, transgender identity or expression, sexual orientation, ethnicity, religious beliefs, physical impairments or age. No confirmed cases of violations of human rights were reported during the year.
NCC is pursuing a number of proactive initiatives for increasing diversity and equality, both in the construction industry and in the Group. Through NCC Diversity Councils, good examples regarding diversity are disseminated to bring about a tangible increase in diversity in the Group.
In 2018, NCC initiated a comprehensive initiative based on the Group's values. Through workshops and dialog exercises, employees contribute to shaping the Group's culture. The purpose of this initiative is to deepen the significance the Group's values and simultaneously to teach the employees more about diversity and inclusion. At year-end, more than 60 employees had been trained to facilitate such workshops and about ten management teams and some 400 employees have already received the training. The initiative will be intensified and expanded in 2019.
NCC's female network Stella celebrated its 20th anniversary in 2018. In addition to promoting more gender-equal norms in the construction industry and working to facilitate more female managers, the network has pursued such practical issues as parental salaries, increased flexitime, bans on discriminatory photos at the worksite, workwear for women and succession planning, and also influenced the formation of a Diversity Committee within NCC. The network currently has more than 550 members and offers network meetings, lectures and workshops.
Since 2016, the Group offers the NCC Nystart labor market program aimed at foreign-born engineers who are seeking employment. The education has been designed in cooperation with the Kunskapsskolan school and the Swedish Public Employment Service to meet NCC's considerable recruitment need and promote integration and diversity. For 30 weeks, theoretical studies at Kunskapsskolan are mixed with practical work at NCC's worksites. The aim is to offer employment to the participants when they have completed the program. Since the start, 36 people have completed the training program and 25 have been offered employment at NCC.
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| Proportion, % | Women | Men | Women | Men | |
| Board of Directors | 63 | 37 | 57 | 43 | |
| Executive Team | 50 | 50 | 33 | 67 | |
| Management groups | 40 | 60 | 37 | 63 | |
| Managers | 14 | 86 | 14 | 86 | |
| Employees | 14 | 86 | 13 | 87 | |
| White-collar employees | 26 | 74 | 25 | 75 | |
| Worker | 3 | 97 | 2 | 98 |
A movement in a positive direction was noted in 2018 concerning NCC's overall diversity target of reflecting the society in which we operate in respect of gender.
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Proportion, % | ≤34 years |
35-49 years |
≤50 years |
≤34 years |
35-49 years |
≤50 years |
||
| Board of Directors | 0 | 13 | 87 | 0 | 0 | 100 | ||
| Executive Team | 0 | 50 | 50 | 0 | 44 | 56 | ||
| Management groups |
3 | 43 | 54 | — | — | — | ||
| Managers | 10 | 46 | 43 | — | — | — | ||
| Employees | 29 | 34 | 37 | 28 | 34 | 38 | ||
| White-collar employees |
25 | 40 | 35 | 24 | 39 | 37 | ||
| Worker | 34 | 28 | 38 | 32 | 28 | 40 |
During the year, NCC entered into a three-year partnership with Fryshuset that is intended to lead to inclusive construction sites, stimulate young people to take part in training and promote integration into society. Partnerships are a feature of NCC's role as a community developer and NCC believes that partnerships can lead to new methods for making the Group's construction projects places that enable integration, training and recruitment. The project is being initiated with a pilot project in Rinkeby.
NCC does not accept any form of discrimination and acts forcefully when incidents are reported. In NCC's employee satisfaction survey NCC Pulse, 6 percent (5) responded that they had experienced discrimination due to gender or age, harassment or bullying during 2018.
NCC has formulated an action plan to counter harassment, discrimination and bullying. The discrimination issue is also being illuminated in conjunction with value-based workshops in management teams and workshops in the operating activities.
NCC's Ask Me/Tell Me function is available for all types of issues, both external and internal, where events that are perceived as not being compliant with NCC's Code of Conduct can be reported anonymously.
Material topics under GRI: Materials, Effluents and waste.
The construction process is material intensive and considerable resources are required for completing a building or structure. Thus, it is of great importance that resources are used as effectively as possible. NCC's long-term objective is to close the loop by prioritizing sustainable materials and products and minimizing and responsibly managing the waste that arises from the construction process, as well as by means of project engineering and design that facilitates reuse and recycling. The aim for the strategy period is to increase the proportion of materials sent for reuse or materials recycling while reducing the total amount of waste. Read more on p. 79.
NCC aims to produce buildings and civil engineering structures that are content-declared and only comprise sustainable products that are sound from an environmental and health perspective. In the long term, this will result to a greater extent in buildings being designed to allow for their input materials to be recycled when their useful life expires.
In addition to applying the rules and regulations set forth by the EU, such as REACH, NCC uses various tools and databases that provide guidance on how to phase out the most hazardous substances. A crucial link in the transition to sound and recyclable products is to impose appropriate requirements on suppliers and to work with traceability throughout the production chain.
In April 2018, NCC together with industry actors made the decision to take shared responsibility for meeting future requirements for a digitalized, traceable and sustainable construction process through the use of GTIN (Global Trade Item Number), a joint and global standardized method for identifying products. GTINs are created by the respective producers and are allocated to each unique product. This unique identification provides traceability and serves as a platform for an unbroken information flow concerning the construction products from manufacturing and project design to management and demolition. In 2018, NCC developed a new purchasing system, which now directly imports sustainability performance data on products from various databases with the help of GTIN. This digital solution increases the efficiency of the purchasing process and facilitates sustainable product selection.
The construction waste generated at construction sites represents great potential because it can be used in other projects. By cooperating both cross-functionally within NCC and with suppliers, new ways of reducing construction waste and reintroducing it into production are being developed. For example, NCC has initiated an effort to create a platform that enables projects to share surplus materials in other projects within the Group. Other examples of efforts to contribute to a circular flow include the acclaimed Loop Rocks platform, which contributes to a smarter way of managing building residue, stones, soil and gravel. Loop Rocks became a separate company in 2018 and is now available in all Nordic countries, with Norway as the latest market in February 2018.
NCC cooperates closely with the Group's waste-management partners in a number of areas to enable the recycling or reuse of materials. Examples include the use of recovered concrete as construction materials in the reinforcing and bearing structure, garden waste that becomes new topsoil, metal scrap that is recycled into new metals, corrugated board that becomes new paper and shrink wrap that is used in the production of new plastic. NCC also contributes to research projects in collaboration with other players concerning the recycling of glass wool, plastics and gypsum.
Every year, NCC handles large amounts of construction pallets, some of which are thrown in containers at construction sites. In 2018, NCC Building Sweden and NCC Infrastructure implemented an initiative to increase the proportion of pallets that are resold to the Byggpall returnable system, an industry initiative aimed at collecting and recycling construction pallets. The initiative contributes to financial savings through reduced container costs and compensation for returned pallets, while also reducing the amount of waste at construction sites and carbon emissions from the production of new pallets.
In May 2018, NCC together with Axfood, H&M, Houdini, IKEA, SSAB, Tarkett and the Swedish Recycling Industries' Association, launched the Circular Sweden corporate forum. The aim is to move policies and development towards more circular material flows. The point of departure is that resource-efficient societal responsibility is an important part of the solution for climate adjustment and that a shift from linear to circular material flows is necessary to maintain welfare levels in the future.
NCC also continuously improves its recycling capacity in a growing number of asphalt plants, enabling more ecologically adapted operations. In 2018, recycled asphalt granulate accounted for 21 percent (20) of hot asphalt production.
| 2018 | 2017 | |||||
|---|---|---|---|---|---|---|
| total weight, ton |
% | total weight, ton |
% | |||
| Non-hazardous waste | ||||||
| Sorting (mixed waste) | 11,083 | 21 | 13,135 | 26 | ||
| Energy recycling (combustible waste) |
12,112 | 22 | 11,192 | 22 | ||
| Landfill | 3,863 | 7 | 2,987 | 6 | ||
| Reuse/materials recycling |
26,548 | 49 | 22,351 | 45 | ||
| Special treatment (hazardous waste) |
629 | 1 | 436 | 1 | ||
| Total amount of waste | 54,054 | 50,102 |
1) The data has been collected from NCC's waste-management partners.
The total amount of waste increased by 8 percent compared with 2017. This was due largely to the increased number of projects compared with 2017. The amount of building and construction waste per SEK 1 M of sales continued to decline during 2018, from 1.64 tons/SEK M in 2015 to 1.17 tons/SEK M in 2018.
The rate of sorting increased but some of the actions implemented have yet to generate effect. Work is continuing to ensure that the rate of sorting continues to increase up to 2020.
The statistics cover traditional construction waste. Soil, stone and fill materials, which are directly dependent on the projects' geography, are sorted separately and reused to a large extent and are thus not included in statistics in the table.
Material topics under GRI: Energy, Emissions.
Since the construction industry has a considerable environmental impact, which includes large emissions of greenhouse gases, NCC works actively to influence development in a sustainable direction. By using new technology, for example, emissions from production, operations and maintenance of finished products are being reduced. Accordingly, NCC is able to contribute to lower climate impact throughout the value chain.
Increasingly efficient energy consumption, internal process improvements, more resource-efficient products and a transition from fossil fuels to more eco-friendly energy sources are high on NCC's agenda for reducing the Group's climate impact. These measures also contribute to increased competitiveness and reduced costs for the Group's customers. NCC is also working to influence external players towards improving the industry's sustainability work, such as by supporting advances in procurement, lifecycle analysis and training.
NCC joined Fossil-free Sweden in February, 2018. This organization constitutes a platform for collaboration and dialog among 300 players that want to make Sweden free from fossil fuels. In April 2018, the construction and civil engineering industry submitted a joint road map to the Swedish government concerning how the industry aims to use existing technology to halve its emissions by 2030.
NCC's asphalt production accounts for approximately 60 percent of the Group's own carbon emissions. A large share of the carbon emissions derives from the combustion of fossil fuels at the 66 stationary plants that produce hot asphalt. By switching to such renewable fuels as wood pellets or bio-oil, and reducing the moisture level in stone materials and asphalt granulate, the climate impact has been mitigated in recent years. In Sweden, NCC has converted 23 of a total of 28 asphalt plant for the use of biofuel. NCC is also endeavoring to develop more eco-friendly products, in part by increasing the portion of recycled asphalt in production. Another example of environmental activities is NCC Green Asphalt®, which is warm asphalt produced by a manufacturing method that generates significantly lower carbon emissions than conventional production of hot asphalt. NCC currently has some 50 facilities that can produce NCC Green Asphalt®, which corresponds to nearly 80 percent of the facilities.
To reduce the Group's other carbon emissions, NCC's various business areas are working on a range of quantity initiatives such as energy-efficiency improvements, an increased mix of renewable fuel in machinery and vehicles, energy-efficient modules and a continued transition to electricity from renewable sources.
| MWh | 2018 | Change compared with base year 2015, % |
2017 | 2016 | 20151) |
|---|---|---|---|---|---|
| Electricity from renewable sources2) |
152,259 | 49 | 118,754 | 108,927 | 102,360 |
| Other electricity | 18,559 | -86 | 55,259 | 102,861 | 131,120 |
| Electricity, total | 170,817 | -27 | 174,013 | 211,787 233,480 |
1) Excluding Bonava.
2) Hydroelectric and wind power.
During 2018, nearly 90 percent of all electricity purchased by NCC was either eco-labeled as a good environmental choice or origin-labeled using guarantees of origin. The amount of fossil-based electricity has been reduced by 86 percent since 2015.
| MWh | 2018 | Change compared with base year 2015, % |
2017 | 2016 | 20151) |
|---|---|---|---|---|---|
| District cooling | 624 | 199 | 22 | 1,286 | 209 |
| District heating | 29,156 | -41 | 29,207 | 48,933 | 49,239 |
| District heating/dis trict cooling, total |
29,780 | -40 | 29,229 | 50,219 | 49,448 |
1) Excluding Bonava.
The need for district heating and district cooling varies from year to year. The amount of district heating and district cooling that is purchased depends to a large extent on the projects that were under way during the year, their placement and the phase at which they found themselves.
| MWh | 2018 | Change compared with base year 2015, % |
2017 | 2016 | 20151) |
|---|---|---|---|---|---|
| Renewable fuels | 111,879 | 7 | 114,206 | 87,893 | 104,786 |
| Fossil fuels | 889,356 | -14 | 951,544 | 906,966 1,034,349 | |
| Fuels, total | 1,001,234 | -12 | 1,065,750 994,859 1,139,135 |
1) Excluding Bonava.
NCC continues to reduce its use of fossil fuels. Since 2015, their use has been reduced by 14 percent, due largely to the continued conversion to biofuels in the Swedish asphalt plants.
| Market-based | 2018 | Change compared with base year 2015, % |
2017 | 2016 | 20151) |
|---|---|---|---|---|---|
| Greenhouse gas emissions2) CO2e (tons, 000s) |
227 | -27 | 260 | 267 | 312 |
| – of which, scope 13) |
217 | -15 | 234 | 223 | 255 |
| – of which, scope 24) |
10 | -83 | 26 | 44 | 57 |
| Net sales, SEK M | 57,346 | 8 | 54,608 | 52,934 | 53,116 |
| CO2e (tons)/MSEK | 4.0 | -32 | 4.8 | 5.0 | 5.9 |
1) Greenhouse gases N2O, CH4 and CO2 are included in the calculations
2) Refers to direct emissions from NCC's operations, of which –0.5 (tons 000)
derived from the combustion of biomass (2018).
3) Refers to indirect emissions from electricity and heat.
4) Excluding Bonava.
Carbon emissions related both to purchased fuels and to electricity, district heating and district cooling have declined since the base year 2015. This was because of an increased use of renewable fuels, the transition to electricity from renewable sources and energy-savings measures. Relative to sales, NCC's greenhouse gas emissions from own operations have been reduced by 32 percent since 2015.
For calculating emissions, conversion from consumption to emissions has been conducted in accordance with the Greenhouse Gas Protocol. The market-based calculation method is used to measure carbon emissions from electricity and heating. NCC does not use climate compensation. Information on purchases of fuels, electricity and heating/cooling energy is collected from NCC's suppliers. The Credit360 support system is used to compile the statistics.
In 2018, NCC worked to refine and develop procedures for collecting sustainability data, mainly concerning climate and energy. The aim is that this will enable more comprehensive sustainability reporting, both internally and externally.
NCC responds on an annual basis to the CDP's "Climate change program," in which additional details about the Group's energy consumption and emissions are reported. During 2018, NCC belonged to the top 5% of organizations in the world that are leaders in the effective manage-
Future climate changes are expected to affect both societies and people, and can be linked to both risks and opportunities for NCC. The Group manages this through risk assessments, climate adaptation of operations and targeted efforts to reduce NCC's climate impact. Demand for new business models is also growing, as customers become aware of the opportunities that, for example, digitization and sharing services can generate.
Material topics under GRI: Anti-corruption, Anti-competitive behavior, Supplier environmental assessment, Supplier social assessment.
NCC endeavors to be a trustworthy partner acting with high ethical standards and transparency. The Group's Code of Conduct is an important feature of NCC's compliance efforts, both as an internal compass for describing how the Group should act and as external communication to clarify NCC's expectations of its suppliers and business partners. The Code of Conduct constitutes a component of NCC's agreements with suppliers. Other stakeholders are informed about the Code of Conduct through NCC's website, contracts and agreements.
NCC works continuously to ensure compliance with its Code of Conduct in all of the Group's partnerships, and to ensure that no violations occur in respect of, for example, competitive situations and business ethics. NCC also cooperates with industry colleagues to promote healthy business practices. In cooperation with most other industry players in Sweden, a joint policy has been formulated: "Agreement on counteracting bribery and corruption."
Following an analysis based on the risk of noncompliance with NCC's Code of Conduct, three areas have been identified as being of particular importance: bribery and corruption, competition law and
As awareness of climate change increases, as well as the changes this entails in cities and societies, the customers' requirements and demand for NCC's offering could change and this could benefit more sustainable products and services. Through strategic sustainability and product development work, the Group ensures that its offerings match the requirements of customers. Products developed by NCC include NCC DrænStabil® – a stone-material product that prevents flooding by ensuring that water quickly and readily penetrates the soil. NCC is also working on site- and project-adapted solutions for outdoor environments, whereby development and construction are combined with retained diversity of natural services, such as temperature regulation, noise abatement, surface water management, esthetics and opportunities for recreation.
In the next few years, stricter legislation regarding the energy efficiency of buildings is expected. NCC welcomes this and works continuously to improve the energy performance of its buildings but regards follow-up as an important feature for attaining the full impact of new, more rigorous requirements. NCC is also reviewing its production processes and working to enhance efficiency so as to gradually reduce the negative environmental impact.
NCC depends on a large quantity of raw materials, fuel and other resources to conduct its operations. Changes in supply, price and availability of these products due to climate change, and future taxation of fuel, energy or carbon dioxide could affect NCC's cost base. To minimize the impact, NCC endeavors to achieve a long-term reduction of its climate impact, phase out fossil fuels and move towards a more circular use of raw materials.
Climate change, such as extreme weather and flooding, could also lead to changed construction processes and changed conditions for conducting construction and civil engineering operations. The risk of flooding, erosion and earthquakes could negatively impact the safety of employees, as well as the storage of materials at construction sites. NCC manages this risk by performing risk assessments of all projects.
conflicts of interest. No confirmed cases of corruption were reported during the year.
Developing sustainable and competitive purchasing is a key issue for NCC. The Group's Code of Conduct is the foundation for purchasing work and NCC works systematically to minimize risks and increase control. Towards the end of 2018, NCC launched a Code of Conduct for Suppliers, which is a condensed version of the Group's Code of Conduct. The aim is that it must be easy to understand, which makes it easier for the Group's suppliers to follow and disseminate to their own employees and further on in the value chain, thus facilitating positive supplier behavior.
NCC's supplier base is large and the company cooperates with several thousand suppliers through its purchases of everything from building materials and subcontractors to travel and office supplies. By far the majority of NCC's suppliers are Nordic, but NCC also has suppliers in other regions such as Poland, the Baltic countries and China. The supplier base consists of framework agreement suppliers, international suppliers and Nordic project sourcing suppliers. Work on reducing the number of suppliers is under way and includes increasing the proportion of purchases under framework agreements. The aim is to reduce NCC's purchasing costs and to facilitate increased control.
To be able to manage NCC's staffing requirements during work peaks, NCC has developed its own staffing company, NCC Montage. NCC Montage has been tasked with securing NCC's capacity and competence supply of skilled workers and to transparently show that the right wages and terms and conditions are provided. This initiative minimizes NCC's risks and simultaneously strengthens control and healthy competitiveness in the industry. During 2018, NCC Montage supported projects in the Nordic region with some 350 skilled workers.
NCC works continuously on quality development of the follow-up the Group's suppliers. According to NCC's purchasing processes, an assessment of a new supplier must be conducted before any cooperation commences. The scope of this assessment varies depending on the type of supplier. However, NCC still has no quantitative data to report on the follow-up of supplier assessments (in terms of the entire Group). To assess, monitor and develop non-Nordic suppliers, NCC focuses specifically on audits of social responsibility, quality, environment and work environment. To ensure compliance with NCC's
requirements and advances in these areas, NCC applies a one- to three-year supplier-assessment and supplier-performance audit cycle. Noncompliance that is noted under the supplier assessment and that is not corrected according to the action plan could lead to termination of cooperation with the supplier. For suppliers in highrisk countries (according to the BSCI definition), audits performed by own staff are combined with third-party audits performed with the help of external experts.
NCC supports the recommendations that the TCFD (Task Force on Climate-related Financial Disclosure) has formulated concerning reportknowledge is enhanced and thus also opportunities to make wellfounded decisions, develop new products and services, manage forthcoming regulations and become more competitive.
Material topic under GRI: Marketing and labeling.
The Group's product portfolio includes NCC's initiatives in the sustainability area, which facilitate a wide range of sustainable products, concepts and services that add value for NCC's stakeholders and also help the Group achieve its long-term sustainability targets, while strengthening its competitiveness and ability to generate long-term profitable growth.
NCC offers its customers all the types of environmental certifications that are available to both buildings and civil-engineering structures. Nordic Swan Ecolabel, Miljöbyggnad, CEEQUAL, BREEAM, LEED, DGNB and Citylab are used for housing and infrastructure projects, as well as city districts. BREEAM and DGNB are used for the projects that NCC develops itself. NCC sees that demand for environmentally certified buildings continues to increase. NCC certified 68 (47) commercial and residential buildings in 2018, a year-on-year increase of 45 percent. This shows that demand for certified buildings continues to rise. Read more about some of the Group's certified buildings on pp. 88.
NCC contributes to favorable social and urban development by providing sustainable solutions. The year's projects included the Markbygden ETT wind farm in Piteå and civil engineering works at Amagerverket in Copenhagen. Read more on pp. 88.
During the year, NCC launched a Group-wide tool for sustainable sites that is linked to NCC's sustainability framework. The aim of the tool, which has been named "Sustainable Sites", is to create a shared platform upon which to base the sustainability work at all worksites, regardless of country or type of operation. Work is based on a checklist containing requirements that must always be fulfilled and requirements for which fulfillment would be advantageous. It is obligatory to document how the requirements have been attained and the projects' plans for regular follow-ups. The tool is already obligatory for all projects in NCC Building Sweden with a project value exceeding 50 MSEK. During autumn 2018, pilot projects were also initiated at NCC Infrastructure and within NCC Industry.
| NORDIC SWAN ECOLABEL |
BREEAM | LEED | DGNB | SWEDEN GREEN BUILDING COUNCIL |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Certification systems | Number | Grade | Number | Grade | Number | Grade | Number | Grade | Number | |
| Pass | Bronze | Bronze | Bronze | |||||||
| Good | Silver | Silver | Silver | 43 | ||||||
| Very Good | 2 | Gold | Gold | 2 | Gold | 5 | ||||
| Excellent | 1 | Platinum | Platinum | |||||||
| 15 | Outstanding | |||||||||
| Total, 2018 (2017) | 15 (9) | 3 (10) | 0 (1) | 2 (0) | 48 (27) | |||||
Masthuggskajen in Gothenburg became the first urban-development project in Sweden to be certified under Guide 2.0, Sustainable Urban Development in the Planning Stage. This certification system, which has been developed by the Sweden Green Building Council, is the first one for sustainable urban development that has been completely adapted to Swedish conditions. The certification covers early and overall planning and program stages, and the project must fulfill 20 indicators to be approved. These include a distinct vision and tangible targets for the development and that the area offers various forms of tenure, meeting places, green spaces and sustainable modes of transport.
Valle Wood is Norway's largest office building with a frame of solid wood and has attracted considerable interest during the development and construction phases. What is planned at Valle Wood includes an office concept featuring collaborative and entrepreneurial activities, as well as meeting rooms, conference facilities and various catering and service offerings. The building fulfilled rigorous environmental requirements during construction and achieved BREEAM Excellent certification.
NCC built Lund's new, environmentally certified district court on behalf of Specialfastigheter. The architectural expression of the new district court is modern and stylish, while meeting the stringent security requirements of the court's operations. The building comprises 12,400 square meters divided between seven floors, one of which is underground. The building was certified at the Gold level by the Sweden Green Building Council, meaning that energy consumption will be 38 percent lower than the level stated in construction regulations for southern Sweden. The indoor environment contains carefully selected materials with a focus on sustainability.
NCC has been commissioned to conduct extensive infrastructure work at the Markbygden ETT wind farm in Piteå. With 179 wind turbines, it will be one of Europe's largest land-based wind farms and it will increase Sweden's share of wind power by 12.5 percent.
At the Amagerverket power plant in Copenhagen, NCC is assisting HOFOR, Copenhagen's energy company, by performing such civil engineering works as roads and green areas. Through comprehensive refurbishment, the power plant is being switched from the use of coal to sustainable biomass and is a feature of Copenhagen's ambition to be the world's first capital city to become climate neutral by 2025.
NCC uses internal analyses of strategic issues, drivers in society and the results of stakeholder dialogs to define the most significant sustainability issues. The method for defining these significant issues follows the GRI guidelines and comprises identification, prioritization and validation. The participants in stakeholder dialogs are selected by the various business areas on the basis of relevance; for example, if they are affected by the Group's work.
In 2016, a web-based stakeholder survey was conducted to solidify NCC's sustainability framework and enable stakeholders to provide feedback on NCC's significant issues. More than 2,800 stakeholders from Sweden, Denmark, Finland and Norway participated in the survey, jointly representing employees, suppliers, customers, investors and students. The results of the survey reflected considerable commitment to NCC's sustainability work and shared views about the focus areas defined in the sustainability framework. The questions that were highlighted by the stakeholders were healthy and safe workplaces, sound business practices and no corruption, no discrimination at NCC's workplaces, healthy buildings and designs and choices of materials based on health and environmental properties.
Other types of dialog are also implemented regularly, for example, in the form of a quarterly customer survey (Net Promoter Score) and an employee survey (NCC Pulse). Every third year, NCC measures the Group's reputation among decision-makers, interest organizations and the general public.
During 2018, NCC focused the stakeholder dialog on investors, mainly major shareholders. The dialog primarily involved the Group's climate impact and reporting based on the framework of the Task Force for Climate Related Financial Disclosures,
Regular checks will continue to be carried out with NCC's stakeholders to ensure that NCC's priorities are relevant for the market, society and NCC.
On the basis of NCC's sustainability framework, the Group has identified 14 material aspects according to the GRI Standards. The material aspects, which can be grouped according to economic, environmental and social responsibility, pervade every link of the value chain, and their significant impact on the value chain is presented in the table below.
SIGNIFICANT SUBSTANCES AND BOUNDARIES
| Significant impact of suppliers |
Significant impact of NCC's operations: |
Significant impact of customers |
|
|---|---|---|---|
| ECONOMIC IMPACT | |||
| Economic performance | |||
| Anti-corruption | |||
| Anti-competitive behavior | |||
| ENVIRONMENTAL IMPACT | |||
| Material | |||
| Energy | |||
| Emissions | |||
| Waste/effluents1) | |||
| Supplier assessment | |||
| SOCIAL IMPACT | |||
| Health and Safety | |||
| Training | |||
| Diversity/equality | |||
| Supplier assessment | |||
| Non-discrimination | |||
| Product and service labeling | |||
1) Limited to NCC's building and construction operations.
The company reports its sustainability work annually as part of the NCC Annual Report. Since 2010, the guidelines of the Global Reporting Initiatives (GRI) for the reporting of sustainability information have been applied. The Sustainability Report, which pertains to the 2018 fiscal year, has been prepared according to GRI Standards Core and also constitutes NCC's Communication on Progress under the UN Global Compact.
More detailed sustainability information and performance indicators are presented on pp. 76–89. For the GRI index, refer to www. ncc.group/sustainabilitygovernance. The financial statements have not been examined by a third party. The Report on the 2018 fiscal year was published on March 15, 2019. Unless otherwise stated, all the information pertains to the entire NCC Group.
Contact: Head of Sustainability Christina Lindbäck, +46 8 585 519 07, [email protected]
This statutory Sustainability Report has been issued by the Board of Directors of NCC AB but is not part of the formal Annual Report documentation. The Sustainability Report in accordance with the Annual Accounts Act is included in the Annual Report on the following pages: pp. 1–7, pp. 17-19 and pp. 76–89.
NCC's business model and sustainability framework are presented on pp. 76-77, environment on pp. 78–79 and 84–86, social conditions on pp. 78–79, 83 and 86, personnel on pp. 78–79 and 81–83, human rights on pp. 78-80, 83 and 86 and anticorruption on pp. 78-80 and 86. Risk descriptions are presented on pp. 17–19.
Unless otherwise stated, the information pertains to the entire NCC Group, including subsidiaries.
To the general meeting of the shareholders in NCC AB, corporate identity number 556034-5174
It is the board of directors who is responsible for the statutory sustainability report for the year 2018 on the pages set out in the left hand box and for that it has been prepared in accordance with the Annual Accounts Act.
Our examination has been conducted in accordance with FAR's recommendation RevR 12 The auditor's statement on the statutory sustainability report. This means that our examination of the statutory sustainability report is substantially different and less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with a sufficient basis for our opinion.
Opinion
A statutory sustainability report has been prepared. Stockholm 13 March 2019
Håkan Malmström Ann-Christine Hägglund Authorised Public Accountant Authorised Public Accountant Auditor-in-charge
NCC AB is a Swedish public limited liability company whose shares are registered for trading on Nasdaq Stockholm. NCC AB is governed in accordance with Swedish company law and other rules that apply to listed companies, which include the Swedish Code of Corporate Governance (for further information concerning the Code, refer to www. corporategovernanceboard.se).
NCC has applied the Code since it was introduced in 2005. During the year, NCC AB complied with Nasdaq Stockholm's Rule Book for Issuers and generally accepted practices on the stock market. This report has been issued by the Board of Directors but is not part of the formal Annual Report documentation.
The procedures for notifying shareholders of General Meetings are stipulated in the Articles of Association.
Official notice of meetings shall be made in the form of an announcement in Post- och Inrikes Tidningar and on the company's website www. ncc.se. Confirmation that the Official notice has been issued will be announced in Dagens Nyheter and Svenska Dagbladet.
According to the Swedish Companies Act, notice of the Annual General Meeting (AGM) shall be issued not earlier than six weeks and not later than four weeks prior to the Meeting.
Notice of Extraordinary General Meetings (EGMs) convened to address amendments to the Articles of Association shall be issued not earlier than six weeks and not later than four weeks prior to the Meeting. Notice of other EGMs shall be issued not earlier than six weeks and not later than two weeks prior to the Meeting. General Meetings may be held in the municipalities of Stockholm, Solna or Sigtuna. At General Meetings, shareholders may be accompanied by not more than two advisors, on condition that the shareholder has given the company prior notice of this. There are no stipulations in the Articles of Association concerning the appointment and dismissal of Board Members or concerning amendments of the Articles of Association.
The Board shall consist of not fewer than five and not more than ten members elected by the AGM. The employees are represented on the Board. The members of the Board are elected for a period of one year. During 2018, eight Board Members were elected by the AGM. The Board also included three representatives and two deputies for the employees. For information on individual Board members, see pp. 96-97. The Audit Committee comprises Members of the Board Ulla Litzén, Angela Langemar Olsson and Mats Jönsson. The Chair of the Audit Committee is Ulla Litzén. The Project Committee comprises Board Members Carina Edblad and Geir Magne Aarstad. The Chair of the Project Committee is Carina Edblad.
The Chairman of the Board is Tomas Billing (for details concerning the Chairman's age, professional experience, assignments outside the company and holdings of shares in the company, refer to p. 97). The Chairman of the Board directs the work conducted by the Board and maintains continuous contact with the President and CEO, in order to continuously monitor the Group's operations and development.
The Chairman represents the company in ownership matters and is a co-opted member of the Nomination Committee but has no voting right.
shares. Each Series A share carries ten votes and each Series B share carries one vote. All shares provide the same entitlement to participation in the company's assets and profit and to an equally large dividend. For a breakdown of the number of shares and voting rights, as well as the shareholder structure, see ncc.se. On request, Series A shares may be converted into Series B shares. A written conversion request must be submitted to the company's Board, which makes continuous decisions on conversion matters. After a conversion decision is made, this is reported to Euroclear Sweden AB for registration. Conversions become effective when the shares are registered. The number of shareholders at year-end was 48,863, with Nordstjernan AB as the largest individual holder accounting for 17 percent of the share capital and 47 percent of the voting rights.
The President and CEO of the company is Tomas Carlsson (for details concerning the CEO's age, professional experience, assignments outside the company and holdings of shares in the company, refer to pp. 99.) The Board has established instructions for the division of duties between the Board and the President and CEO, and for financial reporting to the Board (also refer to Board of Directors' report on internal control, p. 94).
The company has not appointed any Deputy Chief Executive Officer.
Since October 8, 2018, NCC's Executive Team (ET) has consisted of the President and CEO, the Heads of NCC Industry, NCC Infrastructure, NCC Building Nordics, NCC Building Sweden and NCC Property Development, the Chief Financial Officer and Head of Operational Development and IT. For information on members of the ET, see pp. 98-99.
The ET mainly focuses on strategic and other Group-wide matters and generally meets once per month.
The AGM elects a Nomination Committee whose task is to nominate candidates to the AGM for election as Chairman of the Meeting, Chairman of the Board and Board members, and to propose the fees to these officers. Another task of the Nomination Committee is to nominate auditors and propose the fees to be paid to them. The Nomination Committee's work complies with the instructions adopted by the AGM.
The Board of Directors is evaluated within the framework of the Nomination Committee's work. The Board also performs an annual evaluation of its work and the format for performing Board work, which also constitutes part of the Nomination Committee's evaluation (refer also to "Work of the Board of Directors," p. 92).
The Board or, where appropriate, the Audit Committee appointed by the Board, also assists the Nomination Committee in evaluating the work of the auditors.
The Group is composed of business areas. Each business area is led by a business area manager and has a Board of Directors, of which, among others, NCC AB's CEO, CFO and Senior Legal Counsel are members. For certain decisions, the approval of the CEO, NCC AB's Board Chairman or Board of Directors is required. The decision-making procedure consists of proposals, endorsement, decisions and confirmation. A matter requiring a decision is normally processed by the entity that initiated the matter or which is responsible for it in terms of function.
The individual Group-staff heads are responsible for Group-wide functional issues that fall under the position and mandate of the individual head of Group staff.
For the purpose of examining the company's Annual Report, consolidated financial statements, accounting records and the company's management by the Board and the CEO, the AGM appoints a maximum of three Authorized Public Accountants, with a maximum of three deputies. A registered firm of accountants may also be appointed auditor of the company. The Nomination Committee nominates auditors. Auditors are currently appointed for a period of one year. Until the close of the AGM in 2019, the registered firm of accountants PricewaterhouseCoopers AB (PwC) serves as NCC's auditors. Authorized Public Accountant Håkan Malmström has been elected PwC's auditor-in-charge. The Audit Report is also signed by Authorized Public Accountant Ann-Christine Hägglund. For more information on elected auditors, see p. 97.
NCC's operations require a considerable amount of delegated responsibility. Group-wide decision-making procedures are in place to clarify exactly who is entitled to make decisions at each stage of the decision-making process. In addition to strategic and organizational matters, the areas regulated include investments and divestments, rental and leasing agreements, financing, sureties, guarantees, the assessment of tenders and business agreements. On top of the rules of procedure for decision making, a number of other Group-wide control documents govern communication, finance, code of conduct, the environment and work environment.
The number of ongoing projects in production varies from year to year but totals several thousands. The organization of each project varies according to the specific project's size and complexity. Each project is led by a project manager who is responsible for product format, purchases, financial aspects, production, quality, completion and handover to the customer. Major projects are monitored on a monthly basis by the business area manager, CEO, Chief Financial Officer and Senior Legal Counsel. Tenders for projects exceeding SEK 300 M are subject to special assessment and must be confirmed by the CEO. Tenders for projects exceeding SEK 500 M must be confirmed by NCC AB's Board. Proprietary housing projects representing an investment exceeding SEK 50 M must be approved by the CEO and such projects exceeding SEK 150 M must be authorized by NCC AB's Board. Decisions regarding investments corresponding to less than SEK 50 M are the responsibility of the particular business area.
A comprehensive program to develop and implement the Group's values has long been under way. These values have been translated into norms and rules governing how NCC employees are to behave in various situations. These regulations are summarized in a Code of Conduct. The Code of Conduct describes the requirements that NCC – the Board of Directors, management and all employees – have to meet in terms of behavior and conduct and that NCC in turn expects its business partners to respect.
Every manager has an obligation, within his or her area of responsibility, to ensure that employees and business partners are informed about the contents of the Code of Conduct and the requirement that they be observed. NCC managers must always set a good example. Adherence to the Code of Conduct is followed up continuously as a natural part of ongoing operations.
In 2018, NCC continued to refine its compliance program in line with the applicable Group-wide policy and needs-adapted process. NCC Compass focuses on providing straightforward and tangible advice to the organization, in order to prevent the risk of irregularities. Three areas have been identified as especially important in NCC Compass: bribery and corruption, competition law and conflicts of interest. The area of diversity was added to NCC Compass in 2017 and in 2018 management of personal data was added as a feature of NCC's GDPR work. NCC Compass is available via NCC's intranet. All NCC employees can make use of the content of NCC Compass and seek guidance. NCC has also appointed and provided special training to 58 employees in business ethics and how NCC Compass is to be applied in various situations. These employees are called Navigators since their assignment is to assist employees at NCC to correctly navigate the areas covered by NCC's Code of Conduct. In addition, NCC has introduced advanced system support for internal and external reporting of irregularities, all within the framework of the value-driven and transparent corporate culture that NCC is working to refine. Moreover, NCC has undertaken a comprehensive overhaul of the operations and identified risk areas and risk processes. The purpose of NCC's procedures is to make it easier for employees to dare to ask questions in difficult situations, rather than letting ignorance or thoughtlessness lead them to take the wrong decisions or behave in an undesired manner. The work methods include guidelines covering such areas as how to handle the most prevalent risk situations. Implementation combined with training and discussions with NCC employees continued in 2018. All NCC employees are covered by the training programs. Further training in the area is provided in the form of shorter, Web-based courses. During 2018, both web-based and instructor-led GDPR courses were arranged for groups with special interests and needs due to their management of personal data.
Employees who suspect unethical behavior or improper action should firstly report this to the immediate superior. A procedure for reporting anonymously is also in place. The function has two purposes: firstly, to protect the reporting party and, secondly, to make sure that the reported matter is dealt with securely. All tips containing sufficient information result in an investigation and, in any cases that arise, a written report compiled by an independent party. Disciplinary action will be taken where called for.
The 2018 Annual General Meeting (AGM) was held at Grand Hôtel, Vinterträdgården, in Stockholm on April 11. 469 shareholders were present representing 54.1 percent of the share capital and 68.17 percent of the total number of votes. The minutes of the 2018 AGM and from previous AGMs are available at www.ncc.se. The 2018 AGM passed the following resolutions, among others:
Dividend for the 2017 fiscal year of SEK 8.00, divided into two payments.
Tomas Billing, Carina Edblad, Viveca Ax:son Johnson, Geir Magne Aarstad, Mats Jönsson, Ulla Litzén and Birgit Nørgaard were reelected as Members of the Board. Angela Langemar Olsson was newly appointed to the Board. Reelection of Tomas Billing as Chairman of the Board.
It was resolved that director fees would total SEK 4,100,000, excluding remuneration for committee work, distributed so that the Chairman of the Board would receive SEK 1,100,000 and that each other AGM-elected member would receive SEK 500,000. The adopted fees for the Chairman and per Board member are unchanged. Fees to the members of the Audit Committee are payable as follows: the chair of the Committee will receive SEK 175,000 and each other member will receive SEK 125,000.
Guiding principles were adopted for determining the salary and other remuneration of the CEO and other members of the company's management. It was also resolved to introduce a long-term performance-based incentive plan (LTI 2018) for senior executives and key personnel.
To cover the commitment under LTI 2018, the AGM authorized the Board, until the next AGM, to purchase a maximum of 867,487 Series B shares and to transfer a maximum of 300,000 Series B shares to the participants of LTI 2018. It is also to be possible to transfer a maximum of 500,000 Series B shares via Nasdaq Stockholm to cover costs, mainly for compensation for dividends, social security fees and
payments on the basis of the synthetic shares, pursuant to outstanding long-term performance-based incentive programs (LTI 2015, LTI 2016, LTI 2017 and LTI 2018).
Income statements and balance sheets for 2018 were adopted and discharge from personal liability was granted to the Board and the CEO.
In 2018, NCC's Board held seven scheduled meetings, four nonscheduled meetings and the statutory meeting held directly after the AGM. The Board's work focuses primarily on strategic issues, the adoption and follow-up of operational goals, business plans, the financial accounts, major investments and divestments, plus other decisions that, in accordance with NCC's decision-making procedures, have to be addressed by the Board. Project impairments and management changes gave rise to a number of non-scheduled Board meetings during the year. Reporting on the progress of the company's operations and financial position was a standing item on the agenda. The Board has established rules of procedure for its work and instructions for the division of duties between the Board and the CEO, as well as for financial reporting to the Board. The Board made a number of worksite visits in connection with Board meetings. In addition to the CEO and the CFO, other senior NCC executives participated in Board meetings in order to present matters. NCC's Senior Legal Counsel was secretary of the Board.
The tasks of the Audit Committee, within the framework of the work of the Board, include monitoring the company's financial statements and preparing matters related to the company's financial statements and audit in accordance with Chapter 8, Section 49 b of the Swedish Companies Act, and fulfill the duties pursuant to EU ordinance No. 537/2014.
In 2018, the Audit Committee held six meetings at which all members were present. The Board also assessed the need of a special audit function (internal audit). The Board concluded that moving
| BOARD MEETINGS AND ATTENDANCE 2018 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Elected | Independent in relation to the company and execu tive man agement |
Independent in relation to major shareholders |
Board fees, SEK 000s |
Fees for work on commit tees, SEK 000s |
10 Jan (unsched uled) |
24 Jan |
191 Mar (unsched uled) |
11 Apr |
11 Apr (statu tory) |
24 Apr |
26 Jun |
17 Jul |
18 Sep (unsched uled) |
15 Oct (unsched uled) |
24 Oct |
14 Dec |
|
| Board Members elected by the AGM |
|||||||||||||||||
| Tomas Billing | 1999 | yes | no | 1,100 | |||||||||||||
| Viveca Ax:son Johnson | 2014 | yes | no | 500 | |||||||||||||
| Carina Edblad | 2014 | yes | yes | 500 | 125 | ||||||||||||
| Geir Magne Aarstad | 2017 | yes | yes | 500 | 100 | ||||||||||||
| Angela Langemar Olsson* |
2018 | yes | no | 500 | 125 | ||||||||||||
| Mats Jönsson | 2017 | yes | yes | 500 | 125 | ||||||||||||
| Ulla Litzén | 2008 | yes | yes | 500 | 175 | ||||||||||||
| Birgit Nørgaard | 2017 | yes | yes | 500 | |||||||||||||
| Regular employee representatives |
|||||||||||||||||
| Lars Bergqvist** | 1991 | – | |||||||||||||||
| Karl G. Sivertsson | 2009 | – | |||||||||||||||
| Karl-Johan Andersson | 2011 | – | |||||||||||||||
| Harald Stjernström** | 2018 | – |
* Angela Langemar Olsson participated as an observer at the March 19 and April 11 Board meetings and was elected to the Board at the AGM on April 11, 2018.
** Employee representative Lars Bergqvist passed away on April 17, 2018 and was succeeded on the Board by employee representative Harald Stjernström.
forward there will be a need for a separate internal audit and an independent internal audit function, Group Internal Audit, was established in December 2018. The Board's evaluation of its work was conducted by the Board engaging in separate interviews of other Members. The results of these interviews were then compiled and discussed by the Board. Documentation for this matter was prepared by the Nomination Committee.
In July 2017, the Board established a Project Committee, which assists in the preparation, analysis and decisions regarding tenders in contracting operations in respect of projects exceeding SEK 1.5 billion. In 2018, the Committee addressed six projects and held five meetings, which all members attended. A special fee is paid to the members the Project Committee, which amounts to SEK 125,000 for the chair and SEK 100,000 for each other member.
The company holds 402,050 Series B shares to cover its commitments under long-term incentive programs. In 2018, 31,952 shares were sold to cover costs, 20,343 shares were transferred to participants in LTI 2015 and 101,022 shares were bought back.
According to the Swedish Code of Corporate Governance (the Code), the Board must establish a remuneration committee to prepare matters involvnig remuneration and other terms of employment for executive management. If, as in the case at NCC, the Board considers it more appropriate, the entire Board may fulfill the duties of a remuneration committee. Guidelines for salary and other remuneration for the company's senior executives are resolved by the AGM. Remuneration paid to the CEO is proposed by the Chairman and adopted by the Board. Remuneration of other senior executives is proposed by the CEO and approved by the Chairman. Remuneration of the CEO and other senior executives consists of a fixed salary, variable remuneration, pension and other benefits. The 2018 AGM resolved on a long-term performancebased incentive program (LTI 2018), comprising the CEO, members of the Executive Team (ET) and an additional 148 executives in the Group. LTI 2018 is a three-year program that entitles the participants to receive Series B shares, assuming that certain performance targets have been achieved at the end of the program; i.e. the end of 2020. Short-term variable remuneration is decided by the Board. The variable remuneration potentially payable to the CEO and other senior executives is linked to predetermined and measurable criteria, which have also been designed to promote long-term value generation in the company. The maximum outcome of variable remuneration is also subject to distinct limits. The Swedish Code of Corporate Governance stipulates that for agreements signed as of July 1, 2010, the total amount of pay during a period of notice and severance pay may not exceed a sum corresponding to two years of fixed salary. The Board follows up and evaluates application of the remuneration program applicable for senior executives. The term "other senior executives" pertains to the executives who, in addition to the CEO, comprise the Executive Team. A specification of salaries and other remuneration paid to Board members, the CEO and senior executives is presented in Note 5, on p. 39.
The AGM on April 11, 2018 reelected Viveca Ax:son Johnson (Chairman of the Board of Nordstjernan AB), Anders Oscarsson (equity manager AMF/AMF Fonder) and Simon Blecher (Carnegie Funds) as members of the Nomination Committee, with Viveca Ax:son Johnson as Chair. Tomas Billing, Chairman of the NCC Board of Directors, is a co-opted member of the Nomination Committee but has no voting right. No remuneration was paid to members of the Nomination Committee. The diversity policy applied by the Nomination Committee complies with Article 4.1 of the Swedish Code of Corporate Governance. The Nomination Committee's proposals to the 2019 AGM are available at ncc.se.
THE BOARD OF DIRECTORS' 2018 WORKING YEAR – IN ADDITION TO STANDING POINTS ON THE AGENDA SUCH AS BUSINESS PLANS, INVESTMENTS AND DIVESTMENTS, AS WELL AS FINANCING.
The Board's responsibility for internal control is regulated in the Swedish Companies Act and in the Swedish Code of Corporate Governance. The Corporate Governance Report must contain disclosures concerning the principal features of the company's internal-control and risk-management systems in connection with financial reporting and in the preparation of the company's consolidated financial statements. Information on this is provided in this section.
As a feature of its internal control efforts, NCC implements methodical risk assessment and risk management for ensuring that the risks to which NCC is exposed, and that can impact the internal control and financial statements, are addressed within the company's established processes.
The material risks that have to be taken into account include market risks and operating risks as well as the risk of errors in financial recognition. With respect to the latter, systematic and documented updates occur once annually. The material risks that have to be considered mainly comprise the risk of errors in percentage-of-completion profit recognition and items based on assessments and estimates, such as valuations of land held for future development and ongoing property-development, goodwill and provisions.
Financial risk positions, such as interest rate, credit, liquidity, exchange rate and refinancing risks, are managed by the specialist function, NCC Corporate Finance. NCC's financial policy stipulates that NCC Corporate Finance must always be consulted and, in cases where Corporate Finance sees fit, that it must manage financial matters. Risks that could also influence reporting include breach of NCC's Code of Conduct and shortcoming in insurance coverage. These risks are monitored by the Compliance and Insurance function.
For more information on control and governance at NCC, see the Group's website www.ncc.se. The information also includes such documents as the Articles of Association and the Code of Conduct.
The Board has overall responsibility for internal control and financial reporting. A good control environment is characterized by the company having prepared and complied with established policies, guidelines, manuals and job descriptions. These must be documented and kept available. In NCC, this means that the Board establishes rules of procedure for the Board's work each year. The Board also prepares an instruction concerning the division of work between the Board and the CEO. According to this instruction, the CEO is responsible for ensuring that work on the internal control contributes to an efficient control environment.
The NCC Group is an international organization that governs and conducts its operations in a Nordic operational structure. Operational management of the Group is based on decision-making regulations within the NCC Group that are adopted annually by the Board. The decision-making regulations stipulate the matters that require the Board's approval or confirmation. In turn, this is reflected in the corresponding decision-making regulations and attestation regulations applying to the business areas. The basis for the internal control of financial reporting comprises everything that is documented and communicated in control documents, such as internal policies, guidelines, instructions and other manuals. Considerable effort has been devoted to achieving a structure between the policies that are central and the policies regarded as local, and that all significant areas are covered. The NCC Group's legal governance occurs on the basis of a uniform corporate structure with subsidiaries in each country.
For more information on governance and control, see the Group's website www.ncc.se. The information also includes such documents as the Articles of Association and the Code of Conduct.
At NCC, the management of risks is based on a number of control activities that are conducted at various levels for business areas, Shared Service Centers (SSCs) and staff units.
The purpose of the control activities is to ensure both the efficiency of the Group's processes and efficient internal control of identified risks. For the business operations, operational control systems form the basis for the established control structure and these focus on important stages in the business operations, such as investment decisions, assessment of tenders and permission to start up projects. NCC attaches considerable weight to project follow-up.
A strong focus is placed on ensuring the correctness of the business transactions included in the financial reporting.
For a number of years, NCC has had several SSCs, in part NCC Business Services (NBS), which manages most of the financial transactions of the Nordic operations, and in part the Human Resources Services (HRS), which manages NCC's payroll administration for the Nordic countries.
There is also Development & Operations (DOS), which has central responsibility for the shared IT systems in NCC.
The functions require that their processes include control activities that manage identified risks in a manner that is efficient for NCC in relation to the cost incurred. The units systematically and continuously develop their processes, using control target matrixes that connect risks, control and efficiency measurement, and ensure that the control is documented and that proof of control exists.
Information and communication regarding the internal policies, guidelines, manuals and codes to which the financial reporting is subject are available on NCC's Intranet (MyNCC). 4
The information also contains methodology, instructions and supporting documentation in the form of checklists etc., and overall time schedules. It is a living regulatory system that is updated regularly through the addition of, for example, new regulations concerning IFRS and Nasdaq Stockholm. NCC's CFO has principal responsibility. MyNCC includes among others the following:
All financial reporting must comply with the rules and regulations found on MyNCC.
Financial reporting occurs in part in the form of figures in the Group-wide reporting system and in part in the form of written comments in accordance with specially formulated templates. Instructions and regulations concerning both written and figure-based reporting are available on MyNCC. Regular training programs and conferences are arranged for management and
financial control personnel in respect of joint principles and frameworks concerning the requirements to which the internal control is subject.
The status of the internal control set-up is reported annually at a meeting of the NCC AB Board. Debriefing also occurs at business area level. The CFO of the NCC Group is responsible for ensuring that information about and communication of the control have been established and are effective.
Follow-ups to safeguard the efficiency and quality of the internal controls are conducted in various ways within NCC. NCC has developed a system (framework) for documented self-evaluation of internal control. Self-assessments are performed regularly for NCC's business areas, staff units and Group offices and comprise a component of the Board's assessment of internal control.
Operational control systems, the very basis of NCC's operations, are evaluated through audits of business areas' operations, during which any shortcomings are rectified. The internal controls are followed up via Board work within the various business areas and, in cases where it is considered that targeted action is required, the financial control and controller organization is utilized, or external consultants with suitable expertise for the assignment.
As part of its audit of the financial statements and the administration, NCC's auditor, PwC, also examines a selection of NCC's controls. The Audit Committee held five meetings during 2018. The duties of the Audit Committee in terms the financial statements include monitoring the efficiency of the company's internal controls, internal audit and risk management. In December 2018, the NCC AB Board of Directors decided, through its Audit Committee, to establish an independent internal audit function, Group Internal Audit, in accordance with the Swedish Code of Corporate Governance. The function is led by the Chief Audit Executive and is responsible for providing independent and objective assurance and evaluation of risk management and internal control processes. The function plans its work in consultation with the Audit Committee and it reports directly to the Board of Directors through the Audit Committee. The Board meets the auditors at least once a year. In addition, the Chairman of the Board has direct contact with the auditors on a number of occasions during the year. Prior to these meetings, views from the audit of the business areas and subsidiaries have been presented to the Board meetings held in the particular business area/subsidiary or to the respective business area management. The views that arise are to be considered and followed up within the particular unit. NCC's auditor also reviewed the company's nine-month report.
To the general meeting of the shareholders in NCC AB, corporate identity number 556034-5174
It is the board of directors who is responsible for the corporate governance statement for the year 2018 on pages 90-99 and for that it has been prepared in accordance with the Annual Accounts Act.
Our examination has been conducted in accordance with FAR's standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 second paragraph of the same law are consistent with the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act.
Stockholm 13 March 2019 PricewaterhouseCoopers AB
Håkan Malmström Ann-Christine Hägglund Authorised Public Accountant Authorised Public Accountant Auditor-in-charge
Auditors – PricewaterhouseCoopers AB HÅKAN MALMSTRÖM
Auditor-in-charge. Born 1965. Other material assignments Auditor-in-Charge at companies including Axel Johnson, JM and Nordstjernan
Authorized Public Accountant Born 1966. Other significant assignments: Auditor-in-Charge at Business Sweden, Byggmax and Lernia.
The details regarding shareholdings in NCC pertain to shares that were directly owned, owned via related parties or owned via companies at December 31, 2018.
Chairman. Born 1963. Board member since 1999 and Chairman since 2001.
Other assignments: Board member of BiJaKa AB, Röko AB, Centrum för rättvisa (Center for Justice) and Parkinson Research Foundation. Previous experience includes: CEO of Hufvudstaden AB and Monark Bodyguard AB. Shareholding in NCC AB: 20,600 Series A shares and 105,400 Series B shares.
Born 1956.
Board member since 2008 and chairman of the Audit Committee.
Other assignments: Board member of AB Electrolux, Husqvarna AB, Ratos AB and Epiroc AB. Previous experience includes: CEO of W Capital Management AB (2001–2005)
and Vice President of Investor AB (1996–2001). Shareholding in NCC AB: 6,900 Series B shares.
Born 1960.
Board member since 2017 and member of the Project Committee.
Other assignments: Chairman and partner of GRAA AS.
Previous experience includes: CEO of AL Rahhi Contracting Company Ltd (Saudi Arabia) (2009– 2011), CEO of Skanska Norway (2004–2009) and regional head of Skanska Norway (2001– 2004).
Shareholding in NCC AB: 0.
Born 1964. Paver.
Board member since 2011. Employed since 1984. Shop steward in NCC. Employee representative of SEKO (Union for Employees in the Service and Communication Sectors).
Other assignments: Chairman of SEKO's Road and Rail Department in Skåne. Chairman of SEKO's negotiating organization at NCC. Shareholding in NCC AB: 0.
Deputy Board member since 2011. Employed since 1977. Construction carpenter and shop steward at NCC, as well as officer for occupational health and safety issues. Employee representative of Svenska Byggnadsarbetareförbundet (Swedish Building Workers Union). Other assignments: Board member of AB Ronneby Industrifastigheter and Deputy Chairman of Byggnadsarbetareförbundet in the Småland/
Blekinge region.
Shareholding in NCC AB: 260 Series B shares.
Born 1963.
Board member since 2014.
Other assignments: Chairman of the Board of Nordstjernan AB and the Axel and Margaret Ax:son Johnson Foundation for Public Benefit. Board member of Bonava AB, Rosti Group AB, FPG Media AB and the Axel and Margaret Ax:son Johnson Foundation. Previous experience includes: Deputy Chairman of Nordstjernan (1997–2007), Chairman since 2007, as well as various positions in the Nordstjernan Group. Shareholding in NCC AB: 59,000 Series B shares (including related-party holdings), as well as 25,000 Series A shares and 31,000 Series B shares via private companies.
Born 1957.
Board member since 2017 and member of the Audit Committee.
Other assignments: Chairman of the Board of Logent and Lekolar and Member of the Board of Coor and Assemblin.
Previous experience includes: President and CEO of Coor Service Management (2004–2013), Business Unit Manager of Skanska Services (2000–2004) and Division Manager of Skanska Sweden (1998–2000).
Shareholding in NCC AB: 10,000 Series A shares.
Born 1970.
Board member since 2018 and member of the Audit Committee. Senior Investment Manager at Nordstjernan AB.
Other assignments: Chairman of the Board of Win-Group AG. Previous experience includes: CFO at Nordstjernan AB, Group Controller at Hufvudstaden AB and Assistant Controller at Swedish Match AB. Shareholding in NCC AB: 5,700 Series B shares.
Born 1962, Project Manager within the NCC Building, Building Stockholm Dept. Board member since 2018. Employed since 1984. Shop steward in NCC. Employee representative of Ledarna (Swedish Association of Supervisors). Shareholding in NCC AB: 0.
Born 1958.
Board member since 2017.
Other assignments: Chairman of the Board of Norisol A/S, Deputy Chairman of the Board of NNE A/S, Danska Statens IT Råd och Dansk Væktkapital I, Board member of DVS A/S, IMI Plc, WSP Global Inc., RGS Nordic A/S and Dansk Vækstkapital II. Previous experience includes: President and CEO of Carl Bro A/S (2003–2010), COO of Grontmij NV (2006–2010) and CFO of Danisco Distillers A/S (1993–2000).
Shareholding in NCC AB: 3,000 Series B shares.
Born 1963.
Board member since 2014 and chair of the Project Committee. CEO of Thomas Betong AB. Other assignments: Chairman of the Board of Svensk Betong and Member of the Board of Instalco and the Confederation of Swedish Enterprise. Previous experience includes: 25 years of experience from Skanska AB, where she was Line Manager and Chief of Staff in various operations in the Nordic region.
Shareholding in NCC AB: 0.
Born 1961. Carpenter and crane operator. Board member since 2009. Employed since 1981. Shop steward in NCC. Employee representative of Svenska Byggnadsarbetareförbundet. Other assignments: Board member of Svenska Byggnadsarbetareförbundet, Central Norrland Region, and deputy member of Federation Board of Svenska Byggnadsarbetareförbundet. Shareholding in NCC AB: 200 Series B shares.
Born 1959. Installation Manager Deputy Board member since 2017. Shop steward in NCC. Employee representative of Unionen. Shareholding in NCC AB: 0.
Born 1972, Master of Laws. NCC AB's Senior Legal Counsel since September 28, 2018.
Previous experience includes: Acting Senior Legal Counsel at NCC AB, Chief Legal Counsel in NCC Infrastructure and Senior Legal Counsel at Skanska AB. Employed by NCC since 2017. Shareholding in NCC AB: 0.
President and CEO Born 1965.
President and CEO since May 7, 2018. Previous experience includes: CEO of Sweco (2012-2018), Head of NCC Construction Sweden (2007-2012) and Regional Manager of NCC Construction Western Sweden (2005-2006). Other assignments: Board member of Alimak Group AB.
Shareholding in NCC AB: 21,270 Series A shares and 282,929 call options on Series B shares.
Head of NCC Infrastructure since April 3, 2018. Employed by NCC since 2018.
Previous experience includes: 20 years of experience from various senior positions at Skanska and in management teams, and another ten years of experience as a works manager, project manager and supervisor.
Shareholding in NCC AB: 14,147 call options on Series B shares
Born 1972.
Head of NCC Property Development since 2013. Employed by NCC since 2013.
Previous experience includes: Business Development Director at Atrium Ljungberg (2006–2013), Business Development Director at Ljungberg-Gruppen (2003–2006), Property Manager for Stockholm/Uppsala at Drott (1998–2003) and Property Manager for Skanska (1995–1998). Other assignments: Board member of Sweden Green Building Council and WinGroup AG. Shareholding in NCC AB: 3,572 Series B shares and 28,292 call options on Series B shares.
Chief Financial Officer Born 1961. Chief Financial Officer since November 12, 2018. Employed since 2018. Previous experience includes: CFO of Billerud Korsnäs (2011–2018), CEO of Mercuri International and several positions at Ericsson. Shareholding in NCC AB: 0
Head of NCC Building Nordics since October 1, 2018. Employed by NCC since 1985.
Previous experience includes: Business Area Manager of NCC Building (2016-2018) and NCC Construction Denmark (2012–2015) and Vice President of NCC Construction Denmark (2009–2012). Executive Director of NCC Construction Denmark (2002–2009).
Shareholding in NCC AB: 7,842 Series B shares and 28,292 call options on Series B shares.
Head of NCC Industry business area Born 1965.
Head of NCC Industry since 2016. Employed by NCC since 2008.
Previous experience includes: Business Area Manager of NCC Roads (2015), Division Manager of NCC Roads Services (2014), Business Unit Manager of NCC Roads in Finland (2009–2013) and various positions at ExxonMobil internationally and Esso in Finland.
Shareholding in NCC AB: 3,017 Series B shares and 28,292 call options on Series B shares.
Head of Development & Operations Services Born 1971.
Head of Development & Operations Services since October 8, 2018. Employed by NCC since 2018.
Previous experience: CEO of Nobelhuset AB (2017–2018). Prior to that, such positions as Deputy Division Manager of NCC Building, Head of Market and Operational Development at NCC Construction Sweden and a number of construction contract and production roles. Shareholding in NCC AB: 2,000 Series B shares.
Head of NCC Building Sweden since October 1, 2018. Employed at NCC for a total of 10 years. Previous experience includes: Division Manager of NCC Building Sweden (2016–2018), Vice President of NCC Construction Sweden (2014–2016), Head of Project Development Fastighets AB L E Lundberg and CEO of Byggnads AB L E Lundberg (2011–2013) and Business Manager NCC Construction Sweden (2005–2011). Shareholding in NCC AB: 1,000 Series B shares and 14,147 call options on Series B shares.
HARRI SAVOLAINEN, Head of Purchasing MARIE REIFELT, Senior Vice President Human Resources ANN-MARIE HEDBECK, Senior Legal Counsel MARIA GRIMBERG, Head of Corporate Communication
The details regarding shareholdings in NCC pertain to shares that were directly owned, owned via related parties or owned via companies at December 31, 2018.
NCC will publish financial information regarding the 2019 fiscal year on the following dates:
| April 9 | Annual General Meeting |
|---|---|
| April 29 | Interim report, January–March |
| July 19 | Interim report, January–June |
| October 28 | Interim report, January–September |
| January 2020 | Year-end report 2019 |
NCC's interim reports are downloadable from the NCC Group's website, www.ncc.se, where all information regarding the NCC Group is organized in English and Swedish versions.
The website also includes an archive of interim reports dating back to 2009 and annual reports dating back to 1996. NCC does not print or distribute its interim reports or Annual Report.
The price performance of NCC's Series A and B shares, updated every 15th minute of each day of trading, is presented under the "Investor Relations" tab, as are relevant financial figures. NCC's press releases are available on the website.
NCC's financial information can be ordered either by using the order form available on the www.ncc.se, website, by e-mailing ir@ ncc.se, writing to NCC AB, SE-170 80 Solna, Sweden, or calling NCC AB at +46 8 585 510 00. The person at the NCC Group responsible for shareholder-related issues and financial information is Johan Bergman, IR Manager (Tel: +46 8 585 523 53; e-mail: [email protected]).
The Annual General Meeting will be held at 4:30 p.m. on April 9, 2019. Location: Norra Latin, Drottninggatan 71 B, Stockholm. Notification can be made via NCC's www.ncc.se website, by regular mail to NCC AB c/o Euroclear Sweden AB, Box 191, SE-101 23 Stockholm, or by telephone to +46 8 402 92 no later than April 3, 2019. Notification should include name, personal identification number (corporate registration number), address, telephone number and the number of any advisors.
Registration at the Meeting will begin at 3:30 p.m. The official notification of the AGM is available on the NCC Group's website, www. ncc.se, and was published in Post- and Inrikestidningar on March 8, 2019. Confirmation that the official notification had been issued was announced in Dagens Nyheter and Svenska Dagbladet.
NCC AB (publ), Corp. Reg. No. 556034-5174, Registered Head Office: Solna. Addresses to the companies in the NCC Group are available at www.ncc.se.
All financial information concerning the NCC Group and everything that concerns you as a NCC shareholder is available on NCC's website under the Investor Relations tab.
Johan Bergman IR Manager Tel: +46 8 585 523 53, E-mail: [email protected]
Share of risk-bearing capital: Sum total of shareholders' equity and deferred tax liabilities as a percentage of total assets.
Return on shareholders' equity: Net profit for the year according to the income statement excluding non-controlling interests, as a percentage of average shareholders' equity.
Return on capital employed: Profit after financial items including results from participations in associated companies following the reversal of interest expense in relation to average capital employed. Return on capital employed is used to optimize the Group's capital allocation and value generation.
Dividend yield: Dividend as a percentage of the market price at year-end.
Operating net: Profit from property management before depreciation.
EBITDA: Operating profit in accordance with the income statement with depreciation and impairment losses reversed (not construction-related projects) including impairment losses properties classed as current assets.
Average period of fixed interest: The remaining period of fixed interest weighted by interest-bearing liabilities outstanding.
Average shareholders' equity: Average of recognized shareholders' equity at January 1, March 31, June 30, September 30 and December 31.
Capital turnover rate: Net sales divided by average capital employed.
Net investments: Closing balance less opening balance plus depreciation and impairment losses less write-ups of fixed assets and properties classed as current assets.
Net debt: Interest-bearing liabilities and provisions less financial assets including cash and cash equivalents.
Net sales: The net sales of construction operations are recognized in accordance with the percentage-of-completion principle. These revenues are recognized in pace with the gradual completion of construction projects within the company. Property sales are recognized on the date when significant risks and benefits are transferred to the buyer, which normally coincides with the transfer of ownership. In the Parent Company, net sales correspond to recognized sales from completed projects.
Net debt/EBITDA: Net debt excluding pension debt divided by EBITDA. NCC uses this measure to analyze the amount of debt the company can have and to provide guidance to creditors about its indebtedness.
Orders received: Value of received projects and changes in existing projects during the period concerned. Proprietary projects for sale are also included among assignments received, assuming that a decision to initiate the assignment has been taken, as well as sold completed housing units from inventory.
Order backlog: Year-end value of the remaining non-worked-up project revenues for projects received, including proprietary projects for sale that have not been completed.
P/E ratio: Year-end market price of the shares, divided by earnings per share after taxes.
Earnings per share, after taxes: Net profit for the year attributable to NCC shareholders divided by the weighted number of shares during the year in question.
Interest-coverage ratio: Profit after financial items following the reversal of financial expense divided by financial expense.
Operating margin: Operating profit as a percentage of net sales.
Debt/equity ratio: Net debt divided by shareholders' equity.
Equity/assets ratio: Shareholders' equity as a percentage of total assets.
Capital employed: Total assets less interest-free liabilities including deferred tax liabilities. Average capital employed is calculated as the average of the balances at January 1, March 31, June 30, September 30 and December 31.
Production: NCC and Solberg. Translation: The Bugli Company
Photographers: BAU p.6. Trine Gaarder Stenberg p.88. Sten Jansin p.96, 98. Johnér Bildbyrå p.76. Erik Holmstedt p.88. Joakim Kröger p.3, 6-7, 15, 88, 96, 98, cover front and back. Simon Sørensen p.88. Daniel Ring p.6. White Arkitekter p.88.
Total return: Share-price performance during the year plus dividend paid divided by share price at the beginning of the year.
Closing date interest rate: Nominal interest weighted by interest-bearing liabilities outstanding on the balance-sheet date.
Exchange-rate effect: Impact of changes in various exchange rates on current reporting in NCC's consolidated accounts on translation into SEK.
Exchange-rate difference: Exchange-rate changes attributable to movements in various exchange rates when receivables and liabilities in foreign currencies are translated into SEK.
Buyback of company shares (treasury shares) in share data: Treasury shares have been excluded from calculations of key figures based on the number of shares outstanding.
Construction costs: The cost of constructing a building, including building accessories, utility-connection fees, other contractor-related costs and VAT. Construction costs do not include the cost of land.
Development rights: Estimated possibility to develop a site. Either ownership of a site or an option on ownership of the site concerned is a prerequisite for being granted access to a development right. For commercial properties, development rights are measured in square meters.
Detailed development plan: Municipal plan for the use of land in a certain area, which is legally binding and can form the basis for granting building permits.
Required yield: The yield required by purchasers in connection with acquisitions of property projects. Operating revenues less operating and maintenance expenses (=operating net) divided by the market value.
Proprietary project: When NCC, for its own development purposes, acquires land, designs a project, conducts construction work and then sells the project. Pertains to commercial property projects.
Properties: In descriptions of operations, "properties" refers to buildings, housing or land.
Function contract: Usually a multi-year contract in which the customer imposes functional requirements rather than detailed requirements concerning materials and design.
Buildings/other buildings: In descriptions of operations, this term pertains in part to commercial buildings, mainly offices, retail outlets, shopping malls, garages, hotels and industrial buildings and in part to public premises and buildings such as hospitals, schools, healthcare and care facilities and public administration buildings.
NCC Partnering: A cooperation format applied in the construction and civil engineering industry, whereby the client, consultants and contractor establish open and trusting cooperation at an early stage of the process based on shared goals, joint activities and joint financial targets in order to optimize the project.
Platforms: Group-wide standardized technical solutions. Have been developed for everything from sports arenas, offices, logistics facilities and bridges to single-family and multi-family housing.
Leasing rate: The percentage of anticipated rental revenues that corresponds to signed leases (also called leasing rate based on revenues).
VDC Virtual Design and Construction.
General plan: Municipal plan for the use of land in a certain area, which is not legally binding and normally necessitates being followed up and defined in greater detail in detailed development plans.
NCC is one of the leading construction and property development companies in the Nordic region, with sales of more than SEK 57 billion and 16,500 employees. With the Nordic region as its home market, NCC is active throughout the value chain – developing commercial properties and constructing housing, offices, industrial facilities and public buildings, roads, civil engineering structures and other types of infrastructure.
NCC also offers input materials used in construction and provides paving and road services. NCC creates future environments for working, living and communication based on responsible construction operations that result in sustainable interaction between people and the environment.
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