Serneke Group

Interim / Quarterly Report • Jul 17, 2018

INTERIM REPORT JANUARY-JUNE 2018

SERNEKE CONTINUES TOGROW

APRIL–JUNE 2018

• Income amounted to SEK1,681million (1,464), an increase of 15percent
• Operating profit amounted to SEK74million (95) and the operating margin was 4.4percent (6.5)
• Profit for the period amounted to SEK48million (87)
• Earnings per share after dilution amounted to SEK2.05 (3.72)
• Cash flow from operating activities amounted to a negative SEK-199million (39)
• Order bookings amounted to SEK1,328million (1,742)
• A bond was issued for total of SEK700million
• A long-term share savings program has been introduced for all Group employees

JANUARY-JUNE 2018

• Income amounted to SEK3,166million (2,602), an increase of 22percent
• Operating profit amounted to SEK126million (142) and the operating margin was 4.0percent (5.5)
• Profit for the period amounted to SEK87million (120)
• Earnings per share after dilution amounted to SEK3.71 (5.13)
• The equity/assets ratio was 37.3percent (42.8)
• Cash flow from operating activities amounted to SEK10million (101)
• Order bookings amounted to SEK2,456million (3,811)
• Order backlog amounted to SEK7,398million (8,308)

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	1,681	1,464	3,166	2,602	6,169	5,605
Operating profit	74	95	126	142	403	419
Operating margin, %	4.4	6.5	4.0	5.5	6.5	7.5
Profit/loss for the period	48	87	87	120	290	323
Earnings per share, SEK, before dilution	2.06	3.74	3.74	5.20	12.47	13.94
Earnings per share, SEK, after dilution	2.05	3.72	3.71	5.13	12.38	13.81
Equity per share, SEK, after dilution	75.55	69.33	75.55	69.33	76.13	77.73
Equity/assets ratio, %	37.3	42.8	37.3	42.8	37.3	41.3
Net debt	458	-123	458	-123	458	254
Net debt/EBITDA	1.1	-0.5	1.1	-0.5	1.1	0.6
Net debt/equity ratio, %	25.9	-7.6	25.9	-7.6	25.9	13.9
Order bookings	1,328	1,742	2,456	3,811	5,045	6,400
Order backlog	7,398	8,308	7,398	8,308	7,398	7,965

CEO STATEMENT

Growing at a higher pace than the market

The Group continues to grow and increased its sales by 15 percent in the second quarter. All four business areas have increased their income and, despite a selective downturn in the market compared with a year ago, we are seeing continued high demand. In the first half of 2018, income increased by SEK 564 million, corresponding to 22 percent, in line with our target for 2020.

Order bookings for the quarter and the order backlog at the end of the period were both lower than in the preceding year, partly as a result of the order mix containing a larger share of collaborative projects than previously, but also as a consequence of a more cautious market, which has influenced the pace at which decisions are taken in connection with new projects. We are monitoring developments carefully and are raising our readiness for possible changes in the market, although we currently assess the underlying needs of the market, our specific market and the customers we address, as providing a stable foundation for continued expansion in line with our established objectives.

In the second quarter, the Group's operating profit amounted to SEK 74 million (95), a decrease of 22 percent. A transaction within Project Development in the second quarter of 2017 impacted earnings positively by SEK 52 million. During the quarter, our efforts to develop and establish improved structural and process capacity, aimed at supporting our continued rapid expansion, accelerated, impacting earnings negatively.

The contracting operations continue to perform strongly, growing by a total of 13 percent during the period. Their operating profit increased by 5 percent to SEK 44 million. Our largest business area, Construction, grew 11 percent during the second quarter, which is lower than previously but still at a higher rate than the market. Our construction operations continue to prioritize appropriate orders over higher growth. Our strategy remains to focus on major orders, collaborative projects and to be selective in choosing customer segments. We continue to compete with market leaders for major projects and the new agreements secured during the period are mainly in industry and offices, but also in properties for public sector clients. Operating profit for Business Area Construction decreased slightly compared with the corresponding quarter last year, amounting to SEK 42 million (44). The operating margin was 2.9 percent, which is in line with the previous quarter. Business Area Civil Engineering continues its trend of bringing home more major projects and increased its sales during the second quarter to SEK 190 million (152), an increase of 25 percent. Civil Engineering shows profitable growth for the fourth consecutive quarter, which is pleasing following a phase of building up the operations. The strategy continues to be to compete for major infrastructure projects, for which we perceive considerable future demand.

Business Area Project Development increased its revenues by 68 percent during the period and although profitability did not appear during the quarter, we take a positive view of the underlying and long-term profitability trend, particularly as we now approach the end of the first intensive phase of investment and expansion.

In Business Area Property Development, which is dominated by the Säve holding, two significant events occurred during the quarter. In part, a new, more solid plan was drawn up for the entire Säve area and, in part, former official restrictions on the Säve area were lifted. The latter prompted a decision to revalue the area, aided by an external party, as the conditions for the area's development have changed significantly. This revaluation had a positive effect on earnings for the quarter.

Enhancing competitiveness on the way towards our objectives

During the quarter, a bond issue totaling MSEK 700 was implemented, with previous bonds being redeemed. The surplus from the new bond provides increased strategic scope for implementing the growth strategy, and the company's improved bond terms provide a lower average cost of capital.

We are continuing on our course towards ambitious targets. To date, our strategy has been successful, and now, with a slightly different market situation, it is important to listen carefully to the market, to stay close to our customers and to continuously improve our offering with the same energy as before. Last but not least, and absolutely crucial, is retaining and recruiting the best personnel. For this reason, in May, the Board of Directors took a further step to support the company's ambitions by approving a new share saving program that I hope will help Serneke continue towards its objective of being the sector's most attractive employer by enabling employees to share in the growth in value.

Ola Serneke, President and CEO

GROUP DEVELOPMENT

ORDER BOOKINGS AND ORDER BACKLOG

Order bookings during the second quarter amounted to SEK1,328million (1,742). Order bookings reflect a favorable product mix as well as a good geographic spread and consist predominantly of industrial and office properties. Order bookings fluctuate between quarters depending on when contracts are signed, and this is particularly evident when it comes to the procurement of major projects, which the Group has chosen to prioritize. The metropolitan areas of Stockholm, Gothenburg and

Malmö and their environs continue to be the Group's most important markets, even though the Group is expanding geographically and securing significant assignments in new markets.

The Group's order backlog at the end of the second quarter amounted to SEK7,398million (8,308).

Order bookings	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Construction	1,000	1,606	1,927	3,436	4,306	5,815
Civil Engineering	328	136	529	375	739	585
Group	1,328	1,742	2,456	3,811	5,045	6,400
Order backlog	June 30	June 30	Dec 31
SEK million	2018	2017	2017
Construction	6,879	7,894	7,649
Civil Engineering	519	414	316
Group	7,398	8,308	7,965

NEW ASSIGNMENTS DURING THE PERIOD APRIL-JUNE 2018

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

Assignment	Location	Client	Order value (SEK million)	Anticipated start of construction
Office property	Trollhättan	Kraftstaden Fastigheter AB	195	Third quarter 2018
Industry/office	Västerås	Northvolt	*	Started
Headquarters	Järfälla	Lidl Sweden	*	Fourth quarter 2018
Groundwork	Gothenburg	Karlastaden development	150	Third quarter 2018
*Order value yet to be published

INCOME AND PROFIT

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

				Jan
	Apr–Jun	Apr–Jun	Jan-Jun	Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	1,681	1,464	3,166	2,602	6,169	5,605
Operating profit	74	95	126	142	403	419
Net financial items	-16	-2	-19	-9	-28	-18
Earnings after financial items	58	93	107	133	375	401
Tax	-10	-6	–20	-13	-85	-78
Profit/loss for the period	48	87	87	120	290	323

APRIL-JUNE 2018

Consolidated income amounted to SEK1,681million (1,464), an increase of 15percent compared with the corresponding quarter in the preceding year. All business areas increased their sales during the quarter. Construction increased by 11percent while Civil Engineering increased by 25percent, providing a total increase for the contracting operations of 13percent. Project Development increased its sales by 68percent, with more projects having transitioned to the production phase. Property Management showed an increase in sales of 200percent, generated from the expanded property portfolio and hotel income.

Operating profit amounted to SEK74million (95), a decrease of 22percent. Income from the contracting operations amounted to SEK44million (42), an increase of 5percent. The operating loss from Project Development was SEK6million (profit 47). The decrease is due to the preceding year's sale of the Mälardalen University projects, which generated a gain of SEK52million, corresponding transactions have not occurred during the quarter. Operating profit for Property Management amounted to SEK42million (3), which was attributable to increased property values by SEK43million (decrease 1).

Net financial items were negative in the amount of SEK16million (2). During the quarter, early redemption of bonds affected net financial items by a negative SEK12million (0). The Group reported an estimated tax expense of SEK10million (6).

Profit after tax amounted to SEK48million (87) and earnings per share before dilution for the quarter were SEK2.06 (3.74).

JANUARY-JUNE 2018

Consolidated income amounted to SEK3,166million (2,602), an increase of 22percent. Operating profit amounted to SEK126million (142). The contracting operations generated an operating profit of SEK80million (79), an increase of 1percent.

During the period, changes in the value of investment properties affected operating profit positively by SEK43million (18). The share in the profit of associates and joint ventures amounted to a negative SEK8million (positive 49). The share in profit was burdened by intra-Group eliminations attributable to the Karlastaden project as a result of increased activity in the project. Last year, the sale of the Mälardalen University project also generated SEK38 MSEKtowards the share in profit.

Net financial items were negative in the amount of SEK19million (9) and the Group's estimated tax amounted to SEK20million (13). Profit after tax amounted to SEK87million (120) and earnings per share before dilution were SEK3.74 (5.20).

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 profit rolling 12

SALES

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Construction	1,437	1,292	2,697	2,295	5,321	4,919
Civil Engineering	190	152	369	275	717	623
Project Development	89	53	151	103	260	212
Property Management	27	9	48	21	78	51
Group-wide	40	33	81	41	148	108
Eliminations	-102	-75	-180	-133	-355	-308
Total	1,681	1,464	3,166	2,602	6,169	5,605
OPERATING PROFIT	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Construction	42	44	77	85	175	183
Civil Engineering	2	-2	3	-6	10	1
Project Development	-6	47	3	47	21	65
Property Management	42	3	32	14	231	213
Group-wide	-6	3	11	2	-34	-43
Total	74	95	126	142	403	419
Net financial items	-16	-2	-19	-9	-28	-18
Profit after financial items	58	93	107	133	375	401

* Group-wide: Other operations are reported under Group-wide – and consist of key companies, Group functions and elimination of intra-Group profit.

Seasonal variations

Serneke's operations largely lack clear 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 effects of weather during the winter months. Profits are also affected by public holidays falling within a certain interim period, leading to fewer production days.

FINANCIAL POSITION

	June 30	Dec 31
2018	2017	2017
4,742	3,788	4,404
1,770	1,621	1,821
458	-123	254
1.1	-0.5	0.6
562	558	431
37.3	42.8	41.3
	June 30

The consolidated balance sheet total amounted to SEK4,742million (4,404) as at June 30, and the equity/assets ratio was 37.3percent (41.3). During the period, the Group issued a bond for SEK700million and prematurely redeemed a bond for SEK300million, which affected both the balance sheet total and the equity/assets ratio. At the end of the period, consolidated cash and cash equivalents, including unutilized credit facilities, amounted to SEK762million (631).

Shareholders' equity has decreased by SEK51million since December 31, 2017, amounting to

SEK1,770million (1,821) as at 30 June. Profit for the year contributed by SEK87million, while dividends and share repurchase burdened shareholders' equity by SEK93million and SEK45million respectively.

As at June 30, net debt amounted to SEK458million (254). Net debt in relation to EBITDA was 1.1percent (0.6) and the average interest rate was 4.29percent (3.94). Unutilized committed credit facilities amounted to SEK200million (200) at the end of the period. The bank overdraft with Nordea carries a covenant, which means that the Group shall have an equity/assets ratio of 25percent.

GROUP CAPITAL STRUCTURE

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

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

CASH FLOW

APRIL– JUNE 2018

Cash flow from operating activities amounted to a negative SEK199million (39). The change is mainly explained by an increased amount of capital being tied up. Cash flow from investments was negative in the amount of SEK87million (28), consisting mainly of investments in investment properties. Cash flow from financing activities amounted to SEK223million (negative 73) and mainly involved new loans in the form of bonds, premature redemption of previous bonds, dividends paid and share repurchases attributable to share saving programs. Cash flow for the period amounted to a negative SEK63million (140).

JANUARY-JUNE 2018

Cash flow from operating activities amounted to SEK10million (101). The change is mainly explained by an increased amount of capital being tied up. Cash flow from investments was negative in the amount of SEK98million (57), consisting mainly of investments in investment properties. Cash flow from financing activities amounted to SEK219million (negative 57) and mainly involved new loans in the form of bonds, premature redemption of previous bonds, dividends paid and share repurchases attributable to share saving programs. Cash flow for the period amounted to SEK131million (negative 13).

EMPLOYEES

The average number of employees during the period April–June 2018, was 1,051 compared with 919 in the corresponding period in the preceding year.

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 Areas Project Development and Property Management.

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	1,437	1,292	2,697	2,295	5,321	4,919
Operating profit	42	44	77	85	175	183
Operating margin, %	2.9	3.4	2.9	3.7	3.3	3.7
Order bookings	1,000	1,606	1,927	3,436	4,306	5,815
Order backlog	6,879	7,894	6,879	7,894	6,879	7,649
Average number of employees	750	681	747	670	735	696

APRIL– JUNE 2018

Income amounted to SEK1,437million (1,292), an increase of 11percent. Operating profit amounted to SEK42million (44), a decrease of 5percent. The operating margin was 2.9percent (3.4).

Order bookings amounted to SEK1,000million (1,606). New assignments during the quarter were predominantly in industry and offices, although agreements were also signed with authorities for public buildings.

Order bookings during the period amounted to SEK1,927million (3,436) and, at the end of the period, the total order backlog amounted to SEK6,879million (7,894).

FINANCIAL TARGET

The long-term target in Business Area Construction is an operating margin of 5percent. The operating margin for the quarter was 2.9percent.

JANUARY-JUNE 2018

Income amounted to SEK2,697million (2,295), an increase of 18percent. Operating profit amounted to SEK77million (85), a decrease of 9percent.

Serneke has been commissioned by Kraftstadens Fastigheter AB in Trollhättan to construct a new seven-story office building. The building will be constructed in accordance with Environment Building Silver certification, which will include solar panels being installed on the roof. The building is scheduled for completion in the second quarter of 2020.

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.

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	190	152	369	275	717	623
Operating profit	2	-2	3	-6	10	1
Operating margin, %	1.1	-1.3	0.8	-2.2	1.4	0.2
Order bookings	328	136	529	375	739	585
Order backlog	519	414	519	414	519	316
Average number of employees	171	137	163	132	157	141

APRIL– JUNE 2018

Income amounted to SEK190million (152), an increase of 25percent. The sales increase is explained by more major projects now being in full production. Operating profit improved to SEK2million (negative 2) and the operating margin was 1.1percent (negative 1.3).

Order bookings amounted to SEK328million (136). Business Area Civil Engineering sees continued favorable demand for infrastructure projects and is continuing with its strategic plan to gradually compete for major projects. New assignments in the second quarter of the year were mainly in groundwork and industry.

JANUARY-JUNE 2018

Income amounted to SEK369million (275), an increase of 34percent. Operating profit amounted to SEK3million (negative 6) and the operating margin was 0.8percent (negative 2.2).

Order bookings amounted to SEK529million (375) and, at the end of the period, the total order backlog amounted to SEK519million (414), now amounting to the highest level in the history of the business area.

FINANCIAL TARGET

The long-term target in Business Area Civil Engineering is an operating margin of 5percent. The operating margin for the quarter was 1.1percent.

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.

SEK million	Apr–Jun 2018	Apr–Jun 2017	Jan-Jun 2018	Jan-Jun 2017	Jul-Jun 2017/2018	Jan–Dec 2017
Income	89	53	151	103	260	212
Share in profit of associates and joint ventures	-2	38	-6	38	-6	38
Operating profit	-6	47	3	47	21	65
Operating margin, %	-6.7	88.7	2	45.6	8.1	30.7
Average number of employees	49	31	47	29	42	34

APRIL– JUNE 2018

Income amounted to SEK89million (53), an increase of 68percent. The increase in income is explained by there being more projects in progress than in the corresponding period the preceding year.

Shares in the profit/loss of associates and joint ventures affected earnings negatively by SEK2million (positive 38) pertaining to internal profit elimination. Last year included a capital gain of SEK38million attributable to the sale of the Mälardalen University project through a joint venture. A corresponding transaction have not occurred during the second quarter 2018.

The operating loss amounted to SEK6million (profit 47). Last year, the sale of the Mälardalen University project generated SEK52million towards profit.

JANUARY-JUNE 2018

Income amounted to SEK151million (103), an increase of 47percent. Operating profit amounted to SEK3million (47). Last year, the sale of the Mälardalen University project generated SEK52million towards profit.

FINANCIAL TARGET

Project Development aims for a return on capital employed of 20percent. On June 30, 2018, the return on capital employed, based on rolling 12-months earnings, amounted to 6.7percent.

JV Karlastaden

Serneke is a partner in a joint venture with NREP, in which the parties each own 50percent. Serneke recognizes its holdings as a participation in joint ventures in the consolidated balance sheet.

The project is progressing as planned and the groundwork for the Karlatornet tower continued during the quarter.

The Group's share of JV Karlastaden

	June 30	June 30	Dec 31
SEK million	2018	2017	2017
Ownership share %	50	50	50
Share of equity	379	331	356
Share in profit	0	0	-1

Income statement JV	Apr–Jun	Jan-Jun	Jan–Dec
SEK million	2018	2018	2017
Income	1	2	2
Profit for the year	0	0	-2
Balance sheet JV	June 30	June 30	Dec 31
SEK million	2018	2017	2017
ASSETS
Properties	1,007	427	688
Other assets	8	60	95
Total assets	1,015	487	783
EQUITY AND LIABILITIES
Shareholders' equity	179	33	106
Interest-bearing liabilities	708	417	523
Other liabilities	128	37	154
Total equity and liabilities	1,015	487	783

Project development portfolio

At June 30, 2018, the total book value of the project development portfolio amounted to SEK305million, which is recognized as project and development properties in the balance sheet. The Project Karlastaden holding is recognized as a joint venture in participations in associated companies and joint ventures in the balance sheet at a value of SEK379million as at June 30, 2018.

Serneke's estimates the value of the project portfolio at approximately SEK1,777million, based on an external valuation made in the fourth quarter of 2017.

Of the assessed value of the project portfolio of SEK1,777million, SEK194million represented the value of development rights in the Company's own balance sheet, agreed development rights of which the Company has yet to take possession were estimated at about SEK678million and development rights held through joint ventures or associates were estimated at approximately SEK905million.

Projects to construct two tenant-owner housing schemes commenced during the quarter.

Serneke has been selected as contractor for the construction of Lidl Sweden's new headquarters at Barkabystaden in the Municipality of Järfälla outside Stockholm. The contract also includes the construction of a new 2,500 square meter store that will be adjacent to the offices. The ambition is for the buildings to be certified in accordance with BREEAM level Excellent.

BUSINESS AREA PROPERTY MANAGEMENT

Business Area Property Management manages and develops properties for long-term capital appreciation. Management is conducted of commercial properties. The business area is working to acquire properties with development potential and generate growth by investing, developing, streamlining and rationalizing property management. Investment properties are managed through wholly owned companies or in collaboration with third parties through associates.

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	27	9	48	21	78	51
Earnings from property management	-4	0	-16	-5	-18	-7
Changes in value of properties	43	-1	43	8	263	228
Share in profit of associates and joint
ventures	3	4	5	11	–14	-8
Operating profit	42	3	32	14	231	213
Average number of employees	17	14	17	14	15	14

APRIL– JUNE 2018

Income amounted to SEK27million (9), an increase of 200percent generated from the increased property portfolio and hotel revenues.

The operating loss amounted to SEK4million (0).

Changes in the value of the investment properties were positive in the amount of SEK43million (negative 1). An increasing number of tenants, combined with favorable decisions by the authorities, formed the basis for a new valuation by an external assessor. The share in profit of associated companies amounted to SEK3million (4), primarily attributable to property management earnings in the associate Änglagården Holding AB, which manages Prioritet Serneke Arena.

The total book value of the investment properties amounted to SEK1,016million as at June 30 (895).

JANUARY-JUNE 2018

Income amounted to SEK48million (21), an increase of 129percent.

Earnings from property management were negative in the amount of SEK16million (5) including a nonrecurring expense of SEK4million.

Changes in the value of the investment properties were positive in the amount of SEK43million (8). The share in profit of associated companies amounted to SEK5million (11), primarily attributable to property management earnings in Änglagården Holding AB.

FINANCIAL TARGET

Property Management aims for a return on equity of 20percent. On June 30, 2018, the return shareholders' equity, based on rolling 12-months earnings, amounted to 65.4percent.

Änglagården Holding

Business Area Property Management 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	June 30 2018	June 30 2017	Dec 31 2017
Ownership as apercentage	40	40	40
Share in associated companies*	88	101	83
Share in profit	5	10	-8
Of which:
Earnings from property management	6	10	20
Change in value of property	-1	-	-28

*) The Group's participation in the associate Änglagården Holding is calculated based on shareholders' equity less the preferential dividend right of SEK32million (55) which applies to the other shareholders. The closing value is subsequently reduced by an internal profit of SEK19million (19).

Income statement Änglagården Holding AB	Apr–Jun	Jan-Jun	Jan–Dec
SEK million	2018	2018	2017
Income	16	31	81
Profit for the year	8	12	–20
Balance Sheet Änglagården Holding AB	June 30	June 30	Dec 31
SEK million	2018	2017	2017
ASSETS
Properties	797	888	799
Other assets	153	186	207
Total assets	950	1,074	1,006
EQUITY AND LIABILITIES
Shareholders' equity	299	356	310
Interest-bearing liabilities	465	478	478
Other liabilities	186	240	218
Total equity and liabilities	950	1,074	1,006

Other investment properties

Within the business area, some smaller properties are managed where rental of warehouses, garages and industrial premises is conducted for municipal activities and private activities via subsidiaries.

PARENT COMPANY

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

Income for April-June amounted to SEK37million (30) and consisted primarily of intra-group services. Operating profit for the same period amounted to SEK3million (1).

Income for the period January–June amounted to SEK75million (56) and operating profit amounted to SEK40million (1).

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 34 of the 2017 Annual Report. Material related-party transactions have taken place with property company Adapta AB, Ola Serneke Invest AB, JV Karlastaden and associate Änglagården. 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 consisted mainly of construction income and rental of Serneke's headquarters, and sales amounted to SEK263million and purchases to SEK6million as at June 30, 2018. 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. The transactions consist of the acquisition of an investment property at an underlying property value of SEK26million. The acquisition was conducted as a company acquisition and also includes an additional purchase consideration of SEK10million, subject to a new detailed development plan for the area gaining legal force. Serneke deems this to be likely and has therefore recognized a provision for the additional purchase consideration. Transactions with JV Karlastaden consist mainly of project income, and sales amounted to SEK137million as at June 30, 2018. Transactions with associate Änglagården consist mainly of contracted personnel and rental of the venue name and, at June 30, 2018, this income amounted to SEK1million and purchases to 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.

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 2017 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

Serneke has issued a bond and implemented premature redemption of existing bonds

Serneke has issued new senior non-covered bonds totaling SEK700million within a framework of SEK1 billion and maturing in 2021.

After attracting considerable interest, the bond issue was oversubscribed. Serneke has used the net proceeds to prematurely redeem all outstanding bonds under its existing SEK300million bond loan maturing in 2019 (ISIN:SE0008992184), as well as in the operating activities. The cost of early redemption of existing bonds impacted earnings for the quarter negatively by SEK12million, which is recognized in net financial items.

The new bond loan carries a variable interest rate of three-month STIBOR +5.25percent and expires in June 2021. Serneke applied for listing of the new bond loan on Nasdaq Stockholm and the first trading day was July 5.

Serneke introduces new share saving program for employees

The Annual General Meeting of May 3, 2018 approved the introduction of a new long-term share saving program for all full-time employees of the Group. The purpose of the program is, in part, to enhance opportunities to retain and recruit employees, but also to engender a personal and long-term ownership commitment among participants, contributing to increased interest in the Group's operations and earnings trend, and providing a competitive and motivational incentive for all Group employees.

The programs will be reported in accordance with IFRS 2 – Share-based Payment. The program commenced on July 1, 2018 and, beyond the costs for developing the program, no additional costs burdened the quarter.

The Board of Directors has resolved to exercise the authorization granted to it by the Annual General Meeting to repurchase shares to safeguard the supply of shares to participants in Serneke's share savings program extending between 2020 and 2022.

On June 30, 2018, Serneke held 474,619 of the company's own Series B shares.

Share repurchases

THE SERNEKE SHARE (SRNKE)

Serneke Group AB has two share series, Series A and B. On June 30, 2018, Serneke had approximately 5,700 shareholders and the closing price on June 30, 2018 was SEK92.

Serneke's ten largest shareholders, June 30, 2018

Name	Shares of Series A	Shares of Series B	Total number of shares	Proportion of Shares, %	Proportion of votes, %
Ola Serneke Invest AB	3,710,000	2,331,354	6,041,354	25.99%	55.16%
Lommen Holding AB	540,000	3,457,803	3,997,803	17.20%	12.39%
Christer Larsson i Trollhättan AB	380,000	497,000	877,000	3.77%	6.01%
Ledge Ing AB	330,000	450,000	780,000	3.36%	5.25%
Vision Group i väst AB	250,000	536,000	786,000	3.38%	4.25%
AB Stratio	150,000	0	150,000	0.65%	2.10%
Svolder Aktiebolag	0	1,200,000	1,200,000	5.16%	1.68%
Cliens fonder	0	853,000	853,000	3.67%	1.19%
Carnegie Fonder	0	731,099	731,099	3.14%	1.02%
JPMEL – Stockholm Branch	0	500,000	500,000	2.15%	0.70%
Total, 10 largest	5,360,000	10,556,256	15,916,256	68.46%	89.74%
Other shareholders	0	7,332,196	7,332,196	31.54%	10.26%
Total	5,360,000	17,888,452	23,248,452	100%	100%

Source: Euroclear and Serneke

Share series, number of shares and votes, June 30, 2018

Share class	Shares	Votes
Series A
shares	5,360,000	5,360,000
Series B
shares	17,888,452	1,788,845.2
Total	23,248,452	7,148,845.2

INCENTIVE PROGRAMS

The Extraordinary General Meeting of June 29, 2016 resolved to issue convertible debentures with a nominal value of approximately SEK15.9million. The convertibles are valid up to and including August 26, 2019, carry 1.6percent annual interest and have a conversion price of SEK120. Upon conversion, a maximum of 132,350 Series B shares may be added and share capital may increase by a maximum of SEK13,235. No further conversion occurred during the quarter, and, at June 30, 2018, a total of 850 convertibles had been converted into Series B shares, with 131,500 convertibles remaining.

At the Annual General Meeting of May 3, 2017, a decision was taken to issue convertibles for a nominal amount of approximately SEK7.6million, which means that a maximum of 48,503 Series B shares can be added, increasing share capital by at most SEK4,850.3 on full

conversion. The conversion rate was fixed at SEK157.70. The convertibles fall due September 8, 2020, provided conversion has not taken place before this date. No conversion took place during the quarter. The convertibles will carry an annual interest rate of 2.60percent.

FINANCIAL CALENDAR

Interim Report January–September 2018 October 24, 2018 Year-end Report 2018 Feb 6, 2019 Interim Report January–March April 17, 2019

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, July 17, 2018 Serneke Group AB (publ)

Board

Kent Sander Chairman

Mari Broman Member

Ludwig Mattsson Member

Ola Serneke CEO

Anna-Karin Celsing Member

Susanne Lithander Member

For further information:

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

Anders Düring, CFO E-mail: anders.antonsson@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 July 17, 2018, at 8:00 a.m.

QUARTERLY DATA AND MULTI-YEAR REVIEW

	Apr–Jun	Jan–Mar	Oct–Dec	Jul–Sep	Apr–Jun	Jan–Mar	Oct–Dec	Jul–Sep
SEK million	2018	2018	2017	2017	2017	2017	2016	2016
Income
Construction	1,437	1,260	1,511	1,113	1,292	1003	1,089	683
Civil Engineering	190	179	208	140	152	123	162	121
Project Development	89	62	53	56	53	50	37	11
Property Management	27	21	18	12	9	12	8	4
Group-wide	40	41	37	30	33	8	27	34
Eliminations	-102	-78	-95	-80	-75	-58	-57	-51
Total	1,681	1,485	1,732	1,271	1,464	1,138	1,266	802
Operating profit
Construction	42	35	56	42	44	41	40	19
Civil Engineering	2	1	4	3	-2	-4	-9	-7
Project Development	-6	9	15	3	47	0	5	-6
Property Management	42	-10	182	17	3	11	10	46
Group-wide	-6	17	-47	2	3	-1	-12	13
Total	74	52	210	67	95	47	34	65
Operating margin, %	4.4	3.5	12.1	5.3	6.5	4.1	2.7	8.1
Profit after net financial
items Profit/loss for the period	58	49	206	62	93	40	29	60
	48	39	152	51	87	33	26	52
Balance sheet
Fixed assets	1,944	1,725	1,682	1,353	1,274	1,212	1,160	1,032
Current assets	2,798	2,627	2,722	2,615	2,514	2,393	2,277	1,826
Total assets	4,742	4,352	4,404	3,968	3,788	3,605	3,437	2,858
Shareholders' equity	1,770	1,860	1,821	1,669	1,621	1,530	1,469	822
Non-current liabilities	1,387	972	980	920	738	725	764	919
Current liabilities	1,585	1,520	1,603	1,379	1,429	1,350	1,204	1,117
Total equity and	4,742	4,352	4,404	3,968	3,788	3,605	3,437	2,858
liabilities
Orders
Order bookings	1,328	1,128	1,898	691	1,742	2,069	1,650	920
Order backlog	7,398	7,671	7,965	7,765	8,308	7,995	7,041	6,629
Employees
Average number of employees	1,051	1,022	1,001	970	919	878	847	800

KEY INDICATORS

IFRS-based key indicators

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	1,681	1,464	3,166	2,602	6,169	5,605
Earnings per share, SEK, before dilution	2.06	3.74	3.74	5.20	12.47	13.94
Earnings per share, SEK, after dilution	2.05	3.72	3.71	5.13	12.38	13.81
Weighted average number of shares before dilution	23,248,452	23,248,452	23,248,452	23,090,335	23,248,452	23,169,394
Weighted average number of shares after dilution	23,428,455	23,379,953	23,428,455	23,379,953	23,420,371	23,396,120

Other key indicators

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Operating profit	74	95	126	142	403	419
Growth, %	14.8	21.1	21.7	36.2	32.1	40.9
Order bookings	1,328	1,742	2,456	3,811	5,045	6,400
Order backlog	7,398	8,308	7,398	8,308	7,398	7,965
Organic growth, %	14.8	19.3	21.7	35.1	31.1	39.1
Operating margin, %	4.4	6.5	4.0	5.5	6.5	7.5
Cash flow before financing	-286	-67	-88	44	-404	-272
Cash flow from operations per share, before dilution	-8.56	-1.68	-1.89	4.37	-1.89	2.03
Cash flow from operations per share, after dilution	-8.49	-1.67	-1.88	4.32	-1.88	2.01
Equity per share, SEK, before dilution	76.13	69.73	76.13	69.73	76.13	78.33
Equity per share, SEK, after dilution	75.55	69.33	75.55	69.33	75.58	77.73
Working capital	1,213	1,085	1,213	1,085	1,213	1,119
Capital employed	2,826	2,076	2,826	2,076	2,826	2,516
Return on capital employed, %	19.1	16.4	19.1	16.4	18.1	21.6
Return on equity after taxes, %	17.1	16.6	17.1	16.6	17.1	19.6
Equity/assets ratio, %	37.3	42.8	37.3	42.8	37.3	41.3
Net debt	458	-123	458	-123	458	254
Net debt/equity ratio, %	25.9	-7.6	25.9	-7.6	25.9	13.9
Net debt/EBITDA	1.1	-0.5	1.1	-0.5	1.1	0.6

SUMMARY FINANCIAL STATEMENTS

SUMMARY OF CONSOLIDATED INCOME STATEMENT

Summary of Consolidated Income

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	1,681	1,464	3,166	2,602	6,169	5,605
Production and administration expenses	-1,614	-1,381	-3,011	-2,472	-5,838	-5,299
Gross profit	67	83	155	130	331	306
Sales and administration expenses	–33	-29	-64	-55	-160	-151
Change in value of investment properties	43	-1	43	18	263	238
Revaluation of joint ventures	0	0	0	0	0	0
Share in profit of associates and joint
ventures	-3	42	-8	49	-31	26
Operating profit	74	95	126	142	403	419
Net financial items	-16	-2	-19	-9	-28	-18
Profit after financial items	58	93	107	133	375	401
Tax	-10	-6	–20	-13	-85	-78
Profit/loss for the period	48	87	87	120	290	323
Attributable to:
Parent Company shareholders	48	87	87	120	290	323
Non-controlling interests	0	0	0	0	0	0
Earnings per share before dilution, SEK	2.06	3.74	3.74	5.20	12.47	13.94
Earnings per share after dilution, SEK	2.05	3.72	3.71	5.13	12.38	13.81
Average number of shares before dilution	23,248,452	23,248,452	23,248,452	23,090,335	23,248,452	23,169,394
Average number of shares after dilution	23,428,455	23,379,952	23,428,455	23,379,953	23,420,371	23,396,120

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Profit/loss for the period	48	87	87	120	290	323
Other comprehensive income	0	0	0	0	0	0
Total comprehensive income	48	87	87	120	290	323

CONDENSED CONSOLIDATED BALANCE SHEET

	June 30	June 30	Dec 31
SEK million	2018	2017	2017
Assets
Fixed assets
Intangible fixed assets	23	23	23
Investment properties	1,016	365	895
Other tangible fixed assets	100	88	95
Investments in associates/joint ventures	481	477	446
Deferred tax assets	-	34	-
Non-current interest-bearing receivables	36	54	10
Other non-current receivables	288	233	213
Total fixed assets	1,944	1,274	1,682
Current assets		297	283
Project and development properties	305	2	1
Inventories	1	770	845
Accounts receivable Accrued but not invoiced income	965 394	249	319
Other current receivables	571	638	843
		558	431
Cash and bank balances	562
Total current assets	2,798	2,514	2,722
Total assets	4,742	3,788	4,404
Equity and liabilities
Shareholders' equity	1,770	1,621	1,821
Non-current liabilities
Non-current interest-bearing liabilities	1,024	389	641
Other non-current liabilities	153	224	152
Deferred tax liability	49	-	29
Other provisions	161	125	158
Total non-current liabilities	1,387	738	980
Current liabilities
Current interest-bearing liabilities	32	100	54
Current tax liabilities	4	5	8
Accounts payable	751	669	799
Invoiced but not accrued income	391	311	297
		344	445
Other current liabilities	407
Total current liabilities	1,585	1,429	1,603
Total equity and liabilities	4,742	3,788	4,404

SUMMARY OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

SEK million	June 30 2018	June 30 2017	Dec 31 2017
Equity attributable to Parent Company shareholders
Balance at beginning of period	1,821	1,469	1,469
New share issue	-	2	2
Conversion, convertible debenture loans	-	26	27
Dividend	-93	-	-
Share repurchases	-45	-	-
Other	-	4	-
Comprehensive income for the period	87	120	323
Balance at end of period	1,770	1,621	1,821

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Apr-jun	Apr-jun	Jan-jun	Jan-jun	Jul-jun	Jan-dec
Mkr	2018	2017	2018	2017	2017/2018	2017
Löpande verksamheten
Kassaflöde innan förändring av rörelsekapital	-64	43	-28	71	80	179
Förändring av rörelsekapital	-135	-82	38	30	-144	-132
Kassaflöde från den löpande verksamheten	-199	-39	10	101	-64	47
Investeringsverksamheten
Förvärv av förvaltningsfastigheter	-27	–	-27	–	-275	-248
Förvärv av rörelse	–	-8	–	-8	0	-8
Ökning/minskning av investeringsverksamheten	-60	-20	-71	-49	-65	-63
Kassaflöde från	-87	-28	-98	-57	-340	-319
investeringsverksamheten
Kassaflöde före finansiering	-286	-67	-88	44	-404	-272
Finansieringsverksamheten
Konvertibelt lån	–	–	0	–	8	8
Nyupptagna lån	690	18	690	18	890	218
Nyemission	–	–	–	–	-	–
Amortering av skuld	-328	-70	-332	-70	-341	-79
Återköp av aktier	-45	–	-45	–	-45	–
Utdelning	-93	–	-93	–	-93	–
Ökning/minskning av finansieringsverksamheten	-1	-21	-1	-5	-11	-15
Kassaflöde från	223	-73	219	-57	408	132
finansieringsverksamheten
Periodens kassaflöde	-63	-140	131	-13	4	-140
Likvida medel vid periodens början	625	698	431	571	558	571
Likvida medel vid periodens slut	562	558	562	558	562	431

PARENT COMPANY CONDENSED INCOME STATEMENT

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Income	37	30	75	56	136	117
Sales and administration expenses	-34	-29	-35	-55	-116	–136
Operating profit	3	1	40	1	20	-19
Net financial items	–20	-5	-25	-11	-37	-23
Profit after financial items	-17	-4	15	-10	-17	-42
Appropriations	0	0	0	0	33	33
Profit/loss before tax	-17	-4	15	-10	16	-9
Tax	4	1	-3	2	-29	-24
Profit/loss for the period	-13	-3	12	-8	-13	-33

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
SEK million	2018	2017	2018	2017	2017/2018	2017
Profit/loss for the period	-13	-3	12	-8	-13	-33
Other comprehensive income	0	0	0	0	0	0
Total comprehensive income	-13	-3	12	-8	-13	-33

PARENT COMPANY CONDENSED BALANCE SHEET

	June 30	June 30	Dec 31
SEK million	2018	2017	2017
Assets Fixed assets
Tangible fixed assets	5	5	5
Investments in Group companies	146	98	127
Deferred tax assets	26	56	29
Other non-current receivables	2	1	2
Total fixed assets	179	160	163
Current assets
Project and development properties	3	3	3
Other current receivables	995	768	918
Cash and bank balances	469	525	392
Total current assets	1,467	1,296	1,313
Total assets	1,646	1,456	1,476
Equity and liabilities
Shareholders' equity	553	704	679
Non-current liabilities
Non-current interest-bearing liabilities	714	312	321
Other provisions Total non-current liabilities	- 714	– 312	20 341
Current liabilities
Current interest-bearing liabilities	1	1	1
Accounts payable	12	12	14
Other current liabilities	366	427	441
Total current liabilities	379	440	456

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. From June 2016, ESMA's guidelines on alternative key indicators are applied.

The Group has acquired and sold assets through companies with these acquisitions/disposals not being considered to be acquisitions/disposals of operations. IFRS lacks specific guidance for such transactions. The Group has therefore, in adopting an accounting policy that provides a fair picture of these transactions and reflects their implications, sought guidance in other standards addressing similar transactions, in accordance with IAS 8. Against this background, the Group has chosen to apply the relevant parts of the standard for business combinations, IFRS 3, in accounting for acquisitions and sales of assets through companies.

Implementation of new accounting standards:

New standards and interpretations have not had any material impact on the consolidated accounts

IFRS 15 Revenue from Contracts with Customers

The new IFRS 15 standard was issued on May 28, 2014 and came into effect on January 1, 2018, replacing IAS 11 Construction Contracts, IAS 18 Revenue and IFRIC 15 Agreements for the Construction of Real Estate. IFRS 15 provides a model for revenue recognition for all income generated through agreements with customers, with the exception of leases, financial instruments and insurance contracts. The core principle for revenue recognition in accordance with IFRS 15 is that a company must recognize revenue in a way that reflects the transfer of the promised good or service to the customer, in the amount that the company expects to be entitled to receive in exchange for the good or service. Income is then recognized once the customer gains control of the good or service.

Under IFRS 15, income is reported according to a fivestage model:

The first stage identifies customer contracts. If two or more agreements have been entered with a customer and the pricing of one agreement is dependent on another agreement, these agreements are combined. An amendment to an agreement entails a change to an agreement approved by the parties to the agreement and exists when the parties to the agreement approve an amendment that either creates new rights and obligations for the parties to the agreement or amends existing ones. An amendment to an agreement shall be recognized as a separate agreement when the extent of the agreement increases due to the addition of distinct promised goods or services, and when the price of the agreement increases by a degree of compensation reflecting the company's stand-alone sales prices for the additional goods or services promised. If the parties have not approved an amendment to the agreement, the company will continue to apply the standard to the existing agreement until the amendment to the agreement has been approved.

Stage two identifies the performance undertakings agreed to. A performance undertaking is a promise to convey to the customer a distinct product or service, or a series of distinct goods and services that are essentially the same and the follow the same pattern of conveyance to the customer. A product or service is distinct if the customer can benefit from that product or service separately or together with other resources available to the customer and if the company's promise to transfer the product or service to the customer can be distinguished from other promises in the agreement.

Stage three determines the transaction price. Fixed agreed pricing, variable compensation, possible additional purchase considerations, deductions, profit supplements, discounts and fines are taken into account. The variable compensation amount is estimated at the most probable amount, that being the most likely amount in an interval of possible compensation amounts or the anticipated value, which is the sum of probability-assessed amounts in an interval of possible compensation amounts. If the agreement includes a significant financing component, the transaction price shall be adjusted for the effect of the time value of money.

In step four, the transaction price is allocated to the various performance undertakings in the agreement if there is more than one. The allocated transaction price for each undertaking shall reflect the compensation amount to which the company expects to be entitled in exchange for the transfer of the promised goods or services to the customer, based on a stand-alone sales price.

Income is recognized in stage five, once the performance undertaking has been completed, either over time or at a specific time, and when the customer gains control of the asset. Income is recognized over time as the customer simultaneously receives and makes use of the benefits provided through the company's performance of its undertaking, when the company's performance creates or improves an asset controlled by the customer, or when the company's performance does not create an asset with an alternative use for the company and the company is also entitled to payment for its performance to date, including expenses incurred and a profit margin. Serneke consistently applies the input method to similar performance undertakings, with this method recognizing income based on the company's efforts or input to fulfill a performance undertaking in relation to the total expected input for the fulfillment of the performance undertaking. Exceptions from this expense-based input method may be expenses attributable to significant inefficiencies in the company's performance or when expenses incurred disproportionate to the process of fulfilling the undertaking. If a performance undertaking is not met over time as described above, the company fulfills the undertaking at a specific time. This occurs at the time when the customer gains control of the promised asset. Indicators of control may be that the company is entitled to payment for the asset, the customer gains legal ownership of the asset, the company has transferred the physical holding of the asset, the customer bears the significant risks and benefits associated with ownership of the asset or the customer has approved asset. Expenses incurred in securing an agreement, that is, expenses that the company would not have had if it had not secured the agreement, are reported as an asset only if the company expects to receive compensation for those expenses. Agreements entered into at a loss for the company are expensed immediately, with provisions being made for anticipated losses on remaining work and reported in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Serneke has chosen to implement the standard with a forward-looking retroactive transition method. An analysis of the effects has been carried out by Serneke, indicating that the new rules give rise to no significant translation effects or reclassifications in income recognition. This means that the application of IFRS 15 does not affect the opening balance of shareholders' equity for 2018 but is equal to the closing balance of shareholders' equity, which at December 31, 2017 amounted to SEK1,821million.

A breakdown of income is provided in Note 4.

IFRS 9 Financial Instruments

The new IFRS 9 standard was issued on July 24, 2014 and came into effect on January 1, 2018, replacing IAS 39 Financial Instruments: Recognition and measurement. The standard is more principle-based than rule-based and contains new requirements for the classification and valuation of financial instruments, a forward-looking impairment model and general rules for hedge accounting. The new rules for hedge accounting do not affect Serneke, since hedge accounting is not applied. As in IAS 39, the new rules for classification and valuation entail financial assets being classified in various categories, some of which are valued at amortized cost and others at fair value. Exemptions from application under IFRS 9 include participations in subsidiaries, associated companies and joint ventures, leases, entitlements under employment contracts, treasury shares, financial instruments falling under IFRS 2 and obligations under IFRS 15, except for such rights under IFRS 15 subject to impairment in accordance with IFRS 9.

Serneke has conducted an analysis of the effects of IFRS 9, which shows that the new rules do not result in any significant conversion effects. This means that the application of IFRS 9 does not affect the opening balance of shareholders' equity for 2018 but is equal to the closing balance of shareholders' equity for 2017: SEK1,821million. Serneke applies IFRS 9 retroactively using the practical relief rules specified in the standard, meaning that comparative figures are not recalculated, and that Serneke has chosen to apply the simplified method in calculating anticipated loan losses.

All financial instruments are reported as financial assets or financial liabilities in the statement of financial position when the company becomes party to the contractual terms of the instrument.

Classification of financial assets and financial liabilities

Financial assets

Financial assets are classified within the following valuation categories:

• those to be valued at fair value (either through other comprehensive income or the income statement), and
• those to be valued at amortized cost. The classification depends on the company's business model for managing financial assets and contractual terms for cash flows. A financial asset is valued at amortized cost if the asset is held within the framework of a business model whose purpose is to hold financial assets for the purpose of collecting contractual cash

flows and where the cash flow at specific points in time consists solely of payments of capital amounts and interest on the outstanding capital amount. A financial asset is valued at fair value through other comprehensive income if the asset is held according to a business model whose objectives can be achieved both by collecting contractual cash flows and selling financial assets and where cash flows consist solely of payments of capital amounts and interest on the outstanding capital amount. A financial asset is valued at fair value in the income statement if it is not valued at amortized cost or at fair value through other comprehensive income.

Investments in equity instruments are valued at fair value in the statement of financial position and changes in value are recognized directly in the income statement. Exceptions may be applied in the form of an irrevocable option to report valuations under other comprehensive income instead. This means that all changes in value are subsequently reported in other comprehensive income, except for dividend income, which is recognized in the income statement.

Financial liabilities

All financial liabilities are valued at amortized cost, with the exception of:

• financial liabilities valued at fair value in the income statement (such liabilities, including derivatives that are liabilities, are subsequently valued at fair value)
• financial liabilities that arise when the transfer of a financial asset does not meet the conditions for being removed from the statement of financial position or when a continued commitment applies
• financial guarantee agreements
• a loan commitment at an interest rate below market interest rates
• a conditional additional purchase consideration recognized by a purchaser in connection with a business combination covered by IFRS 3 (any such conditional additional purchase consideration is subsequently valued at fair value with changes being recognized in the income statement)

Only when a company changes its business model for the management of financial assets, may it reclassify all relevant financial assets. Financial liabilities may not be reclassified. On initial recognition, financial assets and liabilities shall be valued at fair value plus or minus transaction costs when acquiring a financial asset or financial liability not valued at fair value in the income statement. Accounts receivable without a significant

financing component are valued on initial recognition at the transaction price. Following initial recognition, financial assets and liabilities shall be valued according to the valuation categories stated above.

Financial instruments reported in Serneke's financial statements are cash and cash equivalents, loan receivables, accounts receivable, accounts payable and loan liabilities. All financial instruments within Serneke are classified and valued at amortized cost, except other noncurrent receivables available for sale and other current and non-current liabilities and additional purchase considerations that are classified and valued at fair value in the income statement. The new rules regarding classification and valuation do not affect Serneke.

A financial asset is removed from the statement of financial position when the contractual rights to cash flows from the financial asset cease or when the company transfers the contractual rights to receive cash flows from the financial asset or retains the contractual rights to receive cash flows but undertakes a contractual obligation to pay cash flows to one or more recipients. A financial liability is removed from the statement of financial position only when the obligation in the agreement is fulfilled, canceled or terminated.

Impairment losses

An assessment is made of expected credit losses on financial assets and a reserve is reported as a deduction against the asset. On each balance sheet date, the loss reserve shall be valued at an amount corresponding to the anticipated credit losses for remaining maturity if the credit risk has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition, the loss reserve shall be valued at an amount equivalent to 12 months of expected loan losses. For accounts receivable, the loss reserve should always be valued at an amount corresponding to the remaining maturity. The valuation of anticipated loan losses should reflect an objective and probability-weighted amount, the time value of money, reasonable and verifiable data on past events, current conditions and forecasts for future economic conditions. Serneke has chosen to apply the simplified method to calculate anticipated credit losses across their lifetime. Historical data and experience from past credit losses are used as a basis for forecasting anticipated credit losses. The new impairment rules do not affect Serneke's credit losses, meaning that opening impairment for 2018 is equal to closing impairment for 2017.

In addition, the Interim Report has been prepared in accordance with the same accounting principles and calculation methods as in the Annual Report for 2017. For detailed information regarding accounting policies, see Serneke's 2017 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 2017 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	June 30 2018	June 30 2017	Dec 31 2017
Financial assets
Available-for-sale financial assets*	2	1	2
Total financial assets	2	1	2
Financial liabilities
Other short– and long-term liabilities	104	31	84
Of which, additional purchase considerations**	104	31	84
Total financial liabilities	104	31	84

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

** 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:

June 30	June 30	Dec 31
2018	2017	2017
727	541	724
626	398	547

Parent Company

Pledged assets	200	321	320
Contingent liabilities	1,333	789	1,192

Note 4 – Breakdown of income

Apr-Jun 2018, SEK million	Constructio n	Civil Engineerin g	Project Development	Property Managemen t	Group wide	Elimination s	Total
Construction income	1,436	190	89	-	40	-102	1,653
Sale of properties and development rights	-	-	-	-	-	-	0
Rental income	0	-	-	14	-	-	14
Other income	1	0	-	13	-	-	14
Total income	1,437	190	89	27	40	-102	1,681
Date of income recognition:
At a specific time	1	0	-	13	-	-	14
Over time	1,436	190	89	14	40	-102	1,667
Total income	1,437	190	89	27	40	-102	1,681

Apr-Jun 2017, SEK million	Constructio n	Civil Engineerin g	Project Development	Property Managemen t	Group wide	Elimination s	Total
Construction income	1,290	152	53	-	33	-75	1,453
Sale of properties and development rights	-	-	0	-	0	-	0
Rental income	0	-	-	9	-	-	9
Other income	2	0	-	0	-	-	2
Total income	1,292	152	53	9	33	-75	1,464
Date of income recognition:
At a specific time	2	0	0	0	0	-	2
Over time	1290	152	53	9	33	-75	1,462
Total income	1,292	152	53	9	33	-75	1,464

Jan-Jun 2018, SEK million	Constructio n	Civil Engineerin g	Project Development	Property Managemen t	Group wide	Elimination s	Total
Construction income	2,692	369	151	-	81	-180	3,113
Sale of properties and development rights	-	-	-	-	-	-	0
Rental income	0	-	-	25	-	-	25
Other income	5	0	-	23	-	-	28
Total income	2,697	369	151	48	81	-180	3,166
Date of income recognition:
At a specific time	5	0	-	23	-	-	28
Over time	2,692	369	151	25	81	-180	3,138
Total income	2,697	369	151	48	81	-180	3,166

Jan-Jun 2017, SEK million	Constructio n	Civil Engineerin g	Project Development	Property Managemen t	Group wide	Elimination s	Total
Construction income	2,292	274	83	-	61	-133	2,577
Sale of properties and development rights	-	-	20	-	–20	-	0
Rental income	0	-	-	21	-	-	21

Other income	3	1	-	0	-	-	4
Total income	2,295	275	103	21	41	-133 2,602
Date of income recognition:
At a specific time	3	1	20	0	–20	-	4
Over time	2,292	274	83	21	61	-133	2,598
Total income	2,295	275	103	21	41	-133 2,602

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.

On the commencement of construction of tenant-owner housing project, with a tenant-owner association as the client, in those cases where the property is already owned by Serneke, the property is transferred at its book value to the contracting project and is included in the other production costs of the project. The project agreements with the housing association meet the requirements set by IFRS 15 for reporting over time when the project is created by Serneke but is controlled by the tenant-owner housing association. Income is then based on the degree of completion and earnings and is calculated based on the same principles as above. Risks associated with commitments to the tenant-owner association in respect of unsold apartments are taken into account in the accumulated earnings.

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 leases under IAS 17. 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
Income	Within the construction operations, income is reported in					In the Company's view, the key indicator
	accordance with thepercentage-of-completion method.					allows investors, who so wish, to assess the
	These revenues are recognized in pace with construction				Company's earnings capacity.
	project within the Company being completed. For project
	development, income and gains on disposals of land and
	development rights are recognized at the point in time at
	which the material risks and benefits are transferred to the
	buyer, which normally coincides with the transfer of ownership, as well as other income, such as rental income.
	In the Parent Company, income corresponds to invoiced
	sales of Group-wide services and rental income.
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 without acquiring operating companies.
	adjusted for acquired growth.
	Calculation of organic growth	Apr–Jun	Apr–Jun	Jan-Jun	Jan-Jun	Jul-Jun	Jan–Dec
	Income current period	2018 1,681	2017 1,464	2018 3,166	2017 2,602	2017/2018 6,169	2017 5,605
	Income corresponding period previous
period		1,464	1,209	2,602	1,910	4,670	3,978
Income change		217	255	564	692	1,499	1,627
	Adjustment for structural effect	0	-22	0	-22	-48	-70
	Total organic growth	217	233	564	670	1,451	1,557
	Total organic growth (%)	14.8%	19.3%	21.7%	35.1%	31.1%	39.1%
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.

Indicator	Definition			Purpose
Operating	Operating profit divided by income.			In the Company's view, the key indicator
margin				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.
				June 30	June 30	Dec 31
	Calculation of capital employed			2018	2017	2017
	Total assets			4,742	3,788	4,404
	Deferred tax assets			0	-34	0
	Less non-interest-bearing liabilities including deferred tax liabilities			-1,916	-1,678	-1,888
	Capital employed			2,826	2,076	2,516
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.
	Calculation of average capital employed			June 30	June 30	Dec 31
	June 30, 2018 (2,826) + June 30, 2017 (2,076) / 2			2018 2,451	2017	2017
	June 30, 2017 (2,076) + June 30, 2016 (1,173) / 2				1,625
	December 31, 2017 (2516) + December 31, 2016 (1,985) / 2					2,251
	Calculation of return on capital employed			June 30	June 30	Dec 31
	Profit after net financial items			2018 375	2017 222	2017 401
	Plus financial expenses			92	44	85
	Average capital employed			2,451	1,625	2,251
	Return on capital employed			19.1%	16.4%	21.6%
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			investors a better understanding of historical return
before/afte	date. The difference between before and after			per share at the closing date.
r dilution	dilution is accounted for by the convertibles issued
Cash flow	by the Group. 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			investors a better understanding of the operations'
operations	difference between before and after dilution is			cash flow in relation to the number of shares,
per share,	accounted for by the convertibles issued by the			adjusted for changes in the number of shares during
before/afte	Group.	the period.
r dilution
Earnings	Profit for the period divided by the average number			It is the Company's view that the key indicator gives
per share,	of shares during the period. The difference between			investors a better understanding of profit per share.
	before and after dilution is accounted for by the convertibles issued by the Group.

Indicator	Definition	Purpose
before/afte
r dilution

Indicator	Definition		Purpose
Return on equity	Profit for the period as apercentage of average			In the Company's view, the key indicator allows
	shareholders' equity. Accumulated interim		investors, who so wish, to assess the Company's
	periods are based on rolling 12-month			capacity to generate a return on the capital
	earnings.			shareholders have placed at the Company's disposal.
				June 30	June 30	Dec 31
	Calculation of average shareholders' equity			2018	2017	2017
	June 30, 2018 (1,770) + June 30, 2017 (1,621) / 2			1,696
	June 30, 2017 (1,621) + June 30, 2016 (769) / 2				1,195
	December 31, 2017 (1821) + December 31, 2016 (1,469) / 2					1,645
				June 30	June 30	Dec 31
	Calculation of return on shareholders' equity			2018	2017	2017
	Profit/loss for the period			290	198	323
	Average shareholders' equity			1,696	1,195	1,645
	Return on equity			17.1%	16.6%	19.6%
Equity/assets	Shareholders' equity less minority interests as			The equity/assets ratio shows the proportion of total
ratio	apercentage of total assets.		assets represented by shareholders' equity and has
				been included to allow investors to be able to assess
				the Company's capital structure.
Net debt	Interest-bearing liabilities less liquid assets less			Net debt is a measure deemed relevant for creditors
	interest-bearing receivables.			and credit rating agencies.
Net debt/equity	Interest-bearing net debt divided by		Net debt/equity ratio is a measure deemed relevant
ratio	shareholders' equity.			for creditors and credit rating agencies.
EBITDA	Operating profit excluding			EBITDA is a measure deemed to provide investors a
	amortization/depreciation.			better understanding of the company's earnings.
		June 30	June 30	Dec 31
	Calculation of EBITDA	2018	2017	2017
	Operating profit	403	241	419
	Depreciation	21		18 20
	EBITDA	424	259	439
Net debt/EBITDA	Interest-bearing liabilities less liquid assets less			Net debt/EBITDA is a measure deemed relevant for
	interest-bearing receivables divided by EBITDA.			creditors and credit rating agencies.

SERNEKE IN BRIEF

Serneke is a rapidly growing corporate group active in construction, civil engineering, projectdevelopment and property management with more than 1,000 employees. Through novel thinking, we drive development and create more effective and more innovative solutions for responsible construction. The business has a good mix of

Serneke Group AB (publ) Headquarters: Kvarnbergsgatan 2 SE-411 05 Gothenburg Phone: +46 (0)31-712 97 00 | info@serneke.se 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.group.

Presentation of the Interim Report for January-June 2018

On July 17, 2018 at 9:00 a.m. (CET), Serneke Group will comment on this Interim 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-q2-2018. Presentation materials for the presentation will be available on the website one hour before the webcast begins.

To participate, please dial: From Sweden: +46 85664 2665