Annual Report • Mar 9, 2020
Annual Report
Open in ViewerOpens in native device viewer
| THE YEAR IN BRIEF 1 | |
|---|---|
| REVIEW BY THE PRESIDENT 2 | |
| THIS IS NCC 6 | |
| EMPLOYEES 10 |
| REPORT OF THE BOARD OF DIRECTORS 12 | |
|---|---|
| BUSINESS AREAS 13 | |
| APPROPRIATION OF PROFITS 19 | |
| RISK 20 | |
| CONSOLIDATED INCOME STATEMENT 23 | |
| CONSOLIDATED BALANCE SHEET 24 | |
| PARENT COMPANY INCOME STATEMENT 26 | |
| PARENT COMPANY BALANCE SHEET 27 | |
| CHANGES IN SHAREHOLDERS' EQUITY 28 | |
| CASH-FLOW STATEMENTS 30 | |
| NOTES 32 | |
| AUDITORS' REPORT 70 | |
| MULTI-YEAR REVIEW 74 | |
| QUARTERLY DATA 77 |
| SUSTAINABILITY STRATEGY 78 | |
|---|---|
| SUSTAINABILITY GOVERNANCE 82 | |
| MATERIAL TOPICS 83 | |
| STAKEHOLDER DIALOG AND MATERIALITY ANALYSIS 91 | |
| GRI CONTENT INDEX 92 |
| CORPORATE GOVERNANCE REPORT 94 | |
|---|---|
| INTERNAL CONTROL 98 | |
| BOARD OF DIRECTORS AND AUDITORS 100 | |
| EXECUTIVE TEAM 102 | |
| FINANCIAL INFORMATION/CONTACTS 104 | |
100 Pipelines (km)
In 2019, NCC renewed nearly 100 kilometers of water and sewage lines in the Nordic region. Read more about trenchless pipeline installation on page 90.
In 2019, NCC had more than 70 school projects in progress. One of them was the Brogårdaskolan School in Bjuv, southern Sweden, an innovative place of learning that puts educational needs at the forefront. Read more on page 8.
NCC is one of the Nordic region's leading construction and property development companies. We stand on a stable and profitable foundation based on healthy demand, a multitude of frequently long-term customer relationships and employees with solid expertise, broad experience and strong technical know-how. The core of our business is managing and delivering successful construction projects.
In addition to everyday work in all of these projects and in our industrial and property development operations, the focus in 2019 was on creating conditions for a sustainable improvement in profitability and launching efforts to define the company's future strategic orientation and operational model. During the year, our performance and rate of change was favorable. NCC enters 2020 as a stronger company with higher profitability.
NCC is a Nordic construction company with commercial property development and industrial production. The company engages in both small-scale assignments and major complex projects. We have five business areas, but fundamentally have three different businesses: Construction and civil engineering operations, industrial operations and commercial property development. The conditions in these businesses vary, as do their priorities and expectations. However, there are strong and key links between all of the operations.
In 2019, we implemented important parts of the action plan adopted in late 2018 with the aim of stabilizing NCC and creating a platform for a sustainable improvement in profitability. I can confirm that we have made significant improvements, and that these have been made in all business areas and in all countries.
Work is now focusing on ensuring that these improvements become permanent, that the progress continues and that we build more resilient and sustainable profitability for the future throughout the company. Key components include a clear focus on the projects, in the form of stronger internal processes prior to tendering, and investing in skills development and knowledge transfer both in and outside the company. We have also initiated a comprehensive project involving the company's future IT architecture.
This is to make it possible for NCC to work in a more data-driven manner and to utilize the opportunities that increased digitalization entails throughout the value chain.
A major change process was also launched during the year, with the focus on creating a joint operational model for NCC in the medium and long term. A large number of employees are involved in identifying and prioritizing activities and creating a foundation for a clear direction moving forward. This work will result in a distinct base for NCC in the future that is firmly rooted in the company.
To increase the stability of the company, we have made it clear that we must choose the right tenders and prioritize profitability ahead of volume. Risks associated with tenders are balanced against the earnings potential. With stronger internal processes for the tendering stages, we are able to analyze the risk in every project and make distinct choices. There have been a number of attractive projects and our orders received have been satisfactory. We are gradually approaching higher and more stable profitability within project operations.
However, a lower risk profile does not mean lowering our ambitions. We must endeavor to always make continuous improvements, we must undertake complex projects and we must be a professional partner to our customers and the most attractive employer in the industry.
NCC reported improved earnings in 2019. Operating profit was SEK 1,296 M, equal to an operating margin of 2.2 percent. Although this was better than in 2018, we have some way to go before achieving our objective of an operating margin of ≥4 percent. If we disregard the remeasurements and restructuring costs charged against the third and fourth quarters of 2018, and which resulted in a significant operating loss in 2018, operating profit improved by 36 percent. Net sales increased slightly.
Orders received were slightly lower year-on-year but there were variations among the business areas. In the Nordic construction operations, orders received rose sharply, driven primarily by major projects in Denmark, while there was a slight decline in Sweden. Due to conscious decisions to increase profitability through selective tendering procedures, orders received by the Road Service division, which is to be divested, declined. Orders received by the remaining civil engineering operations were on a par with the preceding year, if the large-scale order for the Centralen project, which was booked in 2018, is excluded. Industrial
operations were on the same level as in 2018. The total order backlog is larger than it was a year ago.
Earnings in all of the business areas active in construction and civil engineering continue to be impeded by projects with low profitability and by more cautious recognition of profit at early project stages. Earnings will improve as the project portfolio is renewed and replenished, and as the actions to improve profitability have an impact.
Activity in property development was high. A number of important sales were implemented during the year, such as the Valle Wood and Valle View office projects in Norway, and adjacent development rights in the Helsfyr area, two office properties in Fredriksberg, Finland, and the K12 property in Järva krog in Solna, Stockholm, where NCC has its new Head Office. Leasing activity was high.
NCC has the financial strength needed to drive and develop the business. Toward year-end, the company generated a strong cash flow. The return on shareholders' equity was 32 percent, exceeding the target of 20 percent. NCC's net debt comprises pension debt, lease liability and other net debt. The financial objective is that other net debt in relation to EBITDA will be less than 2.5. At the end of 2019, NCC had net cash, meaning no net debt at all in this respect. NCC's dividend policy states that at least 40 percent of after-tax profit for the year is to be distributed to the shareholders.
The market in the Nordic region is largely favorable. There are, however, challenges, such as increased competition from midsize companies that are emerging in local markets, and the establishment of non-Nordic players. But there are also major opportunities moving forward. The economies of the Nordic countries are robust and we are experiencing healthy demand in general, driven by such factors as population growth and urbanization. In Sweden, demand has weakened somewhat from a very high to a more normal but strong level.
We noted that levels in the Nordic housing market stabilized during the year. In Sweden, rental apartments accounted for two thirds of orders received, which reflects the changes in the market. In general, demand for renovation and refurbishment is strong. In Norway and Sweden, public sector initiatives are driving the
infrastructure market, which is resulting in many attractive projects. Demand for asphalt and stone materials in Norway and Sweden is stable, driven by a strong civil engineering market.
The need for investments in, for example, infrastructure expansion is great virtually throughout the Nordic region and functional transportation facilities are vital for a functioning society. NCC links towns with rural areas through smart and sustainable infrastructure solutions. The planning and preparation horizon for many of the investments encompassed by NCC's offering is long, often as much as 15–20 years, and can extend over entire business cycles. Infrastructure construction can rarely be managed separately from other construction. In Stockholm, for example, the build-out of the Eastern Link is necessary to cope with the region's growing traffic situation. In this project, we can clearly see the problems resulting from the long processing periods required for projects of this magnitude.
Well-founded decisions, checks and legislation aimed at preserving and protecting valuable areas are important; however, the lack of predictability and the protracted period required for decisions both prior to and during projects has an adverse impact on implementation and completion of major projects that are of vital importance to a well-functioning society. This is leading to delays in the projects, and often results in conventional solutions that no one questions, rather than investigating innovative new opportunities that drive development forward. This is also pushing up costs. A more long-term approach among all those involved – customers, politicians and construction companies – would benefit the stability of residential construction and social infrastructure.
Construction projects are characterized by the fact that the conditions change over the course of the project, due to technical factors or other changes, and therefore project planning has to be updated and changes regulated. Regulation of these changes is a natural feature of the industry and they are usually managed as they arise. In Norway, the market has been characterized for a number of years by an exceptionally high conflict level, which is creating a climate in which it is difficult to conduct good business, with alarming consequences for future investment levels. Commercial conditions in Norway have also entailed other impediments; for example, in the event of a dispute with customers, the construction company is required to pay VAT on the entire sum before the amount has even been addressed, which can delay projects by several years when conflicts are postponed until after the project close.
We are pleased that the Norwegian government has now decided to examine this and that there are indications of a more collaborative climate.
The Swedish construction sector is in the middle of a comprehensive digitalization migration process and we will see an increasingly rapid pace in terms of digital progress in the future. NCC was quick to utilize this cutting-edge technology and has a high level of maturity and understanding of the benefits represented by digitalization. The real power comes when we can use the data we integrate in our own projects and systems relating to how we build successfully, and use this in new projects. An increasingly
integrated and controlled information flow between processes in the construction projects will contribute to shorter lead-times, higher quality and improved productivity. On this basis, a project has been launched to develop our IT architecture and renew our systems and our work methods. The project process will extend over a number of years and is expected to result in even better decision-making support and reduced risk levels through more efficient work methods.
The purpose of NCC's sustainability work is to help create conditions for people to work, reside, travel and live in a sustainable manner. NCC supports the UN's Global Compact and its ten principles in the areas of human rights, labor conditions, the environment and anticorruption. They form the foundation for NCC's future development, as defined in our sustainability framework. In our communication on progress (CoP), we describe the measures we are taking to integrate the Global Compact and its principles into our business strategy, culture and daily operations. Our sustainability work also encompasses the UN's global Sustainable Development Goals (SDGs). NCC has selected four global goals where we have the greatest potential to contribute through societal solutions, and has identified a further 11 targets that are fundamental to our operations and offerings.
A key feature of our sustainability work is limiting the environmental impact generated by our operations. For example, we are working to recycle asphalt and, to date, NCC has converted 25 of a total of 28 asphalt plants in Sweden to being fueled by biofuel rather than oil.
During the year, NCC provided the capital market with an opportunity to invest in green projects by issuing green bonds in a combined amount of SEK 1.6 billion. The proceeds will be used to finance green investments, primarily in sustainable property development projects and further conversion to renewable energy sources at asphalt plants.
One of our most important priorities for the operations involves the work environment and safety. NCC is striving for a zero accident work environment and our aim must always be to make worksites 100 percent safe and secure. The trend progressed in the right direction in 2019 with lower accident figures than before, but we are not content and these efforts must continue to be prioritized. During the year, responsibility for safety was clarified and decentralized to business areas to a greater extent, with fewer and clearer processes. We thereby achieve more focused work with the potential to take targeted actions in respect of preventive safety measures, where there is cause to do so. This could involve anything from education and training to support from Group staffs and increased management presence.
Our worksites are characterized by a strong safety culture and, during 2019, nine out of ten were completely free from accidents leading to absence from work.
Although safety awareness and caring about oneself and one's work colleagues is completely fundamental to a high safety level, modern technology and digitalization can contribute to further raising the level of safety. For example, NCC is testing how AI technology, in the form of digital safety barriers and object identification, can help to make crane lifts safer by increasing control of what is happening directly under the crane.
The AI technology tests using digital safety barriers at Ångströmslaboratoriet, in Uppsala, Sweden, have shown that it is possible to both discover, and by extension also warn, employees who are in or about to enter a risk zone.
In recent years, we have noted a distinct trend that projects are becoming increasingly complex and comprehensive, a factor that demands a lot from employees, both at NCC and in the customers' organizations, and this relates in particular to project-managing engineers. Since the construction industry is facing major challenges in respect of competency supply, NCC works in various ways to cope with this development through frequent contacts with universities and colleges, trainee positions, apprenticeship schemes and other activities that enhance interest in the industry and in NCC.
During the year, we also highlighted issues related to skills development internally throughout the company. Employees are offered further training in managing projects, but also in the form of leadership training courses. Our platform for promoting knowledge is NCC Project Management Academy, through which we offer further training with a variety of orientations. NCC Project Management Academy's greatest initiative is a skills inventory and development program designed to improve the project management competencies of the company's just over 500 project managers in the various countries. Based on the results, customized development initiatives are formulated at both an individual and organizational level. The initiatives range from workshops with expert functions to mentorship.
In November, we moved into our new Head Office located in the middle of the city district that NCC is developing around Järva Krog. The focus is on a productive work environment that will promote health and sustainability for both employees and inhabitants of the new city district.
We can look back on a year of action and perseverance. The strategic actions we took in 2018 and 2019 have started to generate results. We worked systematically with the action program and change process during the year and I am proud of the progress we have made. However, a lot of work remains before the measures gain their full impact. The focus in 2020 will be on keeping to the charted course for developing and strengthening NCC as one of the leading construction companies in the Nordic region.
With that, I would like to thank our employees, customers, business partners and shareholders for the past year. I look forward to a continued stable and sustainable development in 2020.
Solna, March 2020
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 58 billion and 15,500 employees. NCC is active throughout the value chain in its efforts to create environments for work, living and communication.
Builds infrastructure for travel, transportation, energy and water. Operations comprise projects of all sizes and encompass solutions ranging from water and sewage treatment, storm water management and wind power to roads, railways, bridges and tunnels. Although the business area is Nordic, operations are mainly conducted in Sweden.
Builds and renovates sustainable housing, offices, healthcare buildings, schools, sports facilities and public buildings for public and private customers in Sweden. With advanced skills in sustainability, digitalization and partnering, NCC Building Sweden develops projects jointly with customers starting at the early stages.
Builds and renovates sustainable housing, offices, healthcare buildings, schools, sports facilities and public buildings for public and private customers in Denmark, Finland and Norway. Renovation of existing housing and offices has become an increasingly important part of the operations in recent years.
Offers products and services for construction and infrastructure projects in Sweden, Norway, Denmark and Finland. Operations comprise production of stone materials and asphalt products, paving works and foundation engineering. These components form a natural supply chain that is well integrated into NCC's construction and civil engineering operations.
Develops and sells sustainable office, logistics, commercial and public services properties in prime locations in defined growth markets in the Nordic region. Operations are characterized by close cooperation with the customers to create flexible, customized and healthy worksites.
NCC has established the following financial objectives for the Group:
Operating margin: ≥4% Outcome 2019: 2.2%
Annual return on equity after tax: ≥20% Outcome 2019: 32%
Corporate Net debt:
<2.5 times EBITDA Outcome 2019: –0.03 times EBITDA
Dividend policy: ≥40% of after-tax profit is to be distributed to shareholders Outcome 2019: 62%
The three businesses and business areas pursue the following profitability and return targets:
Construction and civil engineering Operating margin: ≥3.5% Outcome 2019 NCC Infrastructure: 1.2% NCC Building Sweden. 2.5% NCC Building Nordics: 2.0%
Industry Operating margin: ≥4% Outcome 2019: 3.9% Return on capital employed: ≥ 10% Outcome 2019: 9.0%
Operating margin: ≥10% Outcome 2019: 10.2% Return on capital employed: ≥ 10% Outcome 2019: 6.2%
NCC's geographical markets NCC's market share¹
At Högbytorp, in Upplands-Bro Municipality, northern Stockholm, NCC has constructed a new cogeneration plant for the energy company E.ON. The cogeneration plant is part of a larger closed-loop facility designed to satisfy the need for sustainably generated energy from a growing Stockholm region.
The new closed-loop facility will produce electricity, district heating and biogas from recovered energy. It includes the cogeneration plant constructed by NCC and a biogas facility for Hitachi Zosen Inova (HZI), for which NCC was responsible for earth and construction works.
²)
The assignment to construct the new cogeneration plant included both technologically complex construction and installation works and advanced earth, concreting and civil engineering works.
The plant will utilize a full 99 percent of the energy in the fuel. Metals will be recovered from the ash that remains after incineration, while hazardous substances will be taken care of and phased out of the ecocycle.
The cogeneration plant was constructed as part of a partnering project between E.ON and NCC. This cooperative format is ideal for complex projects where the final design is not obvious at the beginning. NCC contributed competencies
from its earthworks, civil engineering and building departments in Stockholm to create a sustainable solution for our customer and society as a whole.
We develop projects with the aim of finding smart new solutions for both small and major problems. Read more about a number of recently completed projects.
"In 2019, the National Board of Housing, Building and Planning recognized the Brogårdaskolan school as a prime example of a new school building"
The development and construction of schools is an important social initiative and a priority for NCC. The new Brogårdaskolan School in Bjuv, southern Sweden was completed in 2019.
The project was completed through a partnering project in close cooperation between the municipality, architects and NCC. The school has been built from the "inside out," putting educational needs at the forefront. All of the spaces can be used for educational activities and the school's outdoor environment offers a complementary educational environment. In addition, all of the classrooms are close to the surrounding nature.
The school's design is based on a new and innovative approach to how a school should work, with the focus on an environment of learning and high educational values. It has evolved from the needs of operations, and through the considerable involvement of both teaching staff and pupils. This makes the school sustainable over time and means that in can be used in the optimal way for educational activities.
The new school was built beside the old one and has space for 470 pupils. The building has a three-section brick body with abundant indoor natural lighting and teaching spaces that face north.
Roof vegetation contributes to a soft transition between the building and the landscape, and has a positive impact on the local environment, by both preserving biodiversity and reducing the volume of surface water.
Read more about the project in our digital annual report.
In 2019, NCC and Schenker renewed their long-term contract for the maintenance of paving at logistics centers in Finland. Under the contract, NCC and DB Schenker's terminal managers will jointly devise maintenance planning for a facility, resulting in a more cost-effective maintenance. Parts of DB Schenker's facilities in Finland are paved with NCC's specialty products, NCC Viaco and NCC Strongphalt, both of which are sustainable paving products and designed for heavy vehicles. Most of the paving is also conducted using NCC Green Asphalt, a product that reduces carbon emissions by up to 25 percent.
Nurmijärvi, Vantaa, Pori and Lieto, near Turku. 70,500 square meters
NCC has sold the Valle Wood and Valle View office projects, including the remaining development rights in the Helsfyr district of Oslo, to Valle Eiendom Holding AS, one of Pareto Securities' newly formed property companies, for nearly SEK 2 billion. The development, construction and sale of Valle Wood and Valle View are prime examples of NCC's strengths as a full-service property development supplier.
In this urban-development project, NCC was an active driver in making the Valle district a vital part of the Norwegian capital. The office projects have been built in phases, with Valle Wood being completed in summer 2019 and is Norway's largest solid-wood commercial property.
Phase 2, Valle View, has started and been leased to the Norwegian Directorate of Immigration (UDI), with completion scheduled for the second quarter of 2021. Both of the projects are planned to be environmentally certified according to BREEAM Excellent.
After more than two years of construction, refurbishment and expansion, the Falkoner Center in Frederiksberg, Copenhagen, is ready. ATP Ejendomme and NCC have transferred responsibility for the building to Scandic Hotels, which opened the refurbished hotel and conference center in August 2019. The refurbishment, which was performed in parallel projects in a complex building while the operations of a number of tenants were still in progress, was successful thanks to close cooperation between the developer, the architect and the consultant.
The refurbished building boosts the surrounding city district, benefiting tenants, users and neighbors.
The Falkoner Center is an excellent example of NCC's longstanding experience of large-scale, complex refurbishment projects with a focus on early involvement and close cooperation with the developer and the consultant.
NCC pursues an objective of becoming the company with the best project managers in the industry. To achieve this, major skills development initiatives were implemented in 2019, which included extensive employee competency mapping, individual and organizational development and customized training programs for key positions. Competent employees working in a safe environment are NCC's principal asset.
Since employees in the construction and civil engineering industry are exposed to various types of risks at worksites, considerable safety awareness forms the foundation for all NCC operations. NCC had its lowest accident frequency rate ever in 2019. The reasons include a more thorough analysis of data, which led to targeted actions in high-risk areas and units, together with an additional increase in safety awareness. Read more about NCC's safety work in the sustainability report on p. 83.
NCC is active in an industry that is currently making great strides forward, not least in relation to digitalization and efficient project management. NCC wants to spearhead this development. Accordingly, NCC conducts active skills development work throughout the employees' careers and in order to become a pioneer in creating a modern, learning organization that adapts to today's rapid advances. It should be possible for NCC's employees to develop throughout their careers, for example, from being a carpenter to a supervisor orfrom a site manager to a project manager for megaprojects.
In addition to continuous skills development of employees and managers, NCC has launched an extensive and targeted initiative to develop the skills of its project managers – the NCC Project Management Academy. This initiative, which was launched in 2018, is a prerequisite if NCC is to continue to deliver the most profitable projects to our customers and be an attractive employer. 0
"Attending the NCC Mega Project Management Program gives me greater understanding of the differences between managing a large and a megaproject. I'm getting lots of inspiration, a network of colleagues with the same challenges and new knowledge," says Trine Tindborg (project manager, Kronløbsøen megaproject in Copenhagen), who joined the program in September 2019.
1) In 2019, the number of management teams in the survey was expanded to include all management teams from the Executive Team to department management or the equivalent.
It comprises both training and other programs, such as competency mapping and individual development plans.
A key feature of the NCC Project Management Academy during 2019 was a mapping of employees competency and development designed to enhance the project management skills of the company's just over 500 project managers in the various countries. Tests and discussions are used as tools to map every project manager's strengths and improvement areas. The results take the form of customized development initiatives at both an individual and organizational level. The initiatives are primarily implemented locally and range from workshops with expert functions to mentorship.
Successfully managing projects is a core operation at NCC and is the foundation for everything we do. Really large projects are both complex and challenging. NCC's Mega Project Management Program is a development program aimed at project managers responsible for projects of SEK 1 billion and above. The program extends over one year and two rounds of programs have started to date, attended by a total of 35 experienced project managers. All of the participants are assigned a mentor during the course of the program.
NCC is convinced that companies and work groups comprising employees with different backgrounds, genders, skills and experiences have greater potential to achieve better results, increase their innovativeness and simultaneously deliver greater social value.
NCC works actively to broaden its recruitment base to increase diversity, attract more candidates to the construction industry and create an inclusive culture that enables our employees to thrive and enjoy their work.
NCC is a value-guided company. In 2019, nearly half of the employees in the business areas NCC Infrastructure in Sweden and NCC Building Sweden participated in workshops on NCC's core values. These have been led by 100 internal moderators. Through this program, the employees have enhanced their knowledge of NCC's values and gained new insights into diversity and inclusion. The initiative will continue in 2020.
Stella has been running since 1998 and is NCC's network for female engineers and academics. Its aim is to support women at NCC, enabling them to exchange experiences, evolve in their
roles and be able to assume senior positions at NCC. There are still too few woman in production – which is why Stella, with its 500 active members, is needed.
NCC is active in a variety of forums and networks:
Martin Florin has attended the Supervisor Academy, He was encouraged by his boss to apply. Martin changed occupation, from a carpenter to a supervisor. "It was fantastic attending an in-house course that gave me the chance to grow. Otherwise, I would have probably eventually applied for a position in another company. One wants to develop and grow."
NCC's values and Code of Conduct function behave and act in everyday working life and
The Board of Directors and the President of NCC AB (publ), corporate identity number 556034-5174 and headquartered in Solna, Sweden, hereby submit the Annual Report and the consolidated financial statements for the 2019 fiscal year.
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.
From January 22, 2003 through May 20, 2016, NCC AB was a subsidiary of Nordstjernan AB, corporate identity number 556000-1421. At the end of 2019, Nordstjernan had an ownership corresponding to 48 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 provides paving.
In general, market conditions remain favorable in the long term, though in certain submarkets a more cautious attitude could be noted, which is prolonging decision processes. The economies of the Nordic countries are robust, and NCC's experience is that demand is good. The need for public buildings such as schools, hospitals and retirement homes is driven by growing cities and the demographic trend. Demand for housing has stabilized. In general, there is a good demand for renovation and refurbishment.
Public-sector infrastructure initiatives are fueling the Nordic infrastructure market, resulting in a continued strong market in Norway and Sweden. Due to intense competition from both domestic and international players, NCC only tenders offers for projects that meet the risk profile and profitability requirements NCC has set. Demand for asphalt and stone materials in Norway and Sweden is stable, driven by a strong civil engineering market.
Low yield requirements from investors and high demand for new premises that are modern and sustainable, primarily in major city areas, are providing favorable market conditions in the Nordic property market. Changes in Board of Directors and senior executives Carola Lavén, who was Business Area Manager of NCC Property Development and a member of the Executive Team (ET), left this position on July 22, 2019. On May 15, 2019, Joachim Holmberg was appointed the new Business Area Manager of NCC Property Development and member of the Executive Team. He assumed his new position on September 1, 2019.
On December 6, 2019, NCC announced that the Nomination Committee proposes that Alf Göransson will be elected new Chairman of the Board. The Nomination Committee also proposes Simon de Château as a new Board member. Board members Tomas Billing and Ulla Litzén have declined reelection. The six other Board members will be nominated for reelection.
Orders received amounted to SEK 58,048 M (61,842). The decrease during the year was mainly due to a major project (Centralen) in NCC Infrastructure, which was registered among orders in 2018. Orders received by NCC Building Nordics were higher than in the preceding year, while NCC Building Sweden reported lower orders received. Changes in exchange rates impacted orders received by SEK 628 M (1,067).
The Group's order backlog amounted to SEK 57,800 M (56,837) at year-end. The higher order backlog was primarily attributable to NCC Building Nordics' Danish operations, which had a high level of orders received during the year. The increase was offset somewhat by lower orders received by NCC Building Sweden. In NCC Infrastructure, one large project (Centralen) was registered among orders in 2018. Changes in exchange rates had a positive impact of SEK 456 M (542) on the order backlog.
Net sales totaled SEK 58,234 M (57,346) during 2019. The increase in net sales was mainly attributable to NCC Building Nordics and NCC Property Development but NCC Infrastructure and NCC Industry also noted a year-on-year increase. Only NCC Building Sweden showed a year-on-year decline, due to a decrease in orders received in 2018. Changes in exchange rates had a positive impact of SEK 519 M (1,077) on sales.
The NCC Group's operating profit for 2019 was SEK 1,296 M (–764). The operating result in 2018 was impacted strongly by the provisions, revaluations and impairment losses done in late 2018. Excluding the
| ORDERS RECEIVED | ORDER BACKLOG | NET SALES | OPERATING PROFIT/LOSS | |||||
|---|---|---|---|---|---|---|---|---|
| SEK M | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| NCC Infrastructure | 16,601 | 21,271 | 20,389 | 21,037 | 17,425 | 16,936 | 212 | –743 |
| NCC Building Sweden | 12,741 | 15,075 | 16,561 | 18,709 | 14,851 | 15,701 | 364 | 453 |
| NCC Building Nordics | 16,080 | 11,229 | 15,807 | 11,313 | 11,769 | 10,753 | 231 | –227 |
| NCC Industry | 12,852 | 12,943 | 2,967 | 3,092 | 12,971 | 12,968 | 511 | 350 |
| NCC Property Development | 3,056 | 2,157 | 313 | –181 | ||||
| Total | 58,274 | 60,519 | 55,725 | 54,152 | 60,071 | 58,514 | 1,631 | –347 |
| NCC Road Services | 1,617 | 3,609 | 2,816 | 3,749 | 2,624 | 2,855 | 20 | –251 |
| Other and eliminations | –1,843 | –2,286 | –740 | –1,063 | –4,461 | –4,024 | –355 | –166 |
| Group | 58,048 | 61,842 | 57,800 | 56,837 | 58,234 | 57,346 | 1,296 | –764 |
effects of these items, profit for the year improved in four of the business areas and finished at the same level in NCC Building Sweden. More projects were recognized in profit in NCC Property Development in 2019, compared with 2018, which contributed to improved earnings. In NCC Building Nordics, higher margins in both ongoing and newly started projects contributed to improved earnings.
Other and eliminations amounted to SEK –355 M (–166). This item included SEK –204 M (–187) for NCC's Head Office and results from minor subsidiaries and associated companies.
Net financial items amounted to SEK –112 M (–85). The increased lease liability due to the new IFRS 16 accounting standard impacted net financial items by SEK –42 M during the year. Profit after financial items totaled SEK 1,184 M (–849). Profit after tax for the year amounted to SEK 875 M (–750).
Comprehensive income for the year totaled SEK 576 M (–1,352). The change derived mainly from net profit for the year and the remeasurement of defined-benefit pension plans, for which a minor reduction in the inflationary assumption and a larger reduction in the discount rate resulted in an increase in the pension debt in 2019. 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.
NCC Infrastructure's orders received totaled SEK 16,601 M (21,271), with the year-on-year difference due to the order registration of the Centralen project (SEK 4.7 billion) in Gothenburg in the first quarter of 2018.
The earth and groundworks segment accounted for the largest share of orders received, and Sweden still constituted a large proportion of total orders received. Examples of projects included in orders received during the year were D14 Mindemyren in Norway, about SEK 0.9 billion, the Western Link in Umeå, SEK 0.4 billion, and the Arninge travel hub in Täby, Stockholm, SEK 0.4 billion.
The order backlog declined year-on-year to SEK 20,389 M (21,037) at year-end.
Net sales rose to SEK 17,425 M (16,936) during the year. The higher level of sales is primarily attributable to Norway, which has major
ongoing projects. Earth and groundworks, roads and railways jointly accounted for nearly 70 percent of NCC Infrastructure's net sales. Sweden is NCC Infrastructure's largest market, accounting for
75 percent (80) of sales, followed by Norway with 19 percent (15).
Operating profit improved and amounted to SEK 212 M (–743). Earnings improved in all divisions, with Civil Engineering Norway recording the largest improvement. The favorable earnings trend during the year resulted from improved profitability in ongoing projects and a somewhat larger volume. Earnings in the previous year were negatively impacted by revaluations.
NCC has decided to divest NCC Road Services and is thus recognizing this operation separately in the table below and in Note 15, Assets held for sale.
NCC Infrastructure excl. Road Services
| SEK M | 2019 | 2018 |
|---|---|---|
| Orders received | 16,601 | 21,271 |
| Net sales | 17,425 | 16,936 |
| Operating profit/loss | 212 | –743 |
| Operating margin, % | 1.2 | –4.4 |
| Average no. of employees | 4,462 | 4,737 |
| Cash flow before financing | 331 | –368 |
Target: operating margin ≥3.5%
| SEK M | 2019 | 2018 |
|---|---|---|
| Orders received | 1,617 | 3,609 |
| Net sales | 2,624 | 2,855 |
| Operating profit/loss | 20 | –251 |
| Operating margin, % | 0.7 | –8.8 |
| Average no. of employees | 505 | 549 |
| Cash flow before financing | 2 | –113 |
Orders received by NCC Building Sweden in 2019 amounted to SEK 12,741 M (15,075). The share of housing units increased year-on-year, corresponding to nearly one-third of total orders received for the year. More than two-thirds of these were rental units.
One of the major projects registered in orders during the year was the new Masthuggskajen city district at an order value of SEK 1.4 billion. The housing category's share of orders received increased again following a decline in 2018 to 30 percent (17) of orders received.
The order backlog decreased to SEK 16,561 M (18,709) at year-end.
Net sales in 2019 decreased year-on-year to SEK 14,851 M (15,701). Housing remained the largest individual category, accounting for 29 percent, although a slight year-on-year decline was noted, followed by renovation and refurbishment, at just over 20 percent.
Operating profit amounted to SEK 364 M (453). Earnings were lower than in the preceding year. This includes a provision owing to a dispute related to the Rågården project. Operating profit was also impacted by the work on long-term improvements to profitability in certain sections of the operation. Earnings in 2018 were negatively impacted by revaluations.
| SEK M | 2019 | 2018 |
|---|---|---|
| Orders received | 12,741 | 15,075 |
| Net sales | 14,851 | 15,701 |
| Operating profit/loss | 364 | 453 |
| Operating margin, % | 2.5 | 2.9 |
| Average no. of employees | 3,325 | 3,732 |
| Cash flow before financing | 371 | 385 |
Target: operating margin ≥3.5%
Orders received by NCC Building Nordics amounted to SEK 16,080 M (11,229). In Denmark, orders received remained strong and the increase in orders received for the full year was attributable primarily to Danish operations. Housing units represented approximately one-third of total orders received, followed by renovation and refurbishment, which in terms of volume are at roughly the same level as in 2018.
One of the major projects included in orders during 2019 was the development of a new city district on the island of Papirøen in central Copenhagen at an order value of some SEK 1.7 billion.
The order backlog increased to SEK 15,807 M (11,313) at year-end. NCC Building Nordics' net sales increased in 2019 to SEK 11,769 M (10,753). The increase was mainly attributable to Finland. The categories housing as well as renovation and refurbishment, which both increased during the year, were equally large in 2019. The education category also increased during the year, while the offices category declined.
Operating profit amounted to SEK 231 M (–227), with the earnings improvement resulting from a better margin on orders received during the year, while 2018 was adversely impacted by revaluations.
| SEK M | 2019 | 2018 |
|---|---|---|
| Orders received | 16,080 | 11,229 |
| Net sales | 11,769 | 10,753 |
| Operating profit/loss | 231 | –227 |
| Operating margin, % | 2.0 | –2.1 |
| Average no. of employees | 2,582 | 2,722 |
| Cash flow before financing | 187 | 400 |
Target: operating margin ≥3.5%
Operating profit,
Average number of employees, 25 (22)%
31%
NCC Industry's net sales amounted to SEK 12,971 M (12,968). The foundation engineering operations in the Hercules division grew as a result of major projects in Sweden, Denmark and Norway, while asphalt and stone materials operations decreased somewhat because volumes were slightly lower than in 2018. Sold volumes of stone materials totaled 28,339 thousand tons (29,275). The net decrease was due to lower volumes of sold stone materials in Denmark and Norway, although volumes were higher in Finland. The asphalt
operation's sales were lower year-on-year in all countries apart from Norway. Sold volumes of asphalt totaled 6,100 thousand tons (6,415).
Operating profit amounted to SEK 511 M (350). Earnings were higher year-on-year in all divisions, with major improvements noted in primarily the Danish asphalt plant operations and Hercules's Norwegian operations. Earnings in 2018 were negatively impacted by revaluations in the third quarter.
Net sales, 21 (20)%
Capital employed, 32 (32)%
| SEK M | 2019 | 2018 |
|---|---|---|
| Net sales | 12,971 | 12,968 |
| Operating profit/loss | 511 | 350 |
| Operating margin, % | 3.9 | 2.7 |
| Capital employed | 5,507 | 4,902 |
| Return on capital employed, % | 9.0 | 7.1 |
| Average no. of employees | 3,650 | 3,768 |
| Stone materials, 1,000 tons1) | 28,339 | 29,275 |
| Asphalt, 1,000 tons1) | 6,100 | 6,415 |
| 1) Sold volume. |
Targets: operating margin ≥4%, return on capital employed ≥10%
Net sales for NCC Property Development improved in 2019 to SEK 3,056 M (2,157). Operating profit increased year-on-year to SEK 313 M (–181).
During the year, eleven (nine) projects were recognized in profit, of which seven in Denmark, two in Norway and two in Sweden. Earnings from projects recognized in profit, sales of land and development rights, as well as previous sales, contributed to the improved earnings. The operating net in 2019 was SEK 60 M (38).
Eight (five) property projects were started during the year, of which six were office projects, one a logistics project and one school. At the end of 2019, 15 projects (18) were ongoing or completed but not yet recognized in profit at a total project cost of SEK 4.4 billion (2.7), equal to a completion rate of 44 percent (35), while the leasing rate was 51 percent (49). Leases were signed for some 98,800 square meters (71,200) during the year.
| SEK M | 2019 | 2018 |
|---|---|---|
| Net sales | 3,056 | 2,157 |
| Operating profit/loss | 313 | –181 |
| Operating margin, % | 10.2 | –8.4 |
| Capital employed | 4,935 | 4,314 |
| Return on capital employed, % | 6.2 | –3.9 |
| Average no. of employees | 109 | 94 |
Targets: operating margin ≥10%, return on capital employed ≥10%
Activity is generally lower in the first quarter, which leads to reduced earnings. During the third quarter of 2018, a comprehensive analysis of operations resulted in revaluations that affected profit. A number of actions were then launched in the fourth quarter of 2018 that were designed to build a strong base for the business. Earnings improved steadily in 2019.
An action program to improve profitability was launched in 2018. In 2018, profitability declined, primarily due to provisions, revaluations and restructuring costs connected to the action program. Profitability improved in 2019.
Orders received for projects of the magnitude of SEK 100–500 M increased the most during the year, while other project sizes declined. The greatest decline was noted for project sizes larger than SEK 500 M. The diagram reflects SEK 47 billion of the total orders received of SEK 58 billion. The Group's total orders received also include NCC Industry.
25-100 SEK M, 19 (23)% <25 SEK M, 19 (20)% 100-300 SEK M, 27 (19)% 300-500 SEK M, 12 (8)% >500 SEK M, 23 (30)%
| NCC's share of |
Completion rate, |
Estimated year |
||
|---|---|---|---|---|
| Projects >SEK 500 M | order value |
Dec 31, 2019, % |
of com pletion |
|
| Railway section, | ||||
| Centralen, Gothenburg | SE | 5,075 | 24% | 2026 |
| Production facility, Gruvön Mill Tunnel construction, |
SE | 2,909 | 99% | 2020 |
| Faroe Islands | NO | 2,904 | 46% | 2024 |
| Railway tunnel, Korsvägen, Örgryte |
SE | 2,290 | 19% | 2026 |
| National Highway 4, Hadeland NO | 1,785 | 99% | 2020 | |
| Railway section, Venjar–Eidsvoll Nord, Eidsvoll |
NO | 1,723 | 30% | 2023 |
| Children's hospital extension, Gothenburg |
SE | 1,583 | 85% | 2021 |
| University Hospital, Örebro | SE | 1,492 | 85% | 2021 |
| Railway section, Lund Arlöv | SE | 1,430 | 42% | 2022 |
| Housing and commercial premises, Aarhus |
DK | 1,368 | 6% | 2022 |
| Tunnel construction, Gvammen-Aarhus |
NO | 1,349 | 99% | 2020 |
| Man-made island with housing | ||||
| & parking, Copenhagen Hospital project, Oulu |
DK FI |
1,305 1,265 |
3% 12% |
2023 2023 |
| New hospital for Hovedstaden | ||||
| region, Hillerød | DK | 1,245 | 1% | 2024 |
| University buildings, Uppsala University |
SE | 956 | 33% | 2021 |
| Expansion of hospital, Ryhov | SE | 915 | 71% | 2021 |
| Destination hotel, Liseberg | SE | 875 | 1% | 2022 |
| Reconstruction of an office building into a Hilton hotel, |
||||
| Copenhagen Light Rail line, Bybanen, Bergen |
DK NO |
858 846 |
21% 5% |
2021 2022 |
| Hotel at railway station, Helsinki | FI | 782 | 52% | 2021 |
| Train maintenance depot, | ||||
| Hässleholm | SE | 780 | 93% | 2020 |
| Interchange, Häggvik | SE | 774 | 48% | 2021 |
| Interchange, Gothenburg | SE | 748 | 95% | 2020 |
| Housing units, Tuborg Havn, Copenhagen |
DK | 734 | 53% | 2021 |
| Hospital, Jönköping | SE | 729 | 94% | 2020 |
| Expansion of gates, Landvetter Airport |
SE | 720 | 83% | 2020 |
| Ice hockey facility, Oslo | NO | 711 | 82% | 2020 |
| Housing, Uppsala | SE | 682 | 27% | 2023 |
| Interchange, Hjulsta | SE | 675 | 66% | 2022 |
| Housing, preschool & stores, Stockholm |
SE | 659 | 73% | 2021 |
| Reconstruction of Sergelhuset, Stockholm |
SE | 610 | 75% | 2020 |
| Offices, Hellsfyr, Oslo | NO | 589 | 27% | 2020 |
| New build of condominiums, Copenhagen |
DK | 584 | 20% | 2022 |
| Police station, Rinkeby, Stockholm |
SE | 577 | 84% | 2020 |
| Cultural district, Örebro | SE | 571 | 41% | 2021 |
| Housing renovation, Roskilde | DK | 559 | 1% | 2023 |
| Housing, Linköping | SE | 543 | 81% | 2020 |
| Healthcare center, Finspång | SE | 528 | 75% | 2020 |
The return on equity was 32 percent (–18). The return on capital employed was 13 percent (–9).
At December 31, 2019, capital employed amounted to SEK 10,382 M (7,619). The increase was due to the transition to IFRS 16 Leases, a larger project portfolio in NCC Property Development and increased cash and cash equivalents.
Net debt amounted to SEK –4,489 M (–3,045). The year-on-year change was mainly due to the changed accounting standard according to IFRS 16 Leases and to higher pension debt. Corporate net debt was positive, meaning net cash of SEK 83 M (–766) was reported at year-end. The average maturity period for interest-bearing liabilities, excluding pension debt according to IAS 19, was 37 months (34) at year-end. NCC's unutilized committed lines of credit at year-end amounted to SEK 3.7 billion (3.6), with an average remaining maturity of 22 (33) months.
On December 31, 2019, the equity/assets ratio was 10 percent (11). The debt/equity ratio was a multiple of 1.5 (1.0).
Cash flow from operating activities amounted to SEK 2,214 (–375) in 2019, which was impacted by positive accounting effects from the new accounting standard, IFRS 16 Leases, in an amount of SEK 575 M. Otherwise, the improvement was attributable to better earnings and a higher rate of advance payments in NCC Property Development.
Cash flow from investing activities amounted to SEK –701 M (–782). Investments in machinery and equipment primarily occurred in NCC Industry.
Cash flow from financing activities was SEK –308 M (–717). The change was mainly due to lower dividends to the shareholders in 2019, compared with 2018.
Total liquid assets including short-term investments with a maturity exceeding three months amounted to SEK 2,478 M (1,269).
NCC Industry's operations and certain operations in NCC Building Sweden and NCC Building Nordics are impacted by seasonal variations due to cold weather. Earnings in 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. 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 p. 91.
The average number of employees in the NCC Group in 2019 was 15,273 (16,523).
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 values-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, trips and falls 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 2019, the Group continued to implement and improve work methods and procedures in health and safety work that have been developed in recent years. NCC had its lowest accident frequency rate to date in 2019.
A description of salary, compensation and terms of employment of the President and CEO and other employees in the company is presented in Note 5, Number of employees, personnel expenses and remuneration of senior executives, pp. 41–44. The guidelines proposed to the 2020 AGM largely comply with those resolved by the 2019 AGM but have been revised and adapted to the new rules according to Swedish Companies Act and the Swedish Code of Corporate Governance; see below.
Guidelines in 2019 for determining salary and other remuneration of the CEO 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 ET, as resolved by the 2019 AGM, and the applicable remuneration structures and remuneration levels in the company. During 2019 the Board has exercised its right to deviate from the guidelines in special cases and due to specific circumstances. For further information, see note 5.
Successful implementation of the company's business strategy and safeguarding its long-term interests, including its sustainability, is a prerequisite for the company's ability to recruit and retain highquality employees. To achieve this, the company must be able to offer competitive remuneration. These guidelines make it possible for senior executives to be offered competitive total remuneration.
Long-term share-based incentive programs that are performance-based have been established in the company. Since they have been adopted by the Annual General Meeting (AGM), they are not encompassed by these guidelines. The long-term share-based incentive program that the Board of Directors has proposed for adoption by the 2020 AGM is not encompassed for the same reason.
Remuneration shall be market-aligned and may comprise the following components: fixed cash salary, variable cash remuneration, pension benefits and other benefits. The AGM may also – regardless of these guidelines – adopt remuneration based on, for example, share and share price-related incentive schemes.
Fixed remuneration. When determining the fixed salary, the individual executive's sphere of responsibility, experience and achieved results are to be taken into account. The fixed salary is to be revised annually.
Variable remuneration. The short-term variable remuneration must be related to the fixed salary, and be based on the outcome in relation to established targets, which are measured annually.
The reason for paying variable remuneration is to motivate and reward value-generating activities that support achievement of NCC's long-term business strategy and interests. The criteria for paying variable cash remuneration thus essentially comply with the Group's long-term operational and financial objectives.
The variable cash remuneration is primarily based on a financial objective (EBIT), with a smaller portion based on the number of worksite accidents (resulting in more than four days of absence from regular work per one million worked hours), adapted functional targets or operational targets. When the measurement period has ended, the extent to which the criteria have been met will be assessed/established. The Board of Directors is responsible for assessing the variable cash remuneration paid to the CEO. The CEO is responsible for the assessment of variable cash remuneration paid to other senior executives. The assessment of the financial objectives is based on the Annual Report. The outcome in relation to established targets for variable remuneration is measured after the performance period; meaning following fiscal year-end.
Assuming that the long-term share-based incentive program is adopted by the 2020 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 40 percent of fixed salary. The variable short-term remuneration is to be revised annually.
It is estimated that the company's commitments for the short-term incentive program in relation to the executives concerned will cost the company at the maximum outcome about SEK 21.5 M including social security fees. Should the AGM not vote in favor of a long-term performance-based 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 50 percent of fixed salary, which is estimated to correspond to a cost at maximum outcome of about SEK 26 M including social security fees.
The short-term variable remuneration is pensionable, except for remuneration paid to the CEO.
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 CEO has a defined-contribution pension with a premium pledge capped at 40 percent of contractual fixed salary. Other 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 capped at 30 percent of pensionable salary increments exceeding 30 income base amounts. Pensionable salary is defined in accordance with ITP, Department 2. Members of the ET who have employment contracts under the terms and conditions of another country are covered by pension solutions in accordance with local practices, which must comply with the principles stated in these guidelines to the extent possible.
NCC aims to harmonize the retirement age of the ET at 65 years. Other benefits. NCC provides other benefits, such as medical insurance and a car benefit, to members of the ET. 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, in total not more than 5 percent of annual cash salary.
Periods of notice and severance pay. A member of the ET who terminates employment at NCC's initiative normally has a six-month period of notice and is entitled to 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 six months if employment is terminated on the initiative of a member of the ET, with no right to severance pay.
In the preparation of the Board of Directors' proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information on the employees' total remuneration, the components of the remuneration and increase and growth rate of the remuneration over time, in the Board of Directors' basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable. The development of the gap between the remuneration to executives and remuneration to other employees will be disclosed in the remuneration report prior to the next AGM.
The Board shall formulate a motion for new guidelines at least every fourth year and submit the motion for resolution by the AGM. The guidelines are to apply until new guidelines have been adopted by the AGM. The Board of Directors is also mandated to monitor and evaluate variable remuneration programs for the ET, the application of guidelines for remuneration of senior executives and applicable remuneration structures and remuneration levels in the company. Neither the CEO nor other members of the ET may participate in the Board of Directors' processing of and decisions on remuneration-related matters, insofar as they are impacted by these matters.
The Board shall be entitled to partly or fully deviate from the guidelines if there is special reason to do so in an individual case and such deviation is necessary to satisfy the company's long-term interests, including its sustainability, and to safeguard the company's financial solidity.
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 employees within the NCC Group (LTI 2020). The proposal essentially matches the long-term performance-based incentive program adopted by the AGM in April 2019. A total of 164 executives are included in LTI 2019. 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 2020 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. 41–44.
At December 31, 2019, NCC's registered share capital comprised 13,209,129 Series A shares and 95,226,693 Series B shares, of which 530,267 were held in treasury. The shares have a quotient value of SEK 8.00 each. 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, 128,766 Series A shares were converted to Series B shares.
In 2019, NCC bought back 128,217 Series B shares at an average price of SEK 150.49, corresponding to 0.12 percent of the share capital. No shares were sold or distributed during the year. Thereafter, the company holds 530,267 Series B shares in treasury at an average price of SEK 186.78.
The number of NCC shareholders at year-end was 42,010 (48,863), with Nordstjernan AB as the largest individual holder accounting for 17 percent (17) of the share capital and 48 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 51 percent (56) of the share capital and 66 percent (67) of the voting rights.
To cover commitments according to the long-term performancebased incentive program LTI 2019, the AGM on April 9, 2019 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 2019. 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 2016, LTI 2017 and LTI 2018) and LTI 2019.
The Corporate Governance Report is included as a separate section of NCC's 2019 Annual Report and does not constitute a feature of the formal annual report documentation; refer to the Corporate Governance section on pp. 94–103.
Catarina Molén-Runnäs took office as Business Area Manager of NCC Building Nordics on January 13, 2020. She replaced Klaus Kaae, who remains at NCC as senior advisor. Catarina began her career at NCC and has since worked in property development across the Nordic region.
The Parent Company's net sales pertain to charges to Group companies. The average number of employees was 58 (71). Write-downs of shares and participations totaled SEK –50 M (–644). Profit after financial items was SEK 358 M (–445). Total dividends to the shareholders in 2019 amounted to SEK 432 M.
The Board of Directors proposes that the profit will be appropriated as follows:
| Total, SEK | 2,240,367,885 |
|---|---|
| To be carried forward | 1,700,840,110 |
| To be distributed to shareholders | 539,527,775 |
| be appropriated as follows: | |
| 2,240,367,885 |
The resolution concerning the proposed dividend will be made taking into account the company's future profits, financial position and capital requirements, as well as the macroeconomic conditions.
The Board's proposal for the 2019 fiscal year is a dividend of SEK 5.00 per share. The dividend will be divided into two payment occasions. April 3, 2020 is proposed as the record date for the first payment of SEK 2.50 and November 2, 2020 for the second payment of SEK 2.50. If the AGM approves the Board's motion, it is estimated that the first dividend will be paid via Euroclear Sweden AB on April 8, 2020 and the second dividend on November 5, 2020. 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.
Management of operational, strategic and financial risks is a key prerequisite for NCC's business and efficient risk management is a necessity for a stable and profitable company. The aim of risk management is to identify risks, assess the efficiency of existing controls and strengthen and develop preventive measures. NCC has conducted a measurement of the company's risks and describes below the risks regarded as most probable and that are estimated to have the greatest impact on NCC's potential to achieve its objectives in the long and the short term.
| RISK AREA | DESCRIPTION | CONTROL ACTIVITIES |
|---|---|---|
| OPERATIONAL AND STRATEGIC RISKS | ||
| COMPETENCY SUPPLY AND LEADERSHIP |
The successful recruitment, retention and development of necessary skills is crucial for the company. Development of managers is essential, firstly to deliver quality in projects and, secondly, to retain personnel with the desired skills. |
Competency mapping and development plans are prepared for key positions. Group-wide skills development programs for project management and leadership. Future managers/leaders are identified and develop ment plans are devised. Succession planning occurs within all business areas and corporate staff functions. |
| PROJECT MANAGEMENT | Within contracting operations, the main operating risks are project selection and project management. |
NCC assigns priority to submitting tenders with identified risks that are manageable and calculable. Various contract formats and partnerships with customers facilitate the management of different risks. These operating risks are counteracted through NCC's project selection, assessment of tenders and operational control systems. |
| WORK ENVIRONMENT | Many operations in the Group feature risky elements for workers that are subject to considerable demands regarding correct training and safety equipment, and not least an established culture that has the safety and health of employees as its highest priority. |
Safety efforts are assigned top priority and are a manda tory aspect of all management team meetings. At Group level, distinct guidelines are set for safety work, and instructions are devised for each business area, all in order to achieve the vision of zero accidents at our worksites. All reported incidents are analyzed with the aim of improving the injury-prevention effort, with a particular focus on creating a culture that encourages safe work. |
| SUPPLY CHAINS | The company is highly dependent on suppliers and subcontractors. Accordingly, this entails that NCC is exposed to a risk of not being able to secure deliveries of such critical materials as steel and bitumen. The supply chains in the construction sector represent a risk of inadequate control of, for example, subcontractors labor conditions. There is a risk that subcontractors do not comply with laws, rules and business ethics. There is also a risk associated with quality assurance of materials from national and international suppliers. |
NCC works systematically to assess and expand its control of the supply chain and to secure access to critical materials. The quality of suppliers is primarily assured by signing central framework agreements that must be followed. Purchasing that transcends central agreements must also comply with established processes and use templates developed for quality control. Tools for ensuring trace ability include logbooks and digital standardized identifi cation of construction products (GTIN). NCC has a thorough process for evaluating suppliers in risk areas in order to prevent human rights crimes. |
| COMPLIANCE | Since NCC is a player in society with a broad customer and supplier base, all employees are strictly required to act in accordance with the company's Code of Conduct. Employees who potentially breach internal rules or break the law represent a risk. |
NCC has focused continuously and actively on the company's values for a number of years and provides training in the Code of Conduct. Efforts in 2020 include further development of a training program addressing competition law. |
| IT SECURITY | Updating and developing IT systems and applications is crucial for improving the efficiency of the company's processes. Over the coming years, the company will be updating a number of systems. |
NCC monitors technical advances, safeguards long-term management and control of the reliability of IT infrastruc ture, and its integration into processes for supporting and protecting the operations. |
| RISK AREA | DESCRIPTION | 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. |
|
| 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. |
|
| REFINANCING RISK | Refinancing risk is the risk that opportunities for financing will be limited and/or that the cost will be higher when loans that expire have to be refinanced, which could adversely impact NCC's operations, earnings and financial position. |
NCC's Finance Policy has been adopted 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 37. |
| LIQUIDITY RISK | 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. |
|
| CREDIT AND COUNTER PARTY RISKS IN FINANCIAL OPERATIONS |
Credit and counterparty risks in financial operations refers to the risk that NCC's financial counterparties are unable to fulfill their obligations to NCC. |
|
| CUSTOMER CREDIT RISK | Customer credit risk refers to the risk that NCC's customers are unable to honor payments to NCC for delivered goods and services. |
At NCC, customer credit risks are managed through Group-wide procedures for identifying and assessing risks, both before agreements are reached with customers and continuously in operational follow-ups. NCC's credit risk in accounts receivable is highly diversified given the large number of projects of varying sizes and types in a multitude of customer categories. |
| PERCENTAGE-OF COMPLETION PROFIT RECOGNITION |
In assignments involving construction contracts, NCC applies percentage-of-completion profit recognition, whereby profit is recognized 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 recognized earlier. |
By means of project management, meaning continuous monitoring of production calculations, reconciliation of work completed, project forecasts, etc., it is possible to ascertain that the information is accurate. |
| The figures are based on the outcome in 2019. | |||||
|---|---|---|---|---|---|
| Change | Result effect after net financial items, SEK M (annual basis) |
Effect on return on equity, (percentage points) |
Effect on return on capital employed (percentage points) |
Comments | |
| NCC INFRASTRUCTURE EXCL. ROAD SERVICES | |||||
| Volume | +/– 5% +/– 1 percentage |
46 | 1.3 | 0.5 | For NCC Infrastructure, a one-percentage-point increase in the margin has a significantly larger impact on earnings than a 5-percent increase in |
| Operating margin | point | 174 | 4.9 | 1.8 | 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% | 47 | 1.4 | 0.5 | For NCC Building Sweden, a one-percentage-point |
| Operating margin | +/– 1 percentage point |
149 | 4.2 | 1.5 | 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% | 38 | 1.1 | 0.4 | For NCC Building Nordics, a one-percentage-point |
| Operating margin | +/– 1 percentage point |
118 | 3.4 | 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% | 49 | 1.4 | 0.5 | NCC Industry's operations are affected by such fac |
| Operating margin | +/– 1 percentage point |
130 | 3.7 | 1.3 | tors as price levels and the volume of produced and paved asphalt. An extended season due to favorable weather conditions increases volumes and, because the proportion of fixed costs is high, the impact on the |
| Capital rationalization | +/– 10% | 7 | 0.2 | 0.8 | margin is material. |
| NCC PROPERTY DEVELOPMENT | |||||
| Sales volume, project | +/– 10% | 55 | 1.6 | 0.6 | NCC Property Development's earnings are predomi |
| Sales margin, project | +/– 1 percentage point |
30 | 0.9 | 0.3 | nantly determined by sales. The potential to sell property projects is largely dependent on the leases signed with tenants. An increased leasing rate facili tates a higher sales volume. The value of a property is also determined by the difference between operat ing expenses and rent levels, and thus 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 percentage point |
16 | 0,5 | On December 31, 2019, net debt amounted to SEK 4,489 M (3,045). |
* Excluding pension debt according to IAS 19.
| SEK M | Note 1, 4, 20, 33 |
2019 | 2018 | 2019 pro forma excl. IFRS 161) |
|---|---|---|---|---|
| Net sales | 3 | 58,234 | 57,346 | 58,234 |
| Production costs | 5, 6, 8, 10, 16, 25 | –54,134 | –55,205 | –54,139 |
| Gross profit | 4,101 | 2,140 | 4,095 | |
| Selling and administrative costs | 5, 7, 16, 17 | –2,811 | –2,875 | –2,818 |
| Capital gain from sales of owner-occupied properties | 17 | –11 | 12 | –11 |
| Impairment loss and reversal of impairment losses, fixed assets | 8, 16, 17 | –22 | –82 | –22 |
| Capital gain from sales of Group companies | 9 | 18 | 18 | |
| Result from participations in associated companies and joint ventures | 21 | 42 | 21 | |
| Operating profit/loss | 1,296 | –764 | 1,283 | |
| Financial income | 12 | 34 | 36 | 34 |
| Financial expenses | 12 | –146 | –121 | –110 |
| Net financial items | –112 | –85 | –76 | |
| Profit/loss after financial items | 1,184 | –849 | 1,208 | |
| Tax on net profit for the year | 24 | –309 | 99 | –314 |
| Net profit/loss for the year | 875 | –750 | 894 | |
| Attributable to: | ||||
| NCC's shareholders | 873 | –756 | 892 | |
| Non-controlling interests | 2 | 6 | 2 | |
| Net profit/loss for the year | 875 | –750 | 894 | |
| Earnings per share | ||||
| Before and after dilution | ||||
| Profit/loss after tax, SEK | 8.09 | –7.00 | 8.27 | |
| Number of shares, millions | ||||
| Total number of issued shares | 108.4 | 108.4 | 108.4 | |
| Average number of shares outstanding before and after dilution during the year | 108.0 | 108.1 | 108.0 | |
| Number of shares outstanding on December 31 | 107.9 | 108.0 | 107.9 |
1) In the pro forma accounts, leases are recognized as operating leases under IAS 17. The pro forma information is unaudited.
| SEK M | Note | 2019 | 2018 | 2019 pro forma excl. IFRS 161) |
|---|---|---|---|---|
| Net profit/loss for the year | 875 | –750 | 894 | |
| Items that have been recycled or can be recycled to net profit/loss for the year2) | ||||
| Exchange differences on translating foreign operations | 43 | 90 | 43 | |
| Change in hedging/fair value reserve | –30 | |||
| Tax attributable to hedging of exchange-rate risk in foreign operations | 24 | 6 | ||
| Fair value changes for the year in cash flow hedges | –4 | –19 | –4 | |
| Fair value changes in cash flow hedges transferred to net profit/loss for the year | 12 | –11 | 12 | |
| Tax attributable to cash flow hedges | 24 | –2 | 6 | –2 |
| 49 | 41 | 49 | ||
| Items that cannot be recycled to net profit/loss for the year | ||||
| Revaluation of defined-benefit pension plans | 30 | –443 | –818 | –443 |
| Tax relating to items that cannot be recycled to net profit/loss for the year | 95 | 175 | 95 | |
| –348 | –643 | –348 | ||
| Other comprehensive income for the year | –299 | –602 | –299 | |
| Comprehensive income for the year | 576 | –1,352 | 595 | |
| Attributable to: | ||||
| NCC's shareholders | 574 | –1,358 | 594 | |
| Non-controlling interests | 2 | 6 | 2 | |
| Total comprehensive income during the year | 576 | –1,352 | 595 |
1) In the pro forma accounts, leases are recognized as operating leases under IAS 17. The pro forma information is unaudited. 2) Also see the specification of the item Reserves in shareholders' equity, p. 29.
| SEK M | Note | 2019 | 2018 | 2019 pro forma excl. IFRS 161) |
|---|---|---|---|---|
| ASSETS | 1, 20, 33, 37 | |||
| Fixed assets | ||||
| Goodwill | 16 | 1,893 | 1,861 | 1,893 |
| Other intangible assets | 16 | 368 | 339 | 368 |
| Right-of-use assets | 2, 34 | 1,579 | 493 | 342 |
| Owner-occupied properties | 17 | 894 | 915 | 894 |
| Machinery and equipment | 17 | 2,516 | 2,559 | 2,516 |
| Long-term holdings of securities | 19, 21 | 114 | 119 | 114 |
| Long-term interest-bearing receivables | 23 | 144 | 195 | 144 |
| Other long-term receivables | 34 | 119 | 34 | |
| Deferred tax assets | 24 | 524 | 531 | 518 |
| Total fixed assets | 8,065 | 7,133 | 6,823 | |
| Current assets | ||||
| Right-of-use assets | 34 | 51 | ||
| Properties held for future development | 25 | 1,391 | 1,633 | 1,391 |
| Ongoing property projects | 25 | 3,042 | 2,292 | 3,042 |
| Completed property projects | 25 | 936 | 308 | 936 |
| Participations in associated companies | 25 | 263 | 226 | 263 |
| Materials and inventory | 26 | 993 | 902 | 993 |
| Tax receivables | 50 | 146 | 50 | |
| Accounts receivable | 37 | 8,674 | 9,629 | 8,674 |
| Worked-up, non-invoiced revenues | 3 | 1,260 | 1,276 | 1,260 |
| Prepaid expenses and accrued income | 1,516 | 1,418 | 1,575 | |
| Current interest-bearing receivables | 226 | 163 | 226 | |
| Other receivables | 23 | 555 | 608 | 555 |
| Short-term investments | 21, 36 | 63 | 72 | 63 |
| Cash and cash equivalents | 36 | 2,416 | 1,197 | 2,416 |
| Assets held for sale | 15 | 392 | 255 | |
| Total current assets | 21,826 | 19,868 | 21,698 | |
| TOTAL ASSETS | 29,890 | 27,001 | 28,521 |
1) The pro forma figures show leases recognized in accordance with IAS 17, which entails a lower net debt of SEK 1,252 M at December 31, 2019. The pro forma information is unaudited.
| EQUITY 1 Share capital 27 867 867 867 Other capital contributions 1,844 1,844 1,844 Reserves –23 –72 –23 Profit/loss brought forward, including profit/loss for the year 357 292 372 Shareholders' equity 3,044 2,931 3,060 Non-controlling interests 17 Total equity 3,044 2,948 3,060 LIABILITIES 1, 20, 33, 37 Long-term liabilities Long-term interest-bearing liabilities 2, 28, 32, 34 3,568 1,342 2,740 Other long-term liabilities 31 52 8 52 Provisions for pensions and similar obligations 30 2,840 2,279 2,840 Deferred tax liabilities 24 170 297 170 Other provisions 29 2,777 2,563 2,777 Total long-term liabilities 9,407 6,488 8,579 Current liabilities Current interest-bearing liabilities 28, 32, 34 796 1,051 372 Accounts payable 4,275 5,164 4,275 Tax liabilities 100 100 Invoiced revenues not worked up 3 6,254 6,311 6,254 Accrued expenses and deferred income 32 3,767 3,452 3,767 Provisions 29 24 68 24 Other current liabilities 31 1,878 1,520 1,878 Liabilities attributable to assets held for sale 15 344 211 Total current liabilities 17,439 17,566 16,882 Total liabilities 26,846 24,054 25,461 TOTAL EQUITY AND LIABILITIES 29,890 27,001 28,521 |
SEK M | Note | 2019 | 2018 | 2019 pro forma excl. IFRS 161) |
|---|---|---|---|---|---|
1) The pro forma figures show leases recognized in accordance with IAS 17, which entails a lower net debt of SEK 1,252 M at December 31, 2019. The pro forma information is unaudited.
| SEK M | Note 1 |
2019 | 2018 |
|---|---|---|---|
| Net sales | 246 | 174 | |
| Gross profit | 246 | 174 | |
| Selling and administrative costs | 5, 7, 8 | –344 | –376 |
| Operating profit/loss | –98 | –202 | |
| Result from financial investments | |||
| Result from participations in Group companies | 8, 9 | 482 | –208 |
| Result from other financial fixed assets | 13 | 12 | |
| Result from financial current assets | 3 | ||
| Interest expense and similar items | 11 | –42 | –47 |
| Profit/loss after financial items | 358 | –445 | |
| Appropriations | 14 | 577 | 545 |
| Tax on net profit for the year | 24 | –102 | –101 |
| NET PROFIT FOR THE YEAR | 833 | –1 |
| SEK M | 2019 | 2018 |
|---|---|---|
| Net profit/loss for the year | 833 | –1 |
| Total comprehensive income during the year | 833 | –1 |
| SEK M | Note | 2019 | 2018 |
|---|---|---|---|
| ASSETS | 1, 22, 37 | ||
| Fixed assets | |||
| Tangible fixed assets | |||
| Machinery and equipment | 17 | 3 | 24 |
| Total tangible fixed assets | 3 | 24 | |
| Financial fixed assets | |||
| Shares in Group companies | 18 | 4,511 | 5,518 |
| Other long-term holdings of securities | 45 | 45 | |
| Deferred tax assets | 24 | 5 | 8 |
| Total financial fixed assets | 4,562 | 5,571 | |
| Total fixed assets | 4,565 | 5,595 | |
| Current assets | |||
| Current receivables | |||
| Accounts receivable | 1 | ||
| Receivables from Group companies | 1,032 | 745 | |
| Other current receivables | 1 | 3 | |
| Tax receivables | 84 | 110 | |
| Prepaid expenses and accrued income | 6 | 17 | |
| Total current receivables | 1,123 | 875 | |
| Balance in NCC Treasury AB | 36 | 164 | 161 |
| Total current assets | 1,287 | 1,036 | |
| TOTAL ASSETS | 5,852 | 6,631 |
| SEK M | Note | 2019 | 2018 |
|---|---|---|---|
| TOTAL EQUITY AND LIABILITIES |
1, 37 | ||
| Equity | |||
| Restricted equity | |||
| Share capital | 27 | 867 | 867 |
| Statutory reserves | 174 | 174 | |
| Total restricted equity | 1,041 | 1,041 | |
| Unrestricted equity | |||
| Profit/loss brought forward | 1,407 | 1,850 | |
| Net profit/loss for the year | 833 | –1 | |
| Total unrestricted equity | 2,240 | 1,850 | |
| Total equity | 3,281 | 2,891 | |
| Provisions | |||
| Provisions for pensions and | |||
| similar obligations | 30 | 1 | |
| Other provisions | 29 | 6 | 7 |
| Total provisions | 6 | 8 | |
| Long-term liabilities | |||
| Liabilities to Group companies | 28 | 1,044 | |
| Long-term interest-bearing liabilities1) | 28 | 800 | 1,000 |
| Other long-term liabilities | 3 | 1 | |
| Total long-term liabilities | 803 | 2,045 | |
| Current liabilities | |||
| Accounts payable | 12 | 25 | |
| Liabilities to Group companies | 28 | 1,474 | 1,232 |
| Current interest-bearing liabilities1) | 28 | 200 | |
| Other liabilities | 18 | 355 | |
| Accrued expenses and deferred income | 32 | 57 | 75 |
| Total current liabilities | 1,761 | 1,687 | |
| TOTAL EQUITY AND LIABILITIES |
5,852 | 6,631 |
1) Pertains to loan from the NCC Group's Pension Foundation.
with comments
| EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS | |||||||
|---|---|---|---|---|---|---|---|
| SEK M | Share capital | Other capital contributions |
Reserves | Profit/loss brought forward |
Total | Non controlling interests |
Total equity |
| Opening equity, Jan 1, 2018 | 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 |
| Net profit/loss for the year | 873 | 873 | 2 | 875 | |||
| Other comprehensive income | 49 | –348 | –299 | –299 | |||
| Total comprehensive income | 49 | 525 | 574 | 2 | 576 | ||
| Divestment and dividends to non-controlling interests | –15 | –15 | –18 | –33 | |||
| Sale/Acquisition of company shares | –19 | –19 | –19 | ||||
| Performance-based incentive program | 5 | 5 | 5 | ||||
| Dividend | –432 | –432 | –432 | ||||
| Total transactions with the Group's shareholders | –461 | –461 | –18 | –479 | |||
| Equity on Dec 31, 2019 | 867 | 1,844 | –23 | 357 | 3,044 | 0 | 3,044 |
If the earlier policies for recognition of pensions according to IAS 19 had been applied, equity would have been SEK 3,274 M higher and net debt SEK 2,840 M lower at December 31, 2019.
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 exchangerate differences that arise from the remeasurement 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 step acquisitions, multi-stage acquisitions, meaning an increase in the fair value of previously owned portions of net assets resulting from step acquisitions.
| Share capital | Statutory reserves |
Profit/loss brought forward |
Net profit/loss for the year | Total share- holders' equity |
|---|---|---|---|---|
| 867 | 174 | 1,824 | 903 | 3,768 |
| 903 | –903 | |||
| –1 | –1 | |||
| –11 | –11 | |||
| –864 | –864 | |||
| –4 | –4 | |||
| 867 | 174 | 1,850 | –1 | 2,891 |
| –1 | 1 | |||
| 833 | 833 | |||
| 4 | 4 | |||
| –19 | –19 | |||
| –432 | –432 | |||
| 6 | 6 | |||
| 867 | 174 | 1,407 | 833 | 3,281 |
| RESTRICTED SHAREHOLDERS' EQUITY |
UNRESTRICTED SHAREHOLDERS' EQUITY |
| GROUP | 2019 | 2018 |
|---|---|---|
| Translation reserve | ||
| Translation reserve, January 1 | –43 | –109 |
| Exchange differences on translating foreign operations | 43 | 90 |
| Gain/loss on hedging of exchange-rate risk in foreign operations |
–30 | |
| Tax attributable to hedging of exchange-rate risk in foreign operations |
||
| Translation difference attributable to divested operations | 6 | |
| Translation reserve, December 31 | 0 | –43 |
| Fair value reserve | ||
| Fair value reserve, January 1 | ||
| Fair value changes on available-for-sale financial assets recognized in profit/loss |
||
| Fair value reserve, December 31 | 0 | 0 |
| Hedging reserve | ||
| Hedging reserve, January 1 | –29 | –7 |
| Fair value changes for the year in cash flow hedges | –4 | –18 |
| Fair value changes on cash flow hedges recycled to net profit/loss for the year |
12 | –11 |
| Tax attributable to cash flow hedges | –2 | 6 |
| Hedging reserve, December 31 | –23 | –29 |
| Revaluation reserve | ||
| Revaluation reserve, January 1 | 1 | 2 |
| Transfer to retained earnings | –1 | |
| Revaluation reserve, December 31 | 1 | 1 |
| Total reserves | ||
| Reserves, January 1 | –72 | –113 |
| Change in reserves during the year | ||
| – Translation reserve | 43 | 66 |
| – Fair value reserve | ||
| – Hedging reserve | 6 | –23 |
| – Revaluation reserve | –1 | |
| Reserves, December 31 | –23 | –72 |
| 2019 pro forma excl. 2019 IFRS 161) 2019 SEK M Note 2018 2018 OPERATING ACTIVITIES Profit/loss after financial items, remaining operations 1,184 –849 1,208 358 –445 Adjustments for items not included in cash flow: – Depreciation/amortization 6 1,407 663 808 2 2 – Impairment loss and reversal of impairment losses 8 22 453 22 50 682 – Exchange-rate differences –13 –17 –13 – Result from sales of fixed assets –35 –148 –35 – Changes in provisions 29 318 711 318 –2 –1 – Anticipated dividend –120 –1 – Other 2 –25 2 7 Total items not included in cash flow 1,700 1,637 1,101 –62 683 Tax paid –110 –53 –110 –74 –59 Cash flow from operating activities before changes in working capital 2,774 735 2,199 222 Cash flow from changes in working capital Sales of property projects 2,116 1,436 2,116 Investments in property projects –3,281 –2,602 –3,281 Other changes in working capital 605 55 605 –35 Cash flow from changes in working capital –560 –1,110 –560 –35 Cash flow from operating activities 2,214 –375 1,639 187 INVESTING ACTIVITIES Acquisition of subsidiaries/operations 36 –59 –80 Sale of subsidiaries 36 75 Investments in buildings and land 17 –92 –100 –92 Sale of buildings and land 29 35 29 Investments in other financial fixed assets –11 –11 Sale of other financial fixed assets 4 47 4 Investments in other fixed assets –790 –929 –790 Sale of other fixed assets 158 150 158 19 Cash flow from investing activities –701 –782 –701 –60 Cash flow before financing 1,512 –1,157 938 127 FINANCING ACTIVITIES Dividend paid –450 –864 –450 –432 Acquisition/sale of company shares –19 –11 –19 –19 Group contributions received 545 Loans raised 2,024 68 2,024 586 |
GROUP | PARENT COMPANY | ||
|---|---|---|---|---|
| 179 | ||||
| –9 | ||||
| –9 | ||||
| 169 | ||||
| –1,488 | ||||
| –18 | ||||
| –1,506 | ||||
| –1,337 | ||||
| –864 | ||||
| –11 | ||||
| 55 | ||||
| 385 | ||||
| Amortization of loans –1,960 –263 –1,385 |
||||
| Increase (–) / Decrease (+) in long-term interest-bearing receivables 58 380 58 |
||||
| Increase (–) / Decrease (+) in current interest-bearing receivables 39 –26 39 –804 |
–30 | |||
| Increase (+) in non-controlling interests, etc. | ||||
| Cash flow from financing activities 36 –308 –717 267 –124 |
–466 | |||
| Cash flow for the year 1,204 –1,874 1,204 3 |
–1,802 | |||
| Cash and cash equivalents, January 1 1,197 3,063 1,197 161 |
1,963 | |||
| Exchange-rate difference in cash and cash equivalents 15 8 15 |
||||
| Cash and cash equivalents, December 31 36 2,416 1,197 2,416 164 |
161 | |||
| Short-term investments with a maturity exceeding three months 63 72 63 |
||||
| Total liquid assets at year-end 2,478 1,269 2,478 164 |
161 |
1) In the pro forma accounts, leases are recognized as operating leases under IAS 17. The pro forma information is unaudited.
For additional disclosures, refer to Note 36 Cash flow statement
| Note | 1 | Accounting policies | 32 |
|---|---|---|---|
| Note | 2 | Effects of amended accounting policies | 39 |
| Note | 3 | Revenue recognition | 39 |
| Note | 4 | Reporting by operating segment | 40 |
| Note | 5 | Number of employees, personnel expenses and remuneration of senior executives |
41 |
| Note | 6 | Depreciation/amortization | 44 |
| Note | 7 | Fees and remuneration to audit firms | 44 |
| Note | 8 | Impairment losses | 44 |
| Note | 9 | Result from participations in Group companies | 45 |
| Note | 10 | Operating expenses by type of cost | 45 |
| Note | 11 | Interest expense and similar items | 45 |
| Note | 12 | Net financial items | 45 |
| Note | 13 | Effects on profit or loss of exchange-rate changes | 45 |
| Note | 14 | Appropriations | 45 |
| Note | 15 | Assets held for sale and liabilities attributable to assets held for sale |
45 |
| Note | 16 | Intangible assets | 46 |
| Note | 17 | Tangible fixed assets | 48 |
| Note | 18 | Participations in Group companies | 49 |
| Note | 19 | Participations in associated companies and joint ventures |
49 |
| Note | 20 | Participations in joint operations | 49 |
| Note | 21 | Financial investments | 50 |
| Note | 22 | Financial fixed assets | 50 |
| Note | 23 | Long-term interest-bearing receivables and other receivables |
51 |
| Note | 24 | Tax on net profit for the year, deferred tax assets and deferred tax liabilities |
51 |
| Note | 25 | Properties classified as current assets | 53 |
| Note | 26 | Materials and inventory | 53 |
| Note | 27 | Share capital | 54 |
| Note | 28 | Interest-bearing liabilities | 54 |
| Note | 29 | Other provisions | 55 |
| Note | 30 | Pensions | 55 |
| Note | 31 | Other liabilities | 57 |
| Note | 32 | Accrued expenses and deferred income | 57 |
| Note | 33 | Related-party transactions | 57 |
| Note | 34 | Leasing | 58 |
| Note | 35 | Pledged assets, sureties, guarantees and contingent liabilities |
59 |
| Note | 36 | Cash flow statement | 59 |
| Note | 37 | Financial instruments and financial risk management |
60 |
| Note | 38 | Information about the Parent Company | 68 |
| Note | 39 | Events after the balance-sheet date | 68 |
| Note | 40 | Appropriation of the company's profit | 68 |
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 and RFR 1 Supplementary Accounting Rules for Groups. The Annual Report and the consolidated financial statements were approved for issue by the Board of Directors on March 5, 2020. 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 1, 2020.
IFRS 16 Leases is applied as of January 1, 2019. IFRS 16 Leases replaces the previous standard IAS 17 Leases. NCC has elected to implement the standard according to the modified retrospective approach, which entails discounting future lease payments to present value and recognizing them as finance lease liability. The same amount has been used for estimating right-of-use assets. No comparative figures have been restated for periods prior to 2019.
IFRS 16 entails that the terms financial and operating leases cease to exist and instead NCC as the lessee is to recognize a right-of-use asset and a lease liability for all leases. Exceptions are leases with a leasing term of less than 12 months and low-value leases, less than SEK 50,000. The right-of-use asset represents a right to use the underlying asset and the lease liability represents a commitment to pay leasing fees.
NCC recognizes right-of-use assets with the associated lease liability for vehicles, heavy production machinery, leased premises and site leaseholds/ land leases. The balance sheet has been changed, including right-of-use assets recognized under tangible fixed assets as well as under current assets. The associated lease liability is included in current and long-term interest-bearing liabilities. Right-of-use assets are depreciated over the term of the lease.
The costs for these leases have been recognized in profit or loss as depreciation and interest expense, respectively. The lease payment is divided into an interest component and a amortization component. The operating result has been impacted positively and net financial items have been impacted negatively. IFRS 16 also entails that cash flow from operating activities increases and cash flow from financing activities decreases.
When discounting future lease payments for the vehicles and heavy machinery leased by the Group, NCC uses the interest rate implicit in each lease as the discount rate. In respect of other lease fees, such as leased commercial premises and site leaseholds/land leases, the respective subsidiary's incremental borrowing rate is used as the discount rate.
The incremental borrowing rate of the individual subsidiary is based on the legal entity's financial strength, the country and the term of the lease in question. For transitional effects, refer to Note 2.
A number of new standards and interpretations enter into force for fiscal years beginning after January 1, 2019 and these have not been applied in the preparation of these financial statements. These new standards and interpretations are not expected to have a material impact on the Group's financial statements in the current or forthcoming periods, nor on future transactions.
The Parent Company has prepared its annual report in accordance with the Annual Accounts Act and recommendation RFR 2 Accounting for Legal Entities. The Parent Company recognizes Group contributions received and granted as appropriations, which is in accordance 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 recognize certain financial instruments at fair value. NCC applies the exemption rules and has thus refrained from recognizing 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 consideration, 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 net profit for the year.
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 interest, normally through a direct or indirect holding carrying more than 50 percent of the voting rights, are consolidated in their entirety. Controlling interest 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. Participations in subsidiaries are recognized in the Parent Company at cost. Should the recoverable amount 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 interest.
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 participations in associated companies," which is part of operating profit. Amounts are recognized net after taxes.
In the Parent Company, associated companies are recognized at cost less any impairment losses. Dividends received are recognized as revenue.
Joint arrangements are defined by NCC 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 cost less any impairment losses. Dividends received are recognized as revenue.
Receivables, liabilities, revenue 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 33, Related-party transactions.
Market prices are applied for transactions between Group entities.
Foreign subsidiaries, associated companies and joint arrangements 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, meaning when the customer gains control over the sold goods or services. This can occur either by NCC's performance obligations being fulfilled over time (on a percentage-of-completion basis) or at a point in time. NCC's revenues essentially comprise:
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 percentage-of-completion profit recognition, the trend of earnings in ongoing projects is reflected immediately in the financial statements. Percentage-of-completion profit 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 technologically 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 percentage-of-completion profit recognition.
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. When assessing whether the modifications are enforceable, all relevant facts and circumstances are to be considered. 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.
Balance-sheet items such as "worked-up, non-invoiced revenues" and "Invoiced revenues not 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 3, Revenue recognition. The customer is normally invoiced on account during the term of the project.
The following example illustrates how the percentage-of-completion profit recognition 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. Profit 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 |
|---|---|---|
| Profit recognition on completion | 0 | 10 |
| According to percentage-of-completion profit recognition | 5 | 5 |
For agreements that contain both a contract and an operation and maintenance service, the revenue must be allocated to the various parts. The part of the agreement that pertains to the contract-related service is recognized on a percentage-of-completion basis. The operation and maintenance part is recognized as revenue on an even basis over the maturity or when the benefits are transferred to NCC.
NCC's net 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 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 buyer. 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 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 leasing 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. 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:
| Rights-of-use | In pace 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 pace with confirmed depletion of net asset value |
| Fittings in leased premises | 14–20 percent |
| Machinery 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, Note 17, Tangible fixed assets and Note 34, Leasing.
This section does not apply to impairment of inventory, assets that arise during the course of a construction contract, 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 of the assets' carrying amounts. 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 remeasurement of properties classified as current assets. Valuations of these properties are based on the lowest value principle and comply with IAS 2 Inventory.
IFRS 16 Leases is only applied in the consolidated financial statements. In accordance with RFR2, NCC has decided not to apply IFRS 16 for NCC AB. All leasing fees in NCC AB are expensed continuously.
The Group's leases are recognized as right-of-use assets and corresponding lease liability as of the date the leased asset becomes available for use by the Group. Exceptions are leases with a leasing term of less than 12 months and low-value leases, less than SEK 50,000, which are thus expensed continuously.
The right-of-use asset represents a right to use the underlying asset and the lease liability represents an commitment to pay leasing fees. NCC has right-ofuse assets with associated lease liability for vehicles, heavy production machinery, leased premises and site leaseholds/land leases. Right-of-use assets are recognised under tangible fixed assets and current assets, respectively. The associated lease liability is included in current and long-term interest-bearing liabilities. Rights-of-use assets are depreciated over the term of the lease, with the exception of site leaseholds/land leases, which are not depreciated. The costs for these capitalized leases are recognized as depreciation and interest expense, respectively. The lease payment is divided into an interest component and a amortization component.
When discounting future lease payments for most of the vehicles and heavy machinery leased by the Group, NCC uses the interest rate implicit in each lease as the discount rate. In respect of other lease fees, such as leased commercial premises and site leaseholds/land leases, the respective subsidiary's incremental borrowing rate is used as the discount rate.
The incremental borrowing rate of the individual subsidiary is based on the legal entity's financial strength, the country and the term of the lease in question. Additional disclosures on leasing with NCC as the lessee are presented in Note 34, Leasing.
A lessor must classify its leases as either operating or financial leases. A financial lease is a lease under which the financial risks and advantages associated with ownership of an asset are transferred in all significant respects from the lessor to the lessee. An operating lease is a lease that is not a financial lease. NCC as a lessor only has operating leases and income from these are recognized as revenue continuously.
Additional disclosures on leasing with NCC as the lessor are presented in Note 34, Leasing.
A sale-and-leaseback transaction means that NCC as the seller transfers an asset to a buyer at the same time as NCC as a lessee enters into a lease with the buyer. This occurs, for example, when NCC sells an office project and simultaneously signs a lease covering all or parts of the property.
When NCC's sale fulfills the requirements for profit recognition according to IFRS 15, NCC as the seller and lessee must assess the value of the right-of-use asset attributable to the lease at the share of the carrying amount on the date of sale that accrues to the right-of-use asset retained by NCC. This also means that NCC can only recognize a capital gain on that part of the right-of-use asset that is not retained by NCC.
Income taxes comprise current tax and deferred tax. Taxes are recognized in profit or loss, except when the underlying transactions are recognized in other comprehensive income, with the relating tax effects recognized in other 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 net profit for the year 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 CEO, for evaluation of results and for allocating resources to the operating segment. The reporting of operating segments concurs with the reports presented to the CEO. 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 preference 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 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. This type of usufructs is not covered by IFRS 16, Leases.
Properties classified 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 classified 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 cost less accumulated depreciation and any impairment losses.
Financial fixed assets are recognized at fair value or amortized cost. Impairment losses are posted if the fair value is less than the 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 participations in subsidiaries at cost and, where applicable, taking into account write-ups or impairment losses.
Group property holdings classified as property projects are measured as inventory 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 recognized divided as follows:
For a distribution of values, refer to Note 25, Properties classified 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 cost 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.
Inventory is measured at the lower of cost and net realizable value. For a distribution of inventory values, refer to Note 26 Materials and inventory.
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 commitment 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: • Financial assets measured at fair value through profit or loss,
When entered for the first time, 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. A financial liability is recognized at amortized cost, apart from derivatives measured at fair value.
This category includes the Group's derivatives with a positive fair value and interest-bearing securities for which NCC's business model is to maximize the return on the asset within given risk limits. Fair value changes are recognized in financial items in profit or loss. A derivative instrument that is an identified and effective hedging instrument is not included in this category. For an account 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 business model 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.
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. Fair value changes are recognized in financial items.
Derivatives used in hedge accounting are measured 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 exchange-rate 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:
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.
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 considering income tax effects, are recognized in other comprehensive income and accumulated in the hedging reserve. Any ineffectiveness is recognized in financial items. By hedging interest rates, variable interest on parts of NCC's financing becomes fixed.
By entering into oil forward 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 smooth out fluctuations in the Swedish electricity market, NCC has elected, using electricity derivatives entered into gradually over a period of three years, to accumulate the volume of electricity until 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/loss.
Receivables and liabilities in foreign currency are restated at the exchange rates prevailing on the balance-sheet date.
Exchange rate differences arising from the translation of operating receivables and liabilities are recognized in operating profit/loss, while exchange rate 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 the impact on earnings 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.
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.
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, 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 27 Share capital, for more information on repurchased shares.
Share-based remuneration
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 must 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 shares held in treasury 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 commitments 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 commitments |
Defined-contribution pension commitments |
|---|---|---|
| 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 commitment. Each unit is calculated separately and they jointly constitute the total commitment on the balance-sheet date. The intention of the principle is to expense pension payments straight-line over 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 30, Pensions. The interest rate on firstclass housing bonds is used as the basis for calculating the discount rate for Swedish pension plans. Swedish defined-benefit pension commitments are funded in the NCC Group's Pension Foundation. For funded plans, the fair value of plan assets reduces the computed commitment. Changes in plan assets and commitments 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 for recognizing pension debt, pertains mainly to how the discount rate is determined, the fact that the calculation of defined-benefit commitments is based on the current salary level without assuming future salary increases 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 recognized 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 redundancy. 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 remuneration 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 made when such commitments arise. Provisions are made for that portion of restoration that arises for start-up of a quarry and construction of plants at pits and quarries, and on a continuous basis when activities are related to additional extractions at pits and quarries.
A restructuring provision 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.
Fixed assets held for sale and assets and liabilities attributable to discontinued operations will be recognized separately in the balance sheet among current assets and current liabilities, respectively.
Borrowing costs attributable to qualifying assets are capitalized as a portion of the capitalized asset's cost when the borrowing costs total a significant amount. A qualifying asset is an asset that takes a significant 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 a continuous basis 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 commitments as pledged assets. These may be liabilities, provisions included in the balance sheet or commitments not recognized 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 35, 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 36 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 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 3, Revenue recognition.
Property sales are recognized at the point in time when control is transferred to the buyer. The point in time primarily depends on the assessment of which point in time NCC is entitled to payment. This normally does not occur until the project is completed and handed over to the customer, at which time the revenue is recognized in full. However, assessments are made on an contract-by-contract basis.
NCC's properties classified 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.
Goodwill is measured at the lower of cost and recoverable amount.
Several assumptions and estimates 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 the discount rate. 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 estimates 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 Note 37.
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 29, Other provisions.
Recognized amounts are affected by changes in the actuarial assumptions that form the basis for calculations of the plan assets and pension commitments. These actuarial assumptions are described in Note 30 Pensions, as is a sensitivity analysis.
Within the framework of its regular business operations, NCC occasionally becomes a party to claims or legal procedures. 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.
When measuring leases according to IFRS 16, NCC uses a discount rate, either upon the measurement of vehicles and heavy machinery or the interest rate implicit in the respective lease, or for leased premises and site leaseholds/land leases, the incremental borrowing rate of the respective subsidiary. In the event of a change in these discount rates, future lease payments in the form of the lease liability will be remeasured, which will result in accounting effects for the Group as a whole.
Upon transition to IFRS 16, the Group recognizes lease liabilities attributable to leases that were previously classified as operating leases in accordance with the regulations of IAS 17 Leases. These liabilities have been measured at the present value of future minimum leasing fees. When calculating this, the implicit interest rate for the lease or the various lessees has been used,
depending on the asset that has been leased. The Group's weighted average incremental borrowing rate applied for lease liabilities on January 1, 2019 was 2.18 percent.
The figures below show the effects of the transition from IAS 17 Leases to reporting in accordance with IFRS 16 Leases.
Other information on Leases is presented in Note 34.
| Reported balance sheet, |
Adjusted | Commitments for operating leases at December 31, 2018 | 1,612 | ||
|---|---|---|---|---|---|
| SEK M | December 31, 2018 |
Adjustments Jan 1, 2019 |
balance sheet, Jan 1, 2019 |
Discounted using the Group's incremental borrowing rate | –244 |
| Added: liabilities for financial leases at Dec 31, 2018 | 493 | ||||
| ASSETS | Added: effect of changes in index | 126 | |||
| Right-of-use assets | 493 | 1,494 | 1,987 | ||
| Other fixed assets | 6,640 | 6,640 | Lease liability recognized on January 1, 2019 | 1,987 | |
| Total current assets | 19,868 | –80 | 19,788 |
BALANCE SHEET
| Total equity and liabilities | 27,001 | 1,414 | 28,415 |
|---|---|---|---|
| Other liabilities | 21,167 | 21,167 | |
| Interest-bearing liabilities | 2,393 | 2,393 | |
| Interest-bearing lease liability | 493 | 1,414 | 1,907 |
| Total equity | 2,948 | 2,948 |
Total assets 27,001 1,414 28,415
| NCC Infrastructure |
NCC Building Sweden |
NCC Building Nordics |
Subtotal, construction and civil engineering |
NCC Industry | NCC Property Development |
Other and eliminations |
Group | |
|---|---|---|---|---|---|---|---|---|
| Order backlog, December 31, 2019 | 23,205 | 16,561 | 15,807 | 55,572 | 2,967 | –739 | 57,800 | |
| External net sales 2019 | 19,637 | 13,697 | 10,864 | 44,197 | 11,036 | 2,998 | 3 | 58,234 |
| External net sales 2018 | 19,347 | 14,800 | 9,861 | 44,008 | 11,209 | 2,113 | 15 | 57,346 |
| 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 (upon 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 over the coming 24 months, the majority of which within 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 as yet unfulfilled performance obligations, see note 25. For information on orders received, see p. 12.
| GROUP | 2019 | 2018 |
|---|---|---|
| Worked-up revenues from ongoing contracts | 24,462 | 26,683 |
| Invoicing for ongoing contracts | –23,101 | –25,407 |
| Reclassifications1) | –100 | |
| Total | 1,260 | 1,276 |
| GROUP | 2019 | 2018 |
|---|---|---|
| Invoicing for ongoing contracts | 56,444 | 53,494 |
| Worked-up revenues from ongoing contracts | –50,090 | –47,182 |
| Reclassifications1) | –100 | |
| Total | 6,254 | 6,311 |
1) Attributable to assets held for sale. Refer also to Note 15.
Worked-up revenues from ongoing projects including recognized gains less recognized loss reserves amounted to SEK 74,552 M (73,865).
Revenues recognized in 2019 that emanate from work performed in 2018 or earlier are not estimated to amount to material sums.
In all significant respects, invoiced revenues, not worked up at December 31, 2018 or earlier are adjudged to have been recognized in 2019.
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 Team. The following segments were identified based on this reporting procedure:
NCC Infrastructure supplies entire infrastructure projects (such as tunnels, roads and railways), from design and construction to production and service.
NCC Building Sweden and NCC Building Nordics primarily build housing and offices, but also construct such public premises as schools and hospitals and such commercial premises as stores and warehouses.
NCC Industry's 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 are conducted on a purely commercial basis.
The segment reporting also recognizes Swedish pension costs using Swedish accounting standards and adjustments of IFRS in "Other and eliminations." "Other and eliminations" may occasionally also include certain items, primarily impairment losses and provisions, attributable to the activities conducted in the segments. Other and eliminations also includes the Parent Company.
| GROUP, 2019 | NCC Infrastructure |
NCC Building Sweden | NCC Building Nordics | NCC Industry | NCC Property Development |
Total segments |
Other and eliminations |
Group |
|---|---|---|---|---|---|---|---|---|
| External net sales | 19,637 | 13,697 | 10,864 | 11,036 | 2,998 | 58,231 | 3 | 58,234 |
| Internal net sales | 412 | 1,154 | 905 | 1,935 | 59 | 4,465 | –4,465 | |
| Total net sales | 20,049 | 14,851 | 11,769 | 12,971 | 3,056 | 62,696 | –4,462 | 58,234 |
| Depreciation/amortization | –411 | –55 | –132 | –710 | –14 | –1,322 | –84 | –1,407 |
| Impairment losses and reversed impairment losses |
–22 | –22 | –22 | |||||
| Share in associated company profits |
11 | 6 | 4 | 21 | 21 | |||
| Operating profit/loss | 232 | 364 | 231 | 511 | 313 | 1,651 | –355 | 1,296 |
| Net financial items | –112 | |||||||
| Profit/loss after financial items | 1,184 | |||||||
| Capital employed | 5,507 | 4,935 |
| GROUP, 2018 | NCC Infrastructure |
NCC Building Sweden | NCC Building Nordics | NCC Industry | NCC Property Development |
Total segments |
Other and eliminations |
Group |
|---|---|---|---|---|---|---|---|---|
| External net sales | 19,347 | 14,800 | 9,861 | 11,209 | 2,113 | 57,331 | 15 | 57,346 |
| Internal net sales | 444 | 900 | 891 | 1,758 | 45 | 4,038 | –4,038 | |
| Total net sales | 19,791 | 15,701 | 10,753 | 12,968 | 2,157 | 61,369 | –4,023 | 57,346 |
| Depreciation/amortization | –245 | –31 | –21 | –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/loss | –993 | 453 | –227 | 350 | –181 | –597 | –166 | –764 |
| Net financial items | –85 | |||||||
| Profit/loss after financial items | –849 | |||||||
| Capital employed | 4,902 | 4,314 |
| OTHER AND ELIMINATIONS | EXTERNAL NET SALES | OPERATING PROFIT/LOSS | |||
|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | ||
| NCC's Head Office, results from minor subsidiaries and associated companies, as well as the remaining portions of NCC International |
3 | 15 | –204 | –187 | |
| Eliminations of inter-company gains | –24 | 11 | |||
| Other Group adjustments (essentially comprising the difference in accounting policies between segments and the Group pertaining to such items as pensions) |
–126 | 10 | |||
| Total | 3 | 15 | –355 | –166 |
| ORDERS RECEIVED | ORDER BACKLOG | NET SALES | FIXED ASSETS1) | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 20192) | 2018 | ||
| Sweden | 31,693 | 38,218 | 33,596 | 36,501 | 33,979 | 35,489 | 3,034 | 2,628 | |
| Denmark | 13,114 | 5,939 | 10,032 | 4,496 | 8,421 | 8,062 | 1,932 | 1,621 | |
| Finland | 6,646 | 8,512 | 6,837 | 7,661 | 7,400 | 6,989 | 521 | 413 | |
| Norway | 6,595 | 9,173 | 7,335 | 8,179 | 8,435 | 6,807 | 2,000 | 1,480 | |
| St. Petersburg | 27 |
1) Pertains to fixed assets (incl. right-of-use assets according to Note 34) that are not financial instruments, deferred tax assets, assets pertaining to post-employment remuneration and rights arising in accordance with insurance agreements.
2) of which, SEK –237 M in reclassifications attributable to assets held for sale; see Note 15.
| 2019 | 2018 | |||||
|---|---|---|---|---|---|---|
| Number of employees |
of whom men | Number of employees |
of whom men | |||
| Parent Company | ||||||
| Sweden | 58 | 24 | 71 | 36 | ||
| Subsidiaries | ||||||
| Sweden | 9,105 | 7,775 | 9,826 | 8,502 | ||
| Norway | 2,120 | 1,936 | 2,190 | 1,984 | ||
| Finland | 1,671 | 1,352 | 1,796 | 1,482 | ||
| Denmark | 2,151 | 1,876 | 2,256 | 1,962 | ||
| Poland | 40 | 28 | 351 | 340 | ||
| Other countries | 128 | 100 | 33 | 28 | ||
| Total in subsidiaries | 15,215 | 13,067 | 16,452 | 14,298 | ||
| Group total | 15,273 | 13,091 | 16,523 | 14,334 |
| Percentage of women, % | 2019 | 2018 |
|---|---|---|
| Gender breakdown within the Board of Directors and the Executive Team on the balance-sheet date |
||
| – Board of Directors | 36.4 | 45.5 |
| – AGM-elected Board members | 50.0 | 62.5 |
| – Executive Team | 25.0 | 37.5 |
| – Executive Team, employed in the Parent Company | 66.7 | 66.7 |
The Board of Directors is defined as the Parent Company's Board of Directors. Only the Parent Company's Board of Directors and the Executive Team are regarded as senior executives. The definition has been changed compared with 2018 and the comparative figures above have been recalculated.
| 2019 | 2018 | |||||
|---|---|---|---|---|---|---|
| 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 | 31 | 84 | 115 | 46 | 62 | 108 |
| Social security expenses | 72 | 70 | ||||
| – of which, pension costs | 6 | 22 | 28 | 8 | 21 | 29 |
| Pension commitment | 1 | 6 | ||||
| Group | 60 | 9,332 | 9,392 | 102 | 9,726 | 9,828 |
| (7.4) | (4.1) | |||||
| Social security expenses | 2,902 | 2,968 | ||||
| – of which, pension costs | 828 | 950 | ||||
| Pension commitment | 3 | 15 |
1) The senior executives category comprises 3 individuals (4) in the Parent Company and 6 individuals (27) in subsidiaries. The definition senior executive applies solely to the Parent Company's Board of Directors and the Executive Team, incl. the CEO, as of 2019. The comparative figures above have not been recalculated.
EMPLOYMENT CONDITIONS AND REMUNERATION OF SENIOR EXECUTIVES The Chairman of the Board and other AGM-elected Board members receive director fees according to an AGM resolution for work on the Board of Directors and committees. No pensions are paid to Board members. No special fee is paid to the Nomination Committee.
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 Team (ET) 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 ET.
President and CEO Tomas Carlsson receives a fixed monthly salary of SEK 750,000.
For CEO Tomas Carlsson, the short-term variable remuneration is capped at 65 percent of fixed remuneration and based on the outcome of established targets, which are mainly financial. Short-term variable remuneration for other senior executives in 2019 is capped at 40 percent of fixed remuneration. The maximum percentages above for the CEO and other senior executives are adjusted downward by 10 percentage points for those persons who participated in LTI 2019.
guidelines in one special case due to specific circumstances, where a new employed senior executive received a bonus of 53 percent of fixed remuneration during the employment period. The Board's reason to deviate from the guidelines was to be able to recruit the person best suited for the position.
In 2019, CEO Tomas Carlsson was covered by a defined-contribution pension plan with a premium limit of maximum 40 percent of his contractual fixed remuneration. Tomas Carlsson's retirement age is 65 years.
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 commitment 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. If employment is terminated by NCC, severance pay is payable for 18 months. The severance pay is not pensionable and does not carry entitlement 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. Other senior executives are subject to six to 12 months' period of 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. The severance pay will, with one exception, be reduced by an amount corresponding to any remuneration received from a new employer or own business. During the period of notice, senior executives may not take up a new position with another employer or conduct their own business activities without NCC's written consent.
The prerequisites and conditions for allotment are listed below.
The AGM in April 2019 resolved, in accordance with the Board's motion, to establish a long-term performance-based incentive program for senior executives and key personnel within the NCC Group (LTI 2019). The purpose of LTI 2019 is to ensure a focus on the company's long-term profitability and growth, to minimize the number of serious worksite accidents and create prerequisites for retaining and recruiting key personnel.
LTI 2019 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. Participants resident in Denmark only receive share awards and not synthetic shares. In view of the introduction of LTI 2019, the maximum short-term variable remuneration payable to the participants was adjusted downwards by five or ten percentage points of their basic salary. LTI 2019 runs parallel in all significant respects to the LTI program adopted by the 2018 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, 2019 through December 31, 2021).
The fundamental prerequisites for an outcome from LTI 2019 is that the NCC Group reports a pretax profit during the program period of 2019–2021 and during the final year of the program (meaning 2021).
The targets that have been set for LTI 2019 comprise the profitability during the vesting period, and a reduction in the number of serious worksite accidents as at the end of 2021. In respect of the financial objective, 100 percent is disbursed if the overall operating margin reaches or exceeds 4.0 percent. Target fulfillment is measured for a three-year period (2019–2021). 0 percent is awarded/disbursed if target fulfillment 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 internationally established benchmark figure for the industry will be used based on the number of worksite accidents resulting in more than four days of absence from ordinary work per million working hours. Allotment/disbursement of 100 percent will occur if the ratio for 2021 is less than 3.5, while 0 percent will be allotted/disbursed if it exceeds 6.0. Within the range of 3.5 and 6.0, allotment/payment will occur linearly. At the end of 2019, NCC's benchmark was 4.1.
| REMUNERATION, PROVISIONS AND OTHER BENEFITS IN 2019 SEK 000s |
Total remuneration and benefits1) |
of which, benefits |
of which, variable remuneration2) |
of which, provision for share-based remuneration3) |
Pension cost | Pension commitment |
|---|---|---|---|---|---|---|
| Chairman of the Board Tomas Billing | 1,100 | |||||
| Member of the Board Viveca Ax:son Johnson | 500 | |||||
| Member of the Board Carina Edblad4) | 171 | |||||
| Member of the Board Geir Magne Aarstad | 600 | |||||
| Member of the Board Mats Jönsson | 625 | |||||
| Member of the Board Birgit Nørgaard | 500 | |||||
| Member of the Board Ulla Litzén | 675 | |||||
| Member of the Board Angela Langemar Olsson | 625 | |||||
| Member of the Board Alf Göransson5) | 454 | |||||
| CEO Tomas Carlsson | 17,453 | 98 | 2,841 | 1,410 | 3,600 | 484 |
| Other senior executives6) | 8,615 | 135 | 1,236 | 363 | 1,901 | 928 |
| Total Parent Company | 31,318 | 233 | 4,077 | 1,773 | 5,501 | 1,412 |
| Other senior executives in subsidiaries7) | 28,494 | 477 | 3,341 | 997 | 5,846 | 1,100 |
| Total senior executives | 59,811 | 710 | 7,418 | 2,770 | 11,346 | 2,512 |
1) Remuneration and benefits include committee fees and 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, which can deviate from future paid out remuneration.
3) Amounts reserved/reversed during the year for the closed LTI program 2016, and the ongoing LTI programs 2017, 2018 and 2019.
4) Carina Edblad stepped down from the Board at the AGM on April 9, 2019.
5) Alf Göransson was elected (new election) at the AGM on April 9, 2019.
6) This includes the positions of CFO, as well as Head of Development & Operations Services for the whole of 2019.
7) This includes the Heads of NCC Infrastructure, NCC Building Sweden, NCC Building
Nordics, NCC Industry for the whole of 2019. The former Head of NCC Property Development, Carola Lavén, was included through July 22, 2019, and the current Head of NCC Property Development is included as of September 1, 2019.
Note 5 cont. Number of employees, personnel expenses and remuneration of senior executives
| Total remuneration and benefits1) |
of which, benefits |
of which, variable remuneration2, 9) |
of which, provision for share-based remuneration3) |
Pension cost | Pension commitment |
|---|---|---|---|---|---|
| 1,134 | |||||
| 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 |
1) Remuneration and benefits include committee fees and 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 included 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 were included up to August 28.
–The participants are divided into three categories: CEO; other members of the Executive 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 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 137.80 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 2019, including costs for social security fees, will be approximately SEK 79.9 M, corresponding to the value of about 0.53 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 2019, 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 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 commitments under the company's long-term incentive program and 128,217 Series B shares were bought back in the second quarter of 2019.
7) Pertains to the former Senior Legal Counsel, the Chief Financial Officer and the Head of Corporate Relations.
8) This included for the entire 2018 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 was included as of October 1. One of the executives worked on a consultancy basis and the stated remuneration comprised a consulting fee.
9) Five other senior executives received a discretionary bonus in 2018 regarding their performance during 2017.
10) NCC's pension commitments for Håkan Broman are recognized on the row Other senior executives because he will not retire in the capacity of Acting CEO.
To secure delivery of Series B shares under LTI 2019, the AGM resolved to permit the transfer of no more than 300,000 Series B shares to the participants of LTI 2019. 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 compensation for dividends, social security fees and payments on the basis of the synthetic shares, arising from previously outstanding long-term performance-based incentive programs (LTI 2016, LTI 2017 and LTI 2018) as well as LTI 2019.
The performance period for LTI 2016 expired on December 31, 2018. The fundamental requirements for the outcome – a pretax profit for the NCC Group, calculated in total for the entire program period of 2016–2018 and during the final year of the program, 2018 – were not fulfilled, and the performance targets for the program were not achieved either. Accordingly, no shares were allotted and no cash payment was made.
A new LTI program was launched in 2017 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 2017 was from January 1, 2017 through December 31, 2019. Since the outcome was not achieved during the performance period, no allotment will be paid.
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 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.
A new LTI program was launched in 2019 in accordance with an AGM resolution. The program is essentially the same as previous LTI programs. The overall operating margin for the period is used as the financial performance objective. The performance period for LTI 2019 is from January 1, 2019 through December 31, 2021.
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| NUMBER OF | Share awards |
Synthetic options |
Share awards |
Synthetic options |
| Outstanding at the beginning of the period |
304,832 | 304,832 | 47,540 | 47,540 |
| Allocated during the period | 221,666 | 153,778 | 35,992 | 35,992 |
| Exercised during the period | –78,440 | –78,440 | –13,780 | –13,780 |
| Forfeited during the period | –28,833 | –28,833 | –1,267 | –1,267 |
| Outstanding at the end of the period |
419,225 | 351,337 | 68,485 | 68,485 |
| Puttable at the end of the period | 0 | 0 | 0 | 0 |
All share awards and synthetic options have a redemption price of SEK 0. Share awards and synthetic options outstanding have a remaining maturity of two and a half years to a half year, respectively.
| 2019 | 2018 | |||
|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
|
| Fair value on date of valuation, SEK 000s |
0 | 0 | 3,081 | 318 |
| Share price, SEK | 225.48 | 225.48 | 225.48 | 225.48 |
| Redemption price, SEK | 0 | 0 | 0 | 0 |
| Option maturity, years | 0.5 | 0.5 | 1.5 | 1.5 |
| Risk-free interest rate, % | 1.77 | 1.77 | 1.67 | 1.67 |
| SHARE AWARDS LTI 2018 | 2019 | 2018 | |||
|---|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
||
| Fair value on date of valuation, SEK 000s |
3,838 | 720 | 1,546 | 270 | |
| Share price, SEK | 157.30 | 157.30 | 157.30 | 157.30 | |
| Redemption price, SEK | 0 | 0 | 0 | 0 | |
| Option maturity, years | 1.5 | 1.5 | 2.5 | 2.5 | |
| Risk-free interest rate, % | 1.77 | 1.77 | 1.67 | 1.67 |
| Group | Parent Company |
|
|---|---|---|
| Fair value at date of valuation, SEK 000s |
6,509 | 1,072 |
| Share price, SEK | 151.14 | 151.14 |
| Redemption price, SEK | 0 | 0 |
| Option maturity, years | 2.5 | 2.5 |
| Risk-free interest rate, % | 1.77 | 1.77 |
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.
| 2019 | 2018 | |||
|---|---|---|---|---|
| Group | Parent Company |
Group | Parent Company |
|
| Share awards | 6 | 1 | –4 | –1 |
| Synthetic shares | 5 | 1 | –3 | –2 |
| Social security expenses | 3 | 1 | –2 | –1 |
| Total personnel expenses for share-based remunerations |
14 | 3 | –9 | –4 |
| Total carrying amount pertaining to liability for synthetic shares |
8 | 2 | 8 | 1 |
| Total real value of the liability pertaining to vested benefits |
8 | 2 | 8 | 1 |
The amounts during 2018 are reversed, credited, costs.
| Note 6 Depreciation/amortization |
||||
|---|---|---|---|---|
| GROUP | PARENT COMPANY | |||
| 2019 | 2018 | 2019 | 2018 | |
| Intangible assets | –59 | –65 | ||
| Owner-occupied properties | –58 | –40 | ||
| Owner-occupied properties, right-of-use assets |
–270 | |||
| Machinery and equipment | –559 | –559 | –2 | –2 |
| Machinery and equipment, right-of-use assets |
–461 | –122 | ||
| Total depreciation/amortization | –1,407 | –785 | –2 | –2 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Audit firms | ||||
| PwC | ||||
| Auditing assignments | 16 | 18 | 3 | 7 |
| Audit in addition to the audit assignment |
2 | 0 | 2 | |
| Tax consultations | 0 | |||
| Other services | 1 | 1 | 1 | 0 |
| Other auditors | ||||
| Auditing assignments | 0 | 0 | ||
| Audit in addition to the audit assignment |
0 | |||
| Tax consultations | 0 | |||
| Total fees and remuneration to auditors and audit firms |
19 | 19 | 6 | 7 |
During 2019, PwC received approximately SEK 1 M for non-audit services. The services primarily comprised various types of consultation involving accounting and sustainability issues, but no valuation services.
Auditing assignments amounted to SEK 16 M, of which PwC Sweden accounted for SEK 9 M. Accounting activities in addition to the audit assignment amounted to SEK 2 M, of which SEK 2 M to PwC Sweden. PwC Sweden did not perform any tax consultancy for NCC. Other services assignments amounted to SEK 1 M, of which SEK 1 M to PwC Sweden.
| Note 8 | Impairment losses | ||||
|---|---|---|---|---|---|
| GROUP | PARENT COMPANY | ||||
| 2019 | 2018 | 2019 | 2018 | ||
| Impairment losses on current assets |
|||||
| Properties held for future development |
–130 | ||||
| Completed properties | –240 | ||||
| Total impairment losses on current assets |
–370 | ||||
| Impairment losses on participations in subsidiaries |
|||||
| Shares in subsidiaries | –50 | –644 | |||
| Total impairment losses on participations in subsidiaries |
–50 | –644 | |||
| Impairment losses on other fixed assets |
|||||
| Owner-occupied properties | –13 | –3 | |||
| Machinery and equipment | –8 | –2 | |||
| Goodwill in NCC Infrastructure | –36 | ||||
| Other intangible assets | –1 | –41 | –38 | ||
| Impairment losses on other fixed assets |
–22 | –82 | –38 | ||
| Total impairment losses | –22 | –453 | –50 | –682 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Dividend | 533 | 435 | ||
| Capital gain/loss on sale | 18 | |||
| Impairment losses | –50 | –644 | ||
| Total | 18 | 0 | 482 | –208 |
Profit after financial items 1,173 1,184 11 Net profit for the year 866 875 9
1) Figures for 2019 converted at 2018 exchange rates.
| Note 10 Operating expenses by type of cost |
|||||||
|---|---|---|---|---|---|---|---|
| GROUP | 2019 | 2018 | |||||
| plus raw materials and supplies | Production-related goods and services, | 43,153 | 43,943 | ||||
| Change in inventory | 91 | 138 | |||||
| Personnel expenses | 12,295 | 12,762 | |||||
| Depreciation/amortization | 1,407 | 785 | |||||
| Impairment losses | 22 | 453 | |||||
| administrative costs | Total production costs, and selling and | 56,967 | 58,080 |
| Note 11 | Interest expense and similar items | ||||
|---|---|---|---|---|---|
| PARENT COMPANY | 2019 | 2018 | |||
| Interest expense, Group companies | –17 | –1 | |||
| Interest expense to credit institutions | –18 | –17 | |||
| Financial portion of pension cost | –3 | –3 | |||
| Interest expense, others | –4 | ||||
| Other financial items | –25 | ||||
| Total | –42 | –47 |
| GROUP | 2019 | 2018 |
|---|---|---|
| Interest income on financial assets held for trading | 2 | |
| Interest income on investments held to maturity | 1 | 1 |
| Interest income on loans and accounts receivable | 9 | 12 |
| Interest income on bank balances | 2 | 1 |
| Net gain on available-for sale financial assets | 13 | 13 |
| Net gain on financial assets/liabilities held for trading | 2 | 1 |
| Net exchange-rate changes | 2 | 5 |
| Other financial income | 3 | 2 |
| Financial income | 34 | 36 |
| Interest expense on financial liabilities measured at amortized cost |
–129 | –96 |
| Interest expense on financial liabilities held for trading | –9 | |
| Other financial expenses | –17 | –16 |
| Financial expenses1) | –146 | –121 |
| Net financial items | –112 | –85 |
| Of which, changes in value calculated using valuation techniques |
4 | 6 |
1) Interest payments of SEK 53 M (29) have been capitalized.
| AVERAGE EXCHANGE RATE JAN–DEC |
YEAR-END RATE | |||||
|---|---|---|---|---|---|---|
| Country | SEK | Currency | 2019 | 2018 | 2019 | 2018 |
| Denmark | 100 | DKK | 141.83 | 137.61 | 140.04 | 137.41 |
| EU | 1 | EUR | 10.59 | 10.26 | 10.46 | 10.26 |
| Norway | 100 | NOK | 107.47 | 106.83 | 105.97 | 102.70 |
| Russia | 1 | RUR | 0.15 | 0.14 | 0.15 | 0.13 |
| APPROPRIATIONS | |||
|---|---|---|---|
| PARENT COMPANY | 2019 | 2018 | |
| Group contributions received | 577 | 545 | |
| Total | 577 | 545 |
NCC has decided to divest NCC Road Services in the Infrastructure business area. The division is therefore recognized separately as of the fourth quarter of 2018. In 2019, the division had net sales of SEK 2,624 M and an operating profit of SEK 20 M. Below is the division's share in the consolidated balance sheet.
| GROUP | 2019 |
|---|---|
| Right-of-use assets | 137 |
| Owner-occupied properties | 4 |
| Machinery and equipment | 96 |
| Total fixed assets | 237 |
| Materials and inventory | 15 |
| Worked-up, non-invoiced revenues | 100 |
| Prepaid expenses and accrued income | 40 |
| Total current assets | 155 |
| TOTAL ASSETS | 392 |
| Profit/loss brought forward including profit/loss for the year | 47 |
| Long-term liabilities | |
| Long-term interest-bearing lease liabilities | 82 |
| Current liabilities | |
| Current interest-bearing lease liabilities | 52 |
| Invoiced revenues not worked up | 100 |
| Accrued expenses and deferred income | 111 |
| Total current liabilities | 263 |
| TOTAL LIABILITIES AND EQUITY | 392 |
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| ACQUIRED INTANGIBLE ASSETS | |||||
| 2019 | Goodwill | Usufructs | Other | Total other | Development expenses |
| Recognized cost on January 1 | 2,092 | 264 | 594 | 858 | 38 |
| Investments | 2 | 22 | 24 | ||
| Divestment and scrappage | –6 | –6 | |||
| Reclassifications | 18 | 44 | 62 | ||
| Translation differences during the year | 35 | 4 | 5 | 9 | |
| Recognized cost on December 31 | 2,127 | 282 | 665 | 947 | 38 |
| Accumulated amortization on January 1 | –1 | –170 | –294 | –464 | |
| Divestment and scrappage | 5 | 1 | 5 | ||
| Translation differences during the year | –1 | –2 | –2 | –4 | |
| Amortization according to plan during the year | –10 | –49 | –59 | ||
| Accumulated amortization on December 31 | –2 | –177 | –344 | –522 | |
| Accumulated impairment losses on January 1 | –229 | –15 | –40 | –56 | –38 |
| Translation differences during the year | –3 | ||||
| Impairment losses for the year | –1 | –1 | |||
| Accumulated impairment losses on December 31 | –232 | –16 | –40 | –57 | –38 |
| Residual value on January 1 | 1,861 | 79 | 260 | 339 | 0 |
| Residual value on December 31 | 1,893 | 89 | 280 | 368 | 0 |
| GROUP | 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 | –41 | –41 | –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 |
Goodwill in NCC's balance sheet is distributed among NCC's business areas, segments, as follows:
| Operating segments | 2019 | 2018 |
|---|---|---|
| NCC Infrastructure | 257 | 255 |
| NCC Building Sweden | 233 | 233 |
| NCC Building Nordics | 343 | 334 |
| NCC Industry | 1,060 | 1,039 |
| The NCC Group | 1,893 | 1,861 |
As part of its internal governance, NCC monitors goodwill at a business area level and goodwill is impairment tested at this 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 the units' 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 critical 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: Expected operating margin has been set at a three-year average. The assumption has been based on previous experience.
Working capital and reinvestment requirement: The requirement has been assumed to match the figure for 2019, with a growth rate equal to the sustainable long-term growth rate. The assumption has been based on previous experience and estimates of future requirements.
Discount 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 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 rates vary among the different cash-generating units, in NCC's scenario it totals 8.9 percent (7.3) percent before and 7.0 percent (6.1) after tax.
The year's impairment testing was based on cash flow forecasts for 2020–2021. The average growth rate during the forecast period corresponds to about 2 percent for all business areas.
The anticipated operating margin is based on the latest available forecast for each of the business areas.
The year's impairment testing showed that there was no impairment requirement for any of the segments in the event of an increase in the discount rate by half of a percentage point. Nor was there any impairment requirement in the event of a decrease in the operating margin by half of a percentage point or a decrease in net sales by one percentage point.
Rights-of-use include the right to use gravel and rock pits for a determined period. The periods may vary but the rights normally pertain to longer 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 intangible assets consist 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 | ||
|---|---|---|
| 2019 | 2018 | |
| Production costs | –59 | –65 |
| Total | –59 | –65 |
| PARENT COMPANY | ||||
|---|---|---|---|---|
| 2019 | Owner-occupied properties |
Machinery and equipment |
Total | Machinery and equipment |
| Recognized cost on January 1 | 1,524 | 7,937 | 9,461 | 82 |
| Investments | 100 | 810 | 909 | 33 |
| Reclassification to tangible fixed assets held for sale | –4 | –96 | –100 | |
| Divestment and scrappage | –59 | –583 | –642 | |
| Reclassifications | –9 | –403 | –412 | –52 |
| Translation differences during the year | 20 | 92 | 112 | |
| Recognized cost on December 31 | 1,571 | 7,757 | 9,328 | 62 |
| Accumulated impairment losses and depreciation on January 1 | –609 | –5,400 | –6,008 | –57 |
| Divestment and scrappage | 7 | 461 | 468 | |
| Reclassifications | 3 | 295 | 298 | |
| Translation differences during the year | –8 | –51 | –59 | |
| Impairment losses for the year1) | –13 | –8 | –21 | |
| Depreciation during the year | –58 | –559 | –617 | –2 |
| Accumulated impairment losses and depreciation on December 311) | –677 | –5,262 | –5,938 | –59 |
| Accumulated write-ups at beginning of the year | 21 | 21 | ||
| Accumulated write-ups on December 31 | 21 | 21 | ||
| Residual value on January 1 | 915 | 2,559 | 3,474 | 24 |
| Residual value on December 31 | 894 | 2,516 | 3,410 | 3 |
| 1) Accumulated impairment losses on December 31 | –36 | –55 | –91 |
| PARENT COMPANY | ||||
|---|---|---|---|---|
| 2018 | Owner-occupied properties |
Machinery and equipment |
Total | Machinery and equipment |
| Recognized cost on January 1 | 1,445 | 7,568 | 9,012 | 63 |
| Investments | 100 | 887 | 987 | 18 |
| Increase through acquisitions | 14 | 14 | ||
| Divestment and scrappage | –42 | –661 | –703 | |
| Reclassifications | –5 | –1 | –7 | |
| Translation differences during the year | 26 | 131 | 157 | |
| Recognized cost on December 31 | 1,524 | 7,937 | 9,461 | 82 |
| Accumulated impairment losses and depreciation on January 1 | –565 | –5,295 | –5,859 | –55 |
| Divestment and scrappage | 18 | 543 | 561 | |
| Reclassifications | –8 | –8 | ||
| Translation differences during the year | –12 | –85 | –97 | |
| Impairment losses for the year1) | –3 | –2 | –6 | |
| Depreciation during the year | –40 | –559 | –598 | –2 |
| Accumulated impairment losses and depreciation on December 311) | –609 | –5,400 | –6,008 | –57 |
| Accumulated write-ups at beginning of the year | 21 | 21 | ||
| Accumulated write-ups on December 31 | 21 | 21 | ||
| Residual value on January 1 | 880 | 2,294 | 3,173 | 8 |
| Residual value on December 31 | 915 | 2,559 | 3,474 | 24 |
| 1) Accumulated impairment losses on December 31 | –23 | –46 | –69 |
| PARENT COMPANY | CARRYING AMOUNT |
|||
|---|---|---|---|---|
| Name of company, Corp. ID No., Registered office |
Ownership share, %1) |
No. of shares2) |
2019 | 2018 |
| Property companies: | ||||
| NCC Property Development Nordic AB, 556743-6232, Solna |
100 | 1 | 962 | 962 |
| Total participations in property companies |
962 | 962 | ||
| Other companies: | ||||
| Eeg-Henriksen AB, 556399-2642, Stockholm4) |
1 | |||
| JCC Johnson Construction Company AB, 556113-5251, Solna4) |
||||
| NCC Danmark A/S, 69 89 40 11, Denmark |
100 | 400 | 132 | 116 |
| NCC Construction Norge AS, 911 274 426, Norway |
100 | 17,500 | 1,119 | 1,119 |
| NCC Sverige AB, 556613-4929, Solna |
100 | 500 | 413 | 412 |
| NCC Försäkrings AB, 516401-8151, Solna |
100 | 500 | 78 | 78 |
| NCC Industries AB, 556001-8276, Stockholm4) |
22 | |||
| NCC International AB, 556033-5100, Solna |
100 | 1,000 | 4 | 41 |
| NCC Nordic Construction Company AB, 556065-8949, Solna4) |
1,018 | |||
| NCC Purchasing Group AB, 556104-9932, Stockholm |
100 | 2 | 1 | 1 |
| NCC Suomi Oy, 1765514-2, Finland |
100 | 4 | 94 | 94 |
| NCC Industry Nordic AB, 556144-6732, Solna |
100 | 275 | 1,641 | 1,640 |
| NCC Skakt Aps, 36 95 64 88, Denmark3) |
||||
| NCC Treasury AB, 556030-7091, Solna |
100 | 120 | 16 | 16 |
| Nordic Road Services Holding AB 559172-2227, Solna |
100 | 50 | 52 | |
| 8Industries AB 559149-5550, Solna |
100 | 500 | ||
| Total shares in other companies |
3,549 | 4,557 | ||
| Total shares in Group companies |
4,511 | 5,518 |
1) The ownership share corresponds to the shareholding.
2) Number of shares in thousands.
3) Holding was sold to subsidiaries in the NCC Group during the year.
4) The company was merged into NCC AB in December 2019.
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 interest in 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 137 (132). 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.
Note 18 Shares in Group companies Note 19 Investments in associated companies and joint ventures
| GROUP | CARRYING AMOUNT |
|||
|---|---|---|---|---|
| Name of company, Corp. ID No., Registered office |
Ownership share, %1) |
No. of partici- pations2) |
2019 | 2018 |
| Asfalt & Maskin AS, 960 585 593, Norway |
50 | 7 | 7 | |
| Hercules-Trevi Foundation AB, 556185-3788, Stockholm |
50 | 1 | 2 | 10 |
| Oraser AB, 556293-2722, Stockholm |
50 | 1 | 5 | 5 |
| Sjaellands Emulsionsfabrik I/S, 18004968, Denmark |
50 | 6 | 7 | |
| SHH Invest nr 49 AB, 556889-3746, Stockholm |
50 | 1 | 16 | 8 |
| Östhammarkrossen KB, 916673-1365, Uppsala |
50 | 5 | 5 | |
| Other NCC-owned associated companies 10 (10) |
1 | 1 | ||
| Total | 40 | 42 |
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 operations' net sales, costs, assets and liabilities.
| GROUP | 2019 | 2018 |
|---|---|---|
| Revenue | 860 | 465 |
| Expenses | –823 | –478 |
| Profit/loss | 37 | –13 |
| Fixed assets | 33 | 2 |
| Current assets | 1,462 | 494 |
| Total assets | 1,495 | 496 |
| Long-term liabilities | 15 | 7 |
| Current liabilities | 1,370 | 406 |
| Total liabilities | 1,385 | 413 |
| Net assets | 110 | 83 |
The joint operations category also includes partly owned construction contracts, for which NCC has a contractual joint influence together with the other partners.
| GROUP | Shareholding, % |
|---|---|
| Arandur OY | 33 |
| ARC konsortiet | 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 | 2019 | 2018 |
|---|---|---|
| Financial investments classified as fixed assets | ||
| Fair value through other comprehensive income, equity instruments |
||
| Unlisted securities | 74 | 77 |
| Total | 74 | 77 |
| Short-term investments classified as current assets | ||
| Financial assets measured at amortized cost | ||
| Interest-bearing securities | 10 | 72 |
| Investments held to maturity | ||
| Interest-bearing securities | 52 | |
| Total | 63 | 72 |
Investments held to maturity had an established interest rate ranging from –0.4 percent (–0.4) to 0.7 percent (0.7), and had due dates ranging from 11 to 45 months.
During the year, financial fixed assets were impaired by SEK 0 M (0).
| PARENT COMPANY, 2019 | Participations in Group companies |
Other long-term securities | Other long-term receivables1) | Total |
|---|---|---|---|---|
| Recognized cost on January 1 | 13,924 | 45 | 8 | 13,977 |
| Assets added | 70 | 70 | ||
| Transferred within the Group | 14 | 14 | ||
| Reclassifications | –3,618 | –3,618 | ||
| Assets removed | –3,842 | –2 | –3,844 | |
| Recognized cost on December 31 | 6,548 | 45 | 5 | 6,599 |
| Accumulated write-ups at beginning of the year | ||||
| Accumulated write-ups on December 31 | ||||
| Accumulated impairment losses on January 1 | –8,406 | –8,406 | ||
| Reclassifications | 3,618 | 3,618 | ||
| Assets removed | 2,801 | 2,801 | ||
| Impairment losses for the year | –50 | –50 | ||
| Accumulated impairment losses on December 31 | –2,037 | –2,037 | ||
| Residual value on December 31 | 4,511 | 45 | 5 | 4,562 |
| PARENT COMPANY, 2018 | Participations in Group companies |
Other long-term securities | Other long-term receivables1) | Total |
|---|---|---|---|---|
| Recognized cost on January 1 | 12,440 | 45 | 6 | 12,491 |
| Assets added | 1,484 | 2 | 1,486 | |
| Recognized cost on December 31 | 13,924 | 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 | 45 | 8 | 5,571 |
1) The item also includes deferred tax assets.
| GROUP | 2019 | 2018 |
|---|---|---|
| Long-term interest-bearing receivables classified as fixed assets |
||
| Receivables from associated companies and joint ventures | 5 | |
| Interest-bearing securities1) | 128 | 184 |
| Other long-term receivables | 11 | 11 |
| Long-term interest-bearing receivables classified as fixed assets |
144 | 195 |
| Other receivables classified as current assets | ||
| Receivables from associated companies and joint ventures | 7 | 11 |
| Receivables from divested property and housing projects |
101 | 45 |
| Advance payments to suppliers | 1 | |
| Derivative instruments held for hedging | 60 | 160 |
| Other current receivables | 386 | 390 |
| Other receivables classified as current assets | 555 | 608 |
1) For due dates, refer to Note 21, Financial investments.
Total recognized tax on net
NCC's subsidiary, NCC Försäkrings AB, as an insurance company, must have investment assets that cover technical liabilities for own account. In 2019 and 2018, these requirements were fulfilled. These investment assets pertain to interest-bearing securities, as specified above.
| Note 24 | Tax on net profit for the year, deferred tax assets and deferred tax liabilities |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| GROUP PARENT COMPANY |
|||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||
| Tax on net profit for the year | |||||||||||
| Current tax cost | –320 | –99 | –102 | ||||||||
| Deferred tax revenue/cost | –48 12 147 –2 |
profit for the year –309 99 –102 –101
| GROUP | PARENT COMPANY | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Effective tax | 2019 | 2018 | 2019 | 2018 | |||||
| Tax, % | Profit/loss | Tax, % | Profit/loss | Tax, % | Profit/loss | Tax, % | Profit/loss | ||
| Pretax profit | 1,184 | –849 | 935 | 100 | |||||
| Tax according to company's current tax rate | –21 % | –253 | –22 % | 187 | –21 % | –200 | –22 % | –22 | |
| Effect of other tax rates for non-Swedish companies |
0 % | –5 | –1 % | 10 | |||||
| Amended tax rate1) | 2 % | –17 | |||||||
| Other non-tax-deductible costs | –3 % | –30 | 16 % | –140 | –1 % | –13 | –157 | ||
| Non-taxable revenues | 9 % | 105 | –12 % | 101 | 13 % | 118 | 100 % | 100 | |
| Tax effects resulting from non-capitalized tax loss carryforwards |
0 % | –3 | 2 % | 2 | |||||
| Tax attributable to prior years | –4 % | –52 | 5 % | –38 | 0 % | 1 | –24 % | –24 | |
| Other | –74 | 0 % | –2 | –1 % | –7 | ||||
| Recognized tax | –26 % | –309 | –12 % | 99 | –11% | –102 | –101 % | –101 |
1) Effective 2019, the tax rate in Sweden was changed from 22 percent to 21.4 percent, and in Norway from 23 percent to 22 percent.
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.
TAX ITEMS RECOGNIZED DIRECTLY IN OTHER COMPREHENSIVE INCOME
| GROUP | ||
|---|---|---|
| 2019 | 2018 | |
| Current tax on hedging instruments | 6 | |
| Deferred tax on cash flow hedges | –2 | 6 |
| Deferred tax attributable to the revaluation of defined-benefit pension plans |
95 | 175 |
| Total | 93 | 187 |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Opening carrying amount | 234 | –100 | 8 | 6 |
| Acquisition of subsidiaries | 13 | |||
| Recognized tax on net profit for the year |
12 | 164 | –2 | 2 |
| Amended tax rate1) | –17 | |||
| Tax items recognized in other comprehensive income |
–2 | 6 | ||
| Tax item, revaluation of defined-benefit pension plans recognized in other comprehensive income |
95 | 175 | ||
| Translation differences | 14 | –8 | ||
| Other | 2 | 1 | ||
| Closing carrying amount | 354 | 234 | 5 | 8 |
1) Effective 2019, the tax rate in Sweden was changed from 22 percent to 21.4 percent, and in Norway from 23 percent to 22 percent.
| ASSETS | LIABILITIES | NET | ||||
|---|---|---|---|---|---|---|
| GROUP | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
| Tangible fixed assets | 10 | –12 | 10 | –12 | ||
| Financial fixed assets | –1 | –1 | ||||
| Non-completed projects | –948 | –989 | –948 | –989 | ||
| Properties held for future development | 36 | –1 | 36 | –1 | ||
| Untaxed reserves | –172 | –187 | –172 | –187 | ||
| Provisions | 266 | 462 | 266 | 462 | ||
| Personnel benefits/pension provisions | 621 | 500 | 621 | 500 | ||
| Loss carryforwards1) | 487 | 411 | 487 | 411 | ||
| Other | 43 | 70 | 12 | –19 | 55 | 51 |
| Deferred tax assets/Deferred tax liability | 1,427 | 1,443 | –1,072 | –1,209 | 354 | 234 |
| Offsetting | –903 | –912 | 903 | 912 | ||
| Net deferred tax assets/deferred tax liability | 524 | 531 | –170 | –297 | 354 | 234 |
1) Of the Group's deferred tax assets concerning loss carryforwards totaling SEK 487 M (411), SEK 475 M (398) 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 operations 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 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |
| Provisions | 5 | 4 | 5 | 4 | |||
| Other | 4 | 4 | |||||
| Net deferred tax assets/deferred tax liability | 5 | 8 | 5 | 8 |
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 do they arise from other participations owned by NCC companies in other countries.
| GROUP, 2019 | Properties held for future development |
Ongoing property projects |
Completed property projects |
Total property projects 1) |
Properties held for future development, housing |
Completed housing units |
Participations in associated companies |
Total |
|---|---|---|---|---|---|---|---|---|
| Recognized cost on January 1 | 1,751 | 2,303 | 403 | 4,457 | 63 | 226 | 4,745 | |
| Investments | 530 | 2,666 | 52 | 3,248 | 33 | 3,281 | ||
| Divestment and scrappage | –213 | –1,174 | –821 | –2,208 | –2,208 | |||
| Reclassifications | –631 | –761 | 1,391 | 51 | 5 | 56 | ||
| Translation differences during the year | 32 | 19 | 8 | 58 | –2 | 56 | ||
| Recognized cost on December 31 | 1,469 | 3,053 | 1,033 | 5,555 | 49 | 63 | 263 | 5,930 |
| Accumulated impairment losses on January 1 | –118 | –11 | –95 | –225 | –63 | –287 | ||
| Divestment and scrappage | 43 | 43 | 43 | |||||
| Reclassifications | –51 | –51 | ||||||
| Translation differences during the year | –3 | –2 | –5 | 2 | –3 | |||
| Accumulated impairment losses on December 31 | –78 | –11 | –97 | –186 | –49 | –63 | –298 | |
| Residual value on January 1 | 1,633 | 2,292 | 308 | 4,233 | 0 | 0 | 226 | 4,459 |
| Residual value on December 31 | 1,391 | 3,042 | 936 | 5,369 | 0 | 0 | 263 | 5,632 |
1) Pertains primarily to properties classified as current assets recognized in NCC Property Development.
| 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.
Ongoing property projects comprise 13 projects, six of which, with a carrying amount of SEK 990 M, have been sold but are not yet recognized in profit. Profit will be recognized in 2020 and 2021 on completion and handover to the customer.
| Note 26 | Materials and inventory | ||
|---|---|---|---|
| GROUP | 2019 | 2018 | |
| Stone materials | 649 | 581 | |
| Building materials | 167 | 140 | |
| Other | 192 | 181 | |
| Reclassifications1) | –15 | ||
| Total | 993 | 902 |
1) Attributable to assets held for sale, also see Note 15.
| Changes in share capital | Number of shares |
Share capital, SEK M | |
|---|---|---|---|
| 2018 | End of year | 108,435,822 | 867 |
| 2019 | End of year | 108,435,822 | 867 |
| Series B shares in treasury | Number of shares |
||
| 2017 | End of year | 353,232 | |
| 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 | |
| 2019 | Repurchases | 128,217 | |
| 2019 | End of year | 530,267 |
The share capital is divided into 108,435,822 shares with a quotient value of SEK 8 each. During the year, 128,766 Series A shares (48,373) were converted into Series B shares.
The shares are distributed into the following classes:
| Series A shares | Series B shares | Total | |
|---|---|---|---|
| Number | 13,209,129 | 95,226,693 108,435,822 |
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. 28.
| SERIES A AND B SHARES | Series A shares | Series B shares | Total Series A and Series B |
|---|---|---|---|
| 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 | |
| Treasury shares 2018 | –101,022 | –101,022 | |
| Sale of treasury shares 2018 | 31,952 | 31,952 | |
| Distribution of shares to participants in incentive programs, 2018 |
20,343 | 20,343 | |
| No. of shares on Dec. 31, 2018 |
13,337,895 | 94,695,877 | 108,033,772 |
| Conversion of Series A to Series B shares 2019 |
–128,766 | 128,766 | |
| Treasury shares 2019 | –128,217 | –128,217 | |
| Distribution of shares to participants in incentive programs, 2019 |
|||
| No. of shares on Dec. 31, 2019 |
13,209,129 | 94,696,426 | 107,905,555 |
| Number of voting rights | 132,091,290 | 94,696,426 | 226,787,716 |
| Percentage of voting rights | 58 | 42 | 100 |
| Percentage of share capital | 12 | 88 | 100 |
| Closing price, Dec. 31, 2019 | 154.50 | 153.20 | |
| Market capitalization, SEK M | 2,041 | 14,507 | 16,548 |
| GROUP | 2019 | 2018 |
|---|---|---|
| Long-term liabilities | ||
| Liabilities to credit institutions and investors1) | 2,504 | 1,006 |
| Lease liabilities | 1,140 | 321 |
| Other long-term loans | 5 | 15 |
| Reclassification to assets held for sale | –82 | |
| Total | 3,568 | 1,342 |
| Current liabilities | ||
| Current portion of liabilities to credit institutions and investors1) |
200 | 778 |
| Liabilities to associated companies | 12 | 25 |
| Lease liabilities, current portion | 592 | 173 |
| Other current liabilities | 45 | 75 |
| Reclassification to assets held for sale | –52 | |
| Total | 796 | 1,051 |
| Total interest-bearing liabilities | 4,364 | 2,393 |
1) Including loan of SEK 1,000 M (1,000) from the NCC Group's Pension Foundation, of which, SEK 200 M (0) is current.
For repayment schedules and terms and conditions, see Note 37 Financial instruments and financial risk management.
Interest-bearing long-term liabilities pertaining to pensions is recognized in the balance sheet under Provisions for pensions and similar obligations.
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Long-term liabilities | ||
| Loan from the NCC Group's Pension Foundation | 800 | 1,000 |
| Total | 800 | 1,000 |
| Current liabilities | ||
| Group companies | 1,470 | 1,231 |
| Loan from the NCC Group's Pension Foundation | 200 | |
| Other current liabilities | 350 | |
| Total | 1,670 | 1,581 |
| Total interest-bearing liabilities | 2,470 | 2,581 |
For repayment schedules and terms and conditions, see Note 37 Financial instruments and financial risk management.
| GROUP, 2019 | Guarantees | Other | Total |
|---|---|---|---|
| On January 1 | 1,335 | 1,296 | 2,631 |
| Provisions during the year | 519 | 475 | 994 |
| Amount utilized during the year | –418 | –398 | –816 |
| Reversed, unutilized provisions | –60 | –6 | –66 |
| Reclassifications | 38 | 38 | |
| Translation differences | 13 | 7 | 20 |
| On December 31 | 1,389 | 1,412 | 2,801 |
| GROUP, 2018 | Guarantees | 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 |
| PARENT COMPANY, 2019 | Guarantees | Other | Total |
| On January 1 | 7 | 7 | |
| Amount utilized during the year | –1 | –1 | |
| On December 31 | 6 | 6 | |
| PARENT COMPANY, 2018 | Guarantees | Other | Total |
| On January 1 | 8 | 8 | |
| Amount utilized during the year | –1 | –1 | |
| On December 31 | 7 | 7 | |
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Restoration reserve | 198 | 200 | ||
| Restructuring costs | 24 | 68 | –1 | |
| Other | 1,190 | 1,028 | 6 | 8 |
| Other provisions | 1,412 | 1,296 | 6 | 7 |
| Guarantee commitments | 1,389 | 1,335 | ||
| Total | 2,801 | 2,631 | 6 | 7 |
Guarantee provisions pertain to anticipated future expenses. 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 claims 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 70 percent of the total portfolio. In addition, there are five small defined-benefit plans, all of which are blocked from new vesting. 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 ITP2 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.
| PENSION COST | ||
|---|---|---|
| GROUP | 2019 | 2018 |
| Defined-benefit plans: | ||
| Current service cost | 236 | 226 |
| Interest expense | 169 | 160 |
| Estimated return on plan assets | –121 | –129 |
| Total cost of defined-benefit plans | 284 | 257 |
| Total cost of defined-contribution plans | 544 | 693 |
| Payroll taxes and yield tax | –107 | –167 |
| Total cost of post-employment remuneration | 721 | 783 |
Current service cost is recognized in operating profit and interest expenses, while the estimated return on plan assets is recognized 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 2019 fiscal year, NCC did not have access to the type of information required for recognizing its proportional share of the plan's commitment, plan assets and costs, which makes it impossible to recognize 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 0.19 percent (0.20).
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 2019, Alecta's surplus in the form of its collective solvency rate was 148 percent (142).
| GROUP | 2019 | 2018 |
|---|---|---|
| Obligations secured in full or in part in funds: | ||
| Present value of defined-benefit obligations | 8,159 | 7,044 |
| Fair value of plan assets | 5,871 | 5,207 |
| Net value of obligations funded in full or in part | 2,288 | 1,837 |
| Special payroll tax/employer contributions | 552 | 442 |
| Net amount in balance sheet (commitment +, asset –) | 2,840 | 2,279 |
| Net amount is recognized in the following balance-sheet items: |
||
| Provisions for pensions and similar obligations | 2,840 | 2,279 |
| Net amount in balance sheet (obligation +, asset –) | 2,840 | 2,279 |
| Net amount is distributed among plans in the following countries: |
||
| Sweden | 2,829 | 2,264 |
| Norway | 11 | 15 |
| Net amount in balance sheet (obligation +, asset –) | 2,840 | 2,279 |
| 2019 | 2018 |
|---|---|
| 7,044 | 6,388 |
| –200 | –188 |
| 403 | 386 |
| 112 | 102 |
| 798 | 355 |
| 8,158 | 7,044 |
The weighted average maturity for the plans is 21 years (22).
| GROUP | 2019 | 2018 |
|---|---|---|
| Fair value of plan assets on January 1 | 5,208 | 5,254 |
| Contribution by employer | 5 | 44 |
| Compensation | –18 | –18 |
| Estimated return | 122 | 129 |
| Actuarial gains and losses | 555 | –201 |
| Fair value of plan assets on December 31 | 5,871 | 5,208 |
| The plan assets comprise: | ||
| Swedish stock market, listed | 1,131 | 741 |
| International stock market, listed | 1,098 | 1,134 |
| Hedge funds, listed | 774 | 726 |
| Interest-bearing securities, listed | 1,857 | 1,593 |
| Interest-bearing securities, unlisted | 1,011 | 1,013 |
| Fair value of plan assets on December 31 | 5,871 | 5,208 |
There is no effect of the lowest funding requirements or asset ceiling.
| GROUP | 2019 | 2018 |
|---|---|---|
| Discount interest rate, % | 1.60 | 2.35 |
| Future salary increases, % | 2.80 | 3.00 |
| Anticipated inflation, % | 1.80 | 2.00 |
| Useful life assumption at 65 years, years | 22.5 | 22.4 |
In Sweden, DUS14 is applied.
| GROUP | Increase, % | Decrease, % |
|---|---|---|
| Discount interest rate, 0.5 percentage points change | –8.7 | 9.1 |
| Future salary increases, 0.5 percentage points change | 3.2 | –3.0 |
| Anticipated inflation, 0.5 percentage points change | 7.6 | –7.3 |
| Useful life assumption at 65 years, 1 year change | 4.3 | –4.4 |
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 0 M will be paid in 2020 to funded and unfunded defined-benefit plans.
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Proprietary pension payments | ||
| Proprietary costs, excluding interest expense | 12 | 10 |
| Interest expense | 3 | 3 |
| Cost of proprietary pension payments | 15 | 13 |
| Pension payments through insurance | ||
| Insurance premiums | 18 | 21 |
| Subtotal | 33 | 34 |
| Special payroll tax on pension costs | 3 | 4 |
| Pension costs during the year | 36 | 38 |
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Capital value of pension obligations pertaining to proprietary pension payments on January 1 |
181 | 177 |
| Cost, excluding interest expense, charged against profit | 12 | 10 |
| Interest expense | 3 | 3 |
| Pension payments | –9 | –9 |
| Capital value of pension obligations pertaining to |
proprietary pension payments on December 31 188 181
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Fair value of especially detached assets on January 1 | 216 | 218 |
| Return on especially detached assets | 12 | 8 |
| Payment from pension foundations | –10 | –10 |
| Benefits transferred to NCC Sverige AB | ||
| Fair value of especially detached assets on December 31 |
218 | 216 |
| Fair value of especially detached assets distributed as: | ||
| Shares | 83 | 78 |
| Funds | 28 | 30 |
| Interest-bearing receivables | 107 | 108 |
| Fair value of especially detached assets on December 31 |
218 | 216 |
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.
| Net recognized pension obligation | 0 | 1 |
|---|---|---|
| Surplus on especially detached assets | 30 | 36 |
| Fair value of especially detached assets on December 31 | 218 | 216 |
| Capital value of pension obligations pertaining to proprietary pension payments on December 31 |
188 | 181 |
| PARENT COMPANY | 2019 | 2018 |
| NET PENSION OBLIGATION |
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Discount interest rate on December 31 | 1.60 | 2.35 |
The pension calculations are based on the salary and pension level on the balance-sheet date.
| Note 31 | Other liabilities | ||
|---|---|---|---|
| GROUP | 2019 | 2018 | |
| Other long-term liabilities | |||
| Derivative instruments held for hedging | 1 | 5 | |
| Other long-term liabilities | 51 | 3 | |
| Total | 52 | 8 | |
| Other current liabilities | |||
| Advances from customers | 853 | 536 | |
| Liabilities to associated companies | 7 | 5 | |
| Derivative instruments held for hedging | 73 | 50 | |
| Liabilities, property acquisitions | 1 | 2 | |
| Other current liabilities | 943 | 926 | |
| Total | 1,878 | 1,520 |
| Note 32 | Accrued expenses and deferred income | |
|---|---|---|
| GROUP | PARENT COMPANY | |||
|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |
| Payroll-related costs | 2,327 | 2,111 | 38 | 60 |
| Financial expenses | 1 | 1 | ||
| Prepaid rental revenues | 2 | 3 | ||
| Prepaid revenues from rental guarantees |
92 | 47 | ||
| Project-related costs | 1,022 | 912 | ||
| Administrative costs | 102 | 23 | 12 | 8 |
| Operating and sales costs | 298 | 302 | 3 | 3 |
| Other expenses | 33 | 52 | 4 | 4 |
| Reclassifications1) | –111 | |||
| Total | 3,767 | 3,452 | 57 | 75 |
1) Attributable to assets held for sale, also see Note 15.
The companies classified as being closely related to the NCC Group are primarily NCC's subsidiaries, 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 with the NCC Group's Pension Foundation, see Notes 30 and 37.
Transactions involving NCC's associated companies and joint operations were of a production nature. The transactions were conducted on normal market terms.
| GROUP | 2019 | 2018 |
|---|---|---|
| Transactions with associated companies and joint arrangements |
||
| Sales to associated companies and joint arrangements | 66 | 45 |
| Purchases from associated companies and joint arrangements |
24 | 18 |
| Dividend from associated companies | 5 | 1 |
| Long-term receivables from associated companies and joint arrangements |
5 | |
| Current receivables from associated companies and joint arrangements |
20 | 24 |
| Interest-bearing liabilities to associated companies and joint arrangements |
12 | 25 |
| Operating liabilities to associated companies and joint arrangements |
11 | 9 |
| PARENT COMPANY | 2019 | 2018 |
| Transactions with Group companies | ||
| Purchases from Group companies | 58 | |
| Interest income from Group companies | 3 | 1 |
| Interest expense to Group companies | 17 | 1 |
| Dividend from Group companies | 533 | 435 |
| Current receivables from Group companies | 1,196 | 906 |
| Interest-bearing liabilities to Group companies | 1,470 | 1,226 |
| Operating liabilities to Group companies | 4 | 1,050 |
| Guarantee obligations to Group companies | 21,087 | 19,309 |
The new accounting policy, IFRS 16, Leases, has been applied since January 1, 2019. This entails that right-of-use assets are recognized with the associated lease liability for the framework leases that the Group has entered into concerning cars, trucks, heavy production machinery, owner-occupied properties, such as leased commercial premises, and site leaseholds/land leases.
The costs for these leases have been recognized in profit or loss as depreciation and interest expense, respectively. The lease payment has been divided into an interest component and a amortization component. Following the introduction of the new accounting standard, operating profit was positively impacted and net financial items negatively impacted, while cash flow from operations increased and cash flow from financing activities declined.
| GROUP | 2019 |
|---|---|
| Income statement | |
| Depreciation of right-of-use assets | –731 |
| Interest expense for lease liabilities | –42 |
| Total costs, capitalized leases | –773 |
| Leases with a low value and a short useful life | –1,695 |
| Total costs, non-capitalized leases | –1,695 |
| Total costs, leases | –2,468 |
Total cash flow concerning leases was SEK –748 M in 2019.
| 2019 | 2018 | |
|---|---|---|
| Current lease liabilities | 540 | 173 |
| Long-term lease liabilities | 1,058 | 320 |
| Total lease liabilities | 1,598 | 493 |
For an analysis of the lease liability's maturities, refer to Note 37.
| 2019 | Owner-occupied properties |
Machinery & equipment |
Land leases | Total |
|---|---|---|---|---|
| Recognized cost on January 1 | 800 | 800 | ||
| Increase in leases during the year | 120 | 496 | 615 | |
| Transitional effect, IFRS 16 | –3 | 1,497 | 1,494 | |
| Transferred within the NCC Group | 945 | –996 | 51 | 0 |
| Reclassifications1) | –22 | –180 | –202 | |
| Divestment and scrappage | –14 | –48 | –62 | |
| Translation differences during the year | –9 | –48 | –2 | –58 |
| Recognized cost on December 31 | 1,017 | 1,521 | 49 | 2,588 |
| Accumulated depreciation on January 1 | –307 | –307 | ||
| Transferred within the NCC Group | 1 | –1 | 0 | |
| Reclassifications1) | 10 | 55 | 65 | |
| Divestment and scrappage | 8 | 8 | ||
| Translation differences during the year | 2 | 3 | 2 | 7 |
| Depreciation during the year | –270 | –461 | –731 | |
| Accumulated depreciation on December 31 | –249 | –710 | 2 | –958 |
| Residual value on January 1 | 493 | 493 | ||
| Residual value on December 31 | 768 | 811 | 51 | 1,630 |
1) Reclassifications pertain to the transfer of SEK –137 M net to Assets held for sale; see Note 15.
| GROUP | PARENT COMPANY | ||
|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 |
| 27 | |||
| 45 | 17 | 47 | |
| 150 | 78 | 63 | |
| 62 | 12 | ||
| PARENT COMPANY | 2019 | 2018 |
|---|---|---|
| Lessee | ||
| Future lease payments | ||
| Non-discounted leases that expire: | ||
| Within one year | 8 | 52 |
| Later than one year but earlier than five years | 2 | 70 |
| Later than five years | ||
| Total future non-discounted lease payments | 10 | 122 |
The Parent Company's expensed lease fees amounted to SEK 60 M (62).
| GROUP | PARENT COMPANY | ||||
|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | ||
| Pledged assets | |||||
| For own liabilities: | |||||
| Assets subject to liens, etc. | 479 | 493 | |||
| Restricted bank funds | |||||
| Total | 479 | 493 | |||
| Other pledged assets | 8 | 9 | |||
| Total assets pledged | 487 | 502 | |||
| Guarantee obligations | |||||
| Own contingent liabilities: | |||||
| Sureties on behalf of Group companies |
21,087 | 19,309 | |||
| Other guarantees and contingent liabilities |
459 | 455 | 369 | 368 | |
| Held jointly with other companies: | |||||
| Liabilities in consortiums, trading companies and limited partnerships |
184 | 147 | |||
| Total guarantees and guarantee obligations1) |
643 | 602 | 21,456 | 19,678 |
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 2020. As a result of agreements between NCC AB and Bonava AB, however, NCC AB has been indemnified by Bonava AB for all commitments. 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 cars and trucks.
In its continuous business operations, NCC occasionally becomes a party to claims or legal procedures. 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 significant. 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 requested an opinion from the EU Court of Justice, which announced its verdict in March 2019. This provides an opportunity to claim damages from NCC. Subsequently, the SC in Finland has decided to once again refer the case to the Court of Appeal for determination.
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 dialogue with the authorities concerned 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 significant costs.
| CASH AND CASH EQUIVALENTS | ||
|---|---|---|
| GROUP | 2019 | 2018 |
| Cash and bank balances | 2,416 | 1,197 |
| Total cash and cash equivalents | 2,416 | 1,197 |
| Short-term investments with a maturity exceeding three months |
63 | 72 |
| PARENT COMPANY | 2019 | 2018 |
| Balance in NCC Treasury AB | 164 | 161 |
| Total according to cash flow statement | 164 | 161 |
Short-term investments have been classified as cash and cash equivalents/cash and bank balances based on the following considerations:
• They have a maturity of not more than three months from the date of acquisition.
Acquisitions of intangible and tangible fixed assets, excluding right-of-use lease assets, amounted to SEK 934 M (1,089) during the year, of which SEK 0 M (0) was financed through loans.
Acquisitions of non-controlling interests totaled SEK 0 M (3), of which SEK 0 M (0) had no effect on cash flow. Sales of subsidiaries and non-controlling interests amounted to SEK 15 M (75), of which SEK 15 M (0) had no effect on cash flow.
Acquisitions of intangible and tangible fixed assets during the year amounted to SEK 33 M (18), 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 arises.
Interest received during the year amounted to SEK 14 M (14). Interest paid during the year amounted to SEK 136 M (128).
Interest received during the year amounted to SEK 3 M (1). Interest paid during the year amounted to SEK 42 M (21).
| GROUP | 2019 | 2018 |
|---|---|---|
| Operating activities | 82 | 81 |
| Change in working capital | 39 | 163 |
| Investing activities | –38 | –2 |
| Financing activities | 42 | –135 |
| Total cash flow | 125 | 107 |
| GROUP | 2019 | 2018 |
|---|---|---|
| Cash and cash equivalents in joint operations | 128 | 154 |
| Total cash and cash equivalents unavailable for use | 128 | 154 |
| GROUP | 2019 | 2018 |
|---|---|---|
| Increase in right-of-use assets, leases | 2,110 | 227 |
| Cash flow | |||||
|---|---|---|---|---|---|
| CB 2018 | New leases | Interest indexing |
Exchange-rate differences | CB 2019 | |
| 1,908 | 770 | 7 | 2,685 | ||
| –429 | 97 | –101 | –433 | ||
| 493 | –706 | 1,980 | –42 | 7 | 1,732 |
| 1,972 | 161 | 1,980 | –42 | –88 | 3,983 |
| –450 | |||||
| –19 | |||||
| –308 | |||||
| NON-CASH ITEMS |
| NON-CASH ITEMS | ||||||
|---|---|---|---|---|---|---|
| PARENT COMPANY | CB 2018 | Cash flow | Group contri- butions 2019 | Exchange-rate differences/ other |
CB 2019 | |
| Interest-bearing liabilities | 2,577 | –107 | 2,470 | |||
| Long-term interest-free liabilities | 1,045 | –1,042 | 3 | |||
| Total liabilities in financing activities | 3,622 | –1,149 | 2,473 | |||
| Interest-bearing receivables | –744 | 318 | –577 | –1,003 | ||
| Total financing activities | 2,878 | –831 | –577 | 1,470 |
| GROUP | |||||
|---|---|---|---|---|---|
| SEK M | 2019 | 2018 | |||
| Increase (–) / Decrease (+) in inventory | –97 | –127 | |||
| Increase (–) / Decrease (+) in receivables | 950 | –573 | |||
| Increase (+) / Decrease (–) in liabilities | –248 | 755 | |||
| Other changes in working capital | 605 | 55 |
| GROUP, SEK M | 2019 Jan–Dec |
2018 Jan–Dec |
|---|---|---|
| Net debt, January 1 | –3,045 | –149 |
| Cash flow before financing | 1,512 | –1,157 |
| Leasing IFRS 16 | –1,942 | |
| Acquisition/sale of company shares | –19 | –11 |
| Change in pension debt | –561 | –872 |
| Exchange-rate difference in cash and cash equivalents | 15 | 8 |
| Dividend paid | –450 | –864 |
| Net debt, closing balance | –4,489 | –3,045 |
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 and guarantee capacity risks. NCC's Finance Policy for managing financial risks has been adopted 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 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 net debt/equity ratio covenant restriction 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 two years. NCC meets the requirements for 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 meeting 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 Corporate Debt1) has a maturity structure that minimizes the Group's exposure from the perspective of the refinancing risk. The maturities of the debt portfolio must be well-diversified over time. The norm concerning distribution is that the capital maturity period must be at least 18 months. At December 31, capital maturity period for Corporate Debt1) of SEK 2,766 M (2,392) was 37 months (34).
1) Interest-bearing liabilities excluding pension debt according to IAS 19 and excluding lease liability according to IFRS 16. Comparative figures include lease liability according to IAS 17.
| 20193) | 20184) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| INTEREST-BEARING LIABILITIES | ||||||||||
| Matures | Amount | Proportion, % | Amount | Proportion, % | ||||||
| 2019 | 1,051 | 44 | ||||||||
| 2020 | 256 | 9 | 146 | 6 | ||||||
| 2021 | 209 | 8 | 112 | 5 | ||||||
| 2022 | 1,050 | 38 | 55 | 2 | ||||||
| 2023 | 300 | 11 | 1,029 | 43 | ||||||
| 2024 | 950 | 34 | ||||||||
| Total | 2,766 | 100 | 2,392 | 100 |
1) Of which, loan of SEK 1,000 M (1.000) from the NCC Group's Pension Foundation.
2) Excluding pension debt according to IAS 19.
3) Excluding lease liability according to IFRS 16. 4) Including lease liability of SEK 493 M according to IAS 17.
NCC has the following investor-related market financing programs:
| Limit | Utilized nom SEK M |
|---|---|
| EUR 300 M | |
| SEK 4,000 M | |
| SEK 5,000 M | 1,700 |
| 1,700 | |
Market financing programs accounted for 61 percent (28)2) of NCC's total interest-bearing Corporate Debt.
1) Green bonds, of which a nominal amount of SEK 1,600 M is listed on Nasdaq Stockholm. 2) Including lease liability of SEK 493 M according to IAS 17.
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 credit facilities. Payment capacity is defined as the Group's cash and cash equivalents, short-term investments and unutilized committed credit facilities, less market financing programs with a remaining maturity of less than three months. At the end of the year, the volume of unutilized committed credit facilities was SEK 3,654 M (3,587), with a capital maturity period of 1.8 years (2.8). Available cash and cash equivalents are invested in banks or in interest-bearing instruments with good creditworthiness and a liquid secondary market. At December 31, the Group's cash and cash equivalents, including short-term investments, amounted to SEK 2,478 M (1,268). Payment capacity on December 31 corresponded to 11 percent (8) 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.
| 2019 | 2018 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | <3 months | 3 months– 1 year |
1–3 years | 3–5 years | >5 years | Total | <3 months | 3 months– 1 year |
1–3 years | 3–5 years | |
| Loan from the NCC Group's Pension Foundation |
1,026 | 200 | 10 | 413 | 403 | 1,090 | 18 | 36 | 1,036 | ||
| Interest-bearing liabilities | 1,837 | 51 | 24 | 894 | 868 | 903 | 621 | 261 | 21 | ||
| Lease liabilities | 1,882 | 633 | 776 | 269 | 204 | 502 | 176 | 241 | 85 | ||
| Interest rate swaps | 2 | 2 | |||||||||
| Oil forward contracts | 1 | 1 | 8 | 2 | 6 | ||||||
| Accounts payable | 4,275 | 4,275 | 5,164 | 5,164 | |||||||
| Total | 9,021 | 4,527 | 667 | 2,083 | 1,540 | 204 | 7,669 | 5,789 | 461 | 298 | 1,121 |
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.
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Total | <3 months | 3 months– 1 year |
>1 year | Total | <3 months | 3 months– 1 year |
>1 year | |
| Currency forward contracts | ||||||||
| – outflow | –8,833 | –7,466 | –1,242 | –125 | –6,064 | –4,205 | –1,714 | –145 |
| – inflow | 8,809 | 7,444 | 1,239 | 126 | 6,148 | 4,277 | 1,729 | 142 |
| Net flow from gross settled derivatives | –24 | –22 | –3 | 1 | 84 | 72 | 15 | –3 |
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 policy for the interest rate risk is that the fixed interest maturity period of the company's Corporate Debt1) when exposure is reduced by the period of fixed interest on 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 Corporate Debt should be adequately spread over time. If the available borrowing vehicles are not compatible with the desired interest rate structure for the Corporate Debt, interest rate 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 that maturities, 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 fixed interest maturity period for Corporate Debt1) when reduced by the period of fixed interest on cash and cash equivalents2) was 15 months (5), including interest rate swaps linked to Corporate Debt. Cash and cash equivalents2) amounted to SEK 2,478 M (1,268) and the fixed interest maturity period for these assets was 0.5 months (2).
At the end of year, NCC's interest-bearing Corporate Debt1) amounted to SEK 2,766 M (2,392) and the fixed interest maturity period was 14 months (6).
On December 31, 2019, NCC had interest rate swaps linked to Corporate Debt1) with a nominal value of SEK 590 M (100). At the same date, the interest rate swaps had a fair value of SEK 7 M (–2) net, comprising long-term receivables of SEK 7 M (0) and other current liabilities of SEK 0 M (2). The interest rate swaps have due dates ranging from 2.5 (0.2) to 4.8 (0.2) years with an average fixed interest rate of –0.03 percent (1.58). An increase in interest rates by one percentage point would result in a change of SEK 12 M (–2) in net profit for the year, based on the interest-bearing assets and liabilities, including interest rate swaps, existing on the balance sheet date. An increase in interest rates by one percentage point would result in a change of SEK 4 M (0) in net profit for the year and a change of SEK 11 M (0) in other comprehensive income resulting from a change in fair value of the Group's interest rate swaps.
1) Interest-bearing liabilities excluding pension debt according to IAS 19, and excluding lease liability according to IFRS 16, including interest rate swaps linked to Corporate Debt. Comparative figures include lease liability according to IAS 17.
2) Cash and cash equivalents and short-term investments.
| 20192) | 20183) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| INTEREST-BEARING LIABILITIES, INCL. INTEREST-RATE SWAPS | |||||||||
| Matures | Amount | Proportion, % | Amount | Proportion, % | |||||
| 2019 | 2,368 | 99 | |||||||
| 2020 | 2,161 | 78 | |||||||
| 2021 | 15 | 1 | 24 | 1 | |||||
| 2022 | 290 | 10 | |||||||
| 2023 | 100 | 4 | |||||||
| 2024 | 200 | 7 | |||||||
| Total | 2,766 | 100 | 2,392 | 100 |
1) Excluding pension debt according to IAS 19.
2) Excluding lease liability according to IFRS 16.
3) Including lease liability of SEK 493 M according to IAS 17.
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. Hedges relate to contractual and probable forecast flows, mainly through currency forward contracts. Contracted gross exposure in each currency is to be 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. Currency forward contracts 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 at the point of time 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 of the Group's gross inflows and gross outflows of various currencies, the portion hedged during the year and the exchange rate risk for each currency in the unhedged currency flows. The exchange rate 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.
| 2019 | 2018 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Countervalue in SEK M |
Gross in and outflows |
Hedged proportion SEK M |
Hedged portion, % |
Exchange rate risk 5% after tax on unhedged portion |
Gross in and outflows |
Hedged proportion SEK M |
Hedged portion, % |
Exchange rate risk 5% after tax on unhedged portion |
||
| EUR | 2,085 | 1,767 | 85 | 13 | 2,210 | 1,607 | 73 | 24 | ||
| DKK | 171 | 34 | 20 | 5 | 269 | 54 | 20 | 8 | ||
| NOK | 287 | 163 | 57 | 5 | 245 | 101 | 41 | 6 | ||
| PLN | 73 | 67 | 92 | 153 | 142 | 93 | ||||
| Other | 36 | 11 | 30 | 1 | 42 | 38 | 89 | |||
| Total | 2,652 | 2,041 | 77 | 24 | 2,919 | 1,942 | 67 | 38 |
The currency forward contracts used to hedge contracted and forecast transactions are classified as cash flow hedges. During 2019, 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 2020 (2019) through the first quarter of 2021 (Q1 2020), the outstanding hedge position at year-end and the hedged portion.
| Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | Q1 2021 | TOTAL | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Countervalue in SEK M (2019) |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
| EUR | 156 | 141 | 90 | 169 | 118 | 70 | 150 | 75 | 50 | 136 | 41 | 30 | 135 | 13 | 10 | 745 | 388 | 52 |
| Target value % | 90 | 70 | 50 | 30 | 10 | |||||||||||||
| Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | TOTAL | |||||||||||||
| Countervalue in SEK M (2018) |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
Hedge position |
Hedged portion, % |
Net outflow |
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 |
The table below shows the outstanding hedge position at year-end for the sum of contractual gross inflows and gross outflows per currency.
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Countervalue in SEK M | Total | <3 months | 3 months–1 year |
>1 year | Total | <3 months | 3 months–1 year |
>1 year |
| EUR | 598 | 295 | 257 | 46 | 662 | 147 | 438 | 77 |
| NOK | 178 | 175 | 3 | 349 | 298 | 51 | ||
| PLN | 2 | 1 | 1 | 71 | 45 | 26 | ||
| CZK | 111 | 2 | 43 | 67 | ||||
| Other | 6 | 3 | 3 | |||||
| Total | 895 | 476 | 306 | 113 | 1,082 | 490 | 464 | 128 |
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 –9 M (–32). Of this amount, other long-term receivables of SEK 1 M (0), other receivables of SEK 4 M (9), other long-term liabilities of SEK 0 M (5) and other current liabilities of SEK 13 M (37) have been recognized in the balance sheet.
The tables below show the sum of forecast net outflows and contractual gross inflows and gross outflows, outstanding hedge positions at year-end, the hedged portion and average forward rates per currency in SEK.
| 2019 | |||||
|---|---|---|---|---|---|
| 3 months–1 Total <3 months year |
>1 year | Total | <3 months | 3 months–1 year |
>1 year |
| Total of forecast net outflows and contractual gross inflows and gross outflows, countervalue SEK M 1,640 632 760 |
248 | 1,986 | 716 | 1,003 | 267 |
| Total hedge position, countervalue SEK M 1,283 617 540 |
126 | 1,585 | 693 | 750 | 142 |
| Hedged portion, % 78 98 71 |
51 | 80 | 97 | 75 | 53 |
| Average forward rate in SEK regarding total hedge position: | |||||
| EUR currency forward contracts 10.58 10.54 10.62 |
10.58 | 10.07 | 10.07 | 10.05 | 10.22 |
| NOK currency forward contracts 1.06 1.06 1.03 |
1.06 | 1.06 | 1.07 | ||
| PLN currency forward contracts 2.45 2.47 2.43 |
2.26 | 2.29 | 2.20 | ||
| CZK currency forward contracts 0.40 0.41 0.40 |
0.40 |
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 principals.
According to NCC's Finance Policy, the Group's translation exposure is not to be hedged.
The table below shows the Group's net investments in foreign subsidiaries and the exchange rate risk associated with translation exposure. At December 31, 2019, a 5-percent depreciation of the SEK in relation to other currencies would result in a change of SEK 0 M (0) in net profit for the year and a change of SEK 129 M (106) in other comprehensive income.
| 20192) | 20183) | |||
|---|---|---|---|---|
| Countervalue in SEK M | Amount | Proportion, % | Amount | Proportion, % |
| EUR | 15 | 1 | 24 | 1 |
| NOK | 4 | 105 | 4 | |
| SEK | 2,747 | 99 | 2,263 | 95 |
| Total | 2,766 | 100 | 2,392 | 100 |
1) Excluding pension debt according to IAS 19.
2) Excluding lease liability according to IFRS 16.
3) Including lease liability of SEK 493 M according to IAS 17.
| Countervalue in SEK M | 2019 | 2018 |
|---|---|---|
| Buy +/ Sell – DKK | 1,617 | 337 |
| Buy +/ Sell – EUR | 391 | 421 |
| Buy +/ Sell – NOK | –2,677 | –2,876 |
| Buy +/ Sell – PLN | 27 | |
| Buy +/ Sell – RUB | –32 | |
| Net | –641 | –2,150 |
1) Currency swaps.
A large part of NCC Industry's sales of paving contracts in NCC Industry are subject to indexed prices, whereby the index in relation to the customer matches the index used by the supplier for pricing bitumen, which means that NCC Industry is not exposed to any risk arising from a change in the price of bitumen. There are also 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 associated with purchasing is managed by NCC Treasury via oil forward contracts. As of 2020, due to a change in the index base for pricing bitumen used with NCC's largest supplier, there are also contracts at indexed prices whereby the index in relation to the customer does not match the index used by the supplier for pricing bitumen. As a result, NCC Industry is exposed to a risk that the two indexes develop in different directions. This risk is managed by
NCC Treasury through oil forward contracts on both the customer and the supplier side. The policy is to hedge larger customer contracts when the work is to be performed later than two months from the ordering date. NCC ensures that oil derivatives are priced using the same underlying index as that which applies to suppliers/customers and that the number of purchased/sold tons of bitumen per month exceeds the number of hedged tons of bitumen per month. Ineffectiveness may arise if the point in time of the purchases of bitumen deviates from the derivatives' due date.
The table below shows the Group's purchases of bitumen and the portion hedged via oil forward contracts during the year.
| 2019 | 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Tons | Purchases bitumen |
Hedged portion, tons |
Portion hedged via oil forward contracts, % |
Purchases bitumen |
Hedged portion, tons |
Portion hedged via oil forward contracts, % |
|||
| Total | 284,214 58,495 | 21 | 310,057 | 41,676 | 13 |
The following table shows the Group's forecast volume of purchases of bitumen, the outstanding hedge position at year-end and the portion hedged via oil forward contracts. The hedges fulfill effectiveness requirements, meaning that all changes due to price adjustments are recognized in other comprehensive income. The forward contracts used to hedge forecast purchases of bitumen are classified as cash flow hedges.
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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) | 885,145 | 7,859 | 316,992 | 560,294 | 649,701 | 7,859 | 316,992 | 324,850 |
| Hedge position through oil forward contracts (tons) | 19,139 | 4,783 | 6,638 | 7,718 | 29,719 | 2,960 | 22,146 | 4,613 |
| Hedged portion, % | 2 | 61 | 2 | 1 | 5 | 38 | 7 | 1 |
| Hedge position countervalue, SEK M | 51 | 11 | 17 | 23 | 79 | 11 | 58 | 10 |
| Hedged price per ton (average price in SEK) | 2,663 | 2,300 | 2,606 | 2,937 | 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 1 M (–4). Of this amount, other receivables of SEK 2 M (3), other long-term liabilities of SEK 0 M (1) and other current liabilities of SEK 1 M (7) 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, 2019 would give rise to a change of SEK 3 M (5) in other comprehensive income and of SEK 0 M (0) in net profit for the year. 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 smooth out price fluctuations occurring in the electricity market. NCC progressively hedges the price for up to three years and builds up the volume of electricity contracts until the particular delivery date.
The hedges fulfill effectiveness requirements, meaning that all changes due to price adjustments 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 41 M (43), of which SEK 4 M (4) will fall due within three months, SEK 19 M (18) in three to 12 months and SEK 18 M (21) after one year.
The net fair value of electricity derivatives used for hedging the price risk related to electricity was SEK 0 M (21). Of this amount, other receivables of SEK 0 M (21) 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 are 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 exposure and maturity for various counterparties.
Total counterparty exposure with respect to derivative trading, calculated as the net receivable per counterparty, amounted to SEK 127 M (210) at the end of 2019. The net receivable per counterparty is calculated in accordance with the market-to-market approach, 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 short-term investments amounted to SEK 2,478 M (1,268).
The risk that the Group's customers will not fulfill their commitments, 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 reporting agencies. For major accounts receivable, the risk of loan losses is limited through various types of collateral, such as bank guarantees, blocks on building loans, parent company guarantees and other payment guarantees.
| 2019 | 2018 | |||
|---|---|---|---|---|
| GROUP | Gross | Reserve for doubtful receivables |
Gross | Reserve for doubtful receivables |
| Not past-due accounts receivable | 6,033 | 6,960 | ||
| Past-due accounts receivable 1–30 days |
1,005 | 1,020 | ||
| Past-due accounts receivable 31–60 days |
44 | –1 | 310 | |
| Past-due accounts receivable 61–180 days |
459 | –12 | 280 | –6 |
| Past-due accounts receivable > 180 days |
3,230 | –1,890 | 2,437 | –1,230 |
| Total | 10,771 | –1,903 | 11,007 | –1,236 |
Collateral for accounts receivable was received in an amount of SEK 0 M (0).
Receivables expired >180 days are essentially caused by ongoing discussions/claims with the client and are not connected to a question about the client's creditworthiness.
Reserve for doubtful receivables expired >180 days essentially relates to former claims and not to anticipated payment capacity. Apart from these claims, customer bad debts are low, which results in low reserves.
| GROUP | 2019 | 2018 |
|---|---|---|
| On January 1 | –1,236 | –902 |
| Provision for the year | –791 | –371 |
| Reversal of previously posted impairment losses | 111 | 34 |
| Translation differences | 12 | 4 |
| On December 31 | –1,903 | –1,236 |
The carrying amount and fair value of financial instruments 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 at 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 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 interest-bearing receivables and short-term investments held to maturity, the fair value is based on the price 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 carrying amount and fair value of financial instruments are presented in the following table.
| GROUP, 2019 | Financial assets measured at fair value through profit or loss1) |
Derivatives used in hedge accounting |
Financial assets measured at amortized cost |
Financial assets measured at fair value through other comprehen sive income, equity instruments |
Financial liabilities measured at fair value through profit or loss1) |
Other liabilities |
Total carrying amount |
Total fair value |
|---|---|---|---|---|---|---|---|---|
| Long-term holdings of securities | 74 | 74 | 74 | |||||
| Long-term interest-bearing receivables | 144 | 144 | 144 | |||||
| Other long-term receivables | 1 | 7 | 8 | 8 | ||||
| Accounts receivable | 8,674 | 8,674 | 8,674 | |||||
| Current interest-bearing receivables | 226 | 226 | 226 | |||||
| Other receivables | 55 | 5 | 108 | 168 | 168 | |||
| Short-term investments | 10 | 52 | 63 | 63 | ||||
| Cash and cash equivalents | 2,416 | 2,416 | 2,416 | |||||
| Total assets | 66 | 12 | 11,620 | 74 | 11,773 | 11,773 | ||
| Long-term interest-bearing liabilities2) | 3,568 | 3,568 | 3,569 | |||||
| Other long-term liabilities | 1 | 51 | 52 | 52 | ||||
| Provisions for pensions and similar obligations | 2,840 | 2,840 | 2,840 | |||||
| Current interest-bearing liabilities3) | 796 | 796 | 797 | |||||
| Accounts payable | 4,275 | 4,275 | 4,275 | |||||
| Accrued expenses and deferred income | 1 | 1 | 1 | |||||
| Other current liabilities | 13 | 60 | 8 | 81 | 81 | |||
| Liabilities attributable to assets held for sale | 133 | 133 | 133 | |||||
| Total liabilities | 14 | 60 | 11,673 | 11,747 | 11,749 |
1) Statutorily measured at fair value.
2) Loan of SEK 800 M from the NCC Group's Pension Foundation is included 3) Loan of SEK 200 M from the NCC Group's Pension Foundation is included.
| GROUP, 2018 | Financial assets measured at fair value through profit or loss1) |
Derivatives used in hedge accounting |
Financial assets measured at amortized cost |
Financial assets measured at fair value through other comprehen sive income, equity instruments |
Financial liabilities measured at fair value through profit or 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 | 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) Statutorily measured at fair value.
2) Loan of SEK 1,000 M from the NCC Group's Pension Foundation is included.
| PARENT COMPANY, 2019 | Financial assets measured at amortized 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 | ||
| Current receivables from Group companies | 1,032 | 1,032 | 1,032 | ||
| Balance in NCC Treasury AB | 164 | 164 | 164 | ||
| Total assets | 1,197 | 45 | 1,242 | 1,242 | |
| Long-term interest-bearing liabilities1) | 800 | 800 | 800 | ||
| Other long-term liabilities | 3 | 3 | 3 | ||
| Accounts payable | 12 | 12 | 12 | ||
| Current interest-bearing liabilities1) | 200 | 200 | 200 | ||
| Current liabilities to Group companies | 1,474 | 1,474 | 1,474 | ||
| Total liabilities | 2,489 | 2,489 | 2,489 |
1) Loan of SEK 1,000 M from the NCC Group's Pension Foundation is included.
| PARENT COMPANY, 2018 | Financial assets measured at amortized 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 interest-bearing liabilities1) | 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) Loan of SEK 1,000 M from the NCC Group's Pension Foundation is included.
The classification categories Financial assets measured at fair value through profit or loss and Financial liabilities measured at fair value through profit or loss are not applicable for the Parent Company. No reclassifications of financial assets and liabilities among the above categories were 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.
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 measured at fair value in NCC's balance sheet.
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.
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.
| 2019 | 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 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 | |||||||||
| Short-term investments | 10 | 10 | 72 | 72 | |||||
| Derivative instruments | 56 | 56 | 127 | 127 | |||||
| Derivative instruments used in hedge accounting | 12 | 12 | 34 | 34 | |||||
| Financial assets measured at fair value through other comprehensive income | |||||||||
| Equity instruments | 74 | 74 | 77 | 77 | |||||
| Financial assets not measured at fair value | |||||||||
| Long-term interest-bearing receivables | 144 | 144 | 196 | 196 | |||||
| Short-term investments | 52 | 52 | |||||||
| Total assets | 206 | 68 | 74 | 348 | 268 | 161 | 77 | 506 | |
| Financial liabilities measured at fair value | |||||||||
| Financial liabilities measured at fair value through profit or loss | |||||||||
| Derivative instruments | 60 | 60 | 4 | 4 | |||||
| Derivative instruments used in hedge accounting | 14 | 14 | 51 | 51 | |||||
| Financial liabilities not measured at fair value | |||||||||
| Other interest-bearing liabilities | 1,600 | 2,898 | 4,498 | 79 | 2,315 | 2,394 | |||
| Total liabilities | 1,600 | 2,972 | 4,572 | 79 | 2,370 | 2,449 |
NCC has binding framework agreements on netting (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.
| 2019 | 2018 | |||
|---|---|---|---|---|
| GROUP | Financial assets | Financial liabilities |
Financial assets | Financial liabilities |
| Recognized gross amount1) | 68 | 74 | 161 | 55 |
| Amount included in the netting agreement |
–46 | –46 | –52 | –52 |
| Net amount after netting agreement |
22 | 28 | 109 | 3 |
1) The gross carrying amount of financial assets includes SEK 1 M (0) for derivatives measured at fair value through profit or loss in other long-term receivables, SEK 55 M (127) in other receivables, SEK 7 M (0) for derivatives used in hedge accounting for other long-term receivables and SEK 5 M (33) 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 (0), other current liabilities of SEK 60 M (4), derivatives used in hedge accounting of other long-term liabilities of SEK 1 M (5) and other current liabilities of SEK 13 M (46).
The Parent Company has no derivatives outstanding.
NCC AB, Corporation Identity 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 Nasdaq Exchange Stockholm/Large Cap List.
The address of the Head Office is NCC AB, Herrjärva Torg 4, SE-170 80 Solna, Sweden.
The consolidated financial statements for 2019 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, 2019, Nordstjernan AB accounted for 17 percent of the share capital and 48 percent of the voting rights in NCC AB. Nordstjernan AB, Corporate Identity Number 556000-1421, has its registered Head Office in Stockholm.
Catarina Molén-Runnäs took office as Business Area Manager of NCC Building Nordics on January 13, 2020. She replaced Klaus Kaae, who remains at NCC as senior advisor.
| Note 40 | Appropriation of the company's profit | |
|---|---|---|
| The Board of Directors proposes that the available funds | 2,240,367,885 | |
| Be appropriated as follows: | ||
| Ordinary dividend to shareholders of SEK 5.00 per share1) | 539,527,775 | |
| To be carried forward | 1,700,840,110 | |
| Total, SEK | 2,240,367,885 |
1) The total amount of the proposed dividend is calculated based on the number of shares outstanding on March 5, 2020.
The Board of Directors and the CEO hereby give their assurance that the consolidated financial statements and the Annual Report have been compiled in compliance with international accounting standards, IFRS, as adopted by the EU, 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 5, 2020. 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 1, 2020.
Solna, March 5, 2020
Chairman of the Board Board member Board member
Tomas Billing Geir Magne Aarstad Viveca Ax:son Johnson
Alf Göransson 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 6, 2020 PricewaterhouseCoopers AB
Ann-Christine Hägglund Erik Bergh Authorized Public Accountant Authorized Public Accountant Auditor in Charge
To the general meeting of the 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 2019. The annual accounts and consolidated accounts of the company are included on pages 12–69 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 and the group as of 31 December 2019 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 2019 and their 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 balance sheet for the parent company and the group.
Our opinions in this report on the annual accounts and 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, based on 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 risks of material misstatement in the consolidated financial statements. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated 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 particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group 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 was 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 consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated 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 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 consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
Revenue and results recognition in construction projects 2019 revenue in NCC's construction and civil engineering operations amount to approximately SEK 44 (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. Given 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-ofcompletion profit recognition of projects", "Guarantee commitments" and "Guarantee obligations, legal disputes, etc") in note 1 Accounting Policies as well as note 3 Revenue recognition, note 29 Other provisions and note 35 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.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–11, 74–93 and 104–105. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and 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 Managing Director are responsible for the preparation of the annual accounts and 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 Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and 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 Managing Director 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 Managing Director intend 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 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 ISAs 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 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 consolidated accounts, we have also audited the administration of the Board of Director's and the Managing Director of NCC AB (publ) for the year 2019 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 Director's and the Managing Director 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 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.
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' 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 Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill 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 Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
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 (publ) by the general meeting of the shareholders on the 9 April 2019 and has been the company's auditor since the 5 April 2017.
Stockholm 6 March 2020 PricewaterhouseCoopers AB
Ann-Christine Hägglund Erik Bergh Authorized Public Accountant Authorized Public Accountant Partner in charge
| Net sales 57,227 57,227 57,823 56,867 62,495 53,116 52,934 54,608 54,441 57,346 58,234 Production costs –51,724 –51,731 –52,027 –51,176 –56,009 –48,683 –48,484 –50,460 –50,460 –55,205 –54,134 Gross profit 5,503 5,495 5,796 5,691 6,486 4,432 4,450 4,148 3,981 2,140 4,101 Selling and administrative costs –2,978 –2,988 –3,130 –3,117 –3,405 –2,765 –2,912 –2,933 –2,933 –2,875 –2,811 Result from sales of owner-occupied properties 3 3 6 20 7 7 –10 1 1 12 –11 Impairment losses on fixed assets –2 –2 7 –40 –39 –97 –7 –7 –82 –22 Capital gain from sales of Group companies 6 6 3 2 21 21 18 Result from participations in associated companies 5 5 1 8 –9 26 20 11 11 42 21 Operating profit/loss 2,537 2,519 2,679 2,604 3,039 1,661 1,453 1,242 1,075 –764 1,296 Financial income 74 74 75 46 50 39 26 39 39 36 34 Financial expenses –348 –315 –354 –416 –433 –78 –138 –130 –130 –121 –146 Net financial items –274 –241 –279 –370 –383 –39 –112 –91 –91 –85 –112 Profit/loss after financial items 2,263 2,277 2,400 2,234 2,656 1,623 1,341 1,150 983 –849 1,184 Tax –364 –367 –411 –396 –536 –302 –225 –141 –106 99 –309 Profit/loss for the period 1,899 1,910 1,989 1,838 2,120 1,321 1,116 1,009 877 –750 875 Attributable to: NCC's shareholders 1,894 1,905 1,986 1,835 2,113 1,315 1,113 1,004 872 –756 873 Non-controlling interests 5 5 3 3 6 6 3 5 5 6 2 Profit/loss for the period 1,899 1,910 1,989 1,838 2,120 1,321 1,116 1,009 877 –750 875 |
INCOME STATEMENT, SEK M | 2012 | IAS 19 2012 |
2013 | 2014 | 2015 | Excluding Bonava in 2015 |
2016 | 2017 | IFRS 15 2017 |
2018 | 2019 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
AMENDED ACCOUNTING POLICIES – IAS 19. COMPARATIVE FIGURES FOR 2012 HAVE BEEN RESTATED.
Changes have occurred in the recognition 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 are now recognized in net financial items.
In the Annual Report, comparative figures for 2017 been restated 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 strengthened 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.
| IAS 19 | Excluding Bonava in |
IFRS 15 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE SHEET, SEK M | 2012 | 2012 | 2013 | 2014 | 2015 | 2015 | 2016 | 2017 | 2017 | 2018 | 2019 |
| ASSETS | |||||||||||
| Fixed assets | |||||||||||
| Goodwill | 1,827 | 1,827 | 1,802 | 1,865 | 1,792 | 1,770 | 1,851 | 1,848 | 1,848 | 1,861 | 1,893 |
| Other intangible assets | 204 | 204 | 267 | 389 | 439 | 377 | 275 | 335 | 335 | 339 | 368 |
| Right-of-use assets | 493 | 1,579 | |||||||||
| Owner-occupied properties | 662 | 662 | 704 | 774 | 826 | 776 | 814 | 880 | 880 | 915 | 894 |
| Machinery and equipment | 2,395 | 2,395 | 2,502 | 2,487 | 2,417 | 2,356 | 2,569 | 2,712 | 2,712 | 2,559 | 2,516 |
| Long-term holdings of securities | 97 | 92 | 125 | 129 | 129 | 119 | 114 | ||||
| Long-term interest-bearing receivables | 354 | 271 | 361 | 575 | 575 | 195 | 144 | ||||
| Other long-term receivables | 307 | 203 | 62 | 26 | 26 | 119 | 34 | ||||
| Deferred tax assets | 204 | 97 | 239 | 338 | 531 | 524 | |||||
| Participations in associated companies | 9 | 9 | 9 | 52 | |||||||
| Other long-term holdings of securities | 158 | 158 | 131 | 156 | |||||||
| Long-term receivables | 1,859 | 615 | 496 | 671 | |||||||
| Total fixed assets | 7,114 | 5,870 | 5,910 | 6,395 | 6,435 | 5,845 | 6,154 | 6,743 | 6,843 | 7,133 | 8,065 |
| Current assets | |||||||||||
| Right-of-use assets | 51 | ||||||||||
| Properties held for future development | 2,050 | 2,050 | 1,780 | 1,696 | 1,696 | 1,633 | 1,391 | ||||
| Ongoing property projects | 2,013 | 2,013 | 1,440 | 1,039 | 1,039 | 2,292 | 3,042 | ||||
| Completed property projects | 367 | 367 | 808 | 870 | 870 | 308 | 936 | ||||
| Properties held for future development, housing | 3,749 | 16 | |||||||||
| Participations in associated companies | 226 | 263 | |||||||||
| Capitalized project development costs | 969 | ||||||||||
| Ongoing proprietary housing projects | 6,987 | ||||||||||
| Completed housing units | 583 | ||||||||||
| Property projects | 5,321 | 5,321 | 5,251 | 5,059 | |||||||
| Housing projects | 11,738 | 11,738 | 12,625 | 13,246 | |||||||
| Materials and inventory | 655 | 655 | 673 | 746 | 696 | 691 | 713 | 764 | 764 | 902 | 993 |
| Tax receivable | 33 | 13 | 42 | 241 | 241 | 146 | 50 | ||||
| Accounts receivable | 7,725 | 7,725 | 7,377 | 7,178 | 7,083 | 6,619 | 7,682 | 8,882 | 8,882 | 9,629 | 8,674 |
| Worked-up, non-invoiced revenues | 782 | 782 | 918 | 1,066 | 1,400 | 1,394 | 1,737 | 1,671 | 1,554 | 1,276 | 1,260 |
| Prepaid expenses and accrued income | 1,544 | 1,544 | 1,325 | 1,415 | 1,262 | 936 | 1,061 | 1,170 | 1,170 | 1,418 | 1,516 |
| Current interest-bearing receivables | 106 | 1,752 | 152 | 167 | 167 | 163 | 226 | ||||
| Other receivables | 1,277 | 1,277 | 1,024 | 1,048 | 1,301 | 901 | 446 | 687 | 687 | 608 | 555 |
| Short-term investments | 168 | 168 | 143 | 242 | 190 | 190 | 190 | 41 | 41 | 72 | 63 |
| Cash and cash equivalents | 2,634 | 2,634 | 3,548 | 2,592 | 4,177 | 3,592 | 3,093 | 3,063 | 3,063 | 1,197 | 2,416 |
| Assets held for sale | 392 | ||||||||||
| Total current assets | 31,844 | 31,844 32,883 32,592 | 32,967 | 20,518 | 19,161 20,292 | 20,174 | 19,868 | 21,826 | |||
| TOTAL ASSETS | 38,958 | 37,713 38,793 | 38,987 | 39,402 | 26,363 | 25,315 | 27,035 | 27,018 | 27,001 | 29,890 | |
| EQUITY | |||||||||||
| Shareholders' equity | 8,974 | 7,634 | 8,658 | 8,847 | 9,691 | 4,962 | 5,553 | 5,516 | 5,168 | 2,931 | 3,044 |
| Non-controlling interests | 15 | 15 | 17 | 20 | 23 | 20 | 13 | 12 | 12 | 17 | |
| Total equity | 8,988 | 7,649 | 8,675 | 8,867 | 9,714 | 4,982 | 5,566 | 5,528 | 5,179 | 2,948 | 3,044 |
| LIABILITIES | |||||||||||
| Long-term liabilities | |||||||||||
| Long-term interest-bearing liabilities | 7,102 | 7,102 | 7,029 | 6,957 | 5,887 | 3,865 | 2,288 | 1,669 | 1,669 | 1,342 | 3,568 |
| Other long-term liabilities | 841 | 841 | 299 | 548 | 609 | 158 | 54 | 54 | 54 | 8 | 52 |
| Deferred tax liabilities | 725 | 436 | 414 | 268 | 322 | 456 | 407 | 438 | 438 | 297 | 170 |
| Provisions for pensions and similar obligations | 9 | 393 | 125 | 585 | 338 | 338 | 1,008 | 1,407 | 1,407 | 2,279 | 2,840 |
| Other provisions | 2,435 | 2,435 | 2,070 | 2,017 | 1,970 | 1,612 | 1,686 | 1,889 | 1,889 | 2,563 | 2,777 |
| Total long-term liabilities | 11,113 | 11,208 | 9,937 | 10,376 | 9,126 | 6,429 | 5,443 | 5,456 | 5,456 | 6,488 | 9,407 |
| Current liabilities | |||||||||||
| Current interest-bearing liabilities | 2,141 | 2,141 | 2,515 | 2,526 | 3,154 | 1,900 | 723 | 919 | 919 | 1,051 | 796 |
| Accounts payable | 4,659 | 4,659 | 4,096 | 3,960 | 4,694 | 4,176 | 4,427 | 5,179 | 5,179 | 5,164 | 4,275 |
| Tax liabilities | 122 | 122 | 58 | 117 | 287 | 135 | 115 | 95 | 95 | 100 | |
| Invoiced revenues not worked up | 4,241 | 4,241 | 4,264 | 4,408 | 4,244 | 4,239 | 4,355 | 5,574 | 5,905 | 6,311 | 6,254 |
| Accrued expenses and deferred income | 3,748 | 3,748 | 3,888 | 3,952 | 4,012 | 3,172 | 3,205 | 3,207 | 3,207 | 3,452 | 3,767 |
| Provisions | 59 | 59 | 21 | 24 | 24 | 68 | 24 | ||||
| Other current liabilities | 3,945 | 3,945 | 5,360 | 4,782 | 4,112 | 1,270 | 1,460 | 1,052 | 1,052 | 1,520 | 1,878 |
| Liabilities attributable to assets held for sale | 344 | ||||||||||
| Total current liabilities | 18,855 | 18,856 | 20,181 | 19,745 | 20,562 | 14,951 | 14,306 | 16,051 | 16,382 | 17,566 | 17,439 |
| Total liabilities | 29,968 30,063 | 30,118 | 30,120 | 29,688 | 21,380 | 19,749 | 21,507 | 21,838 24,054 26,846 | |||
| TOTAL EQUITY AND LIABILITIES | 38,958 | 37,713 38,793 | 38,987 | 39,402 | 26,363 | 25,315 | 27,035 | 27,018 | 27,001 | 29,890 |
75
| Excluding | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| KEY FIGURES | 2012 | IAS 19 2012 |
2013 | 2014 | Bonava in 2015 |
2016 | 2017 | IFRS 15 2017 |
2018 | 2019 |
| Financial statements, SEK M | ||||||||||
| Net sales3) | 57,227 | 57,227 | 57,823 | 56,867 | 53,116 | 52,934 | 54,608 | 54,441 | 57,346 | 58,234 |
| Operating profit/loss3) | 2,537 | 2,519 | 2,679 | 2,604 | 1,661 | 1,453 | 1,242 | 1,075 | –764 | 1,296 |
| Profit/loss after financial items3) | 2,263 | 2,277 | 2,400 | 2,234 | 1,623 | 1,341 | 1,150 | 983 | –849 | 1,184 |
| Profit/loss for the year3) | 1,899 | 1,910 | 1,989 | 1,838 | 1,321 | 1,116 | 1,009 | 877 | –750 | 875 |
| Investments in fixed assets | 1,345 | 1,345 | 1,055 | 987 | 1,092 | 1,406 | 1,238 | 1,238 | 1,669 | 2,992 |
| Investments in property projects | 2,692 | 2,692 | 3,890 | 2,255 | 1,858 | 1,612 | 1,152 | 1,152 | 2,602 | 3,281 |
| Investments in housing projects1) | 8,997 | 8,997 | 7,912 | 9,712 | 9,725 | 3,154 | ||||
| Cash flow, SEK M | ||||||||||
| Cash flow from operating activities | –26 | –26 | 2,532 | 1,345 | 4,061 | 1,170 | 2,158 | 2,158 | –375 | 2,214 |
| Cash flow from investing activities | –906 | –906 | –870 | –771 | –730 | –1,181 | –797 | –797 | –782 | –701 |
| Cash flow before financing | –932 | –932 | 1,661 | 574 | 3,331 | –11 | 1,361 | 1,361 | –1,157 | 1,512 |
| Cash flow from financing activities | 2,774 | 2,774 | –741 | –1,515 | –1,713 | –1,087 | –1,392 | –1,392 | –717 | –308 |
| Change in cash and cash equivalents | 1,838 | 1,838 | 914 | –956 | 1,586 | –1,084 | –30 | –30 | –1,866 | 1,219 |
| Profitability ratios | ||||||||||
| Return on equity, %6) | 23 | 28 | 26 | 22 | 26 | 19 | 18 | 17 | –18 | 32 |
| Return on equity, %7) | 23 | 28 | 26 | 22 | 26 | 118 | 18 | 17 | –18 | 32 |
| Return on capital employed, %6) | 15 | 17 | 15 | 14 | 17 | 13 | 13 | 12 | –9 | 13 |
| Return on capital employed, %7) | 15 | 17 | 15 | 14 | 17 | 63 | 13 | 12 | –9 | 13 |
| 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 | 4.7 |
| EBITDA %7) | 5.6 | 5.6 | 5.9 | 5.8 | 6.2 | 17.0 | 3.6 | 3.3 | 0.8 | 4.7 |
| Interest coverage ratio, multiple6) | 7.0 | 7.5 | 7.8 | 6.4 | 7.1 | 6.6 | 9.8 | 8.5 | –6.0 | 9.1 |
| Interest coverage ratio, multiple7) | 7.0 | 7.5 | 7.8 | 6.4 | 7.1 | 31.1 | 9.8 | 8.5 | –6.0 | 9.1 |
| Equity/assets ratio, % | 23 | 20 | 22 | 23 | 25 | 22 | 20 | 19 | 11 | 10 |
| Interest-bearing liabilities/total assets, % | 24 | 26 | 25 | 26 | 24 | 16 | 15 | 15 | 17 | 25 |
| Net cash +/Net debt – | –6,061 | –6,467 | –5,656 | –6,836 | –4,552 | –222 | –149 | –149 | –3,045 | –4,489 |
| Debt/equity ratio, multiple | 0.7 | 0.8 | 0.7 | 0.8 | 0.5 | 0.0 | 0.0 | 0.0 | 1.0 | 1.5 |
| Capital employed at year-end | 18,241 | 17,285 | 18,345 | 18,935 | 19,093 | 9,585 | 9,523 | 9,174 | 7,619 | 10,382 |
| Capital employed, average | 16,632 | 15,755 | 18,005 | 18,531 | 18,672 | 13,474 | 9,418 | 9,138 | 8,780 | 9,936 |
| Capital turnover rate, multiple | 3.4 | 3.6 | 3.2 | 3.1 | 3.3 | 4.1 | 5.8 | 6.0 | 6.5 | 5.9 |
| Share of risk-bearing capital, % | 25 | 21 | 23 | 23 | 25 | 24 | 22 | 21 | 12 | 11 |
| Closing interest rate, %2) | 3.6 | 3.6 | 3.3 | 2.8 | 2.8 | 2.6 | 2.0 | 2.0 | 1.3 | 1.1 |
| Average interest-rate maturity, years2) | 1.1 | 1.1 | 1.2 | 1.1 | 0.9 | 0.9 | 0.6 | 0.6 | 0.5 | 1.2 |
| Order status, SEK M | ||||||||||
| Orders received3) | 55,759 | 55,759 | 56,979 | 61,379 | 51,492 | 56,506 | 56,990 | 56,777 | 61,842 | 58,048 |
| Order backlog3) | 45,833 | 45,833 | 47,638 | 54,777 | 41,538 | 47,940 | 51,806 | 51,734 | 56,837 | 57,800 |
| Per share data, SEK | ||||||||||
| Profit/loss after taxes, before and after dilution6) | 17.51 | 17.62 | 18.40 | 17.01 | 19.59 | 11.61 | 9.29 | 8.07 | –7.00 | 8.09 |
| Profit/loss after taxes, before and after dilution7) | 17.51 | 17.62 | 18.40 | 17.01 | 19.59 | 73.81 | 9.29 | 8.07 | –7.00 | 8.09 |
| Cash flow from operating activities, after dilution | –0.24 | –0.24 | 23.46 | 12.47 | 37.65 | 10.88 | 19.97 | 19.97 | –3.47 | 20.50 |
| Cash flow before financing, after dilution | –8.61 | –8.61 | 15.40 | 5.32 | 30.88 | –0.05 | 12.59 | 12.59 | –10.71 | 14.01 |
| P/E ratio, before dilution6) | 8 | 8 | 11 | 15 | 13 | 19 | 17 | 19 | –20 | 19 |
| P/E ratio, before dilution7) | 8 | 8 | 11 | 15 | 13 | 3 | 17 | 19 | –20 | 19 |
| Dividend, ordinary | 10.00 | 10.00 | 12.00 | 12.00 | 3.00 | 8.00 | 8.00 | 8.00 | 4.00 | 5.004) |
| Dividend yield, % | 7.3 | 7.3 | 5.7 | 4.9 | 1.1 | 3.5 | 5.1 | 5.1 | 2.9 | 3.3 |
| Shareholders' equity, before and after dilution | 82.97 | 70.58 | 80.24 | 82.04 | 89.85 | 51.39 | 51.04 | 47.81 | 27.13 | 28.21 |
| Share price/shareholders' equity, % | 164 | 193 | 262 | 301 | 293 | 439 | 308 | 329 | 508 | 543 |
| Share price at year-end, NCC B | 136.20 | 136.20 | 209.90 | 246.80 | 263.00 | 225.40 | 157.30 | 157.30 | 137.80 | 153.20 |
| 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 | 0.5 |
| Total number of shares outstanding before dilution at | ||||||||||
| year-end | 108.0 | 108.0 | 107.8 | 107.8 | 107.9 | 108.1 | 108.1 | 108.1 | 108.0 | 107.9 |
| Average number of shares outstanding before dilution | ||||||||||
| for the period | 108.2 | 108.2 | 107.9 | 107.8 | 107.9 | 108.1 | 108.1 | 108.1 | 108.1 | 107.9 |
| Market capitalization before dilution, SEK M | 14,706 | 14,706 | 22,625 | 26,574 | 28,369 | 24,325 | 16,997 | 16,997 | 14,896 | 16,548 |
| Personnel | ||||||||||
| Average no. of employees | 18,175 | 18,175 | 18,360 | 17,669 | 17,872 | 16,793 | 17,762 | 17,762 | 16,523 | 15,273 |
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 earnings of SEK 6,724 M that arose from the spinoff of Bonava has been excluded. 7) When calculating the key figure, the impact on earnings of SEK 6,724 M that arose from
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 2019 pertains to the Board of Directors' motion to the AGM.
5) All shares issued by NCC are common shares.
the spinoff of Bonava has been included. For definitions of key figures, see page 105.
| QUARTERLY AMOUNTS, 2019 | FULL YEAR |
QUARTERLY AMOUNTS, 2018 | FULL YEAR |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | Q1 | Q2 | Q3 | Q4 | 2019 | Q1 | Q2 | Q3 | Q4 | 2018 |
| Group | ||||||||||
| Orders received | 15,501 | 16,070 | 12,769 | 13,708 | 58,048 | 17,521 | 13,834 | 12,738 | 17,750 | 61,842 |
| Order backlog | 61,370 | 63,027 | 61,658 | 57,800 | 57,800 | 58,851 | 58,741 | 56,587 | 56,837 | 56,837 |
| Net sales | 11,434 | 14,610 | 13,951 | 18,239 | 58,234 | 10,894 | 14,349 | 14,269 | 17,832 | 57,346 |
| Operating profit/loss | –352 | 411 | 568 | 670 | 1,296 | –364 | 452 | –1,108 | 256 | –764 |
| Profit/loss after financial items | –370 | 380 | 536 | 639 | 1,184 | –372 | 427 | –1,133 | 229 | –849 |
| Profit/loss after tax | –314 | 322 | 459 | 408 | 875 | –296 | 341 | –955 | 160 | –750 |
| Earnings per share after dilution, SEK | –2.88 | 2.85 | 4.21 | 3.91 | 8.09 | –2.73 | 3.12 | –8.87 | 1.47 | –7.00 |
| Cash flow before financing | –140 | –1,109 | –814 | 3,575 | 1,512 | –815 | –1,710 | –574 | 1,942 | –1,157 |
| Equity/assets ratio, % | 10 | 8 | 7 | 10 | 10 | 18 | 15 | 11 | 11 | 11 |
| Net cash +/Net debt – | –4,844 | –6,352 | –8,124 | –4,489 | –4,489 | –1,011 | –3,084 | –4,169 | –3,045 | –3,045 |
| NCC Infrastructure | ||||||||||
| Orders received | 4,840 | 3,428 | 4,466 | 3,868 | 16,601 | 9,497 | 3,740 | 5,423 | 6,220 | 24,880 |
| Order backlog | 22,460 | 21,770 | 22,002 | 20,389 | 20,389 | 25,195 | 24,118 | 24,923 | 24,786 | 24,786 |
| Net sales | 3,649 | 4,192 | 4,213 | 5,371 | 17,425 | 4,294 | 4,990 | 4,515 | 5,992 | 19,791 |
| Operating profit/loss | 8 | 81 | 46 | 78 | 212 | –11 | 51 | –883 | –150 | –993 |
| Operating margin, % | 0.2 | 1.9 | 1.1 | 1.4 | 1.2 | –0.3 | 1.0 | –19.6 | –2.5 | –5.0 |
| NCC Building Sweden | ||||||||||
| Orders received | 2,579 | 2,368 | 3,687 | 4,107 | 12,741 | 3,677 | 3,111 | 2,394 | 5,893 | 15,075 |
| Order backlog | 17,619 | 16,261 | 16,717 | 16,561 | 16,561 | 19,367 | 18,422 | 17,435 | 18,709 | 18,709 |
| Net sales | 3,669 | 3,726 | 3,192 | 4,264 | 14,851 | 3,649 | 4,057 | 3,380 | 4,614 | 15,701 |
| Operating profit/loss | 110 | 76 | 75 | 103 | 364 | 111 | 147 | 86 | 109 | 453 |
| Operating margin, % | 3.0 | 2.0 | 2.4 | 2.4 | 2.5 | 3.0 | 3.6 | 2.6 | 2.4 | 2.9 |
| NCC Building Nordics | ||||||||||
| Orders received | 4,187 | 6,210 | 2,683 | 3,001 | 16,080 | 1,915 | 3,349 | 2,488 | 3,477 | 11,229 |
| Order backlog | 13,132 | 16,738 | 16,694 | 15,807 | 15,807 | 10,384 | 11,501 | 11,110 | 11,313 | 11,313 |
| Net sales | 2,567 | 2,803 | 2,914 | 3,485 | 11,769 | 2,299 | 2,571 | 2,720 | 3,162 | 10,753 |
| Operating profit/loss | 34 | 46 | 53 | 99 | 231 | 11 | 34 | –193 | –78 | –227 |
| Operating margin, % | 1.3 | 1.6 | 1.8 | 2.8 | 2.0 | 0.5 | 1.3 | –7.1 | –2.5 | –2.1 |
| NCC Industry | ||||||||||
| Orders received | 3,372 | 3,991 | 2,450 | 3,040 | 12,852 | 2,867 | 4,106 | 2,913 | 3,058 | 12,943 |
| Order backlog | 5,188 | 5,487 | 3,631 | 2,967 | 2,967 | 4,855 | 5,380 | 3,940 | 3,092 | 3,092 |
| Net sales | 1,265 | 3,721 | 4,311 | 3,674 | 12,971 | 1,165 | 3,625 | 4,301 | 3,876 | 12,968 |
| Operating profit/loss | –385 | 322 | 387 | 187 | 511 | –411 | 324 | 283 | 155 | 350 |
| Operating margin, % | –30.5 | 8.6 | 9.0 | 5.1 | 3.9 | –35.3 | 8.9 | 6.6 | 4.0 | 2.7 |
| Capital employed | 5,409 | 6,397 | 6,393 | 5,507 | 5,507 | 4,456 | 5,733 | 5,540 | 4,902 | 4,902 |
| NCC Property Development | ||||||||||
| Net sales | 411 | 321 | 335 | 1,989 | 3,056 | 285 | 115 | 397 | 1,361 | 2,157 |
| Operating profit/loss | –20 | 40 | 19 | 273 | 313 | 16 | –16 | –326 | 144 | –181 |
| Capital employed | 4,746 | 5,534 | 6,107 | 4,935 | 4,935 | 4,591 | 4,985 | 4,383 | 4,314 | 4,314 |
| Operating margin, % | –4.8 | 12.5 | 5.6 | 13.7 | 10.2 | 5.5 | –13.9 | –82.1 | 10.6 | –8.4 |
| NCC Road Services | ||||||||||
| Orders received | 849 | 268 | 388 | 112 | 1,617 | |||||
| Order backlog | 4,013 | 3,697 | 3,481 | 2,816 | 2,816 | |||||
| Net sales | 662 | 635 | 592 | 735 | 2,624 | |||||
| Operating profit/loss | –5 | 6 | 4 | 14 | 20 |
The asphalt and civil engineering operations of NCC Industry and certain units within NCC Building 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.
A decision has been taken to divest NCC Road Services within NCC Infrastructure, and accordingly, this division is presented separately as of 2019.
NCC is one of the Nordic region's leading construction and property development companies and is active throughout the value chain with the task of creating environments for work, living and communication. The construction industry has a major environmental impact and NCC plays an important role in the transition toward a more sustainable society. We aim to proactively contribute to reducing the use of nonrenewable resources, increase societal value and develop new technical solutions, products and work methods that promote a sustainable development for customers, the Group and society at large.
For NCC, this involves taking into account the needs of current and future generations, increasing the company's competitiveness and ability to generate profitable growth and taking long-term responsibility in day-to-day operations. Our vision is to renew the industry and provide superior sustainable solutions.
Five business areas interacting to reduce climate impact
With five business areas that complement each other in an extensive operation, NCC has the potential to lower the climate impact of its own manufacturing of materials and production as well as of the operation and maintenance of its finished products. NCC Industry's asphalt production accounts for the majority of the Group's own carbon emissions. By switching from fossil to renewable fuels, the climate impact has been mitigated in recent years. NCC Building and NCC Infrastructure have developed standard solutions, prefabricates and processes for which precise amounts of materials are ordered, thus reducing waste generated at construction sites. NCC prioritizes sustainable materials and products and enables the recovery and reuse of the waste that arises from the construction process. NCC is a leader in constructing commercial properties and housing units with low energy requirements and, through NCC Property Development, can provide support in urban planning concerning the health and wellbeing of people in both office buildings and their surroundings.
The world's awareness of climate challenges accelerated in 2019. The Nordic countries have set ambitious climate targets, which will shape the industry and the solutions needed in the years ahead. As part of the industry's desire to reach the emissions targets that have been set, we will see an increased focus on renovation of existing buildings and infrastructure, on energy use at construction sites and on the energy needed to produce building materials. We also note increasing requirements from the market for circular processes – the reuse and recycling of materials.
NCC thus needs to work proactively on how the Group can produce and use materials even more efficiently and analyze and measure the climate footprint of both its own and its suppliers' product manufacturing and energy consumption to an even greater extent, to be able to report climate emissions throughout the value chain.
The UN and leaders of the world have united behind 17 goals and 169 sub-targets to tackle the most urgent social, economic and environmental challenges in the period up to 2030.
On the basis of these goals, we can evaluate whether NCC is on the right path in respect of its offering. The Agenda targets can also be used to predict the demands that will be placed on NCC in the future. Agenda 2030 and the global goals thereby 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 where the Group has the greatest potential to contribute through various societal solutions, and another 11 goals that are fundamental to NCC's operations and offerings. NCC has also evaluated the global goals at the sub-target level and selected about 50 of the 169 sub-targets as relevant and guiding for NCC. 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.
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 encompasses creating inclusive societies by building housing and infrastructure that everyone can afford and that remove physical and mental barriers in cities. It also involves being resourceefficient by creating circular material flows and independence from fossil fuels, and building resilient societies that can cope with the effects of climate change, such as heavy rain and extreme heat.
NCC has long 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.
Intelligent buildings and sustainable infrastructure can promote people's health and well-being. By integrating green areas into urban environments and promoting various species in our quarries, NCC also contributes to improving biodiversity and sustainable ecosystems.
Although the Nordic region currently has relatively favorable access to water, NCC regards clean water and life below water as important goals to promote, for example, through ecosystem services and water efficiency throughout the value chain.
NCC is a value-guided company and, in that capacity, it can contribute to achieving goals 4, 5, 8, 10, 16 and 17. We enhance knowledge and expertise in society through, for example, the schools we build and the training we provide to employees, which contributes to achieving global goal 4. NCC complies with principles for equality, reduced inequality and decent labor conditions, and economic growth, which are directly linked to global goals 5, 8 and 10. The company will also continue to promote employment for young people, ensure a safe work environment and proactively work to end all types of discrimination. Cooperation and partnerships with various stakeholders are fundamental to make the transformation to a sustainable world by 2030, as reflected in global goals 16 and 17.
Read more at: www.ncc.group/globalgoals.
NCC's sustainability work is the foundation for the Group's future development. The purpose of NCC's sustainability work is 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. NCC's sustainability framework illuminates the most important areas for our sustainability work: Health and Safety, Social inclusion, Materials and Waste, Climate and Energy, Compliance and Portfolio performance. These areas link closely with the Sustainable Development Goals and show that NCC has an important role to play in the transition of society.
NCC has set targets for 2016–2020 for all areas in the framework. The targets and outcomes for the year are reported on p. 81. For each area, there are also long-term sustainability objectives that relate to the changed market conditions, outline the path ahead and provide a direction and stability for the Group's long-term sustainability work.
| 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 2019 46% Target for 2020 50% reduction in number
of accidents compared with 2015.
¹) Worksite accidents resulting in one day or more of absence from work per million worked hours.
Outcome 2019
7.0
The accident frequency declined from 9.5 in 2018 to 7.0 in 2019, which is the lowest level recorded since measurements began. Proactive work to improve analyses and a long-term focus contributed to the positive outcome. Occupational health and safety remains one of our foremost focus areas for 2020 and our long-term aim of halving accidents between 2015 and 2020 stands firm.
Target, gender: No gender should represent a higher share of a team than 70%¹)
Outcome 2019 45%
¹) Management teams
Ton waste per turnover SEK M
No age group (<34 years, 35–49 years, >50 years) should represent a higher share of a business area than 70 percent.
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.
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 turnover is decreasing.
As of 2019, the number of management teams in the survey was expanded to include all management teams from the Executive Team to department management or the equivalent. NCC also noted positive development during the year in terms of ethnic diversity.
As a result of targeted action and commitment within the organization, the amount of construction waste was reduced in 2019, in both absolute terms and in relation to turnover of the construction operations. The total amount of waste decreased by 25 percent compared with 2015 and 7 percent compared with 2018. The amount of waste per SEK 1 M turnover was reduced from 1.64 tons/SEK M in 2015 to 1.14 tons/SEK M in 2019, or by 31 percent.
Emissions of greenhouse gases from its own operations per turnover SEK M
Target for 2020 50% reduction in CO2 emissions by 2020, compared with 2015.
Carbon emissions, related both to purchased fuels and to electricity, district heating and district cooling, have declined since the base year 2015. This was due to energyefficiency improvements, an increased use of renewable fuels and a transition to electricity from renewable sources. Relative to turnover, NCC's greenhouse gas emissions from own operations have been reduced by 37 percent since 2015.
CULTURE Our aim is to have a 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 2016–2020. TRANSPARENCY We disclose our number
of Tell Me matters and Ask Me questions
in our Annual Report.
60 Number of Ask-me questions and Tell-me matters
79 (76) High rating 75–100 Average rating 60–74 Low rating 0–59 Index rating in NCC Pulse
We provide superior sustainable solutions To be able to track NCC's portfolio performance in line with the market's increasing demand for sustainable products and services, NCC measures the company's portfolio performance by monitoring net sales of sustainable products, services and concepts. Work is under way to develop a governing follow-up process for sustainable offerings.
Sustainability work in NCC is governed, inter alia, 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 Team is responsible for compliance with the Code of Conduct, which is continuously followed up within the framework of operating activities. Awareness of the Code of Conduct at NCC is very high. According to NCC's employee survey, NCC Pulse, employees believe to an increasing extent that NCC's values and Code of Conduct provide guidance in their work.
NCC's business partners play an important role in the operations and NCC expects that they will also respect and live up to the Group's values. In 2019, NCC implemented a Code of Conduct adapted for suppliers. This applies to all parties who supply NCC with products, personnel or services, including direct and indirect suppliers, service suppliers, subcontractors, intermediaries and agents, as well as, where relevant, employees of suppliers and their subcontractors and agents.
NCC Compass is a support to managers and 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 requirements, guidelines and general advice, also features an Ask Me and a Tell Me function.
The Ask Me function was created to assist employees in making the right decisions. This function is managed by 55 specially trained employees, 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, when needed, with external expertise, to guarantee legally secure treatment.
The Ask Me function received 35 questions (55) during the year, which was fewer than in 2018. The main reason for the decline was that the number of questions related to everyday operating activities was lower. Many questions were about business entertainment and gifts. Frequently asked questions are compiled in NCC Compass. In 2019, 30 (27) suspected cases were reported in the Tell Me function, which was in line with the preceding year. A number of incidents were also reported in other ways. This resulted in a total of 53 (44) 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, three led to dismissal and 21 to other actions, such as the employees deciding to resign, to changes in procedures and processes or to targeted communication measures.
Information on how the Group manages personal data and any inquiries and incidents in accordance with GDPR is available on both NCC's external website and intranet.
NCC continuously provides compliance, anti-corruption and GDPR training to its employees. During the year, 1,900 employees received compliance training and 1,500 received GDPR training.
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.
| NCC'S POLICIES | |||
|---|---|---|---|
| Area | Anti-corruption | The environment | Social issues incl. HR and human rights |
| Policies | • Code of Conduct • Code of Conduct for Suppliers • NCC Compass |
• Code of Conduct • Code of Conduct for Suppliers • Sustainability Policy featuring an Environmental Policy |
• Code of Conduct • Code of Conduct for Suppliers • NCC Compass • Health and Safety Policy • Diversity Policy • Directive on alcohol and drug use |
| Main areas | • Business ethics • Compliance and tools for business ethics |
• Environmental responsibility • Product and service development • Precautionary approach |
• Human rights • Occupational health and safety • Recruitment • Training and education |
NCC has collective agreements that regulate minimum wages, working hours and employees' rights in relation to the employer in all markets. 93 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 the digital service UE-kedja (Subcontractor Chain), which makes it easier to track all the subcontractors active at construction sites, and who has been commissioned for what. This service has been tested with favorable results in a number of projects. NCC is maintaining a close dialog with Infobric and implementation will continue in the year ahead.
| EMPLOYMENT | PERMANENT | TEMPORARY EMPLOYMENT |
|||
|---|---|---|---|---|---|
| NUMBER OF EMPLOYEES | Men | Women | Men | Women | |
| Sweden | 7,469 | 1,347 | 288 | 48 | |
| Norway | 1,319 | 154 | 50 | 11 | |
| Denmark | 1,912 | 275 | 34 | 7 | |
| Finland | 1,169 | 281 | 45 | 6 | |
| Total, NCC | 11,869 | 2,057 | 417 | 72 | 14,415 |
| FULL-TIME | PART-TIME | ||||
|---|---|---|---|---|---|
| NUMBER OF EMPLOYEES | Men | Women | Men | Women | |
| Sweden | 3,411 | 1,262 | 42 | 65 | |
| Norway | 492 | 127 | 3 | 7 | |
| Denmark | 725 | 221 | 11 | 30 | |
| Finland | 727 | 241 | 25 | 11 | |
| Total, NCC | 5,355 | 1,851 | 81 | 113 |
Employee data pertains to the number of employees at the end of 2019 and was collected from the Group's HR and payroll system.
GRI 403 Occupational health and safety, and GRI 404 Training and education.
Health and safety include both a safe and secure worksite for the Group's employees and subcontractors and good labor 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. During the year, health and safety efforts were further clarified through a Group directive for occupational health and safety, which specifies the measures that are compulsory at NCC's worksites.
In recent years, NCC has developed processes and tools, and improved the safety culture, to achieve the vision of zero accidents. However, since it is impossible to completely avoid human error, work to develop safety barriers to separate people from the risk of an accident continues. NCC has identified three high-risk areas: working at heights, heavy lifts by construction cranes and work in heavily trafficked environments. Using an additional measurement ratio, NCC is strengthening its follow-up of activities for serious accidents leading to protracted absence from work. In 2019, tests of digital safety barriers were conducted together with external suppliers to study the risk arising from interaction between people and heavy lifts by cranes. Using cameras fitted to a tower crane's boom, images are collected that are then processed in a computer placed inside the crane cabin. This is done to immediately warn the crane operator and any people on the ground, and thus avoid a risky situation.
NCC has also identified a number of risk areas for the Group's employees and subcontractors that could lead to illness, such as working with asbestos, strain injuries and working with quartzite dust.
Health and safety incidents are reported to Synergi, the Group's digital system, which functions as both an online system and an app. The system is used to report and follow up accidents, incidents and negative and positive observations. Since the introduction of Synergi, an increase in reporting has been noted and there is now a qualitative amount of data that enables detailed and precise analyses in preventive occupational health and safety work.
Every year, a number of activities are conducted to increase occupational health and safety awareness. In May, the Health and Safety Week is arranged, at which all worksites reserve time for activities related to occupational health and safety. The focus at offices throughout the Nordic region was primarily on the organizational and social work environment. On September 4, the Awareness Day was held for the ninth consecutive year, with the focus on behavior and values, and how these affect occupational health and safety work. Tools were
1) Collected through Synergi and payroll systems.
2) Number of lost working days during the year per 100 full-time employees.
| 2019 | 2018 | |
|---|---|---|
| Sweden | 8,413 | 6,494 |
| Norway | 5,290 | 5,012 |
| Denmark | 6,440 | 8,385 |
| Finland | 17,825 | 14,412 |
| Total | 37,969 | 34,303 |
We note a continued positive trend in the reporting level and quality of Synergi, NCC's reporting and analysis system, which provides a solid foundation for NCC's strategic occupational health and safety work.
| Injuries1) Injuries resulting in one day or more of sickness absence |
Injury frequency Injuries resulting in one day or more of sickness absence per million hours worked |
Injuries Injuries resulting in four days or more of sickness absence |
Injury frequency Injuries resulting in four days or more of sickness absence per million hours worked |
Work-related fatalities |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||
| Sweden | NCC employees | 116 | 148 | 7.5 | 9.5 | 65 | 86 | 4.2 | 5.5 | 0 | 0 |
| Subcontractors | 133 | 113 | 14.4 | 12.8 | 1 | 0 | |||||
| Norway | NCC employees | 10 | 20 | 3 | 5.4 | 7 | 16 | 2.1 | 4.3 | 0 | 0 |
| Subcontractors | 4 | 10 | 0.6 | 2.8 | 0 | 0 | |||||
| Denmark | NCC employees | 28 | 44 | 8 | 13.4 | 12 | 26 | 3.4 | 8 | 0 | 0 |
| Subcontractors | 28 | 32 | 8.9 | 9.5 | 0 | 0 | |||||
| Finland | NCC employees | 20 | 34 | 7.2 | 11.6 | 17 | 21 | 6.1 | 7.2 | 0 | 0 |
| Subcontractors | 53 | 39 | 13.3 | 14.5 | 0 | 0 | |||||
| Total | NCC2) | 176 | 257 | 7.0 | 9.5 | 103 | 156 | 4.1 | 5.8 | 0 | 0 |
| Subcontractors | 218 | 194 | 9.5 | 9,7 | 1 | 0 |
1) Crushing/cuts and trips/falls are the most common injuries.
2) Total NCC employees, including Safida Montage
downed at 9:00 a.m. at all of NCC's worksites. A Group-wide discussion was held at worksites, during which all employees reflected and put forward thoughts and ideas on how the worksite can be made safer and what each individual can do to foster a good safety culture.
On October 7, Sweden's first physical safety training park was inaugurated, with NCC as one of the arranging parties. The industry-wide safety training park enables employees of the construction industry to practice and refine safety awareness in real-life environments, thus strengthening the safety culture. The Swedish safety training park is based on a concept from Finland, which currently has three safety training parks. NCC is a multi-year partner to the Finnish concept, which has greatly benefited the company's safety culture.
Attracting, developing and retaining employees so that the right expertise is available in the future is a key issue for the industry. Today, there is considerable focus on digitalization and efficient project management, which are areas where NCC aims to take the lead. NCC works in many ways to create a sustainable career for its employees, by means of continuous skills development. Employees are offered continuous skills development in the form of traditional courses, e-learning or mentorship and through development initiatives adapted to the requirements of the individual and NCC's needs. During the year, NCC took several actions to further enhance the skills of key personnel among the production workforce. These included a widespread effort to map the competency of project managers in order to adapt skills development at the individual and team level, a new training course in general project management and the continuation of joint training of project managers for megaprojects in all Nordic countries.
Sustainability is a high-priority area and, since the launch of sustainability training in 2017, just over 4,500 white collar employees at NCC have completed or started a digital interactive course in sustainability comprising the six components of NCC's sustainability framework.
| 2019 | ||||
|---|---|---|---|---|
| Women | Men | Total | 2018 | |
| Hours of training, Sweden |
||||
| White-collar employees | 16,1 | 23,1 | 21,2 | 34,8 |
| Blue-collar employees | 15,2 | 9,0 | 9,1 | 13,7 |
| Hours of training, Nordic region |
||||
| White-collar employees | 13,4 | 17,8 | 16,6 | 27,5 |
| Blue-collar employees | 6,3 | 6,6 | 6,6 | 8,7 |
Since a large part of the training activities is managed and administered locally in the various countries and projects, these are not reported in the above account.
GRI 405 Diversity and equal opportunity and GRI 406 Non-discrimination.
NCC 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. This is exemplified by NCC's "Socialt hållbara projekt" (Socially sustainable projects) concept, which defines and clarifies projects in respect of work involving social aspects.
Diversity and equal opportunity are important elements of NCC's efforts to offer an inclusive worksite where employees perform, develop and have job satisfaction. 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, diversity targets for 2016–2020 (read more on p. 81), NCC's Code of Conduct and NCC Compass.
NCC's Diversity Policy is based on the conviction that diversity contributes to 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, functional disability or age. NCC does not accept any form of discrimination and acts forcefully when incidents are reported.
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.
NCC worked systematically on its values during the year. Nearly half of the employees in NCC Infrastructure in Sweden and NCC Building Sweden attended value-based workshops. A total of 100 moderators from the various business areas have been trained in holding these workshops and will thereafter act as ambassadors in core values-related activities, while disseminating and enhancing knowledge of NCC's values, diversity and inclusion within the organization. The initiative will continue in 2020.
NCC's womens network Stella is a driver for more gender-equal norms in the construction industry and is working to promote an increase in female managers. The network also 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 around 500 members and offers network meetings, lectures and workshops.
In 2019, a pilot project was started in Rinkeby within the framework of NCC's partnership with Fryshuset. This partnership is a feature of NCC's role as a community developer and NCC believes that it can lead to inclusive construction sites, inspire young people to study and promote integration into society.
Starting in 2019, NCC participated in the "Tekniksprånget" (Technology Leap), an internship program whereby Swedish employers and the government jointly invest in ensuring the future supply of competencies to the industry by attracting more young people to tertiary technical programs.
With a focus on dialog and multidisciplinary cooperation in the fields of climate and sustainability, CONCITO, the Center for Building Preservation in Raadvad, Denmark, arranged the NCC Winter Academy for the fifth consecutive year. This event, which is arranged by NCC in cooperation with the Center for Building Preservation, was held in Copenhagen in March and the theme was construction, housing and sustainability. The vision for the NCC Winter Academy is to collaborate with and educate young people through meetings between students and various occupational groups in society.
| 2019 | 2018 | ||||
|---|---|---|---|---|---|
| PROPORTION, % | Women | Men | Women | Men | |
| Board of Directors | 50 | 50 | 63 | 37 | |
| Executive Team | 25 | 75 | 38 | 62 | |
| Management teams | 32 | 68 | 40 | 60 | |
| Managers | 17 | 83 | 14 | 86 | |
| Employees | 15 | 85 | 14 | 86 | |
| White-collar employees | 26 | 74 | 26 | 74 | |
| Workers | 2.4 | 97.6 | 2.6 | 97.4 |
As of 2019, the number of management teams in the survey has been expanded to include all management teams from the Executive Team to department management or the equivalent.
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| PROPORTION, % | ≤34 years |
35–49 years |
≥50 years |
≤34 years |
35–49 years |
≥50 years |
||
| Board of Directors | 0 | 13 | 87 | 0 | 13 | 87 | ||
| Executive Team | 0 | 38 | 62 | 0 | 38 | 62 | ||
| Management teams | 4 | 51 | 45 | 3 | 43 | 54 | ||
| Managers | 9 | 49 | 42 | 10 | 46 | 43 | ||
| Employees | 29 | 34 | 37 | 29 | 34 | 37 | ||
| White-collar employees | 25 | 40 | 35 | 25 | 40 | 35 | ||
| Workers | 32 | 29 | 39 | 34 | 28 | 38 |
No confirmed cases of violations of human rights were reported during the year. In NCC's employee satisfaction survey, NCC Pulse, 5 percent (6) responded that they had experienced discrimination due to gender or age, harassment or bullying during 2019, a decrease compared with 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 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.
NCC has also developed an e-learning course, Värderingskollen (Values Check), to help employees reflect on how NCC's values can be used in daily work in order to contribute to a work climate where everyone feels a sense of job satisfaction and included.
There are also risks of human rights crimes in NCC's value chain and they could also arise at the purchasing level in risk areas. NCC has a thorough process for supplier assessment in third countries, which includes assessing and ensuring that we do not do business with suppliers who do not respect human rights. No violations were reported during the year. Also refer to the risk section on p. 20.
GRI 301 Materials and GRI 306 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 2016–2020 is to increase the proportion of materials sent for reuse or materials recycling while reducing the total amount of waste. Read more on p. 81.
NCC aims to produce buildings and civil engineering structures that are content-declared and only comprise products that are sound from an environmental and health perspective. Ultimately, the aim is that buildings will increasingly be designed to allow for their input materials to be recycled when the service life of the building 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.
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 launched a platform, Reused by NCC, which enables projects to share surplus materials with other projects within the Group. NCC Building's increased use of the flooring industry's return systems for installation residue is another example of a contribution to a circular flow. By updating contract templates and information to the departments, awareness is increased and more distinct processes are created. Together with the flooring industry, NCC has also developed a traceability system for flooring residue, which facilitates greater control of return flows for plastics in the industry.
NCC, together with Axfood, H&M, Houdini, IKEA, SSAB, Tarkett and the Swedish Recycling Industries' Association, has launched the Circular Sweden corporate forum. The aim is to move policies and development forward towards more circular material flows. The point of departure is that resource-efficient societal responsibility is an important part of the solution to climate change and that a shift from linear to circular material flows is necessary to maintain welfare levels in the future.
In Denmark, NCC has been active in the "Gentræ" project, an industry-wide innovation project within the framework of "Circular Construction Challenge – Rethink Waste". This project involves the collection of surplus wood from construction sites for resale as recycled wood.
NCC is also continuously improving its recycling capacity in a growing number of asphalt plants, enabling more ecologically adapted operations. In 2019, recycled asphalt granulate accounted for 25 percent (21) of hot asphalt production.
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
| 2019 | 2018 | |||
|---|---|---|---|---|
| total weight, tons | % | total weight, tons | % | |
| Non-hazardous waste | ||||
| Sorting (mixed waste) |
9,802 | 19 | 11,083 | 21 |
| Energy recycling (combustible waste) |
8,894 | 18 | 12,112 | 22 |
| Landfill | 2,887 | 6 | 3,863 | 7 |
| Reuse/materials recycling | 27,662 | 55 | 26,548 | 49 |
| Special treatment (hazardous waste) |
813 | 2 | 629 | 1 |
| Total amount of waste | 50,058 | 54,054 |
The data has been collected from NCC's waste-management partners.
As a result of targeted action and commitment within the organization, the amount of construction waste was reduced in 2019, in both absolute terms and in relation to turnover of the construction operations. The total amount of waste decreased by 25 percent compared with 2015 and 7 percent compared with 2018. The amount of waste per SEK 1 M of turnover was reduced from 1.64 tons/SEK M in 2015 to 1.14 tons/SEK M in 2019, or by 31 percent. Work is continuing to reduce the amount of waste and to ensure that the rate of sorting continues to increase during 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.
research projects in collaboration with other players concerning the recycling of flat glass, concrete, plastics and gypsum and is an active partner in strategic innovation initiatives, such as Smart Built Environment, InfraSweden2030 and Re:Source.
Every year, NCC handles large amounts of construction pallets, which are occasionally thrown in containers at construction sites. NCC Building Sweden and NCC Infrastructure have 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 2019, NCC returned just over 41,000 pallets.
Increased standardization is a key component of a more sustainable use of materials. A large amount of the work involving articles is currently conducted manually, which often leads to high costs and difficulties in optimizing construction and management from a sustainability viewpoint.
The Swedish construction industry was the first in the world to agree on a joint system for the naming of products in the form of a Global Trade Item Number, GTIN, designed to meet future demands for a digitalalized, traceable and sustainable construction process. Each unique product is assigned a GTIN, which can be utilized in a bar code and read by a scanner. 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.
NCC has also participated in work to devise an open system for describing sustainability information about an article in a standardized and internationally usable format. Available article information facilitates, for example, procurement based on sustainability parameters, reduced waste, increased useful life of buildings, increased reuse and recycling and better measurement and reporting of climate impact.
GRI 302 Energy and GRI 305 Emissions.
Since the construction industry emits considerable amounts of greenhouse gas emissions, climate change is a high-priority matter for NCC. By using new technology, for example, emissions from production, operation 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 sustainable 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 and through lifecycle analyses and training. NCC joined Fossil-free Sweden in 2018. This initiative forms a platform for collaboration and dialog among more than 300 players intent on making Sweden independent of fossil fuels. In April 2018, the construction and civil engineering industry submitted a joint roadmap, signed by NCC, to the Swedish government showing how the industry aims to use existing technology to halve its emissions by 2030. Work to follow up the roadmap continued in 2019 and NCC is working internally on an action plan that is expected to be completed in the first half of 2020. In Finland, similar work is under way to formulate a road map, in which NCC is also involved.
Since December 2019, NCC, through involvement in three task forces, has been participating in the Danish government's climate initiative with the aim of delivering a number of recommendations for how the construction sector will reduce its emissions of greenhouse gases to meet the government's target of a 70-percent reduction 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 63 stationary plants that produce hot asphalt. By switching to renewable fuels, such 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 27 of a total of 32 asphalt plant for the use of biofuel. NCC is also endeavoring to develop more sustainable products, in part by increasing the portion of recycled
asphalt in production. Another example of environmental activities is NCC Green Asphalt, hot asphalt produced by a manufacturing method that generates significantly lower carbon emissions than conventional production of hot asphalt. NCC currently has some 60 facilities that can produce NCC Green Asphalt, which corresponds to more than 80 percent of the facilities. The recycling rate for asphalt (reclaimed asphalt pavement or RAP), is 25 percent (21). To reduce the Group's other carbon emissions, NCC's business areas are working on a range of initiatives such as energy-efficiency improvements, an increased mix of renewable fuel in machinery and vehicles, energy-efficient portacabins and a continued transition to green-labeled electricity. In Norway, a considerable focus is on fossil-free worksites, meaning that only fossil-free fuels or electric machinery will be used at worksites. In 2019, six of NCC's worksites in Norway were fossil free.
NCC participates annually in the CDP's climate change program, in which additional details about the Group's energy consumption and emissions are reported. In 2019, NCC was ranked at the leadership level for the second consecutive year, which is higher than the average for the construction sector and for the total of 8,400 companies that responded to the questionnaire.
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 greenhouse gas emissions from electricity and heating. NCC does not use climate
| MWh | 2019 | Change com- pared with base year 2015, % |
2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| Electricity from renewable sources1) |
157,204 | 54 | 152,259 | 118,754 | 108,927 |
| Other electricity | 13,535 | –90 | 18,559 | 55,259 | 102,861 |
| Electricity, total | 170,736 | –27 | 170,817 | 174,013 | 211,787 |
1) Hydroelectric and wind power.
A key aspect of work toward achieving the target of halving greenhouse gas emissions by 2020 is improved energy efficiency, and replacing fossil-based energy with energy from renewable sources. In 2019, 92 percent of all electricity purchased by NCC was either eco-labeled as "Bra Miljöval" (good environmental choice) or origin-labeled using guarantees of origin. The amount of fossil-based electricity has been reduced by 90 percent since 2015.
| MWh | 2019 | Change com pared with base year 2015, % |
2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| District cooling | 598 | 187 | 624 | 22 | 1,286 |
| District heating | 42,508 | –14 | 29,156 | 29,207 | 48,933 |
| District heating/ district cooling, total |
43,106 | –13 | 29,780 | 29,229 | 50,219 |
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.
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.
NCC measures its operations' carbon emissions in scope 1 and 2, with scope 1 referring to emissions related to the use of fuel in asphalt plants and from own vehicles and machinery, while scope 2 refers to emissions related to the production of the electricity, district heating and district cooling used by the operations. Scope 3 refers to indirect emissions from purchased material and external services, travel, subcontractors' vehicles and machinery, transportation, demolition of the Group's products and waste. In many industries, the largest emissions are in scope 3, which is why it is important to also measure and set targets for these. In construction and civil engineering, considerable indirect emissions derive from key input materials, such as concrete, steel and transportation. NCC has started to map these emissions and will gradually take relevant actions to reduce its climate footprint in scope 3. In 2019, for example, NCC implemented a new system for more efficient collection and measurement of carbon emissions in order to increase its understanding of the climate impact of various choices of materials. The intention is for suppliers to able to report their data directly in the system in the future and to thus more clearly illuminate scope 3.
NCC Infrastructure, together with data from suppliers, has calculated the climate impact of concrete and computed statistics on the use of concrete for 2017 and 2018. The business area has set the target of reducing its climate impact by 10 percent by 2020 compared with 2018, in part through employee training, to thereby create conditions for more sustainable choices of concrete.
NCC supports the recommendations that the TCFD (Task Force on Climate-related Financial Disclosures) has formulated concerning reporting of climate-related information. By working with climate-related risks, knowledge is enhanced and thus also opportunities to make well-founded decisions, develop new products and services, manage forthcoming regulations and become more competitive.
| MWh | 2019 | Change com- pared with base year 2015, % |
2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| Renewable fuels | 137,273 | 31 | 111,879 | 114,206 | 87,893 |
| Fossil fuels | 854,982 | –17 | 889,356 | 951,544 | 906,966 |
| Fuels, total | 992,255 | –13 | 1,001,234 | 1,065,750 994,859 |
NCC continues to reduce its use of fossil fuels. Since 2015, their use has been reduced by 17 percent, due largely to the continued conversion to biofuels in the Swedish asphalt plants.
| MARKET-BASED | 2019 | Change com pared with base year 2015, % |
2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| Greenhouse gas emis sions1) CO2e (tons, 000) |
216 | –31 | 227 | 260 | 267 |
| – of which, scope 12) | 209 | –18 | 217 | 234 | 223 |
| – of which, scope 23) | 7 | –88 | 10 | 26 | 44 |
| Net sales, SEK M | 58,234 | 10 | 57,346 | 54,608 | 52,934 |
| CO2e (ton)/SEK M | 3.7 | –37 | 4.0 | 4.8 | 5.0 |
1) Greenhouse gases N2O, CH4 and CO2 are included in the calculations.
2) Refers to direct emissions from NCC's operations, of which –0.6 (tons 000) derived from the combustion of biomass (2019).
3) Refers to indirect emissions from electricity and heat.
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 energy-efficiency improvements, an increased use of renewable fuels and a transition to electricity from renewable sources. Relative to sales, NCC's greenhouse gas emissions from own operations have been reduced by 37 percent since 2015.
Climate change is 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.
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. Furthermore, NCC is reviewing its production processes and working to enhance the efficiency of these so as to gradually reduce the negative environmental impact.
NCC and Volvo Trucks have jointly developed a digital service to increase the efficiency of loading and removal of excavation rubble. By having diggers and trucks that remove clay, earth and stone connected to a digital weighbridge, the load capacity of the vehicles can be optimized for each transport. During the year, the service was tested at NCC's construction site for the Centralen subproject of the West Link and calculations indicate that the number of truck journeys can be reduced by up to 8,000, corresponding to a 1,000-ton reduction in carbon emissions during the course of the eight-year project.
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.
An environmental product declaration (EPD) describes the environmental impact of a product or service and helps customers make more informed product choices. NCC has developed a process for making its own EPDs for stone and asphalt products from the NCC Industry
business area. The process was certified by Bureau Veritas in November 2019. With knowledge of a product's environmental performance, NCC can conduct systematic work to reduce the product's carbon footprint. NCC used life cycle analyses, LCAs, to formulate EPDs. Using LCA calculations, NCC is able to make simulations and then implement changes in production that reduce the environmental impact. In Finland for the past ten years, NCC has been using an inhousedeveloped calculation tool to calculate the carbon footprint.
EPDs are an important step in NCC's endeavors to increase transparency and also enable NCC to deliver requested scope 3 information to its customers, which few suppliers in the industry can do today.
External suppliers, such as the Swedish Transport Administration, require climate calculations for all projects with a value exceeding SEK 50 M. This means that as early as in the tendering phase, NCC analyzes and offers various alternatives for meeting the targets set for the project. The more stringent requirements thus affect the work tools used in operations at the tendering phase, and these adaptations are currently a work in progress.
GRI 205 Anti-corruption, GRI 206 Anti-competitive behavior, GRI 305 Supplier environmental assessment and GRI 414 Supplier social assessment.
NCC will always be a trustworthy partner acting with high ethical standards and transparency. The Group's Code of Conduct is an important feature of the compliance agenda, 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, for example, in connection with competitive situations and in terms of business ethics. NCC is a member of Transparency International Supplies Forum Sweden, complies with the Code of Business Conduct issued by the Swedish Anti-Corruption Institute and has a policy and guidelines for its anticorruption efforts. 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." NCC also participated in the formation of a Swedish Ethical Trading Initiative (ETI), a joint initiative to promote good labor conditions in producing countries.
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 to NCC: bribery and corruption, competition law and conflicts of interest. During the year, NCC dealt with seven cases of suspected corruption involving, inter alia, breach of trust, fraud and embezzlement. Six cases of conflicts of interest involving transactions with own companies, organizations and related parties that contravened NCC's rules were also dealt with 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. In 2019, NCC implemented a Code of Conduct for suppliers. Read more under Sustainability governance on p. 82.
NCC has business relationships 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, Safida Montage. Safida 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.
NCC works continuously on developing the quality of follow-up in relation to 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 oneto three-year supplier-assessment and supplier-performance audit cycle. Noncompliances that are noted during 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 high-risk countries (according to Amfori BSCI's definition), audits performed by internal staff are combined with third-party audits performed with the help of external experts.
GRI G4 Construction and Real Estate Sector Supplement: Marketing and labeling.
The Group's product portfolio includes 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 and strengthen 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, Miljobyggnad, CEEQUAL, BREEAM, LEED, DGNB and Citylab are used for housing and infrastructure projects, as well as whole city districts. BREEAM and DGNB are used for the projects that NCC develops itself.
NCC has also developed its own certification system, named "Sustainable Sites", to create a shared platform upon which to base the sustainability work at all NCC worksites, regardless of country or type of operation. The tool is mandatory for all projects in NCC Building Sweden with a project value exceeding SEK 50 M and in NCC Infrastructure Sweden for projects with a project value exceeding SEK 100 M.
NCC contributes to favorable social and urban development by providing sustainable solutions. In 2019, NCC Industry worked on developing its portfolio of sustainable products, services and methods and collected them in three concepts under the joint heading of "Smart choices for a better world":
NCC Kielo, a method for creating and retaining biodiversity in NCC's quarries, is an example of a method that supports smart choices for a better world.
For the first time ever, NCC issued green bonds of SEK 1.6 billion in 2019 that were listed on Nasdaq Stockholm. Furthermore, NCC refinanced SEK 100 M on the basis of a green private placement. The intention is to finance investments in sustainable property development projects, conversion to renewable energy sources in asphalt production, reuse at construction sites and other green investments.
The green framework for the bonds has been verified by the Center for International Climate and Environmental Research (CICERO), an independent research center connected to the University of Oslo. The framework is classified as Medium Green, the second highest level in CICERO's ratings, and the governance structure is Excellent, which is the highest rating.
Excavation in connection with pipeline installation results in a considerable strain on the environment. The widespread use of transportation and machinery entails considerable energy consumption and carbon emissions. The method also entails the use, processing and production of such finite resources as gravel, stone materials and asphalt products and has an adverse environmental footprint.
NoDig is an NCC service for sustainable upgrading of pipelines that minimizes the need of excavation. Instead of digging up water and sewage lines and replacing them, existing lines are upgraded in a climate-smart manner by only excavating at two ends of the line. The service is cost effective and results in less disruption of the street environment, shortens the project period, requires significantly less resources and considerably reduces the climate footprint.
| NORDIC SWAN ECOLABEL |
BREEAM | LEED | DGNB | MILJÖBYGGNAD | |||||
|---|---|---|---|---|---|---|---|---|---|
| CERTIFICATION SYSTEMS | Number | Grade | Number | Grade | Number | Grade | Number | Grade | Number |
| NCC | Pass | Bronze | Bronze | Bronze | |||||
| Good | Silver | Silver | Silver | 9 | |||||
| Very Good | 5 | Gold | 4 | Gold | Gold | 3 | |||
| Excellent | 4 | Platinum | Platinum | ||||||
| 3 | Outstanding | ||||||||
| Total 2019 (2018) | 3 (15) | 9 (3) | 4 (0) | 0 (2) | 12 (48) |
That buildings are constructed to satisfy ambitious certification requirements has become a matter of course in many construction projects; however, it is not equally self-evident that the building will be actually certified. As of 2019, preliminary certifications are not included in the table; only certifications implemented during the year.
NCC uses analyses of strategic issues, driving forces 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, Norway, Denmark and Finland 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-related and environmental criteria.
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). NCC also measures the Group's
| 2019 | 2018 |
|---|---|
| 58,262 | 57,400 |
| –44,673 | –45,366 |
| –9,392 | –9,828 |
| –112 | –85 |
| –3,211 | –2,869 |
| –540¹) | –4321) |
| 334 | –1,180 |
1) Proposed dividend.
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 2019 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. 78–91. For the GRI index, refer to the following pages. The report has not been examined by a third party. The Report on the 2019 fiscal year was published on March 9, 2020. Unless otherwise stated, all the information pertains to the entire NCC Group.
Contact: Chief Financial Officer Susanne Lithander, +46 8 585 510 00, [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. 1–11, pp. 20–22 and pp. 78–91.
NCC's business model and sustainability framework are presented on pp. 78–79, environment on pp. 80–81 and 86–89, social conditions on pp. 80–81, 85 and 89, personnel on pp. 80–81 and 83–85, human rights on pp. 80–82, 85 and 89 and anticorruption on pp. 80–82 and 89. Risk descriptions are presented on pp. 20–22.
Unless otherwise stated, the information pertains to the entire NCC Group, including subsidiaries.
reputation among decision-makers, interest organizations and the general public.
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 pervade every link of the value chain, and their significant impact on the value chain is presented in the table below.
| Significant impact | ||||||
|---|---|---|---|---|---|---|
| of suppliers | of NCC's operations |
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.
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 2019 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.
A statutory sustainability report has been prepared.
Stockholm 6 March 2020 PricewaterhouseCoopers AB
Ann-Christine Hägglund Erik Bergh Authorized Public Accountant Authorized Public Accountant Auditor-in-charge
| UN Global Compact |
|||||
|---|---|---|---|---|---|
| GRI standard | Disclosure | Principles | Page reference | Omissions | |
| GRI 101: Foundation 2016 GRI 102: General Disclosures 2016 |
|||||
| Organizational profile | |||||
| 102-1 | Name of the organization | 12 | |||
| 102-2 | Activities, brands, products and services | 6–7, 12, 15–17 | |||
| 102-3 | Location of headquarters | 12 | |||
| 102-4 | Location of operations | 6–7 | |||
| 102-5 | Ownership and legal form | 19, 94 | |||
| 102-6 | Markets served | 6–7, 13–15 | |||
| 102-7 | Scale of the organization | 1, 6–7, 13–15, 22–23, 83 |
|||
| 102-8 | Information on employees and other workers | 83 | |||
| 102-9 | Supply chain | 89–91 | |||
| 102-10 | Significant changes to the organization and its supply chain |
22 | |||
| 102-11 | Precautionary Principle or approach | 7 | 82 | ||
| 102-12 | External initiatives | 82, 86–89 | |||
| 102-13 | Membership of organizations | 82, 85–89 | |||
| Strategy | |||||
| 102-14 | Statement from senior decision-maker | 2–5 | |||
| 102-15 | Key impacts, risks and opportunities | 20–21, 78 | |||
| Ethics and integrity | |||||
| 102-16 | Values, principles, standards and norms of behavior | 1–10 | 11, 78–79, 82, 89–91 |
||
| Governance | |||||
| 102-18 | Governance structure | 82, 94–95 | |||
| Stakeholder engagement | |||||
| 102-40 | List of stakeholder groups | 91 | |||
| 102-41 | Collective bargaining agreements | 3 | 83 | ||
| 102-42 | Identifying and selecting stakeholders | 91 | |||
| 102-43 | Approach to stakeholder engagement | 91 | |||
| 102-44 | Key topics and concerns raised | 91 | |||
| Reporting practice | |||||
| 102-45 | Entities included in the consolidated financial statements | 45 | |||
| 102-46 102-47 |
Defining report content and topic Boundaries List of material topics |
91 91 |
|||
| 102-48 | Restatements of information | No restatements. | |||
| 102-49 | Changes in reporting | No changes. | |||
| 102-50 | Reporting period | 12, 91 | |||
| 102-51 | Date of most recent report | 91 | |||
| 102-52 | Reporting cycle | 91 | |||
| 102-53 | Contact point for questions regarding the report | 91 | |||
| 102-54 | Claims of reporting in accordance with the GRI Standards | 91 | |||
| 102-55 | GRI content index | 92–93 | |||
| 102-56 | External assurance | 91 | |||
| GRI 200: Economic standards | |||||
| Economic performance | |||||
| GRI 103: Management approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 91 | ||
| GRI 201: Economic Performance 2016 |
201-1 | Direct economic value generated and distributed | 91 | ||
| 201-2 | Financial implications and other risks and opportunities due to climate change |
88–89 | |||
| 201-3 | 18, 41–44 | ||||
| Anti-corruption | 10 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–82, 91 | ||
| GRI 205: Anticorruption 2016 |
205-1 | Operations assessed for risks related to corruption | 89 | ||
| 205-2 | Communication and training about anti-corruption policies and procedures |
82, 89 | |||
| 205-3 | Confirmed incidents of corruption and actions taken | 82, 89 | |||
| Anti-competitive behavior | 10 | ||||
| GRI 103: Management approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–82, 91 | ||
| GRI 206: Anti-competi tive Behavior 2016 |
206-1 | Legal actions for anti-competitive behavior, anti-trust, and monopoly practices |
55 |
| UN Global Compact |
|||||
|---|---|---|---|---|---|
| GRI standard | Disclosure | Principles | Page reference | Omissions | |
| GRI 300: Environmental standards | |||||
| Material | 7, 8, 9 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 82, 86–87, 91 |
||
| GRI 301: Materials | 301–2 | Recycled input materials used | 86 | Material in NCC's industrial operations. |
|
| Energy | 7, 8, 9 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 87–89, 91 |
||
| GRI 302: Energy 2016 | 302-1 | Energy consumption within the organization | 87–89 | ||
| 302-4 | Reduction of energy consumption | 87–89 | |||
| Emissions | 7, 8, 9 | ||||
| GRI 103: Management | 103-1−3 | Explanation of the material topic, its Boundary and | 78–81, 87–89, | ||
| Approach 2016 | management approach | 91 | |||
| GRI 305: Emissions 2016 | 305-1 305-2 |
Direct (Scope 1) GHG emissions Energy indirect (Scope 2) GHG emissions |
87–89 87–89 |
||
| 305-4 | GHG emissions intensity | 81, 87–89 | |||
| 305-5 | Reduction in GHG emissions | 81, 87–89 | |||
| Waste and effluents | 7, 8, 9 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 87–89, 91 |
||
| GRI 306: Effluents and waste 2016 |
306-2 | Waste by type and disposal method | 86–87 | ||
| Supplier environmental assessment | 7, 8, 9 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–82, 89, 91 | ||
| GRI 308: Supplier Environmental Assessment 2016 |
308-1 | New suppliers that were screened using environmental criteria |
89 | Quantitative data is not avail able due to limitations in the data collection. Actions have been taken to improve the possibilities of reporting on this disclosure in the future. |
|
| GRI 400: Social standards | |||||
| Occupational health and safety | |||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 83–84, 91 |
||
| GRI 403: Occupational Health and Safety 2016 |
403-2 | Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities |
83–84 | Data on sickness absence and lost day rate for subcontractors, as well as data per gender, is not available due to limitations in the data collection |
|
| 403-3 | Workers with high incidence or high risk of diseases related to their occupation |
83–84 | |||
| Training | 1–10 | ||||
| GRI 103: Management | 103-1−3 | Explanation of the material topic, its Boundary and | 78–81, 83–84, | ||
| Approach 2016 | management approach | 91 | |||
| GRI 404: Training and Education 2016 |
404-1 | Average hours of training per year per employee | 84 | Only reported on Group level and for Sweden due to limita tions in the data collection. |
|
| Diversity and equal opportunity | 6 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–82, 85, 91 | ||
| GRI 405: Diversity and Equal Opportunity 2016 |
405-1 | Diversity of governance bodies and employees | 85 | Age breakdown is reported in accordance with the categories in NCC's diversity objectives. |
|
| Non-discrimination | 6 | ||||
| GRI 103: Management | 103-1−3 | Explanation of the material topic, its Boundary and | 78–82, 85, 91 | ||
| Approach 2016 GRI 406: Non-discrimi |
406-1 | management approach Incidents of discrimination and corrective actions taken |
85 | ||
| nation 2016 | |||||
| Supplier social assessment | 1–6, 10 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–82, 89, 91 | ||
| GRI 414: Supplier Social Assessment 2016 |
414-1 | New suppliers that were screened using social criteria | 89 | Quantitative data is not avail able due to limitations in the data collection. Actions have been taken to improve the possibilities of reporting on this disclosure in the future. |
|
| Marketing and labeling | 9 | ||||
| GRI 103: Management Approach 2016 |
103-1−3 | Explanation of the material topic, its Boundary and management approach |
78–81, 90, 91 | ||
| GRI G4: Construction and Real Estate Sector Supplement |
CRE8 | Type and number of sustainability certifications, rating and labeling schemes for new construction, management, occupation and redevelopment |
90 | ||
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 AB 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 of NCC AB but is not part of the formal Annual Report documentation.
1
1
2
2
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.
NCC shares are issued in two series, designated Series A and Series B 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 42,010, with Nordstjernan AB as the largest individual holder accounting for 16.83 percent of the share capital and 47.62 percent of the voting rights.
BOARD OF DIRECTORS, AUDIT COMMITTEE AND PROJECT COMMITTEE 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 2019, 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 p. 101. 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 Alf Göransson and Geir Magne Aarstad. The Project Committee is chaired by Alf Göransson.
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. 101). The Chairman of the Board directs the work conducted by the Board and maintains regular 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.
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 p. 103.) The Board has established instructions for the division of duties between the Board and the CEO, and for financial reporting to the Board (also refer to "Board of Directors' report on internal control," p. 98).
4
3
The company has not appointed any Deputy Chief Executive Officer.
NCC's Executive Team (ET) consists of the President and CEO, the Heads of NCC Infrastructure, NCC Building Sweden, NCC Building Nordics, NCC Industry and NCC Property Development, the Chief Financial Officer and Head of Operational Development and IT. For information on members of the ET, see p. 103.
The ET mainly focuses on strategic and other Group-wide matters and generally meets once per month.
The Group is composed of business areas. Each business area is led by a business area manager and has a board of directors whose members include NCC AB's CEO, CFO and Senior Legal Counsel. For certain decisions, the approval of the CEO, NCC AB's Board Chairman or Board of Directors is required.
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.
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. 96).
The Audit Committee also assists the Nomination Committee in evaluating the work of the auditors.
The AGM appoints an Authorized Public Accountant to examine the company's Annual Report, consolidated financial statements, accounting records and the company's management by the Board and the CEO. A registered firm of accountants may also be appointed auditor of the company. The Nomination Committee nominates auditors. The current auditor is appointed for a period of one year. The registered firm of accountants PricewaterhouseCoopers AB (PwC) will serve as NCC's auditor until the close of the AGM in 2020. Authorized Public Accountant Ann-Christine Hägglund has been appointed PwC's auditor-in-charge. For more information on elected auditors, see p. 100.
7
NCC's operations require a considerable amount of delegated responsibility. Group-wide rules of 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 governing 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, the CEO, CFO 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 are subject to special assessment at Group level and by the CEO and must be confirmed by the NCC AB Board. Proprietary property development 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. Concering internal audit, see page 99, item 5, Follow-up.
7
A comprehensive program to develop and implement the Group's values has been under way for some time. 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 operating activities.
During the year, a Code of Conduct for Suppliers was implemented to additionally clarify what NCC expects of suppliers in terms of compliance with NCC's Code of Conduct.
NCC Compass is a governing document with a focus on providing straightforward and tangible guidance to the organization, in order to prevent the risk of irregularities. Five areas have been identified as especially important in NCC Compass: bribery and corruption, competition law, conflicts of interest, diversity and the handling of personal data. 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 55 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 values-driven and transparent corporate culture that NCC is working to refine. The purpose of NCC's procedures and support is make employees feel at ease and have the courage 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 programs and discussions with NCC employees continued during the year. All NCC employees are covered by the training programs. Further training in the area is provided in the form of shorter, e-learning courses. During the year, online training in GDPR also continued to be provided to NCC employees.
Employees who suspect unethical behavior or improper action should firstly report this to their 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. Disciplinary action will be taken where called for.
NCC's Annual General Meeting (AGM) was held at Norra Latin in Stockholm on April 9, 2019. 297 shareholders were present representing 47.9 percent of the share capital and 65.6 percent of the total number of votes. The minutes of the 2019 AGM and from previous AGMs are available at www.ncc.se. The 2019 AGM passed the following resolutions, among others:
Dividend for the 2018 fiscal year of SEK 4.00, divided into two payments. Tomas Billing, Viveca Ax:son Johnson, Geir Magne Aarstad, Mats Jönsson, Angela Langemar Olsson, Ulla Litzén and Birgit Nørgaard were reelected as Members of the Board. Alf Göransson was newly appointed to the Board. Reelection of Tomas Billing as Chairman of the Board.
It was resolved that director fees would total SEK 4,600,000, 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. A special fee is paid to the members of the Project Committee, which amounts to SEK 125,000 for the chair and SEK 100,000 for each other member.
Guidelines 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 program (LTI 2019) for senior executives and key personnel.
To cover the commitment under LTI 2019, the AGM 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 the participants of LTI 2019. 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 2016, LTI 2017, LTI 2018 and LTI 2019).
Income statements and balance sheets for 2018 were adopted and discharge from liability was granted to the Board and the CEO.
In 2019, NCC's Board held nine scheduled meetings and the statutory meeting 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 rules of procedures, have to be addressed by the Board. 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 reporting 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 to fulfill the duties pursuant to EU ordinance No. 537/2014. In 2019, the Audit Committee held seven meetings at which all members were present. In December 2018, in accordance with the Swedish Code of Corporate Governance, the Board of Directors established an independent internal audit function, Group
| BOARD MEETINGS AND ATTENDANCE 2019 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Elected (year) |
Independent in relation to the company and the Executive Team |
Independent in relation to major shareholders |
Board fees, SEK 000s |
Fees for work on committees, SEK 000s |
Jan 29 |
Apr 9 | Apr 9 (statutory) |
Apr 26 |
Apr 28 |
Jun 26 |
Jul 18 |
Oct 25 |
Oct 27 |
Dec 6 |
|
| Board members elected by the AGM |
|||||||||||||||
| Tomas Billing | 1999 | Yes | No | 1,100 | |||||||||||
| Viveca Ax:son Johnson | 2014 | Yes | No | 500 | |||||||||||
| Carina Edblad¹) | 2014 | Yes | Yes | 137 | 34 | ||||||||||
| 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 | |||||||||||
| Alf Göransson²) | 2019 | Yes | Yes | 363 | 91 | ||||||||||
| Employee representatives | |||||||||||||||
| Karl G. Sivertsson | 2009 | – | |||||||||||||
| Karl-Johan Andersson | 2011 | – | |||||||||||||
| Harald Stjernström | 2018 | – |
1) Carina Edblad stepped down from the Board at the AGM on April 9, 2019.
2) Alf Göransson was elected to the Board at the AGM on April 9, 2019.
Internal Audit, which has since conducted audits of the entire Group on assignment from the Audit Committee and the Board of Directors. 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 presented to the Nomination Committee.
The Board's Project Committee, which assists in the preparation, analysis and decisions regarding tenders in contracting operations for projects exceeding SEK 1.5 billion. In 2019, the Committee addressed five projects and held five meetings, which all members attended.
The company holds 530,267 Series B shares to cover its commitments under long-term incentive programs. In 2019, 0 shares were sold to cover costs, 0 shares were transferred to participants in LTI 2016 and 128,217 shares were bought back.
According to the Swedish Code of Corporate Governance (the Code), the Board must establish a remuneration committee to prepare matters involving 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 ET 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 2019 AGM resolved on a long-term performance-based incentive program (LTI 2019), comprising the
CEO, members of the ET and an additional approximately 160 executives in the Group. LTI 2019 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 2021. 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 Board follows up and evaluates application of the remuneration program applicable for the company's 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. 41–44.
The AGM on April 9, 2019 reelected Viveca Ax:son Johnson (Chair of the Board of Nordstjernan AB), Anders Oscarsson (equity manager AMF/AMF Fonder) and Simon Blecher (fund manager 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 2020 AGM are available at ncc.se.
In addition to such standing items as investments and divestments within NCC Property Development and Finance
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.
1
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 reporting, 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 reporting. 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 estimates and assessments, such as valuations of land held for future development and ongoing property-development, goodwill and provisions.
At NCC, risks are followed up in several different ways, including via:
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 Finance 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 discrepancies in insurance coverage. These risks are monitored by the Compliance function and the insurance company NCC Försäkringsaktiebolag.
For more information on governance and control of 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.
2
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, directives, 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 duties 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 rules of procedure within the NCC Group that are adopted annually by the Board. The rules of procedure stipulate the matters that require the Board's approval or confirmation. In turn, this is reflected in the corresponding rules of procedure 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 governing documents, such as internal policies, directives, guidelines, instructions and other manuals. 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 of 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.
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. Operational control systems form the basis for the established control structure for the business operations 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 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 matrixes that connect risks and control and ensure that the control is documented and that proof of control exists.
4
Information and communication regarding the internal policies, directives, guidelines, manuals and codes to which the financial reporting is subject are available on NCC's Intranet (MyNCC).
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 other documents, the following:
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 internal control 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 and communication regarding the internal control have been established and are effective.
5
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 are engaged with suitable expertise for the assignment.
The Audit Committee held seven meetings during 2019 and PwC participated in all of these. The duties of the Audit Committee in terms of financial reporting include monitoring the efficiency of the company's internal controls, internal audit and risk management. The Board of Directors has established
an independent internal audit function, Group Internal Audit. 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 ninemonth 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 2019 on pages 94–103 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 6 March 2020 PricewaterhouseCoopers AB
Ann-Christine Hägglund Erik Bergh Auditor-in-charge
Authorised Public Accountant Authorised Public Accountant
Auditors – PricewaterhouseCoopers AB Ann-Christine Hägglund
Auditor-in-charge. Born 1966. Other significant assignments: Auditor-in-Charge at JM, Byggmax and Business Sweden.
Authorized Public Accountant. Born 1979. Other significant assignments: Co-signing auditor in Cloetta AB and Radisson Hospitality AB.
The details regarding shareholdings in NCC pertain to shares that were directly owned, owned via related parties or owned via companies at December 31, 2019.
Chairman. Born 1963. M.Sc. in Economics Board member since 1999 and Chairman since 2001.
Other assignments: Chairman of the Board of Röko AB and Arboritec Holding AB. Board member of Etac AB, BiJaKa AB, Hotscreen Holding AB, Beths Beauty Holding AB, Centrum för rättvisa (Center for Justice) and the Hilma af Klints Verk Foundation.
Previous experience includes: CEO of Nordstjernan AB and of Hufvudstaden AB. Shareholding in NCC AB: 20,600 Series A shares and 115,400 Series B shares.
Born 1957. International B.Sc. in Economics and Business Administration
Board member since 2019 and chairman of the Project Committee.
Other assignments: Chairman of the Board of Loomis and AxFast and Board member of Sweco, Attendo, Hexpol, Melker Schörling AB and Sandberg Development Group.
Previous experience includes: CEO of Securitas (2007–2018), CEO of NCC (2001–2007) and CEO of Svedala Industri (2000–2001).
Shareholding in NCC AB: 4,000 Series B shares.
Born 1956. M.Sc. Economics and MBA 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 1959. Installation Manager Deputy Board member since 2017. Shop steward in NCC. Employee representative of Unionen. Shareholding in NCC AB: 295 Series B shares.
Born 1962. Project Manager within 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 1960. M.Sc. in Engineering 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: 5,200 Series B shares via private companies.
Born 1957. M.Sc. in Engineering Board member since 2017 and member of the Audit Committee.
Other assignments: Chairman of the Board of Tengbom and Lekolar and Board member 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: 20,000 Series B shares.
Born 1958. M.Sc. Economics and MBA 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 Væktskapital I. Board member of DSV A/S, WSP Global Inc., RGS Nordic A/S, ABP 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 1955. Carpenter.
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: 510 Series B shares.
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: 64,000 Series B shares (including related-party holdings), as well as 25,000 Series A shares and 41,000 Series B shares via private companies.
Born 1970. M.Sc. in Economics
Board member since 2018 and member of the Audit Committee. Senior Investment Manager at Nordstjernan AB.
Other assignments: Chairman of the Board of Sunparadise 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.
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.
Born 1961. Carpenter and crane operator. Board member since 2009. Employed since 1981. Shop steward in NCC. Employee representative of Svenska Byggnadsarbetareförbundet (Byggnads). Other assignments: Board member of Byggnads' Central Northern Sweden region and deputy member of Byggnads' central committee. Shareholding in NCC AB: 200 Series B shares.
Born 1972. Master of Laws NCC AB's Senior Legal Counsel since 2018. Previous experience includes: 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. M.Sc. in Engineering and MBA.
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: 30,270 Series B shares and 299,128 call options on Series B shares.
Born 1975. M.Sc. in Engineering Head of NCC Building Sweden since 2018. Employed by NCC for a total of 12 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, CEO of Byggnads AB L E Lundberg (2011–2013) and Business Manager NCC Construction Sweden (2005–2011). Shareholding in NCC AB: 1,500 Series B shares and 14,957 call options on Series B shares.
Head of NCC Infrastructure since 2018. Employed by NCC since 2018.
Previous experience includes: 30 years of experience from various executive positions at Skanska, such as Deputy CEO of Skanska Sweden AB and Head of Skanska's Road and Civil Engineering operations in Sweden, CEO of Skanska OY and Head of Skanska's construction and civil engineering operations in Finland.
Shareholding in NCC AB: 14,957 call options on Series B shares.
Born 1971. Head of NCC Property Development since 2019. Employed by NCC since 2019. Previous experience includes: Head of Skanska Sweden's Commercial Project Development (2014–2019), Operational Development Head of Skanska Sweden's commercial project development (2012–2014), District Manager Skanska Sweden (2007–2012), Project Manager Skanska Sweden (2003–2007),
Shareholding in NCC AB: 3,000 Series B shares.
Born 1961. B.Sc. in Economics Chief Financial Officer since 2018. Employed since 2018. Previous experience includes: CFO of Billerud Korsnäs (2011–2018), CEO of Mercuri International and several key positions at Ericsson. Shareholding in NCC AB: 1,935 Series B shares.
Born 1965. M.Sc. in Business and Economics 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 29,912 call options on Series B shares.
Born 1971. M.Sc. in Engineering Head of Development & Operations Services since 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: 3,000 Series B shares.
Born 1966. M.Sc. in Engineering Head of NCC Building Nordics since January 13, 2020. Employed by NCC since 2020. Previous experience: CPO Nordic Choice Hotels (2013–2020), CEO Nordic Property Management (2013–2020), Director Technical Services Scandic Hotels (2004–2012). Prior to that, various positions including 10 years at NCC (1988–1998).
Shareholding in NCC AB: 0
Maria Grimberg, Head of Communication Ann-Marie Hedbeck, General Counsel Marie Reifeldt, Head of HR Harri Savolainen, Head of Purchasing
Carola Lavén was Business Area Manager of NCC Property Development and a member of the Executive Team through July 22, 2019. Klaus Kaae was Business Area Manager of NCC Building Nordics and a member of the Executive Team through January 12, 2020.
NCC will publish financial information regarding the 2020 fiscal year on the following dates:
| Annual General Meeting |
|---|
| Interim report, January-March |
| Interim report, January-June |
| Interim report, January-September |
| Year-end report 2020 |
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 key 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 [email protected], 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 Maria Grimberg (Tel: +46 70 896 12 88; e-mail: [email protected]).
The AGM will be held at 4:30 p.m. on April 1, 2020. Location: Norra Latin, Drottninggatan 71 B, Stockholm. Notification can be made via NCC's website www.ncc.se, 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 54 no later than March 26, 2020. Notification should include name, personal identification number (corporate identity number), address, telephone number and the number of any advisors.
Registration at the Meeting will begin at 3:30 p.m. Notice of the AGM is available on the NCC Group's website, www.ncc.se, and was published in Post- och Inrikes Tidningar on March 3, 2020. 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 an NCC shareholder is available on NCC's website under the Investor Relations tab.
MORE INFORMATION/ CONTACT PERSON Maria Grimberg, Head of Communication Tel: + 46 70 896 12 88 E-mail: [email protected]
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.
Corporate net debt: Interest-bearing liabilities and provisions for pensions and similar obligations (pension debt according to IAS 19) excluding lease liability (IFRS 16) and excluding pension debt (IAS 19) less cash and cash equivalents, short-term investments and interest-bearing receivables.
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 on properties classed as current assets excluding depreciation according to IFRS 16, Leases.
Average interest-rate maturity: The remaining interest-rate maturity 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 classified as current assets.
Net sales: The net sales of construction operations are recognized in accordance with the percentage-of-completion profit recognition 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 material 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: Corporate net debt divided by EBITDA.
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 unrecognized 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 expenses 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.
Total return: Share-price performance during the year plus dividend paid divided by share price at the beginning of the year.
Total net debt: Interest-bearing liabilities and provisions for pensions and similar obligations (pension debt according to IAS 19) less cash and cash equivalents, short-term investments and interest-bearing receivables.
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 currency 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.
Required yield: The yield required by buyers in connection with acquisitions of property projects. Operating revenues less operating and maintenance expenses (=operating net) divided by the market value.
Properties: In descriptions of operations, "properties" refers to buildings, housing or land.
NCC Partnering: A cooperation format applied in the construction and civil engineering industry, whereby the developer, 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.
Leasing rate: The percentage of anticipated rental revenues that corresponds to signed leases (also called leasing rate based on revenues).
Production: NCC and Narva.
This is a translation of the Swedish original. In case of discrepancies between this English translation and the Swedish original, the latter shall prevail.
Photographers: Apelöga p 1. Trine Gaarder Stenberg cover. Carina Gran cover inside, p 10. Jonathan Grevsen p 8. Claes Henschel p 5. Joakim Kröger cover inside, p 1, 3, 5, 7, 9, 10, 31, 100, 102. Microsoft p 5. Erik Mårtensson p 11. Damir Prcic p 1, 8. Schenker Pori p 9. Printing: Åtta.45, Stockholm, 2020.
NCC is one of the leading construction and property development companies in the Nordic region, with sales of more than SEK 58 billion and 15,500 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.
NCC AB SE-170 80 Solna, Sweden Tel: +46 8 585 510 00 ncc.se
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.