Serneke Group

Annual Report • Feb 5, 2020

A QUARTER PERVADED BY TRANSACTIONS AND STRONG ORDER BOOKINGS

OCTOBER –DECEMBER 2019

• Order bookings amounted to SEK2,969million (1,000)
• Income amounted to SEK2,253million (1,991)
• The operating loss amounted to SEK97million (profit 509)
• Cash flow from operating activities amounted to SEK83million (264). Cash flow was affected adversely by investments of SEK157million in the production of tenant-owner apartments and the Karlastaden project
• The loss for the period amounted to SEK63million (profit 572)
• The final settlement of the remaining additional purchase consideration for the Säve site strengthened the cash and bank balances by SEK300million and had a negative effect on operating profit by SEK90million

JANUARY –DECEMBER 2019

• Order bookings amounted to SEK8,601million (4,692) and the order backlog was SEK8,943million (6,382)
• Income amounted to SEK6,725million (6,516)
• The operating loss amounted to SEK84million (profit 595)
• Cash flow from operating activities amounted to an outflow of SEK645million (inflow 265). Cash flow was affected adversely by investments of SEK484million in the production of tenant-owner apartments and the Karlastaden project
• The loss for the period amounted to SEK82million (profit 604)
• Recalculated in accordance with the former accounting principle regarding tenant-owner apartments projects and assuming the Karlastaden project as external, income would have instead amounted to SEK7,228million and the operating loss would have been SEK29million.
• The Board of Directors confirms the Company's dividend policy but chooses to await the outcome of current transactions before recommending a dividend for 2019 in the Notice to attend the Annual General Meeting.

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	2,253	1,991	6,725	6,516
Operating profit	–97	509	-84	595
Operating margin, %	-4.3	25.6	-1.2	9.1
Profit/loss for the period	-63	572	-82	604
Earnings per share, SEK, before dilution	-2.81	25.34	-3.66	26.37
Earnings per share, SEK, after dilution	-2.81	25.14	-3.66	26.16
Equity per share, SEK, after dilution	96.94	100.47	96.94	100.47
Equity/assets ratio, %	38.0	40.9	38.0	40.9
Net debt	1,224	552	1,224	552
Net debt/EBITDA	-36.0	0.9	-36.0	0.9
Net debt/equity ratio, %	56.2	24.3	56.2	24.3
Order bookings	2,969	1,000	8,601	4,692
Order backlog	8,943	6,382	8,943	6,382

CEO STATEMENT

Both within the Company and externally, 2019 was a year marked by major challenges. The year also reflected the Company's view that having the courage to change is crucial, even though decisions may be difficult at that moment. We have vigorously addressed aspects bringing long-term organizational improvement and resulting in a more profitable company.

It is therefore gratifying to feel that we can enter a new decade with several of these challenges behind us. Our hard work has borne fruit and much of what we focused on over the year, has fallen into place, particularly in the fourth quarter.

Factors impacting earnings negatively included: capacity that has been kept on "standby" at Karlastaden, our long-term initiative in collaboration agreements, the earnings of the civil engineering operations, the restructuring costs for implementing the new organization, amended accounting principles and, last but not least, the final settlement in the sale of the Säve flygplats site.

Säve represented good business for us, generating total gains of about SEK625million, although an accrual loss of SEK90million was incurred in the fourth quarter of 2019. Although our longterm focus on collaboration agreements will be repaid in 2020, it burdened earnings in 2018 – 2019. The civil engineering operations have now also been restructured in the new organization. The combined negative impact on earnings of these circumstances in 2019 amounts to approximately SEK380million, and to about SEK2.3 billion in sales.

In the fourth quarter, we completed three major transactions: we divested a portfolio of rental properties to Trenum for a total value of SEK1.6 billion, completed the sale of a property to the municipality of Gothenburg for approximately SEK170million and reached a final settlement with Castellum regarding Säve. These and similar transactions form an important part of our business concept and we have on several occasions demonstrated our strength in developing properties, thus generating values that have then been divested. We have an attractive portfolio and look forward to conducting similar transactions in the future, primarily continuing sales of the attractive 150,000 m2 remaining in Karlastaden.

In the fourth quarter, negotiations continued with a new partner in the Karlatornet project. These negotiations have demanded considerable effort by management and have been the focus of the external community's attention. Accordingly, it is highly gratifying that we were recently able to announce an agreement with Oaktree Capital Management on the sale of a majority holding in Karlatornet – a transaction guaranteeing full financing and the implementation of the project with a high level of quality. In addition to having positive effects on cash flow and earnings, the agreement includes us signing a contracting agreement

valued at slightly more than SEK3 billion and maintaining principal responsibility for construction.

As I mentioned earlier, we conducted a review of our operations during the year, resulting in a new organization. Moving ahead, we will be bringing our core operations together within Serneke Sweden, and by delegating greater responsibility and mandates to the regions, we will strengthen entrepreneurial spirit and gain a closer relationship to our customers and the business. For this reason, we believe that our problems with the profitability of the contracting business in general, and the civil engineering operations in particular, can be addressed in a vigorous manner. The reorganization also allows us to adjust the constraints of our overhead costs, further optimizing them. Early in the new year, we had the opportunity to introduce Anders Arfvén as CEO of Serneke Sweden and, accordingly, the person ultimately responsible for our Swedish operations.

Although we witnessed a continued slowdown in housing construction over the year, we are pleased to note that order bookings almost trebled in the fourth quarter to SEK2,969million (1,000). From a full-year perspective, order bookings have risen to SEK8,601million (4,692) and the order backlog amounted to SEK8,943million (6,382) at the end of the year. It is worth noting that neither collaboration agreements nor Karlatornet are not included in these values.

If 2019 was characterized by major challenges, 2020 will be pervaded by considerable opportunities. Together with our dedicated and energetic employees, we are now entering a new phase for the Company, in which we will focus even more on our core values, thus building the strong foundation necessary for our continued expansion.

Ola Serneke, President and CEO

GROUP DEVELOPMENT

ORDER BOOKINGS AND ORDER BACKLOG

External order bookings in the fourth quarter amounted to SEK2,969million (1,000), an increase of 197percent compared with the corresponding quarter of the preceding year. The strong order bookings were attributable foremost to the construction operations, with housing production accounting for most of the projects secured during the quarter. The largest individual order was valued at SEK840million, involving a housing project in Lund.

Demand in the Swedish construction market is considered stable and there is an underlying need for both housing and public properties. The metropolitan regions and their environs are the Group's most important markets, as reflected by the orders secured during the period. At the same time, the Group is continuing its geographic expansion, with a new regional office being established in Luleå during the quarter – meaning that the Group is now present throughout Sweden.

At the end of the fourth quarter, the external order backlog amounted to SEK8,943million (6,382).

Order bookings	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Construction	2,938	1,053	8,124	4,071
Civil Engineering	31	-53	477	621
Group	2,969	1,000	8,601	4,692
Order backlog	Dec 31	Dec 31
SEK million	2019	2018
Construction	8,659	6,190
Civil Engineering	284	192
Group	8,943	6,382

NEW ASSIGNMENTS DURING THE PERIOD OCTOBER–DECEMBER 2019

Listed below are the Group's new assignments for more than SEK100million:

Assignment	Location	Order value (SEK million)	Anticipated start of construction
Housing	Upplands Väsby	255	Fourth quarter 2019
Housing	Trollhättan	150	Fourth quarter 2019
Housing	Varberg	265	Third quarter 2020
Long-stay-hotel/apartments	Falkenberg	151	Fourth quarter 2019
Housing	Lund	840	First quarter 2020

INCOME AND PROFIT

The operations of the Group are organized into three business areas: Construction, Civil Engineering and Project Development.

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	2,253	1,991	6,725	6,516
Operating profit	–97	509	-84	595
Net financial items	12	-8	-27	-37
Earnings after financial items	-85	501	-111	558
Tax	22	71	29	46
Profit/loss for the period	-63	572	-82	604

OCTOBER – DECEMBER 2019

Consolidated income amounted to SEK2,253million (1,991), an increase of 13percent. In Construction, income increased by 3percent, while income decreased by 53percent in Civil Engineering. Project Development accounted for the largest increase in income at 223percent, explained by the business area having completed several transactions during the quarter. These transactions, totaling SEK459million, included both sales of project properties and the handover of a tenantowner apartment project to the customer.

The operating loss amounted to SEK97million (profit 509). Construction generated a profit of SEK4million (54), entailing an operating margin of 0.2percent (3.2). Civil Engineering and Project Development generated losses of SEK42million and SEK32million respectively. During the quarter, Project Development was impacted negatively by the payment of the remaining purchase consideration of SEK90million in the settlement with Castellum. In connection with the settlement, consolidated cash and bank balances were strengthened by SEK300million. Completed transactions contributed SEK97million to operating profit.

Net financial items amounted to SEK12million (negative 8). During the quarter, borrowing expenses of SEK37million on project properties were capitalized, having previously been reported as interest expenses.

The Group reported an estimated tax expense of SEK22million (71). The positive tax effect is attributable partly to the Group not having taxable income and a change in deferred tax related to tax loss carryforwards.

The loss for the period amounted to SEK63million (profit 572) and earnings per share after dilution for the quarter were a negative SEK2.81 (positive 25.14).

JANUARY – DECEMBER 2019

Consolidated income amounted to SEK6,725million (6,516), an increase of 3percent. In Construction, sales increased by 6percent, while in Civil Engineering, they decreased by 23percent, explained by a gradually diminishing order backlog. For the contracting operations as a whole, this has meant a 2-percent increase in income. In Project Development, income increased by 38percent, driven by completed transactions for SEK459million.

The operating loss amounted to SEK84million (profit 595). Construction generated an operating profit of SEK95million (90), providing an operating margin of 1.6percent (1.6). Civil Engineering and Project Development reported losses of SEK65million (profit 10) and SEK55million (profit 487) respectively. The preceding year's earnings for Project Development reflected the sale of Säve flygplats and the revaluation effect of SEK500million in the Karlastaden Project.

Net financial items amounted to a negative SEK27million (37) and were affected positively by borrowing expenses of SEK37million, previously reported as interest expenses, being capitalized on project properties.

The Group reported an estimated tax expense of SEK29million (46). The positive tax effect is attributable partly to the Group not having taxable income and a change in deferred tax related to tax loss carryforwards.

The loss for the period amounted to SEK82million (profit 604) and the loss per share after dilution was SEK3.66 (profit 26.16) for the period.

THE GROUP'S GROWTH AND PROFITABILITY TARGETS

Serneke's long-term growth target is to reach income of SEK10 billion by 2020, primarily through organic growth supplemented with selective acquisitions.

The Group's long-term profitability target is an operating margin amounting to 8percent.

Operating margin, rolling 12

SALES

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Construction	1,728	1,680	5,867	5,530
Civil Engineering	132	284	663	866
Project Development	484	150	568	411
Eliminations and Group-wide	-91	-123	-373	-291
Total	2,253	1,991	6,725	6,516

OPERATING PROFIT

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Construction	4	54	95	90
Civil Engineering	-42	2	-65	10
Project Development	-32	459	-55	487
Group-wide	-27	-6	-59	8
Total	-97	509	-84	595
Net financial items	12	-8	-27	-37
Profit after financial items	-85	501	-111	558

* Group-wide: Other operations are reported under Group-wide – and consist of key companies, Group functions and elimination of intra-Group profit. In the first quarter of 2018, a reversal of SEK20million was made regarding a provision for a dispute where the outcome was in Serneke's favor.

Seasonal variations

To a certain extent, Serneke's operations are subject to seasonal effects. The contracting operations (Business Areas Construction and Civil Engineering) normally experience lower activity in the first quarter of the year

due to fewer production days and, to a greater extent than normal, the weather during the winter months. Earnings are also affected by where public holidays fall, as this affects the number of production days.

FINANCIAL POSITION

	Dec 31	Dec 31
SEK million	2019	2018
Total assets	5,734	5,555
Total equity	2,179	2,272
Net debt	1,224	552
Net debt/EBITDA	-36.0	0.9
Cash and cash equivalents	162	389
Equity/assets ratio, %	38.0	40.9

The consolidated balance sheet total amounted to SEK5,734million (5,555) as at December 31, and the equity/assets ratio was 38.0percent (40.9). At the end of the period, cash and cash equivalents amounted to SEK162million (389), in addition to which, the Group has a credit framework of SEK530million. At the end of the period, available cash and cash equivalents totaled SEK692million (789).

On December 31, equity amounted to SEK2,179million (2,272). The change mainly comprises the loss for the year of SEK82million, a changed accounting policy regarding tenant-owner apartment projects with a negative impact of SEK25million, share-based remuneration of SEK15million, and the conversion of a convertible debenture for a negative SEK1million.

On December 31, net borrowing amounted to SEK1,224million (552). Net borrowing in relation to EBITDA is at a negative 36.0 (positive 0.9) and the change in net borrowing is mainly an increase in interestbearing liabilities of SEK308million attributable to now consolidated tenant-owner apartment projects , interest-bearing lease liabilities of SEK199million attributable to IFRS 16 and lower cash and bank balances. The total loan liabilities for the tenant-owner apartment projects amounted to SEK308million (0) at December 31.

GROUP CAPITAL STRUCTURE

One of the Group's financial targets is for the equity/assets ratio to exceed 25percent.

Equity/assets ratio

The liquidity reserve shall amount to at least 5percent of income in the past 12-month period.

Liquidity reserve

CASH FLOW

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Cash flow from operating activities	83	264	-645	265
Cash flow from investment activities	286	-293	211	-477
Cash flow from financing activities	-207	-46	207	170
Cash flow for the period	162	-75	-227	-42
Cash and cash equivalents at beginning of period	0	464	389	431
Cash and cash equivalents at end of period	162	389	162	389

OCTOBER – DECEMBER 2019

Cash flow from operating activities amounted to SEK 83million (264), of which cash flow from changes in working capital amounted to SEK55million (192). The change in working capital was affected positively by transactions for SEK238million, while tenant-owner apartment production conducted in-house and investments in the Karlastaden project had a negative impact of SEK157million.

Cash flow from investing activities amounted to SEK286million (outflow 293) and consisted mainly of SEK300million in early payments of additional purchase considerations as part of the settlement with Castellum.

Cash flow from financing activities amounted to an outflow of SEK207million (46), mainly involving changes in the loan portfolio and an SEK150million repayment on the overdraft facility.

Cash flow for the period amounted to SEK162million (outflow 75).

JANUARY – DECEMBER 2019

Cash flow from operating activities amounted to an outflow of SEK645million (inflow 265), of which cash flow from changes in working capital amounted to an outflow of SEK593million (inflow 272). The change in working capital was affected positively by transactions for SEK238million, while tenant-owner apartment production conducted in-house and investments in the Karlastaden project had a negative impact of SEK484million.

Cash flow from investing activities amounted to SEK211million (outflow 477) and consisted mainly of SEK300million in early payments of additional purchase considerations as part of the settlement with Castellum.

Cash flow from financing activities amounted to an inflow of SEK207million (170) and mainly relates to newly raised construction credits attributable to tenantowner apartment projects in progress. Cash flow for the period amounted to an outflow of SEK227million (42).

BUSINESS AREA CONSTRUCTION

All of the Group's construction-related operations are conducted within Business Area Construction. The business area performs works for both external customers, as well as with Business Area Project Development.

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	1,728	1,680	5,867	5,530
Operating profit	4	54	95	90
Operating margin, %	0.2	3.2	1.6	1.6
Order bookings	2,938	1,053	8,124	4,071
Order backlog	8,659	6,190	8,659	6,190
Average number of employees	784	778	794	761

OCTOBER – DECEMBER 2019

Income amounted to SEK1,728million (1,680), an increase of 3percent. During the quarter, there was a good production rate in existing projects, with primarily Region South experiencing strong growth compared with the corresponding quarter in the preceding year. Production also commenced during the quarter on a couple of projects in the newly established Region Central.

Operating profit amounted to SEK4million (54) and the operating margin was 0.2percent (3.2). During the quarter, the margin was affected negatively as a result of increased provisions for disputed projects.

Order bookings amounted to SEK2,938million (1,053), an increase of 179percent. During the quarter, several new orders were secured, primarily in housing production, but also assignments in the public sector in the form of public properties. The geographic expansion has continued, with Region North being established with its regional offices in Luleå.

JANUARY – DECEMBER 2019

Income amounted to SEK5,867million (5,530), an increase of 6percent.

Operating profit amounted to SEK95million (90) and the operating margin was 1.6percent (1.6). In the preceding year, Construction was affected negatively by impairment of SEK70million on two projects. The margin for the year was affected negatively as a result of increased provisions for disputed projects.

Order bookings during the period amounted to SEK8,124million (4,071), an increase of 100percent. At the end of the period, the order backlog amounted to SEK8,659million (6,190).

FINANCIAL TARGET

The long-term target in Business Area Construction is an operating margin of 5percent. The operating margin for the rolling 12 months was 1.6percent.

BUSINESS AREA CIVIL ENGINEERING

All of the Group's civil engineering and infrastructure-related operations are conducted within Business Area Civil Engineering. The business area operates in local markets with both national and regional infrastructure projects and maintenance services. The business area performs works for both external customers, as well as the Group's other business areas.

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	132	284	663	866
Operating profit	-42	2	-65	10
Operating margin, %	-31.8	0.7	-9.8	1.2
Order bookings	31	-53	477	621
Order backlog	284	192	284	192
Average number of employees	174	182	179	172

OCTOBER–DECEMBER 2019

Income amounted to SEK132million (284), a decrease of 54percent. As some production projects are completed, income decreases as an effect of the lower order backlog.

The operating loss amounted to SEK42million (profit 2), entailing a negative operating margin of 31.8percent (positive 0.7). The operating margin was affected by impairment in existing projects, while overhead costs increased in relation to the lower sales.

Order bookings amounted to SEK31million (negative 53). The negative order bookings in the corresponding quarter in the preceding year were attributable to the acquisition of the Karlastaden project, in connection with which SEK155million was removed from the order backlog and classified as internal orders.

JANUARY – DECEMBER 2019

Income amounted to SEK663million (866), a decrease of 23percent. The decrease in income is due to fewer production projects as a result of the lower order backlog.

The operating loss amounted to SEK65million (profit 10) and the operating margin was a negative 9.8percent (positive 1.2). The operating margin was affected by impairment in existing projects and increased costs attributable to expansion initiatives, while costs increased in relation to the decrease in sales.

Order bookings amounted to SEK477million (621) and the order backlog was SEK284million (192).

FINANCIAL TARGET

Image:

The long-term target in Business Area Civil Engineering is an operating margin of 5percent. The operating margin for the rolling 12 months was a negative 9.8percent.

BUSINESS AREA PROJECT DEVELOPMENT

Business Area Project Development includes Serneke's development of housing and commercial properties. Project development is performed through wholly owned projects or in collaboration with third parties through associates and joint ventures.

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	484	150	568	411
Share in profit of associates and joint ventures	4	-5	12	-6
Changes in value of properties*	-	240	-	281
Operating profit	-32	459	-55	487
Operating margin, %	-6.6	306.0	-9.7	118.5
Average number of employees	114	74	115	68

* Changes in value of properties refers to changes in value of the investment properties that were previously recognized in Business Area Property Management and now reclassified as project and development properties.

OCTOBER – DECEMBER 2019

Income amounted to SEK484million (150), an increase of 223percent. The increased income is attributable to completed transactions for a total SEK459million.

At the end of the quarter, the business area had a total of six production projects in progress, excluding Karlastaden, including one through a joint venture, comprising a total of 257 homes of which 246, or 85percent, have been sold. In the fourth quarter, a tenant-owner apartment project comprising 33 apartments was handed over to the customer. All of the apartments in the project had been sold.

The share in the profit of associates and joint ventures amounted to SEK4million (loss 5).

The operating loss amounted to SEK32million (profit 459). During the quarter, a final settlement regarding Säve flygplats was signed with the buyer, Castellum. The settlement involved paying all of the remaining additional purchase consideration, which had a negative impact on earnings of SEK90million, while cash and bank balances were strengthened by SEK300million and the Group's environmental responsibility for the site ceased. Sales completed in the quarter affected profit by SEK97million.

JANUARY – DECEMBER 2019

Income amounted to SEK568million (411), an increase of 38percent. The increase is attributable to sales completed in the fourth quarter. Changed accounting policies regarding housing development through tenantowner apartments have entailed a negative effect of SEK145million on income and of SEK19million on operating profit.

The share in the profit of associates and joint ventures amounted to SEK12million (loss 6).

The operating loss amounted to SEK55million (profit 487). Profit was affected negatively in the amount of SEK62million net by the settlement with Castellum, as this also allowed provisions for remaining decontamination undertakings to be extinguished.

Project development portfolio

On December 31, 2019, the total book value of the project development portfolio amounted to SEK3,274million (2,507). The holding consists primarily of the Karlastaden project at SEK2,499million. The foremost increase is due to changed accounting principles for the development of tenant-owner housing and investments made during the year.

FINANCIAL TARGET

Project Development aims for a return on capital employed of 20percent. On December 31, 2019, the return on capital employed, based on rolling 12-month earnings, amounted to a negative 1.5percent.

Änglagården Holding

Business Area Project Development owns 40percent of Änglagården Holding AB, which, in turn, owns Prioritet Serneke Arena. Other shareholders are Prioritet Finans, which holds 50percent, and Lommen Holding, which holds 10percent.

The Group's share of Änglagården Holding AB SEK million	Dec 31 2019	Dec 31 2018
Ownership as apercentage	40	40
Share in associated companies*	107	92
Share in profit	14	9
Of which:
Operating earnings	14	12
Change in value of property	0	-3

*) The Group's participation in the associate Änglagården Holding is calculated based on shareholders' equity less the preferential dividend right of SEK7million (32) which applies to the other shareholders. The closing value is subsequently reduced by an internal profit of SEK19million (19).

Income statement Änglagården Holding AB SEK million	Oct–Dec 2019	Oct–Dec 2018	Jan–Dec 2019	Jan–Dec 2018
Income	17	17	68	64
Profit for the year	12	1	36	23

Balance Sheet Änglagården Holding AB SEK million	Dec 31 2019	Dec 31 2018
ASSETS
Project and development properties	806	790
Other assets	128	164
Total assets	934	954
EQUITY AND LIABILITIES
Shareholders' equity	321	309
Interest-bearing liabilities	426	447
Other liabilities	187	198
Total equity and liabilities	934	954

Changes in accounting policies

As of January 1, 2019, a new accounting policy is applied for housing development in the form of tenant-owner apartments. The new policy means that tenant-owner associations are consolidated in the consolidated financial statements and that income and profit from implemented projects are recognized at the time the individual buyer takes possession of the home and control shifts to the buyer.

The change has not entailed any material impact on the Group's position and performance in previously presented periods, which is why no restatement was made of the comparative figures. The change in policies has entailed an adjustment of net profit before tax in equity of SEK25million attributable to the periods 2016-2018. Of this, SEK8million pertained to the 2018 financial year.

The changed accounting policy is in accordance with the position taken by the Nasdaq Stockholm stock exchange made on December 10, 2018.

PARENT COMPANY

The operations of Serneke Group AB (publ) consist mainly of Group Management and Group-wide services.

Income for October–December amounted to SEK44million (30) and consisted primarily of intra-group services. The increase is attributable to the larger organization's needs for group services. The operating loss for the same period amounted to SEK15million (14).

Income for the period January–December amounted to SEK178million (143) and the operating loss was SEK14million (profit: 30). In the first quarter of 2018, a reversal of SEK20million was made regarding a provision for a dispute where the outcome was in Serneke's favor.

The Parent Company is indirectly affected by the risks described in the section Significant risks and uncertainty factors.

RELATED-PARTY TRANSACTIONS

The nature and extent of transactions by related parties can be found in Note 36 of the 2018 Annual Report. During the year, related-party transactions took place with property company Adapta AB, Ola Serneke Invest AB, JV Sersund AB, associate Änglagården, Michael Berglin, Serneke Midroc Holding AB, associate Fjätervålen AB and associate7H Bil AB. Transactions with related parties have been made on market terms.

Transactions with Adapta AB are considered to constitute related-party transactions since the principal owner, Ludwig Mattsson, is a member of the Board of Serneke Group. The transactions consist mainly of contracting income and rental of Serneke's headquarters, with income amounting to SEK152million and purchases to SEK12million on December 31, 2019. Transactions with Ola Serneke Invest AB are considered to be related party transactions, as Ola Serneke is the principal owner, CEO and a member of the Board of Serneke Group AB. As of December 31, 2019, income consisted primarily of rent and amounted to SEK1million, while costs consisted primarily of a provision of SEK4million for a dispute.

Transactions with JV Sersund AB consist of contracting income of SEK54million. Transactions with associate Änglagården consisted mainly of contracted personnel, rental of premises and rental of the venue name, with this income amounting to SEK14million at December 31, 2019 and purchases to SEK18million. Transactions with Michael Berglin are considered to constitute related party transactions as Michael Berglin is a member of

Serneke Group AB's Group Management. Transactions consist mainly of contracting income, with sales amounting to SEK5million at December 31. Transactions with JV Serneke Midroc Holding AB involve contracted personnel for SEK1million. Transactions with associate Fjätervålen consist of project income of SEK4million. Transactions with associate7H Bil consist of contracting income of SEK1million.

SIGNIFICANT RISKS AND UNCERTAINTIES

Serneke's operations entail several types of risks, both operational and financial. Operational risks are related to the daily operations and can apply to tenders or project development, assessment of profits, risks linked to production or the price trend. Operational risks are managed by the internal business management that has been developed within the Group. Identifying and managing Serneke's risks is crucial to the Group's profitability. Each business area manages its risks based on the business management and developed procedures and processes. Serneke's financial risks such as interest rate, liquidity, financing and credit risks are managed centrally in order to minimize and control risk exposure. The liquidity situation is assessed on an ongoing basis. At the end of the fourth quarter, a number of transactions were included in this assessment. There is also a financial preparedness to safeguard the Company's continued scope of action.

For further information on risks, as well as critical estimates and assessments, see the Board of Directors' Report and Notes 3 and 4 in the 2018 Annual Report. The descriptions in the Annual Report remain relevant. The Annual Report is published at www.serneke.group.

OTHER SIGNIFICANT EVENTS DURING THE REPORT PERIOD

Settlement with Castellum regarding Säve flygplats On December 23, an agreement was reached to settle the remaining purchase consideration in the Säve flygplats transaction effectuated between the companies in December 2018. Financially, this impacted earnings negatively by SEK90million in the fourth quarter, while contributing SEK300million to cash and cash equivalents. The settlement also extinguishes Serneke's responsibilities in terms of decontaminating the area.

OTHER SIGNIFICANT EVENTS FOLLOWING THE REPORT PERIOD

New organization from January 1, 2020

From the start of the year, the Group's core operations have been organized into five regions: South, West, East, Central and North. Responsibility for our shared business, with its strong local connections, lies with the regions, to which full responsibility and authority have been delegated to promote our entire offering to customers, including construction, civil engineering and project development operations alike. On January 10, it was announced that Anders Arfvén would be appointed as President of Serneke Sweden, bearing the overarching national responsibility for all five regions.

Serneke agrees sale of majority holding in Karlatornet to Oaktree

Serneke has reached an agreement with Oaktree Capital Management ("Oaktree") regarding the sale of 80percent of Karlatornet, in the Karlastaden district in the Lindholmen area of Gothenburg. Serneke remains the principal contractor on the project, entering into a turnkey contract with an order value of slightly more than SEK3 billion, to be included in Serneke's order bookings in the quarter in which the transaction is concluded. The transaction will be concluded when bank financing and transaction documentation are in place and the customary terms have been met.

Karlatornet begins its climb towards 73 stories. The tower will rise by one story a week on average. Photo: Kasper Dudzik

THE SERNEKE SHARE (SRNKE)

Serneke Group AB has two share series, Series A and B. On December 31, 2019 Serneke had about 7,300 shareholders and the closing price on that date was SEK61.7.

Serneke's ten largest shareholders, December 31, 2019

Name	Series A shares	No. of B shares	Total number of shares	Percentage of shares outstanding, %	Percentage of votes, %
Ola Serneke Invest AB	3,710,000	2,382,844	6,092,844	27.16%	56.95%
Lommen Holding AB	540,000	3,457,803	3,997,803	17.82%	12.78%
Christer Larsson i Trollhättan AB	380,000	497,000	877,000	3.91%	6.20%
Ledge Ing AB	330,000	476,061	806,061	3.59%	5.45%
Vision Group i väst AB	250,000	552,288	802,288	3.58%	4.40%
Svolder Aktiebolag	-	1,293,400	1,293,400	5.77%	1.87%
Cliens fonder	-	855,000	855,000	3.81%	1.23%
Nordnet Pensionsförsäkring AB	-	354,379	354,379	1.58%	0.51%
Försäkringsaktiebolaget Avanza Pension	-	299,397	299,397	1.33%	0.43%
Bert-Åke Eriksson	-	271,687	271,687	1.21%	0.39%
Total, 10 largest	5,210,000		10,439,859 15,649,859	69.76%	90.21%
Other shareholders	-	5,968,619	5,968,619	30.24%	9.79%
Total shares outstanding	5,210,000	16,408,478	21,618,478	100.00%	100.00%
Repurchased shares	-	814,987	814,987
Total shares registered	5,210,000		17,223,465 22,433,465

Source: Euroclear and Serneke

Share series, number of shares and votes, December 31, 2019

Share class	Shares	Votes
Series A
shares	5,210,000	5,210,000
Series B
shares	17,223,465	1,722,346.5
Total	22,433,465	6,932,346.5

FINANCIAL CALENDAR

Interim Report January–March May 5, 2020 Annual General Meeting May 5, 2020 Interim Report January–June August 20, 2020 Interim report January–September November 5, 2020

The Board of Directors and the CEO certify that this Interim Report provides a fair overview of the Parent Company and Group's operations, position and performance and describes significant risks and uncertainties facing Serneke.

This report has not been reviewed by the Company's auditors.

Gothenburg, February 5, 2020 Serneke Group AB (publ)

Board

Kent Sander Chairman

Mari Broman Member

Ludwig Mattsson Member

Ola Serneke CEO

Anna-Karin Celsing Member

Anna Belfrage Member

Fredrik Alvarsson Member

For further information:

Michael Berglin, Deputy CEO E-mail: michael.berglin@serneke.se Phone: +46 (0) 31712 97 00

Anders Düring, CFO E-mail: anders.during@serneke.se Phone:: +46 (0)70 88 87 733

This information is such that Serneke Group AB (publ) is obliged to publish pursuant to the EU Market Abuse Regulation. The information was submitted for publication on February 5, 2020, at 8:00 a.m.

QUARTERLY DATA AND MULTI-YEAR REVIEW

	Oct–Dec	Jul–Sep	Apr–Jun	Jan–Mar	Oct–Dec	Jul–Sep	Apr–Jun	Jan–Mar
SEK million	2019	2019	2019	2019	2018	2018	2018	2018
Income
Construction	1,728	1,302	1498	1,339	1,680	1,153	1,437	1260
Civil Engineering	132	130	201	200	284	213	190	179
Project Development	484	29	26	29	150	62	116	83
Eliminations and Group
wide	-91	-85	-109	-88	-123	-69	-62	-37
Total	2,253	1,376	1,616	1,480	1,991	1,359	1,681	1,485
Operating profit
Construction	5	25	40	26	54	-41	42	35
Civil Engineering	-42	–20	-3	0	2	5	2	1
Project Development	-32	0	–14	-9	459	-7	36	-1
Group-wide	-27	-10	-23	1	-6	3	-6	17
Total	-97	-5	0	18	509	-40	74	52
Operating margin, %	-4.3	-0.4	0.0	1.2	25.6	-2.9	4.4	3.5
Profit after net financial
items Profit/loss for the period	-85	-30	-3	8	501	-50	58	49
	-63	-27	-2	10	572	-55	48	39
Balance sheet
Fixed assets	661	941	910	1,106	1,094	1,998	1,944	1,725
Current assets	5,072	4,753	4,654	4,546	4,461	2,725	2,798	2,627
Total assets	5,734	5,694	5,564	5,652	5,555	4,723	4,742	4,352
Shareholders' equity	2,179	2,238	2,263	2,257	2,272	1,721	1,770	1,860
Non-current liabilities	1,719	1,615	1,669	1,573	1,289	1,317	1,387	972
Current liabilities	1,835	1,841	1,632	1,822	1,994	1,685	1,585	1,520
Total equity and liabilities Orders	5,734	5,694	5,564	5,652	5,555	4,723	4,742	4,352
Order bookings	2,969	1,792	2,663	1,177	1,000	1,236	1,328	1,128
Order backlog	8,943	7,662	7,149	5,973	6,382	7,303	7,398	7,671
Employees
Average number of employees	1,153	1,173	1,178	1,175	1,110	1,096	1,051	1,022

KEY INDICATORS

IFRS-based key indicators

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	2,253	1,991	6,725	6,516
Earnings per share, SEK, before dilution	-2.81	25.34	-3.66	26.37
Earnings per share, SEK, after dilution	-2.81	25.14	-3.66	26.16
Weighted average number of shares before dilution	22,433,465	22,570,127	22,433,465	22,905,389
Weighted average number of shares after dilution	22,481,968	22,750,130	22,558,676	23,085,392

Other key indicators

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Operating profit	–97	509	-84	595
Growth, %	13.2	15.0	3.2	16.3
Order bookings	2,969	1,000	8,601	4,692
Order backlog	8,943	6,382	8,943	6,382
Organic growth, %	13.2	14.9	3.2	16.2
Operating margin, %	-4.3	25.6	-1.2	9.1
Cash flow before financing	369	-29	-434	-212
Cash flow from operations per share, before dilution	3.70	11.70	-28.75	11.57
Cash flow from operations per share, after dilution	3.69	11.60	-28.75	11.48
Equity per share, SEK, before dilution	97.13	101.28	97.13	101.28
Equity per share, SEK, after dilution	96.92	100.47	96.92	100.47
Working capital	3,237	2,467	3,237	2,467
Capital employed	3,603	3,264	3,603	3,264
Return on capital employed, %	-2.2	21.9	-2.2	21.9
Return on equity after taxes, %	-3.7	29.5	-3.7	29.5
Equity/assets ratio, %	38.0	40.9	38.0	40.9
Net debt	1,224	552	1,224	552
Net debt/equity ratio, %	56.2	24.3	56.2	24.3
Net debt/EBITDA	-36.0	0.9	-36.0	0.9

SUMMARY FINANCIAL STATEMENTS

SUMMARY OF CONSOLIDATED INCOME STATEMENT

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	2,253	1,991	6,725	6,516
Production and administration expenses	-2,297	-1,894	-6,620	-6,273
Gross profit	-44	97	105	243
Sales and administration expenses	-53	-44	-197	-134
Change in value of investment properties	-	240	-	281
Revaluation of previous holdings in joint ventures	-	229	-	229
Share in profit of associates and joint ventures	0	-13	8	-24
Operating profit	-97	509	-84	595
Net financial items	12	-8	-27	-37
Profit after financial items	-85	501	-111	558
Tax	22	71	29	46
Profit/loss for the period	-63	572	-82	604
Attributable to:
Parent Company shareholders	-63	575	-85	607
Non-controlling interests	0	-3	3	-3
Earnings per share before dilution, SEK	-2.81	25.34	-3.66	26.37
Earnings per share after dilution, SEK	-2.81	25.14	-3.66	26.16
Average number of shares before dilution	22,433,465	22,570,127	22,433,465	22,905,389
Average number of shares after dilution	22,481,968	22,750,130	22,558,676	23,085,392

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Profit/loss for the period	-63	572	-82	604
Other comprehensive income	0	0	0	0
Total comprehensive income	-63	572	-82	604

CONDENSED CONSOLIDATED BALANCE SHEET

SEK million	Dec 31 2019	Dec 31 2018
Assets
Fixed assets
Intangible fixed assets	23	23
Investment properties	-	213
Other tangible fixed assets	298	122
Investments in associates/joint ventures	145	122
Non-current interest-bearing receivables	37	51
Other non-current receivables	158	563
Total fixed assets	661	1,094
Current assets
Project and development properties	3,274	2,507
Inventories	1	1
Accounts receivable	825	972
Accrued but not invoiced income	560	398
Other current receivables	251	194
Cash and bank balances	162	389
Total current assets	5,073	4,461
Total assets	5,734	5,555
Equity and liabilities
Shareholders' equity	2,179	2,272
Non-current liabilities
Non-current interest-bearing liabilities	1,246	826
Other non-current liabilities	162	83
Deferred tax liability	128	157
Other provisions	183	223
Total non-current liabilities	1,719	1,289
Current liabilities
Current interest-bearing liabilities	177	166
Current tax liabilities	12	13
Accounts payable	958	991
Invoiced but not accrued income	347	532
Other current liabilities	342	292
Total current liabilities	1,836	1,994
Total equity and liabilities	5,734	5,555

SUMMARY OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

	Dec 31	Dec 31
SEK million	2019	2018
Equity attributable to Parent Company shareholders
Balance at beginning of period	2,272	1,821
Dividend	-	-93
Share repurchases	-	-65
Share-related compensation	15	1
Conversion, convertible debenture loans	-1	-
Changed accounting policy	-25	-
Comprehensive income for the period	-82	607
Non-controlling interests
Acquisition of non-controlling interests	0	4
Transactions with non-controlling interests	0	0
Comprehensive income for the period	0	-3
Balance at end of period	2,179	2,272

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Operating activities
Cash flow before change in working capital	28	72	-52	-7
Change in working capital	55	192	-593	272
Cash flow from operating activities	83	264	-645	265
Investing activities
Acquisitions of investment properties	-	-	-	-26
Acquisitions of businesses	-	-587	-	-592
Sold subsidiaries	-	222	-	222
Increase/decrease in investing activities	286	72	211	-81
Cash flow from investing activities	286	-293	211	-477
Cash flow before financing	369	-29	-434	-212
Financing activities
Newly raised borrowings	240	-	446	691
Amortization of liabilities	-241	-2	-258	-338
Share repurchases	-	–20	-	-65
Dividend	-	-	-	-93
Increase/decrease in financing activities	-206	-24	19	-25
Cash flow from financing activities	-207	-46	207	170
Cash flow for the period	162	-75	-227	-42
Cash and cash equivalents at beginning of period	0	464	389	431
Cash and cash equivalents at end of the period	162	389	162	389

PARENT COMPANY CONDENSED INCOME STATEMENT

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Income	44	30	178	143
Sales and administration expenses	-59	-44	-192	-113
Operating profit	-15	-14	-14	30
Net financial items	-39	-15	-91	-50
Profit after financial items	-54	-29	-105	-20
Appropriations	0	22	0	22
Profit/loss before tax	-54	-7	-105	2
Tax	-4	-17	3	-19
Profit/loss for the period	-58	-24	-102	-17

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
SEK million	2019	2018	2019	2018
Profit/loss for the period	-58	-24	-102	-17
Other comprehensive income	0	0	0	0
Total comprehensive income	-58	-24	-102	-17

PARENT COMPANY CONDENSED BALANCE SHEET

SEK million	Dec 31 2019	Dec 31 2018
Assets Fixed assets
Tangible fixed assets	13	12
Investments in Group companies	300	162
Investments in associates and joint ventures	-	10
Deferred tax assets	13	10
Other non-current receivables	3	2
Total fixed assets	329	196
Current assets
Project and development properties	2	3
Other current receivables	1,726	1,572
Cash and bank balances	66	310
Total current assets	1,794	1,885
Total assets	2,123	2,081
Equity and liabilities
Shareholders' equity	417	505
Non-current liabilities
Non-current interest-bearing liabilities	699	702
Other provisions	2	0
Total non-current liabilities	701	702
Current liabilities
Current interest-bearing liabilities	10	16
Accounts payable	20	18
Other current liabilities	975	840
Total current liabilities	1,005	874
Total equity and liabilities	2,123	2,081

NOTES

NOTE 1 – Accounting policies

This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting. The Interim Report has been prepared in accordance with International Financial Reporting Standards (IFRS), as well as interpretations of current International Financial Reporting Interpretations Committee (IFRIC) standards as adopted by the EU. The Parent Company's reports have been prepared in compliance with the Annual Accounts Act and the Financial Reporting Board's recommendation RFR 2, Accounting for Legal Entities. ESMA's guidelines on alternative key indicators are applied in the report.

Implementation of new accounting standards

IFRS 16 Leasing

In January 2016, IASB published the new standard IFRS 16 Leases, which was approved by the EU in November 2017 and will be applied from the 2019 financial year. In contrast to IAS 17 Leases, the standard means that Serneke as a lessee in operating leases, except for exceptions for small and short leases, must recognize the leases in the Statement of financial position. Serneke applies IFRS 16 Leases as of January 1, 2019 and has accordingly not applied the standard retroactively. The recognized right of use (ROU) assets were assigned the same value as the recognized leasing liabilities as of January 1, 2019. The transition to IFRS 16 has not had any material impact on the Groups position and performance or cash flow statement. In its capacity as lessee, Serneke conducted a detailed review and analysis of the Group's leases, whereby rental agreements were identified as the single most significant. In addition to rental agreements, a number of smaller leases were identified, such as vehicles, machinery and construction equipment. The effect on the leasing liability as of January 1, 2019 amounted to SEK103million where a corresponding ROU asset is recognized.

The right-of-use asset is reported under tangible fixed assets and the lease liability under non-current and current interest-bearing liabilities.

Bridge from operating leases under IAS 17 to leasing liabilities according to IFRS 16

Commitments for operating leases as at December 31, 2018	88
Discounting by the Group's weighted average marginal loan interest 2.79%	-7
Plus: liabilities for finance leases as of December 31, 2018	71
Less: leases for which the underlying asset is of a low value that is expensed on a straight-line basis	-2
Plus: adjustments due to other handling of options to extend or cancel agreements	18
Lease liability as at January 1, 2019	168

In addition, the Interim Report has been prepared in accordance with the same accounting principles and calculation methods as in the 2018 Annual Report. For detailed information regarding accounting policies, see Serneke's 2018 Annual Report, see www.serneke.se.

NOTE 2 – Financial assets and liabilities at fair value

Financial assets and financial liabilities measured at fair value in the balance sheet are classified according to one of three levels based on the information used to establish the fair value. The Group only holds financial assets and liabilities valued in level 3, which is why levels 1 and 2 have been omitted in the table below. No transfers have been made between the levels during the periods. A more detailed description of the levels can be found in Note 4 of the 2018 Annual Report.

Level 1 – Valuation is made according to prices in active markets for identical instruments.

Level 2 – Financial instruments for which the fair value is established based on valuation models that are based on observable data for the asset or liability other than quoted prices included in Level 1.

Level 3 – Financial instruments for which fair value is established based on valuation models where significant inputs are based on non-observable data.

Group SEK million	Dec 31 2019	Dec 31 2018
Financial assets
Available-for-sale financial assets*	2	2
Total financial assets Financial liabilities	2	2
Other short- and long-term liabilities Of which, additional purchase	23	58
considerations**	23	58
Total financial liabilities	23	58

* In the fair value calculation of available-for-sale financial assets at level 3, the market price method has been applied and the yield value assumption has been used.

** In the fair value calculation of the additional purchase considerations at level 3, project estimates, budgets and forecasts have been applied.

For the Group's other financial assets and financial liabilities, the reported values are assessed as corresponding to FAIR VALUE. No significant changes in valuation models, assumptions or inputs were made during the period.

Note 3 Pledged assets and contingent liabilities

The Group pledges collateral for external loans. The Group's contingent liabilities arise primarily in connection with different property disposals, whereby various operational guarantees may occur, as well as performance guarantees for future contracts. Serneke Group AB (publ) has also entered into a guarantee undertaking, which means that the co-owners in Prioritet Serneke Arena are jointly responsible for the correct fulfillment of interest and repayment of the associate's liabilities to credit institutions in the event that the associate is unable to pay.

Pledged assets and contingent liabilities in the consolidated balance sheet:

	Dec 31	Dec 31
Group	2019	2018
Pledged assets	2,044	1,941
Contingent liabilities	350	450
Parent Company
Pledged assets	500	500
Contingent liabilities	2,262	1,205

Note 4 – Breakdown of income

Oct–Dec 2019, SEK million	Construction	Civil Engineering	Project Development	Elimination/Group wide	Total
Construction income	1,724	131	1	-91	1,765
Sale of properties and development rights	0	0	463	0	463
Rental income	0	0	2	0	2
Other income	4	1	18	0	23
Total income	1,728	132	484	-91	2,253
Date of income recognition:
At a specific time	4	1	481	0	486
Over time	1,724	131	3	-91	1,767
Total income	1,728	132	484	-91	2,253

Oct–Dec 2018, SEK million	Construction	Civil Engineering	Project Development	Elimination/Group wide	Total
Construction income	1,676	284	91	-123	1,928
Sale of properties and development rights	0	0	0	0	0
Rental income	0	0	16	0	16
Other income	4	0	43	0	47
Total income	1,680	284	150	-123	1,991
Date of income recognition:
At a specific time	4	0	43	0	47
Over time	1,676	284	107	-123	1,944
Total income	1,680	284	150	-123	1,991

Jan–Dec 2019, SEK million	Construction	Civil Engineering	Project Development	Elimination/Group wide	Total
Construction income	5,850	661	18	-373	6,156
Sale of properties and development rights	0	0	466	0	466
Rental income	0	0	17	0	17
Other income	17	2	67	0	86
Total income	5,867	663	568	-373	6,725
Date of income recognition:
At a specific time	17	2	533	0	552
Over time	5,850	661	35	-373	6,173
Total income	5,867	663	568	-373	6,725

Jan–Dec 2018, SEK million	Construction	Civil Engineering	Project Development	Elimination/Group wide	Total
Construction income	5,519	866	274	-291	6,368
Sale of properties and development rights	0	0	0	0	0
Rental income	0	0	56	0	56
Other income	11	0	81	0	92
Total income	5,530	866	411	-291	6,516
Date of income recognition:
At a specific time	11	0	81	0	92
Over time	5,519	866	330	-291	6,424
Total income	5,530	866	411	-291	6,516

Construction income

Income from contracting agreements are reported in accordance with IFRS 15 Revenue from Contracts with Customers, either by fulfilling the performance undertaking over time (that is, gradually) or at one specific time. Contracting agreements entail the construction contract being performed on the customer's land, where an asset is created over which the customer gains control in pace with the completion of the asset. This entails income being recognized gradually (over time), applyingpercentage-of-completion. When applyingpercentage-of-completion, the input method applies whereby income is reported based on the degree of completion, which is calculated as the ratio between the expenses incurred for work performed at the end of reporting period and the estimated total expenses for the assignment. Revaluations of the project's final forecasts entail corrections of previously accumulated earnings. If it is probable that the total contract expenses will exceed the total contract income, the anticipated loss should be immediately recognized as a cost in its entirety. Additional orders and amendments are included in the income from the assignment to the extent that they are approved by the customer.

Sale of properties and development rights

On disposal of properties or development rights directly or indirectly through a sale of shares, the underlying property or development right's value is recognized in the Group as income. Income from property sales is reported at the time at which the new owner takes possession. When contracts include property sales, development rights and construction contracting to the buyer of the planned building, an assessment is made regarding whether the property and/or development rights transactions and the construction contract are separate performance undertakings. Depending on the design and terms of the agreement, the sale can be seen as one or several

performance undertakings. Sales are reported at the point in time at which control is transferred to the buyer. Control is transferred over time if the seller has no alternative use for the property sold and the seller is entitled to payment from the customer for the work performed. In such cases, income is reported applyingpercentage of completion. If any of the above criteria are not met, income is reported at a single point in time, on completion and transfer to the customer.

Sales of development rights can be dependent upon decisions regarding future detailed development plans. An assessment is then made as to the likelihood of the respective detailed development plan. Sales income and earnings are recognized when the probability is deemed to be very high. When sales income is recognized, all remaining commitments in the sales earnings are also taken into account. Property projects are also on occasion sold with guarantees for a certain degree of leasing and, at the time of sale, any lease guarantees are reported as a reserve in the project, which then has a positive effect on thepercentage of completion as leases are signed.

Rental income

Income also includes rental income, which is to be considered as operating leasing. Rental income is invoiced in advance and recognized on a straight-line basis in the income statement based on the terms of the lease agreements. Advance rent is reported as prepaid rental income. In cases where the rental contract allows a reduced rent for a certain period of time, which is compensated for by higher rent during another period, this is allocated across the term of the contract.

Other income

Other income refers to income not classified as construction income, sales of properties and

development rights or rental income, including, for example, hotel income or income from central companies.

FINANCIAL DEFINITIONS

Indicator	Definition Purpose
Growth	Income for the period less income for the previous period In the Company's view, the key indicator
	divided by income for the previous period.			allows investors, who so wish, to assess the
			Company's capacity to increase its earnings.
Organic		Income for the period, adjusted for acquired growth, less				In the Company's view, the key indicator
growth	income for the previous period, adjusted for acquired					allows investors, who so wish, to assess the
	growth, divided by income for the previous period,					Company's capacity to increase its income
	adjusted for acquired growth.					without acquiring operating companies.
		Oct–Dec		Oct–Dec	Jan–Dec	Jan–Dec
	Calculation of organic growth		2019	2018	2019	2018
	Income current period		2,253	1,991	6,725	6,516
	Income corresponding to previous period		1,991	1,732	6,516	5,605
	Income change		262	259	209	911
	Adjustment for structural effect		0	-1	0	-1
	Total organic growth		262	258	209	910
	Total organic growth (%)		13.2%	14.9%	3.2%	16.2%
Order	The value of new projects and changes in existing projects					In Serneke's view, the key indicator allows
bookings	during the period.					investors, who so wish, to assess the Group's
						sales by Business Area Construction and
			Business Area Civil Engineering for the
			current period.
Order	The value of the Company's undelivered orders at the end		In the Company's view, the key indicator
backlog	of the period excluding cooperation agreements.	allows investors, who so wish, to assess the
		Company's income through Business Area
				Construction and Business Area Civil
					Engineering in future periods.
Operating margin	Operating profit divided by income.					In the Company's view, the key indicator allows investors, who so wish, to assess the
				Company's profitability.
Operating	Current assets less current liabilities.					In the Company's view, the key indicator
capital						allows investors, who so wish, to assess the
						Company's tied-up capital in relation to its
				competitors.
Capital	Consolidated total assets less deferred tax assets less non					In the Company's view, the key indicator
employed	interest-bearing liabilities including deferred tax liabilities.					allows investors, who so wish, to assess the
	For the business areas, the net of Group-internal		total capital placed at the Company's
	receivables and liabilities is also deducted.					disposal by shareholders and creditors.
				Dec 31	Dec 31
	Calculation of capital employed			2019	2018
	Total assets			5,734	5,555

Indicator	Definition			Purpose
	Deferred tax assets			0	0
	Less non-interest-bearing liabilities including deferred tax liabilities			-2,132	-2,291
	Capital employed			3,603	3,264
Return on	Profit after net financial items plus financial expenses					In the Company's view, the key indicator
capital	divided by average capital employed for the period.			allows investors, who so wish, to assess the
employed	Accumulated interim periods are based on rolling 12-		Company's capacity to generate a return on
	month earnings.			the total capital placed at the Company's
						disposal by shareholders and creditors.
				Dec 31	Dec 31
	Calculation of average capital employed			2019	2018
	Dec 31, 2019 (3,603) + Dec 31, 2018 (3,264) / 2			3,433
	Dec 31, 2018 (3,264) + Dec 31, 2017 (2,516) / 2				2,890
				Dec 31	Dec 31
	Calculation of return on capital employed			2019	2018
	Profit after net financial items			-111	558
	Plus financial expenses			36		75
	Average capital employed			3,433	2,890
	Return on capital employed			-2.2%	21.9%
Equity per	Total equity according to the balance sheet divided					The Company believes that key indicators give
share,	by the number of shares outstanding on the closing date. The difference between before and after					investors a better understanding of historical return
before/afte	dilution is accounted for by the convertibles issued			per share at the closing date.
r dilution	by the Group.
Cash flow	Cash flow from operating activities divided by the					It is the Company's view that the key indicator gives
from	average number of shares during the period. The difference between before and after dilution is		investors a better understanding of the operations'
operations	accounted for by the convertibles issued by the Group.		cash flow in relation to the number of shares,
per share,			adjusted for changes in the number of shares during the period.
before/afte r dilution
Earnings	Profit for the period divided by the average number
per share,	of shares during the period. The difference between		It is the Company's view that the key indicator gives investors a better understanding of profit per share.
before/afte	before and after dilution is accounted for by the
r dilution	convertibles issued by the Group.

Indicator	Definition	Purpose
Return on equity	Profit for the period as apercentage of	In the Company's view, the key indicator allows investors,
	average shareholders' equity.	who so wish, to assess the Company's capacity to
	Accumulated interim periods are	generate a return on the capital shareholders have placed
	based on rolling 12-month earnings.	at the Company's disposal.

Indicator	Definition	Purpose
			Dec 31	Dec 31
	Calculation of average shareholders' equity		2019	2018
	Dec 31, 2019 (2,179) + Dec 31, 2018 (2,272) / 2		2,226
	Dec 31, 2018 (2,272) + Dec 31, 2017 (1,821) / 2			2,047
			Dec 31	Dec 31
	Calculation of return on shareholders' equity		2019	2018
	Profit/loss for the period			-82 604
	Average shareholders' equity		2,226	2,047
	Return on equity		-3.7%	29.5%
Equity/assets ratio	Shareholders' equity less minority	The equity/assets ratio shows the proportion of total
	interests as apercentage of total	assets represented by shareholders' equity and has been
	assets.	included to allow investors to be able to assess the
		Company's capital structure.
Net debt	assets less interest-bearing	Interest-bearing liabilities less liquid		Net debt is a measure deemed relevant for creditors and
	receivables.	credit rating agencies.
Net debt/equity ratio	Interest-bearing net debt divided by	Net debt/equity ratio is a measure deemed relevant for
	shareholders' equity.	creditors and credit rating agencies.
EBITDA	Operating profit excluding	EBITDA is a measure deemed to provide investors a better
	amortization/depreciation.	understanding of the Company's earnings.
			Dec 31	Dec 31
	Calculation of EBITDA		2019	2018
	Operating profit		-84	595
	Depreciation		50	24
	EBITDA		-34	619
Net debt/EBITDA	Interest-bearing liabilities less liquid	Net debt/EBITDA is a measure deemed relevant for
	assets less interest-bearing	creditors and credit rating agencies.
	receivables divided by EBITDA.

SERNEKE IN BRIEF

Serneke is a growing corporate group active in construction, civil engineering and projectdevelopment, with more than 1,100 employees. Through novel thinking, we drive development and create more effective and more innovative solutions for responsible construction.

Serneke Group AB (publ) Headquarters: Kvarnbergsgatan 2 SE-411 05 Gothenburg Phone: +46 (0)31-712 97 00 | info@serneke.se The business has a good mix of public and commercial assignments, providing strength over economic cycles.

Serneke's annual reports and other financial information are available under the tab Investors at www.serneke.se

Presentation of the Interim Report for January–December 2019

On February 5, 2020 at 9:00 a.m. (CET), Serneke Group will comment on this Year-End Report in a conference call with an online presentation for investors, analysts and the media. The presentation will be in Swedish and can be followed live via webcast at https://tv.streamfabriken.com/serneke-q4-2019. Presentation materials for the presentation will be available on the website one hour before the webcast begins.

To participate, please dial: +46 8 50 55 83 59