Skanska — Annual Report 2019

Feb 28, 2020

Q4 2019 Press release, February 7, 2020, 7:30 a.m. CET

We build for a better society. Bank of America Tower, Houston, USA

2 Press release, February 7, 2020, 7:30 a.m. CE ~~T~~

Year-end report, January–December 2019

Highlights according to segment reporting

Revenue amounted to SEK 176.8 billion (170.5); adjusted for currency effects revenue decreased 1 percent.

Operating income amounted to SEK 7.8 billion (4.8); adjusted for currency effects operating income increased 57 percent.

Earnings per share increased 62 percent to SEK 15.46 (9.55).

The Board of Directors propose a dividend of SEK 6.25 (6.00) per share.

Operating cash flow from operations amounted to SEK 3.8 billion (7.4), according to IFRS.

Adjusted interest-bearing net receivables (+)/net debt (–) totaled SEK 3.2 billion (September 30, 2019: –3.9), according to IFRS.

Order bookings in Construction amounted to SEK 145.8 billion (151.7); adjusted for currency effects order bookings decreased 8 percent. The order backlog amounted to SEK 185.4 billion (September 30, 2019: 183.7).

Operating income in Construction amounted to SEK 3.8 billion (1.1) and includes a SEK –0.4 billion goodwill impairment charge in the UK operations in the fourth quarter. The comparable period includes project write-downs and other non recurring items at a total net of SEK –2.3 billion.

Operating income in Project Development amounted to SEK 4.5 billion (4.6); adjusted for currency effects operating income decreased 5 percent.

Return on capital employed in Project Development was 10.3 percent (12.0).

Return on equity was 21.4 percent (14.1).

Performance analysis

Tables referring to segment reporting are in shaded background. For more information see page 14. For definitions of non-IFRS financial measures see pages 15-17.

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SEK M Jan-Dec 2019 Jan-Dec 2018 Change, % Oct-Dec 2019 Oct-Dec 2018 Change, %
Revenue
Construction 159,579 157,894 1 42,411 42,580 0
Residential Development 12,483 10,739 16 5,292 4,120 28
Commercial Property Development 17,850 16,271 10 7,063 7,082 0
Central and eliminations –13,130 –14,410 –9 –3,369 –4,093 –18
Total 176,782 170,494 4 51,397 49,689 3
Operating income
Construction 3,772 1,099 243 1,092 868 26
Residential Development 1,195 1,505 –21 377 383 –2
Commercial Property Development 3,287 3,069 7 1,267 1,281 –1
Central –388 –780 –50 –247 –141 75
Eliminations –38 –66 –42 –36 –8 350
Operating income 7,828 4,827 62 2,453 2,383 3
Net financial items –103 36 – –34 –17 100
Income after financial items 7,725 4,863 59 2,419 2,366 2
Taxes –1,353 –934 45 –477 –528 –10
Profit for the period 6,372 3,929 62 1,942 1,838 6
Earnings for the period per share, SEK 15.46 9.55 62 4.71 4.48 5
Revenue for the period according to IFRSs 172,846 171,730 1 50,691 50,478 0
Operating income for the period according to IFRSs 7,428 5,647 32 2,767 3,063 –10
Earnings for the period per share according
to IFRSs, SEK 14.68 11.17 31 5.34 5.80 –8
Operating cash flow from operations 3,835 7,377 –48 8,339 7,518 11
Interest-bearing net receivables(+)/net debt(–) –4,917 3,231 – –4,917 3,231 –
Return on capital employed in
Project Development, % 10.3 12.0
Adjusted interest-bearing net receivables(+)/
net debt(–) 3,241 2,055 58
Return on equity, % 21.4 14.1
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Revenue
SEK bn
200
150
100
50
0 2015 2016 2017 2018 2019
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Operating income

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SEK bn
10
8
6
4
2
0 2015 2016 2017 2018 2019
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Operating income per segment,
Dec 31, 2019
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• [Construction, 46%]
• [Residential Development, 14%]
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• [Commercial Property]

• Development, 40%

Operating cash flow from operations

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SEK bn
8
6
4
2
0
-2
-4
2015 2016 2017 2018 2019
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~~Skans~~ ka Year-end report, January–December 2019 3

Comments from Skanska’s President and CEO Anders Danielsson

Throughout 2019, significant performance improvements were made in our Construction operations and we generated substantial value in Project Development. This is the result of consistent execution against our strategic plan initiated in 2018. For the full year, the operating margin in Construction improved to 2.4 percent, return on capital employed in Project Development was 10.3 percent and return on

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equity for the Group was 21.4 percent. These latter two items were above our targets – I consider this to be a strong result.

In Construction, underlying profitability is improving. Our strategy includes a more selective bidding, improved commercial focus and increased cost efficiency. We have a strong focus on cost control and we are continuously reviewing the performance of all parts of our operations and undertaking actions where needed. As we complete and replace the challenging projects, the profitability has the potential to further improve. More selective bidding has impacted our order bookings in some business units but our major operations in Sweden and USA are showing strong bookings. As the overall construction market activity is high, being selective in our markets makes it possible to refill the backlog with projects having the right balance between risk and return.

In Commercial Property Development, a new all-time-high in gain on sale was reached in 2019. Supportive markets and very strong execution made way for record gains on our divestments. The momentum in our leasing activity has also been strong and by filling our modern green properties with long-term tenants we are creating significant future value. In the fourth quarter, we started several new developments that will add to our strong portfolio of ongoing developments. In 2019, we expanded our US operations to a fifth strategic city, Los Angeles, by acquiring land and plan to start development on this site and additional sites as we build up this portfolio.

With our strong balance sheet, integrated business model, clear values and trusted brand, we have a competitive advantage that we will continue to leverage going forward. Backed by a supportive market outlook, despite signs of slower economic growth and geopolitical uncertainties, we see significant opportunities for attractive investments in Project Development that have the potential to create long term value for Skanska. With that in mind, the Board of Directors propose a dividend of SEK 6.25 per share.

Going into 2020, I would like to take this opportunity to thank our customers, business partners, shareholders and employees. It is Skanska’s people who make our achievements possible. In 2019 Skanska delivered a total shareholder return of 55 percent, and I would like to emphasize that my and the leadership team’s ambition is to continue to deliver an industry- leading total shareholder return.

In Residential Development, the Swedish residential new-built market is gradually improving as activity and confidence in the market is picking up. A new normal in the Swedish market in which customers make their purchase decisions closer to project completion seems to have been established and is something to which we have adapted. The underlying operating margin remains at a solid 10 percent thanks to strong execution and a welldiversified portfolio in various segments and geographies. During 2019, we increased our diversification by expanding BoKlok, our low-cost homes concept, to the UK.

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Bank of America Tower, Houston, USA

Skanska has developed and built Bank of America Tower a 72,500-squaremeter of contemporary office building in Houston’s Central Business District, tenants include Bank of America, Waste Management, Winston and Strawn, Quantum Energy Partners and Skanska. The property features an open-air community hub that includes a full-service restaurant and a culinary market with seven chef-driven concepts and a cocktail bar. The building will use 25 percent less energy than typical facilities and is certified according to LEED Platinum version 4. In 2019, Skanska divested a 90 percent interest in the Bank of America Tower office property, for USD 373 M, about SEK 3.5 billion, to an affiliate of Beacon Capital Partners. This is Skanska’s largest ever divestment in terms of square meters.

4 Skanska Year-end report, January–Decemb ~~er 2019~~

Market outlook, next 12 months

Slightly stronger market outlook since last quarter.

Weaker outlook compared to previous quarter. Unchanged outlook compared to previous quarter. Improved outlook compared to previous quarter. Very strong market coming 12m Strong market coming 12m Stable market coming 12m Weak market coming 12m Very weak market coming 12m

Construction

In Sweden, the civil market and the non-residential market is strong, although the landscape is competitive. The Swedish residential building market is slow. In Norway, the outlook for the civil market remains positive, but with significant competition in new bids. The non-residential market also benefits from increased public investments, while investments in the residential building market are slightly lower. The overall market situation in Finland is stable except for a slowdown in the residential building market.

In the UK, Brexit is still limiting investments in the non-residential building market and civil market to a certain degree. In Central Europe there is a high activity level in general and construction related inflation is high, causing postponement of new projects coming to the market in especially Poland.

In USA the overall market is strong. The civil construction market remains good, although competition is intense, and the building construction market is strong in sectors such as offices, aviation, education, data centers and healthcare.

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Building, Building,
non-residential residential Civil
Nordics
Sweden
Norway
Finland
Europe
Poland
Czech Republic [1]
–
United Kingdom
USA
USA –
1 Including Slovakia.
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Residential Development

The Swedish residential market for new developments is improving slightly as confidence regarding housing prices is recovering and transaction activity is increasing. In Norway the market situation is stable, while the Finnish market is slower. The Central European market is stable. Common for all markets is the challenge with high construction costs and long zoning processes.

Nordics Sweden Norway Finland Europe

Solseglet,Residential building Malmö, Sweden

Commercial Property Development

Vacancy rates for office space in most of the Nordic and Central European cities where Skanska has operations are stable. In Sweden vacancy rates are low and rents are high. Demand for office space is strong in Poland and in other parts of Central Europe as well. In USA, demand from tenants is good in Boston and Seattle, while somewhat weaker in Washington, D.C. and Houston’s Energy Corridor. Modern properties with high quality tenants are in demand from property investors, resulting in attractive valuations for these properties. Investor appetite remains strong in USA, Central Europe and the Nordics, especially Sweden, but the number of shortlisted investors in transactions are fewer and more selective regarding investment objects. Yield levels in Sweden and in USA have likely bottomed out. Common for all markets is the challenge with high construction costs and long zoning processes.

Nordics Sweden Norway Finland Denmark Europe Poland Czech Republic Hungary Romania USA

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9000 Wilshire, office project, Los Angeles, USA

~~Skans~~ ka Year-end report, January–December 2019 5

Performance analysis

Group

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Revenue and operating income, rolling 12 months
SEK bn, operating income SEK bn, revenue
10 200
8 160
6 120
4 80
2 40
0 0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue
Operating income
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Revenue and earnings

SEK M	Jan-Dec 2019	Jan-Dec 2018	Change, %	Oct-Dec 2019	Oct-Dec 2018	Change, %
Revenue	176,782	170,494	4	51,397	49,689	3
Operating income1, 2	7,828	4,827	62	2,453	2,383	3
Net fnancial items	–103	36	–	–34	–17	100
Income after fnancial items	7,725	4,863	59	2,419	2,366	2
Taxes	–1,353	–934	45	–477	–528	–10
Proft for the period	6,372	3,929	62	1,942	1,838	6
Earnings for the period per share, SEK3	15.46	9.55	62	4.71	4.48	5
Earnings for the period per share according to to IFRSs, SEK3	14.68	11.17	31	5.34	5.80	–8

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Revenue per segment, January–December 2019
• [Construction, 84%]
• [Residential Development, 7%]
• [Commercial Property]
Development, 9%
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Operating income per segment, January–December 2019
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• [Construction, 46%]
• [Residential Development, 14% ]
• [Commercial Property]
Development, 40%
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1 Central, SEK –388 M (–780).

2 Eliminations, SEK –38 M (–66).

3 Earnings for the period attributable to equity holders divided by the average number of shares outstanding.

Changes and currency rate effects

	Jan-Dec 2019 / Jan-Dec 2018	Jan-Dec 2019 / Jan-Dec 2018	Jan-Dec 2019 / Jan-Dec 2018
	Change in SEK	Change in local currency	Currency effect
Revenue	4%	–1%	5%
Operating income	62%	57%	5%

Revenue increased 4 percent and amounted to SEK 176.8 billion (170.5); adjusted for currency effects revenue decreased 1 percent. Operating income increased 62 percent and amounted to SEK 7,828 M (4,827); adjusted for currency effects operating income increased 57 percent. Operating income was positively affected by income from legal cases of SEK 408 M during the second quarter. In the fourth quarter, goodwill impairment charges of SEK – 467 M related to the UK Construction operations and Norwegian Residential Development operations had a negative impact.

The comparable period includes negative impact from restructuring charges and project write-downs, and positive impact from claims resolutions, effects from pension curtailments and land divestments gains and release of reserves, totaling SEK –2.1 billion, net.

Central expenses totaled SEK –388 M (–780) of which SEK 24 M (31) relate to the PPP-portfolio. Release of a provision totaling SEK 212 M related to the legal case concerning the R4 project in the Czech Republic had a positive impact during the second quarter. The comparable period includes restructuring charges of SEK –220 M in total, of which SEK –120 M relate to the PPP-portfolio. The elimination of gains in Intra-Group projects amounted to SEK –38 M (–66).

Net financial items amounted to SEK –103 M (36) and include interest expenses from lease liabilities according to IFRS 16 effective from January 1, 2019.

Taxes for the period amounted to SEK –1,353 M (–934), corresponding to an effective tax rate of 18 percent (19).

6 Skanska Year-end report, January–Decemb ~~er 2019~~

Cash flow

Group

Operating cash flow from operations

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SEK bn
10
8
6
4
2
0
-2
-4
-6
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Operating cash flow from operations, quarterly]
Rolling 12 months
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Operating cash flow

Operating cash flow
SEK M	Jan-Dec 2019	Jan-Dec 2018	Change, %	Oct-Dec 2019	Oct-Dec 2018	Change, %
Cash fow from business operations	4,704	394	1,094	1,142	–412	–
Change in working capital	–651	4,040	–	3,237	2,793	16
Net divestments(+) / investments(–)	1,632	3,316	–51	4,213	5,088	–17
Cash fow adjustment	209	–39	–	–37	246	–
Cash fow from business operations before taxes paid Taxes paid in business operations	5,894 –1,371	7,711 –443	–24 209	8,555 –107	7,715 –281	11 –62
Cash fow from fnancing operations	–688	109	–	–109	84	–
Operating cash fow from operations Net strategic divest- ments(+)/investments(–)	3,835 –6	7,377 –16	–48 –63	8,339 0	7,518 0	11 –
Dividend etc	–2,488	–3,472	–28	–15	0	–
Cash fow before change in interest-bearing receivables and liabilities Change in interest- bearing receivables and liabilities excluding lease liabilities	1,341 –3,415	3,889 –311	–66 998	8,324 –2,716	7,518 –1,054	11 158
Cash fow for the period	–2,074	3,578	–	5,608	6,464	–13

Operating cash flow from operations amounted to SEK 3,835 M (7,377), where change in working capital in Construction and net investments in Commercial Property Development is the main reason for the change in cash flow.

Taxes paid in business operations amounted to SEK –1,371 M (–443) and the increase is a result of higher income after financial items.

Commercial Property Development assets sold but not transferred will have a positive effect on cash flow of SEK 9.2 billion, of which SEK 7.6 billion will be received during 2020. The remainder will affect cash flow during 2021 and 2022.

Free working capital in Construction

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SEK bn %
30 18
25 15
20 12
15 9
10 6
5 3
0 0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Free working capital, SEK bn ] • [Free working capital, end of Q4, SEK bn]
[Average free working capital/Construction revenue, rolling 12 months, %]
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Free working capital in Construction amounted to SEK 26.4 billion (25.6), with average free working capital in relation to Construction revenue in the past 12 months at 15.7 percent. Free working capital in Construction remained at a good level due to favorable cash flow profiles in several projects and continued focus on cash generation in the Construction stream. Cash flow due to changes in working capital in Construction amounted to SEK –262 M (2,600).

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European Spallation Source, Lund, Sweden

~~Skans~~ ka Year-end report, January–December 2019 7

Financial position

Adjusted interest-bearing net receivables(+)/net debt(–)

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SEK bn
6
4
2
0
-2
-4
-6
-8
-10
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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Balance sheet – Summary

Balance sheet – Summary
SEK bn	Dec 31, 2019	Dec 31, 2018
Total assets	126.0	116.3
Total equity	33.0	29.3
Interest-bearing net receivables (+)/net debt (–)	–4.9	3.2
Adjusted interest-bearing net receivables(+)/ net debt(–)	3.2	2.1
Capital employed, closing balance	55.9	46.2
Equity/assets ratio, %	26.2	25.2

Change in net interest-bearing receivables and liabilities

SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Opening balance interest-bearing net receivables(+)/net debt(–)	3,231	–1,126	–14,446	–3,717
Change in accounting principle1	–7,469	–30	0	0
Adjusted opening balance Cash fow for the period	–4,238 –2,074	–1,156 3,578	–14,446 5,608	–3,717 6,464
Less change in interest-bearing recei- vables and liabilities	3,415	311	2,716	1,054
Cash fow before change in interest- bearing receivables and liabilities Translation differences, net receivables/net debt	1,341 129	3,889 282	8,324 32	7,518 39
Remeasurements of pension liabilities	–751	–271	1,089	–893
Interest-bearing liabilities acquired/ divested	–505	–7	10	1
Other changes, interest-bearing net receivables/net debt	–893	494	74	283
Change in interest-bearing net receivables/net debt	–679	4,387	9,529	6,948
Closing balance interest-bearing net receivables(+)/net debt(–) Restricted cash	–4,917 –6,084	3,231 –5,941	–4,917 –6,084	3,231 –5,941
Pension liability, net	5,321	4,765	5,321	4,765
Lease liabilities	8,921	–	8,921	–
Closing balance adjusted interest-bearing net receivables(+)/net debt(–)	3,241	2,055	3,241	2,055

1 Change in accounting principle is attributable to the implementation of IFRS 16 (2019) and IFRS 9 (2018). For further information see the Annual and Sustainability Report 2018, Note 1 (on IFRS 16) and Note 3 (on IFRS 9).

Adjusted interest-bearing net receivables (+)/net debt (–) amounted to SEK 3.2 billion (September 30, 2019: –3.9). Interest-bearing net debt amounted to SEK –4.9 billion (September 30, 2019: –14.4) and include SEK 8.9 billion in interest-bearing lease liabilities according to IFRS 16 effective from January 1, 2019.

~~At the end~~ of the quarter, cash, cash equivalents and committed unutilized credit facilities amounted to SEK 17.6 billion (September 30, 2019: 11.7), of which SEK 11.8 billion (September 30, 2019: 9.7) is available within one week. The Group central loan portfolio amounted to SEK 3.5 billion (September 30, 2019: 4.2) and had an average maturity of 3.4 years (September 30, 2019: 3.6), including committed unutilized credit facilities. Restricted cash totaled SEK 6.1 billion (September 30, 2019: 5.1), net pension liabilities totaled SEK 5.3 billion (September 30, 2019: 6.4) and lease liabilities totaled SEK 8.9 billion (September 30, 2019: 9.3). At the end of the quarter, capital employed amounted to SEK 55.9 billion (September 30, 2019: 55.6).

Equity

Changes in equity

Changes in equity
SEK M	Jan–Dec 2019	Jan–Dec 2018	Oct–Dec 2019	Oct–Dec 2018
Opening balance	29,347	27,185	30,311	28,034
Change in accounting principle1	–67	–140	–	–
Adjusted opening balance Dividend to shareholders	29,280 –2,462	27,045 –3,373	30,311 0	28,034 0
Other changes in equity not included in total comprehensive income for the year	219	132	55	65
Proft for the period Other comprehensive income Translation differences	6,054 679	4,594 1,119	2,202 –784	2,383 –270
Effects of remeasurements of pensions	–729	–419	1,055	–840
Effects of cash fow hedges	–20	249	182	–25
Closing balance	33,021	29,347	33,021	29,347

1 Change in accounting principle is attributable to the implementation of IFRS 16 (2019) and IFRS 9 (2018). For further information see the Annual and Sustainability Report 2018, Note 1 (on IFRS 16) and Note 3 (on IFRS 9).

Adjusted equity, less standard tax of 10 percent

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SEK bn
50
45
40
35
30
25
20 • [Effect in unrealized equity in]
PPP-portfolio
15
• [Unrealized Commercial]
10 Property Development gains
• [Unrealized surplus value in ]
5 Residential Development
0 • [Equity attributable to equity holders]
Dec 31, 2018 Sep 30, 2019 Dec 31, 2019
----- End of picture text -----

The Group’s equity amounted to SEK 33.0 billion (29.3), resulting in an equity/assets ratio of 26.2 percent (25.2) and a net debt/equity ratio of 0.1 (–0.1).

The effects of remeasurements of pensions amounted to SEK –729 M (–419). This can be explained by lower discount rates in Sweden, Norway and the UK. The effect is partly offset by higher actual return on plan assets than estimated. Translation differences amounted to SEK 679 M (1,119) and are due to a weaker Swedish krona. Unrealized surplus values in Project Development including the PPP-portfolio amounted to SEK 14.6 billion of which SEK 1.6 billion was realized according to segment reporting. Corresponding amounts less standard tax were SEK 13.2 billion and SEK 1.4 billion respectively.

8 Skanska Year-end report, January–Decemb ~~er 2019~~

Investments and divestments

Investments and divestments

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SEK bn
15
10
5
0
-5
-10
-15 2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Divestments, ] • [Investments, ] [Net investments,]
quarterly quarterly rolling 12 months
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The Group’s investments amounted to SEK –24,969 M (–24,540), while divestments amounted to SEK 26,595 M (27,840), resulting in net divestments of SEK 1,626 M (3,300).

In Construction, investments totaled SEK –2,542 M (–2,526). These investments mainly relate to property, plant and equipment for the Group’s own operations. Net investments in Construction amounted to SEK –1,503 M (–2,096). Depreciation of property, plant and equipment amounted to SEK –1,715 M (–1,550).

In Residential Development, investments totaled SEK –9,437 M (–10,542), of which SEK –1,744 M (–1,599) relates to land acquisitions, corresponding to 4,197 building rights. Divestments amounted to SEK 11,793 M (12,146). Net divestments in Residential Development amounted to SEK 2,356 M (1,604).

In Commercial Property Development, investments totaled SEK –12,946 M (–11,452), of which SEK –2,498 M (–994) relates to investments in new land, while divestments amounted to SEK 13,713 M (15,275). Net divestments in Commercial Property Development amounted to SEK 767 M (3,823).

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Investments, divestments and net divestments(+)/investments(-)

	SEK M	Jan-Dec 2019	Jan-Dec 2018	Change, %	Oct-Dec 2019	Oct-Dec 2018	Change, %
	Investments
	Construction	–2,542	–2,526	1	–875	–704	24
	Residential
	Development	–9,437	–10,542	–10	–2,590	–3,026	–14
	Commercial Property
	Development	–12,946	–11,452	13	–4,219	–3,249	30
	Other	–44	–20	120	17	58	–71
	Total	–24,969	–24,540	2	–7,667	–6,921	11
	Divestments
	Construction	1,039	430	142	397	245	62
	Residential Development	11,793	12,146	–3	3,482	4,562	–24
	Commercial Property
	Development	13,713	15,275	–10	7,963	7,278	9
	Other Total	50 26,595	–11 27,840	– –4	38 11,880	–76 12,009	– –1
	Net divestments(+)/ investments(–) Construction Residential Development Commercial Property Development	–1,503 2,356 767	–2,096 1,604 3,823	–28 47 –80	–478 892 3,744	–459 1,536 4,029	4 –42 –7
	Other Total	6 1,626	–31 3,300	– –51	55 4,213	–18 5,088	– –17
	of which strategic	–6	–16	–63	0	0	–

Capital employed in Project Development

SEK M	Dec 31, 2019	Sep 30, 2019	Dec 31, 2018
Residential Development	12,954	13,444	13,636
Commercial Property Development	34,495	36,744	26,672
Total in Project Development	47,449	50,188	40,308

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Divestment, Aura, Malmö, Sweden

Investment, Ørestad City, Copenhagen, Denmark

~~Skans~~ ka Year-end report, January–December 2019 9

Performance analysis, business streams

Construction – Order situation

Order backlog, revenue and order bookings

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SEK bn
250
200
150
100
50
0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue, rolling 12 months Order bookings, rolling 12 months
• [Order backlog] Order bookings per quarter
Order bookings and order backlog in Construction
SEK bn Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
Order bookings 145.8 151.7 49.0 49.1
Order backlog [1] 185.4 192.0 – –
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1 Refers to the end of each period.

Order bookings amounted to SEK 145.8 billion (151.7); adjusted for currency effects order bookings decreased 8 percent. On a rolling 12-month basis the book-to-build ratio was 91 percent (September 30, 2019: 91). The lower order bookings are mainly a result of the strategic initiatives to focus the operations in certain markets and reduce risks in the Construction stream. For more information, see page 26.

At the end of the quarter, the order backlog amounted to SEK 185.4 billion compared to SEK 183.7 billion at the end of the previous quarter. The order backlog corresponds to 14 months of production (September 30, 2019: 13).

Changes and currency rate effects

	Change in SEK	Change in local currency	Currency effect
	Jan-Dec 2019 / Jan-Dec 2018
Order bookings	–4%	–8%	4%
	Dec 31, 2019 / Sep 30, 2019
Order backlog	1%	4%	–3%

Major orders in the quarter

Geography	Contract	Amount SEK M	Client
USA	Light rail extension	7,300	Sound Transit
USA	Interchange	2,700	New York State Department of Transportation
USA	Surgical pavilion	2,300	North Shore University Hospital (NSUH
USA	Surgical tower	1,900	University of North Carolina Hospitals
Nordic	Shopping center	1,800	Citycon Oyj

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Shopping center, Espoo, Finland

10 Skanska Year-end report, January–Decemb ~~er 2019~~

Construction

Revenue and operating margin, rolling 12 months

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----- Start of picture text -----

% SEK bn
6 180
5 150
4 120
3 90
2 60
1 30
0 0
-1 -30
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue
Operating margin
----- End of picture text -----

Revenue and earnings

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----- Start of picture text -----

Jan-Dec Jan-Dec Change, Oct-Dec Oct-Dec Change,
SEK M 2019 2018 % 2019 2018 %
Revenue 159,579 157,894 1 42,411 42,580 0
Gross income 10,437 8,045 30 3,175 2,605 22
Selling and adminis-
trative expenses –6,702 –6,998 –4 –2,094 –1,764 19
Income from joint
ventures and asso-
ciated companies 37 52 –29 11 27 –59
Operating income 3,772 1,099 243 1,092 868 26
Gross margin, % 6.5 5.1 7.5 6.1
Selling and adminis-
trative expenses, % –4.2 –4.4 –4.9 –4.1
Operating margin, % 2.4 0.7 2.6 2.0
Employees 33,225 37,006
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Changes and currency rate effects

	Jan-Dec 2019 / Jan-Dec 2018	Jan-Dec 2019 / Jan-Dec 2018	Jan-Dec 2019 / Jan-Dec 2018
	Change in SEK	Change in local currency	Currency effect
Revenue	1%	-3%	4%
Operating income	243%	233%	10%

Revenue in the Construction business stream increased 1 percent and amounted to SEK 159.6 billion (157.9); adjusted for currency effects revenue decreased 3 percent. Operating income amounted to SEK 3,772 M (1,099). The operating income include proceeds of SEK 196 M related to awarded damages by the Court of Appeal in the legal case Follo EPC Oslo S during the second quarter. The fourth quarter was negatively impacted by a goodwill impairment charge of SEK –367 M in a part of the UK operations. The operating income in Sweden was in relation to the comparable period negatively impacted by fewer project completions with high profitability and by weak performance in the residential construction operations in Stockholm and in the asphalt operations. The comparable period includes restructuring charges and project write-downs in Poland and the USA, goodwill impairment charge in the USA, but also positive claims resolutions in the USA and effects from pension curtailments in the UK affected operating income. Total net impact of SEK –2.3 billion.

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Light rail extension, Shoreline – Lynnwood, USA

~~Skansk~~ a Year-end report, January–December 2019 11

Residential Development

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----- Start of picture text -----

Revenue and operating margin, rolling 12 months
% SEK bn
20 20
15 15
10 10
5 5
0 0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Revenue
Operating margin
Revenue and earnings
Jan-Dec Jan-Dec Change, Oct-Dec Oct-Dec Change,
SEK M 2019 2018 % 2019 2018 %
Revenue 12,483 10,739 16 5,292 4,120 28
Gross income 1,986 2,181 –9 668 562 19
Selling and adminis-
trative expenses –791 –676 17 –291 –179 63
Operating income 1,195 1,505 –21 377 383 –2
Gross margin, % 15.9 20.3 12.6 13.6
Selling and adminis-
trative expenses, % –6.3 –6.3 –5.5 –4.3
Operating margin, % 9.6 14.0 7.1 9.3
Return on capital
employed, % [1] 9.8 11.4 – –
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Homes sold and started

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----- Start of picture text -----

Jan-Dec 2019 Jan-Dec 2018
Homes sold 3,853 3,653
Homes started 3,407 4,480
Homes under construction and unsold
Homes
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0 2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Sold under construction ] • [Unsold under construction ] • [Unsold completed ]
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Homes under construction and unsold

Homes under construction and unsold
	Dec 31, 2019	Dec 31, 2018
Homes under construction	7,130	7,539
of which sold, %	70	68
Completed unsold, number of homes	134	314

1 For definition see page 16.

Revenue in the Residential Development business stream amounted to SEK 12,483 M (10,739). The number of homes sold totaled 3,853 (3,653) and construction started on 3,407 homes (4,480). Operating income amounted to SEK 1,195 M (1,505) and includes a negative impact of SEK –100 M in a goodwill impairment charge in Norway due to lower volumes than previously expected. The operating margin amounted to 9.6 percent (14.0) where the comparable period includes a larger positive effect from land divestment gains and release of provisions related to completion of projects in the Nordics.

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Homes sold and started, rolling 12 months
Homes
5,000
4,000
3,000
2,000
1,000
0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Sold
Started
----- End of picture text -----

Return on capital employed was 9.8 percent (11.4). At the end of the quarter, 7,130 homes (September 30, 2019: 6,508) were under construction. Of these, 70 percent (September 30, 2019: 70) were sold. The number of completed unsold homes decreased to 134 (September 30, 2019: 176). The number of completed homes amounted to 3,816 (4,414) for 2019.

	Breakdown of carrying amounts	Breakdown of carrying amounts
	SEK M		Dec 31, 2019	Sep 30, 2019	Dec 31, 2018
	Completed projects		567	558	903
	Ongoing projects		7,902	8,204	8,213
	Undeveloped land and
	development properties		8,196	8,455	7,446
	Total		16,665	17,217	16,562

A breakdown of the carrying amounts for Residential Development is presented in the table above. Ongoing projects amounted to SEK 7.9 billion (September 30, 2019: 8.2) and undeveloped land and development properties amounted to SEK 8.2 billion (September 30, 2019: 8.5). The estimated unrealized surplus value in unsold homes in construction and undeveloped land and development properties amounted to SEK 3.2 billion. The undeveloped land and development properties correspond to Skanska-owned building rights for 26,200 homes and 1,300 building rights held by joint ventures. In addition, subject to certain conditions, the business stream has the right to purchase 13,600 building rights.

12 Skanska Year-end report, January–Decemb ~~er 2019~~

Commercial Property Development

Revenue and operating income from property divestments

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----- Start of picture text -----

SEK bn
20
18
16
14
12
10
8
6
4
2
0 2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Revenue from divestments, ] Operating income from divestments,
rolling 12 months rolling 12 months
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Revenue and earnings

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----- Start of picture text -----

Jan-Dec Jan-Dec Change, Oct-Dec Oct-Dec Change,
SEK M 2019 2018 % 2019 2018 %
Revenue 17,850 16,271 10 7,063 7,082 0
of which from divest-
ment of properties 17,133 15,720 9 6,799 6,943 –2
Gross income 4,101 3,936 4 1,551 1,559 –1
Selling and administra-
tive expenses –960 –928 3 –287 –298 –4
Income from joint
ventures and
associated companies 146 61 139 3 20 –85
Operating income 3,287 3,069 7 1,267 1,281 –1
of which from divest-
ment of properties 4,275 4,005 7 1,610 1,653 –3
Return on capital
employed, % [1] 10.5 12.3
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Unrealized and realized gains, segment reporting

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----- Start of picture text -----

SEK bn
10
8
6
4
2
0 2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Unrealized gains in: • Land • Ongoing projects • Completed projects
Realized gains, rolling 12 months
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Leasing and degree of completion

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----- Start of picture text -----

000 sq m %
550 100
500 90
450 80
400 70
350
60
300
50
250
200 40
150 30
100 20
50 10
0 0
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
• [Leasing, rolling 12 months ] Occupancy rate, ongoing projects
Degree of completion, ongoing projects
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1 For definition see page 16.

In the Commercial Property Development business stream, divestments worth SEK 17,133 M (15,720) were made in 2019. Operating income amounted to SEK 3,287 M (3,069) and included gains from property divestments totaling SEK 4,275 M (4,005) as well as income from joint ventures totaling SEK 146 M (61).

Breakdown of investment value and market value

SEK M	Investment value, end of period	Investment value upon completion	Market value1, 2	Occupancy rate, %	Degree of comple- tion, %
Ongoing projects3	15,151	27,743	34,821	59	56
Completed projects4,5	6,054	6,054	7,775	65	100
Undeveloped land and development properties	9,801	9,801	10,802
Total	31,006	43,598	53,398
of which carrying amount6	30,848	43,440
of which completed projects sold according to segment reporting	1,222	1,222	1,544
of which ongoing projects sold according to segment reporting	3,860	6,412	7,648

1 Market value according to appraisal on December 31, 2019.

Return on capital employed was 10.5 percent (12.3).

At the end of the quarter, Commercial Property Development had 42 ongoing projects. During the fourth quarter, five new projects were started and nine were completed. The 42 ongoing projects represent leasable space of about 941,000 sq m with an occupancy rate of 59 percent, measured in rent. The projects’ degree of completion was 56 percent. Their investment value upon completion is expected to total SEK 27.7 billion, with an estimated market value of SEK 34.8 billion.

Of the ongoing projects, 17 have been divested according to segment reporting. These projects represent an investment value upon completion of SEK 6.4 billion, with a sales value of SEK 7.6 billion. By the end of the fourth quarter the total number of completed projects amounted to 12. The market value of these projects, excluding property divested according to segment reporting, was SEK 6.2 billion. The occupancy rate, measured in rent, totaled 65 percent (September 30, 2019: 68).

At the end of the quarter, unrealized gains, excluding properties divested according to segment reporting totaled SEK 8.2 billion. These gains related to SEK 5.8 billion in ongoing projects, SEK 1.4 billion in completed projects and SEK 1.0 billion in undeveloped land and development properties.

Accumulated eliminations of Intra-Group project gains amounted to SEK 547 M. These eliminations are released at the Group level as each project is divested. During 2019 new leases were signed for 421,000 sq m (511,000).

2 Ongoing projects - estimated market value at completion fully leased.

3 Including tenant improvement and leasing commissions in CDUS amounted to SEK 269 M.

4 Including tenant improvement and leasing commissions in CDUS amounted to SEK 737 M.

5 Skanska’s share of total production cost in JVs is SEK 292 M end of period and upon completion.

6 Includes Skanska’s total equity investment in JV of SEK 134 M.

~~Skansk~~ a Year-end report, January–December 2019 13

Personnel

During 2019, the average number of employees in the Group was 34,756 (38,650). At the end of the 2019, the number of employees totaled 33,585 people (September 30, 2019: 34,730).

Transactions with related parties

For the nature and extent of transactions with related parties, see the Annual and Sustainability Report 2018, Note 39. There were no new significant transactions during the quarter.

Material risks and uncertainties

For information about risks and a description of key estimates and judgments, see the Annual and Sustainability Report 2018, pages 20-24, Note 2 and 6, as well as the section above on market outlook.

Other matters

Annual General Meeting

The Annual General Meeting will be held at 10:00 a.m. CET on March 26, 2020, at Stockholm Waterfront Congress Centre, Stockholm, Sweden. The invitation to attend the meeting will be published no later than February 20, 2020.

Dividend

The Board of Directors propose a dividend of SEK 6.25 (6.00) per share. The proposal is equivalent to a regular dividend payout totaling SEK 2,572 M (2,462). The Board of Directors proposes March 30, 2020, as the record date for the dividend. The total dividend amount may change up to the record date, depending on share repurchases and transfers.

Events after the end of the report period

There were no events after the end of the report period.

Financial reports for 2020

Skanska’s interim reports and year-end report are available for download on Skanska’s website, www.skanska.com/investors. The 2019 Annual and Sustainability Report will be available on Skanska’s website in the week commencing March 2, 2020.

The Group’s remaining interim reports for 2020 will be published on the following dates:

April 28, 2020 Three Month Report July 23, 2020 Six Month Report November 5, 2020 Nine Month Report February 5, 2021 Year-end Report

Stockholm February 7, 2020

Anders Danielsson

President and Chief Executive Officer

This year-end report has not been subject to a review by the company’s auditors.

14 Skanska Year-end report, January–Decemb ~~er 2019~~

Accounting principles

For the Group, this year-end report has been prepared in compliance with IAS 34 Interim Financial Reporting, the Annual Accounts Act and the Securities Market Act. For the Parent Company, the year-end report has been prepared in compliance with the Annual Accounts Act, the Securities Market Act, and Swedish Financial Reporting Board’s Recommendation RFR 2.

The new standard IFRS 16 Leases apply from January 1, 2019. Skanska has implemented the standard retroactively with cumulative effect, i.e., without restating the comparison periods. Rows are added to the balance sheet for property, plant and equipment right-of-use assets, current-asset properties right-of-use assets as well as interest-bearing lease liabilities. Right-of-use assets are depreciated over the term of the lease, except for current-asset properties right-of-use assets, which are recognized in the same way as current-asset properties. The lease payments are divided into an interest portion and an amortization portion. Operating income increases, and financial items decrease. Cash flow from operating activities increases and cash flow from financing activities decreases. The effects of IFRS 16 are described in Note 1 in the Annual and Sustainability Report 2018.

Joint ventures are reported under the proportional method in the segment reporting of Residential Development, whereas all other streams/operating segments apply the equity method.

Intra-Group pricing between operating segments occurs on market terms.

The Parent Company in a Swedish Group prepares its accounts in compliance with the Swedish Financial Reporting Board’s Recommendation RFR 2 Accounting for Legal Entities (“RFR 2”). According to RFR 2, the annual accounts of the legal entity must apply IFRS as far as this is possible within the framework of the Annual Accounts Act and considering the connection between accounting and taxation.

Relation between consolidated operating cash flow statement and consolidated cash flow statement

The difference between the operating cash flow statement and the summary cash flow statement in compliance with IAS 7 Cash flow Statements, is presented in the Annual and Sustainability Report 2018, Note 35.

Segment and IFRS reporting

Skanska’s business streams Construction, Residential Development and Commercial Property Development represent the group’s operating segments. Tables in this report that refer to segment reporting are shown with a shaded background. In certain cases, the segment reporting differs from the consolidated results presented in accordance with International Financial Reporting Standards, IFRS.

Construction includes both building construction and civil construction. Revenues and earnings are reported over time for both segment and IFRS reporting.

Residential Development develops residential projects for immediate sale. Homes are adapted to selected customer categories. The units are responsible for planning and selling the projects. The related construction assignments are performed by Skanska’s construction units in the Construction segment in each market. In the segment reporting Residential Development recognizes revenue and earnings when contracts are signed for the sale of homes. In the IFRS reporting revenues are instead recognized when the buyer takes possession of the homes.

Commercial Property Development initiates, develops, leases and divests commercial property projects. In most markets the construction assignments are performed by Skanska’s Construction segment. In the segment reporting Commercial Property Development recognizes revenue and earnings when contracts are signed for the sale of the properties. In the IFRS reporting revenues are instead recognized when the buyer takes possession of the property.

~~Skansk~~ a Year-end report, January–December 2019 15

Definitions

For further definitions, see the Annual and Sustainability Report 2018, Note 44.

Non-IFRS financial measures Definition Reason for use	Non-IFRS financial measures Definition Reason for use	Non-IFRS financial measures Definition Reason for use	Non-IFRS financial measures Definition Reason for use
The following measures are used as they are viewed as the best and most accurate ways to measure Skanska’s operations; reflecting its business model and strategy. Thus assisting investors and management in analyzing trends and performance in Skanska.
Revenue Segment	Revenue segment is the same as revenue IFRS in all streams except for the Residential Development stream and the Commercial Property Development stream, where revenue is recognised for when signing binding agreement for sale of homes and properties. As segment reporting of joint ventures in Residential Development applies the proportional method, revenue segment is affected by this.		Measure revenue generated in current market environment.
Gross income	Revenue minus cost of sales.		Measure profit generated from projects.
Gross margin	Gross income as a percentage of revenue.		Measure profitability in projects.
Selling and admin expenses %	Selling and administrative expenses as a percentage of revenue.		Measure cost efficiency in selling and administrative expenses.
Operating income	Revenue minus cost of sales, selling and administrative expenses and income from joint ventures and associated companies.		Measure profit generated from operations.
Operating income segment	Revenue minus cost of sales, selling and administrative expenses and income from joint ventures and associated companies, according to segment reporting, and where Residential Development applies the proportional method for reporting of joint ventures.		Measure profit generated from operations in current market environment.
Operating income rolling 12 months	Revenue minus cost of sales, selling and administrative expenses and income from joint ventures and associated companies, rolling 12 months.		Measure profit generated from operations.
Operating margin	Operating income as a percentage of revenue.		Measure profitability in operations.
Net financial items	The net of interest income, financial net pension cost, interest expense, capitalized expense, change in fair value and other net financial items.		Measure total net for financial activities.
Income after financial items	Operating income minus net financial items.		Measure profit generated before taxes.
Earnings per share, segment	Profit for the period, segment, attributable to equity holders divided by the average number of shares outstanding.		Measure earnings per share, segment.
Book-to-build, rolling 12 months	Order bookings divided by construction revenue, rolling 12 months.		Measures to which extent new orders are replacing work put in place.
Unrealized gains, Commercial Property Development (CD)	Market value minus investment value upon completion for ongoing projects, completed projects and land. Excluding projects sold according to segment reporting.		Measure potential realization of future gains in Commercial Property Development.
Capital employed, Group	Total assets minus non-interest-bearing liabilities.		Measure capital usage and efficiency.
Capital employed, Stream	Total assets less tax assets, deposits in Skanska’s treasury unit and pension receivable minus non-interest-bearing liabilities excluding tax liabilities. Capitalized interest expense is removed from total assets for the Residential Development and Commercial Property Development segments.		Measure capital usage and efficiency in a Stream.
Capital employed Residential Development (RD) SEK M	Total assets - tax assets - deposits in internal bank - pension receivable - non-interest-bearing liabilities (excluding tax liabilities) - capitalized interest expense	20,929 –286 –549 –29 –7,030 –81 12,954	Measure capital usage and efficiency in Residential Development.
Capital employed Commercial Property Development (CD) SEK M	Total assets - tax assets - deposits in internal bank - pension receivable - non-interest-bearing liabilities (excluding tax liabilities) - capitalized interest expense	38,747 –445 –19 0 –3,452 –336 34,495	Measure capital usage and efficiency in Commercial Property Development.

16 Skanska Year-end report, January–Decemb ~~er 2019~~

Non-IFRS financial measures Definition	Non-IFRS financial measures Definition	Reason for use	Reason for use
Capital employed average	Calculated on the basis of five measuring points; see below.
ROCE in RD segment, rolling 12 months SEK M	Operating income + capitalized interest expense +/– financial income and other financial items — interest income from internal bank Adjusted profit Capital employed average ROCE RD Capital employed average Q4 2019 12,954 x 0.5 6,477 Q3 2019 13,444 13,444 Q2 2019 12,854 12,854 Q1 2019 12,873 12,873 Q4 2018 13,636 x 0.5 6,818 52,466 / 4	1,195 82 11 –7 1,281 13,117 9.8% 13,117	Measure the performance (profitability and capital efficiency) in RD.
ROCE in CD segment, rolling 12 months SEK M	Operating income + capitalized interest expense +/– financial income and other financial items – interest income from internal bank Adjusted profit Capital employed average ROCE CD Capital employed average Q4 2019 34,495 x 0.5 17,248 Q3 2019 36,744 36,744 Q2 2019 34,600 34,600 Q1 2019 32,828 32,828 Q4 2018 26,672 x 0.5 13,336 134,756 / 4	3,287 232 3 –1 3,521 33,689 10.5% 33,689	Measure the performance (profitability and capital efficiency) in CD.
ROCE in Project Development, segment SEK M	Is calculated as the summarized adjusted profit for RD and CD divided by the summarized capital employed average for RD and CD. The total ROCE from RD and CD. Adjusted profit CE avg ROCE RD 1,281 13,117 9.8% CD 3,521 33,689 10.5% 4,802 46,806 10.3%		Measure the performance (profitability and capital efficiency) in Project Development.

~~Skansk~~ a Year-end report, January–December 2019 17

Non-IFRS financial

Non-IFRS financial	Non-IFRS financial
measures Definition		Reason for use
Return on equity segment, rolling 12 months SEK M	Profit attributable to equity holders as a percentage of average equity attributable to equity holders. 6,349 / 29,675 =	21.4%		Measure profitability on invested equity.
Equity average attributable to equity holders SEK M	Calculated on the basis of five measuring points. Q4 2019 32,924 x 0.5 16,462 Q3 2019 30,204 30,204 Q2 2019 29,474 29,474 Q1 2019 27,935 27,935 Q4 2018 29,250 x 0.5 14,625 118,700 / 4	29,675
Operating cash flow from operations	Cash flow from business operations including taxes paid and cash flow from financing operations.			Measure total cash flow generated from operations.
Net divestments/investment	Total investments minus total divestments.			Measure the balance between investments and divestments.
Free working capital	Non-interest-bearing receivables less non-interest-bearing liabilities excluding taxes.			Measure the funding stemming from the negative working capital.
Average free working capital in Construction SEK M	Calculated on the basis of five measuring points. Q4 2019 –26,401 x 0.5 –13,201 Q3 2019 –24,371 –24,371 Q2 2019 –24,332 –24,332 Q1 2019 –25,526 –25,526 Q4 2018 –25,641 x 0.5 –12,821 –100,251 / 4	–25,063		Measure the funding stemming from the negative working capital generated in Construction.
Interest-bearing net receivables/ net debt	Interest-bearing assets minus interest-bearing liabilities.			Measure financial position.
Adjusted interest-bearing net receivables/net debt	Interest-bearing net receivables/net debt excluding restricted cash, lease liabilities and interest-bearing net pension liabilities.			Measure financial position and investment capacity. The latter is derived by comparing adjusted interest-bearing net receivables/net debt to limits set by the Board of Directors.
Equity/assets ratio	Equity including non-controlling interest as a percentage of total assets.			Measure financial position.
Net debt/equity ratio	Interest-bearing net debt divided by equity including non-controlling interest.			Measure leverage of financial position.
Adjusted equity attributable to equity holders SEK bn	Equity attributable to equity holders Unrealized surplus value in RD Unrealized CD gains Effect in unrealized equity in PPP-portfolio Less standard corporate tax, 10% Adjusted equity		32.9 3.2 9.8 1.6 –1.4 46.1	Measure financial position adjusted for surplus values in Project Development net of taxes. The standard corporate tax represents an approximation of the average corporate income tax within the Group.

18 Skanska Year-end report, January–Decemb ~~er 2019~~

Reconciliation between segment reporting and IFRSs

	External revenue	External revenue	Intra–Group revenue	Intra–Group revenue	Total revenue	Total revenue	Operating income	Operating income
SEK M	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018
Construction	146,0001	143,2641	13,579	14,630	159,579	157,894	3,772	1,099
Residential Development	12,431	10,739	52	0	12,483	10,739	1,195	1,505
Commercial Property Development	17,773	16,248	77	23	17,850	16,271	3,287	3,069
Total operating segments	176,204	170,251	13,708	14,653	189,912	184,904	8,254	5,673
Central	578	243	362	412	940	655	–388	–780
Eliminations	0	0	–14,070	–15,065	–14,070	–15,065	–38	–66
Total Group	176,782	170,494	0	0	176,782	170,494	7,828	4,827
Reconciliation to IFRSs2 Total IFRSs	–3,936 172,846	1,236 171,730	0 0	0 0	–3,936 172,846	1,236 171,730	–400 7,428	820 5,647
1 Of which external revenue from joint ventures in PPP-portfolio, SEK 7,223 M (8,173). 2 Of which effect from joint ventures in Residential Development proportionally –532 –160 –144 –160 Of which effect of different revenue recognitions –3,404 1,396 –256 980

Revenue by geographical area (IFRS)

Revenue by geographical area (IFRS)
	Construction		Residential Development		Commercial Property Development		Central and eliminations		Total
SEK M	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2019	Jan-Dec 2018
Nordics	60,113	58,474	10,897	11,570	5,691	5,561	–7,456	–7,729	69,245	67,876
of which Sweden	34,535	34,820	5,777	6,763	3,225	3,864	–5,172	–4,969	38,365	40,478
Europe	30,861	34,437	972	636	3,330	5,954	–4,084	–3,455	31,079	37,572
USA	68,605	64,983	0	0	5,245	4,301	–1,328	–3,002	72,522	66,282
Total operating segments	159,579	157,894	11,869	12,206	14,266	15,816	–12,868	–14,186	172,846	171,730

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Segment IFRS Segment IFRS Segment IFRS Segment IFRS
SEK M Jan-Dec 2019 Jan-Dec 2019 Jan-Dec 2018 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2019 Oct-Dec 2018 Oct-Dec 2018
Revenue
Construction 159,579 159,579 157,894 157,894 42,411 42,411 42,580 42,580
Residential Development 12,483 11,869 10,739 12,206 5,292 3,489 4,120 4,580
Commercial Property Development 17,850 14,266 16,271 15,816 7,063 8,069 7,082 7,415
Central and eliminations –13,130 –12,868 –14,410 –14,186 –3,369 –3,278 –4,093 –4,097
Skanska Group 176,782 172,846 170,494 171,730 51,397 50,691 49,689 50,478
Operating income
Construction 3,772 3,772 1,099 1,099 1,092 1,092 868 868
Residential Development 1,195 1,435 1,505 1,877 377 192 383 697
Commercial Property Development [1] 3,287 2,677 3,069 3,503 1,267 1,712 1,281 1,639
Central –388 –388 –780 –781 –247 –247 –141 –142
of which PPP-portfolio 24 24 31 31 –29 –29 42 42
Eliminations [1] –38 –68 –66 –51 –36 18 –8 1
Operating income 7,828 7,428 4,827 5,647 2,453 2,767 2,383 3,063
Net financial items –103 –88 36 39 –34 –40 –17 –16
Income after financial items 7,725 7,340 4,863 5,686 2,419 2,727 2,366 3,047
Taxes –1,353 –1,286 –934 –1,092 –477 –525 –528 –664
Profit for the period 6,372 6,054 3,929 4,594 1,942 2,202 1,838 2,383
Earnings for the period per share, SEK [2] 15.46 9.55 4.71 4.48
Earnings for the period per share
according to IFRSs, SEK [2] 14.68 11.17 5.34 5.80
1 Of which gains from divestments of
commercial properties reported in:
Commercial Property Development 4,275 3,634 4,005 4,096 1,610 2,024 1,653 2,007
Eliminations 240 204 321 380 132 127 137 187
----- End of picture text -----

2 Earnings for the period attributable to equity holders divided by the average number of shares outstanding.

~~Skansk~~ a Year-end report, January–December 2019 19

The Skanska Group

Summary income statement (IFRS)

Summary income statement (IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Revenue	172,846	171,730	50,691	50,478
Cost of sales	–156,540	–157,465	–44,780	–45,146
Gross income Selling and administrative expenses	16,306 –9,469	14,265 –9,473	5,911 –3,206	5,332 –2,446
Income from joint ventures and associated companies	591	855	62	177
Operating income Financial income	7,428 188	5,647 192	2,767 30	3,063 39
Financial expenses	–276	–153	–70	–55
Net fnancial items1 Income after fnancial items Taxes	–88 7,340 –1,286	39 5,686 –1,092	–40 2,727 –525	–16 3,047 –664
Proft for the period 1 Of which Interest income	6,054 152	4,594 144	2,202 32	2,383 43
Financial net pension costs	–84	–103	–25	–24
Interest expenses	–209	–335	–39	–111
Interest expenses from lease liabilities	–272	–	–73	–
Capitalized interest expenses	307	325	60	101
Net interest items Change in fair value	–106 4	31 11	–45 6	9 0
Other net fnancial items	14	–3	–1	–25
Net fnancial items Proft attributable to: Equity holders	–88 6,031	39 4,571	–40 2,195	–16 2,376
Non-controlling interests	23	23	7	7
Earnings per share, SEK2	14.68	11.17	5.34	5.80
Earnings per share after dilution, SEK3	14.62	11.11	5.32	5.77

2 Earnings for the period attributable to equity holders divided by the average number of shares outstanding.

3 Earnings for the period attributable to equity holders divided by the average number of shares outstanding after dilution.

Statement of profit or loss and other comprehensive income (IFRS)

Statement of profit or loss and other comprehensive income (IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Proft for the period	6,054	4,594	2,202	2,383
Other comprehensive income Items that will not be reclassifed to proft and loss Remeasurements of defned beneft plans	–895	–478	1,360	–1,058
Tax related to items that will not be reclassifed to proft and loss	166	59	–305	218
Items that have been or will be reclassifed to proft and loss Translation differences attributable to equity holders	–729 672	–419 1,299	1,055 –739	–840 –275
Translation differences attributable to non-controlling interests	3	3	–2	–1
Hedgingof exchange rate risk in foreign operations	4	–183	–43	6
Effects of cash fow hedges1	31	–30	79	28
Share of other comprehensive income ofjoint ventures and associated companies2	–41	272	116	–50
Tax related to items that have been or will be reclassifed toproft and loss	–10	7	–13	–3
Other comprehensive income after tax	659 –70	1,368 949	–602 453	–295 –1,135
Total comprehensive income	5,984	5,543	2,655	1,248
Total comprehensive income attributable to Equity holders	5,958	5,517	2,650	1,242
Non-controlling interests	26	26	5	6
1 Of which transferred to income statement	2	0	6	0
2 Of which transferred to income statement	148	154	225	33

20 Skanska Year-end report, January–Decemb ~~er 2019~~

Summary statement of financial position (IFRS)

Summary statement of financialposition (IFRS)
SEK M	Dec 31, 2019	Dec 31, 2018
ASSETS Non-current assets Property, plant and equipment	7,742	7,645
Property, plant and equipment right-of-use assets	4,616	–
Goodwill	4,057	4,324
Intangible assets	865	975
Investments in joint ventures and associated companies	3,442	3,288
Financial non-current assets1, 3	2,528	2,345
Deferred tax assets	1,862	1,933
Total non-current assets Current assets Current-asset properties2	25,112 46,373	20,510 42,391
Current-asset properties right-of-use land	3,980	–
Inventories	1,128	1,256
Financial current assets3	6,899	7,117
Tax assets	670	396
Contract assets	5,898	6,661
Trade and other receivables	27,213	27,243
Cash	8,745	10,722
Total current assets TOTAL ASSETS of which interest-bearing fnancial non-current assets	100,906 126,018 2,483	95,786 116,296 2,302
of which interest-bearing current assets	15,517	17,769
Total interest-bearing assets EQUITY Equity attributable to equity holders	18,000 32,924	20,071 29,250
Non-controlling interests	97	97
Total equity LIABILITIES Non-current liabilities Financial non-current liabilities3	33,021 2,565	29,347 3,912
Lease liabilities	7,843	–
Pensions	6,866	5,669
Deferred tax liabilities	1,045	711
Total non-current liabilities Current liabilities Financial current liabilities3	18,319 4,617	10,292 7,310
Lease liabilities	1,078	–
Tax liabilities	564	615
Current provisions	10,021	9,922
Contract liabilities	20,419	20,738
Trade and other payables	37,979	38,072
Total current liabilities TOTAL EQUITY AND LIABILITIES of which interest-bearing fnancial liabilities	74,678 126,018 16,051	76,657 116,296 11,171
of which interest-bearing pensions and provisions	6,866	5,669
Total interest-bearing liabilities 1 Of which shares	22,917 44	16,840 41
2 Current-asset properties Commercial Property Development	29,708	25,829
Residential Development	16,665	16,562
3 Items regarding non-interest-bearing unrealized changes in derivatives/fnancial instruments are included in the following amounts: Financial non-current assets	1	2
Financial current assets	127	70
Financial non-current liabilities	2	3
Financial current liabilities	50	48

Note: Contingent liabilities amounted to SEK 38.8 bn on December 31, 2019 (Dec 31, 2018: 47.6) and relates to joint operations in Construction and joint ventures in Project Development. For more information see 2018 Annual and Sustainability Report, Note 20B, 20C and 33. During the period, contingent liabilities decreased by SEK 8.8 bn.

~~Skansk~~ a Year-end report, January–December 2019 21

Summary statement of changes in equity (IFRS)

Summary statement of changes in equity (IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Opening balance	29,347	27,185	30,311	28,034
of which non-controlling interests	97	121	107	91
Change in accounting principle1	–67	–140	–	–
Adjusted opening balance	29,280	27,045	30,311	28,034
of which non-controlling interests	97	121	107	91
Dividend to shareholders	–2,462	–3,373	0	0
Change in group composition	0	–23	0	0
Dividend to non-controlling interests	–26	–27	–15	0
Effects of equity-settled share-based payments	245	254	70	65
Repurchase of shares	0	–72	0	0
Total comprehensive income attributable to Equity holders	5,958	5,517	2,650	1,242
Non-controlling interests	26	26	5	6
Closing balance	33,021	29,347	33,021	29,347
of which non-controlling interests	97	97	97	97

1 Change in accounting principle is attributable to the implementation of IFRS 16 (2019) and IFRS 9 (2018). For further information see the Annual and Sustainability Report 2018, Note 1 (on IFRS 16) and Note 3 (on IFRS 9).

Summary consolidated cash flow statement (IAS 7) (IFRS)

Summary consolidated cash flow statement (IAS 7) (IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Cash fow from operating activities before change in working capital, according to IAS 7	3,395	–20	1,044	–678
Cash fow from change in working capital, according to IAS 7	2,643	9,474	7,685	8,589
Net investments in property, plant and equipment and intangible assets	–1453	–2157	–272	–462
Tax payments on sold property, plant and equipment and intangible assets	–62	–29	–9	–15
Cash fow from business operations including taxes paid according to operating cash fow	4,523	7,268	8,448	7,434
Less net investments in property, plant and equipment and intangible assets	1,453	2,157	272	462
Less tax payments on sold property, plant and equipment and intangible assets	62	29	9	15
Cash fow from operating activities, according to IAS 7 Cash fow from strategic investments according to operating cash fow	6,038 –6	9,454 –16	8,729 0	7,911 0
Net investments in property, plant and equipment and intangible assets	–1,453	–2,157	–272	–462
Increase and decrease in interest-bearing receivables	307	–165	–821	–91
Taxes paid on sold property, plant and equipment and intangible assets	–62	–29	–9	–15
Cash fow from investing activities, according to IAS 7 Cash fow from fnancing operations according to operating cash-fow statement	–1,214 –688	–2,367 109	–1,102 –109	–568 84
Change in interest-bearing receivables and liabilities excluding lease liabilities	–3,415	–311	–2,716	–1,054
Increase and decrease in interest-bearing receivables	–307	165	821	91
Dividend etc1	–2,488	–3,472	–15	0
Cash fow from fnancing activities, according to IAS 7	–6,898	–3,509	–2,019	–879
Cash fow for the period	–2,074	3,578	5,608	6,464

1 Of which repurchases of shares SEK 0 M.

22 Skanska Year-end report, January–Decemb ~~er 2019~~

Operating cash flow (IFRS), supplementary information

Operating cash flow (IFRS), supplementary information	Operating cash flow (IFRS), supplementary information	Operating cash flow (IFRS), supplementary information	Operating cash flow (IFRS), supplementary information	Operating cash flow (IFRS), supplementary information
Operating cash flow
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Construction Cash fow from business operations	6,614	2,755	2,236	1,153
Change in working capital	–262	2,600	2,955	2,475
Net divestments(+)/investments(–)	–1,503	–2,080	–478	–459
Total Construction Residential Development Cash fow from business operations	4,849 –707	3,275 –476	4,713 –265	3,169 –173
Change in working capital	1,055	30	95	263
Net divestments(+)/investments(–)	2,354	1,604	892	1,536
Cash fow adjustment	0	0	0	–8
Total Residential Development Commercial Property Development Cash fow from business operations	2,702 –917	1,158 –1,193	722 –612	1,618 –1,232
Change in working capital	–1,130	1,393	70	280
Net divestments(+)/investments(–)	775	3,823	3,744	4,029
Cash fow adjustment	209	–39	–38	254
Total Commercial Property Development Central and eliminations Cash fow from business operations	–1,063 –286	3,984 –692	3,164 –217	3,331 –160
Change in working capital	–314	17	117	–225
Net divestments(+)/investments(–)	6	–31	55	–18
of which PPP-portfolio	124	17	87	17
Cash fow adjustment	0	0	1	0
Total central and eliminations Total cash fow from business operations	–594 4,704	–706 394	–44 1,142	–403 –412
Total change in working capital	–651	4,040	3,237	2,793
Total net divestments(+)/investments(–)	1,632	3,316	4,213	5,088
Total cash fow adjustment	209	–39	–37	246
Cash fow from business operations before taxes paid Taxes paid in business operations	5,894 –1,371	7,711 –443	8,555 –107	7,715 –281
Cash fow from business operations including taxes paid Net interest items, other net fnancial items and amortization of lease liabilities	4,523 –983	7,268 156	8,448 –156	7,434 120
Taxes paid in fnancing operations	295	–47	47	–36
Cash fow from fnancing operations	–688	109	–109	84
Operating cash fow from operations Net strategic divestments(+)/investments(–)	3,835 –6	7,377 –16	8,339 0	7,518 0
Dividend etc1	–2,488	–3,472	–15	0
Cash fow before change in interest-bearing receivables and liabilities	1,341	3,889	8,324	7,518
Change in interest-bearing receivables and liabilities excluding lease liabilities	–3,415	–311	–2,716	–1,054
Cash fow for the period	–2,074	3,578	5,608	6,464
Cash and cash equivalents at the beginning of the period	10,722	6,998	3,245	4,262
Exchange rate differences in cash and cash equivalents	97	146	–108	–4
Cash and cash equivalents at the end of the period	8,745	10,722	8,745	10,722

1 Of which repurchases of shares SEK 0 M.

~~Skansk~~ a Year-end report, January–December 2019 23

Group net divestments/investments (IFRS)

Group net divestments/investments(IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
OPERATIONS – INVESTMENTS Intangible assets	–116
		–225	–8	–66
Property, plant and equipment	–2,566	–2,351	–915	–659
Shares and participations	–108	–99	0	3
Current-asset properties	–22,173	–21,849	–6,744	–6,199
of which Residential Development	–9,308	–10,449	–2,553	–2,937
of which Commercial Property Development	–12,865	–11,400	–4,191	–3,262
Investments in operations STRATEGIC INVESTMENTS Businesses	–24,963 –6	–24,524 –16	–7,667 0	–6,921 0
Strategic investments Total Investments OPERATIONS – DIVESTMENTS Intangible assets	–6 –24,969 25	–16 –24,540 6	0 –7,667 20	0 –6,921 6
Property, plant and equipment	1,028	428	386	247
Shares and participations	284	84	245	7
Current-asset properties	25,258	27,322	11,229	11,749
of which Residential Development	11,740	12,068	3,455	4,483
of which Commercial Property Development	13,518	15,254	7,774	7,266
Divestments in operations Total divestments TOTAL NET DIVESTMENTS(+)/INVESTMENTS(–)	26,595 26,595 1,626	27,840 27,840 3,300	11,880 11,880 4,213	12,009 12,009 5,088
Depreciation, non-current assets	–3,043	–1,780	–776	–510

Capital employed in Project Development (IFRS)

Capital employed in Project Development (IFRS)
SEK M	Dec 31, 2019	Sep 30, 2019	Dec 31, 2018
Residential Development	12,954	13,444	13,636
Commercial Property Development	34,495	36,744	26,672
Total in Project Development	47,449	50,188	40,308

24 Skanska Year-end report, January–Decemb ~~er 2019~~

Parent Company[1]

The parent company’s revenue consists mainly of amounts billed to Group companies. The balance sheet consists of financial instruments almost exclusively in the form of Intra-Group receivables and liabilities. The parent company does not report any significant events during the period.

Summary income statement (IFRS)

Summary income statement (IFRS)
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Revenue	729	739	257	261
Selling and administrative expenses	–533	–697	–167	–137
Operating income Net fnancial items	196 2,863	42 3,931	90 –111	124 –29
Income after fnancial items Taxes	3,059 –21	3,973 –3	–21 –3	95 –29
Proft for the period	3,038	3,970	–24	66
Total comprehensive income	3,038	3,970	–24	66

Summary balance sheet (IFRS)

Summary balance sheet (IFRS)
SEK M	Dec 31, 2019	Dec 31, 2018
ASSETS Intangible non-current assets	11	13
Property, plant and equipment	0	1
Financial non-current assets2	11,810	11,768
Total non-current assets Current receivables	11,821 157	11,782 149
Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity	157 11,978 8,788	149 11,931 7,996
Provisions	254	315
Non-current interest-bearing liabilities2	2,816	3,500
Current liabilities	120	120
TOTAL EQUITY AND LIABILITIES	11,978	11,931

1 As a parent company in an IFRS-group, Skanska AB applies RFR2 in its accounting.

2 Of these amounts, SEK 318 M (Dec 31, 2018: 301) were intra-Group receivables and SEK 2,816 M (Dec 31, 2018: 3,500) intra-Group liabilities.

Note: The Parent Company’s contingent liabilities totaled SEK 173.5 bn on December 31, 2019 (Dec 31, 2018: 167.8), of which SEK 155.0 bn (Dec 31, 2018: 144.0) was related to obligations on behalf of Group companies. Other obligations, SEK 18.5 bn on December 31, 2019 (Dec 31 2018: 23.8), were related to commitments to outside parties.

~~Skansk~~ a Year-end report, January–December 2019 25

Share data

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Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
Earnings per share according to segment reporting, SEK [1] 15.46 9.55 4.71 4.48
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Share data
	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Earnings per share according to segment reporting, SEK1	15.46	9.55	4.71	4.48
Earnings per share, SEK1	14.68	11.17	5.34	5.80
Earnings per share after dilution, SEK2	14.62	11.11	5.32	5.77
Equity per share, SEK3	80.01	71.40
Adjusted equity per share, SEK4	112.04	103.99
Average number of shares outstanding	410,720,937	409,130,770
Average number of shares outstanding after dilution	412,585,074	411,415,278
Average dilution, %	0.45	0.56
Number of shares, at balance sheet date	419,903,072	419,903,072
Average price of total repurchased shares, SEK	137.54	137.54
Number of total Series B shares repurchased	26,888,228	26,888,228
of which repurchased during the year	0	435,000	0	0
Number of shares in Skanska's own custody	8,394,479	10,224,634
Number of shares outstanding	411,508,593	409,678,438

1 Earnings for the period attributable to equity holders divided by the average number of shares outstanding.

2 Earnings for the period attributable to equity holders divided by the average number of shares outstanding after dilution.

3 Equity attributable to equity holders divided by the number of shares outstanding.

4 Adjusted equity divided by the number of shares outstanding.

Five-year Group financial summary

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SEK M Jan-Dec 2019 Jan-Dec 2018 Jan-Dec 2017 Jan-Dec 2016 Jan-Dec 2015
Revenue 176,782 170,494 160,823 151,307 154,935
Operating income 7,828 4,827 5,504 8,199 6,461
Profit for the period 6,372 3,929 4,934 6,526 4,929
Earnings per share, SEK 15.46 9.55 12.01 15.89 11.96
Return on capital employed, % 15.1 11.2 13.3 21.8 17.8
Return on equity, % 21.4 14.1 18.6 28.3 22.5
Operating margin, % 4.4 2.8 3.4 5.4 4.2
Return on capital employed according to IFRSs, % 14.3 13.0 11.1 19.2 17.4
Cash flow per share according to IFRSs, SEK [1] 3.26 9.51 –2.44 –10.16 11.90
----- End of picture text -----

1 Cash flow before change in interest-bearing receivables and liabilities divided by the average number of shares outstanding.

Exchange rates for the most important currencies

Exchange rates for the most important currencies
	Average exchange rates		Exchange rates on the closing day
SEK	Jan-Dec 2019	Jan-Dec 2018	Dec 31, 2019	Dec 31, 2018
US dollar	9.46	8.70	9.33	8.94
British pound	12.07	11.60	12.24	11.35
Norwegian krone	1.07	1.07	1.06	1.03
Euro	10.58	10.26	10.45	10.25
Czech koruna	0.41	0.40	0.41	0.40
Polish zloty	2.46	2.41	2.45	2.38

26 Skanska Year-end report, January–Decemb ~~er 2019~~

Construction

Revenue and earnings

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SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
Revenue 159,579 157,894 42,411 42,580
Gross income 10,437 8,045 3,175 2,605
Selling and administrative expenses –6,702 –6,998 –2,094 –1,764
Income from joint ventures and associated companies 37 52 11 27
Operating income 3,772 1,099 1,092 868
Investments –2,542 –2,526 –875 –704
Divestments 1,039 430 397 245
Net divestments(+)/investments(–) –1,503 –2,096 –478 –459
Gross margin, % 6.5 5.1 7.5 6.1
Selling and administrative expenses, % –4.2 –4.4 –4.9 –4.1
Operating margin, % 2.4 0.7 2.6 2.0
Order bookings, SEK bn 145.8 151.7 49.0 49.1
Order backlog, SEK bn 185.4 192.0 – –
Employees 33,225 37,006 – –
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Revenue by business/reporting unit

Revenue by business/reporting unit
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Nordics	59,600	57,819	16,736	16,720
of which Sweden	35,233	35,490	10,078	10,643
Europe	31,366	34,735	8,151	9,280
USA	68,613	65,340	17,524	16,580
Total	159,579	157,894	42,411	42,580

Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating margin, %	Operating margin, %	Operating margin, %	Operating margin, %
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Nordics	2,299	2,177	723	600		3.9	3.8	4.3	3.6
of which Sweden	1,330	1,617	484	425		3.8	4.6	4.8	4.0
Europe	473	–421	18	143		1.5	neg	0.2	1.5
USA	1,000	–657	351	125		1.5	neg	2.0	0.8
Total	3,772	1,099	1,092	868		2.4	0.7	2.6	2.0

Order backlog SEK M Dec 31, 2019 Dec 31, 2018	Order backlog SEK M Dec 31, 2019 Dec 31, 2018	Order backlog SEK M Dec 31, 2019 Dec 31, 2018	Order backlog SEK M Dec 31, 2019 Dec 31, 2018	Order bookings Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Order bookings Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Order bookings Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Order bookings Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Order bookings Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Book-to build, R-12m	Book-to build, R-12m
SEK M	Dec 31, 2019	Dec 31, 2018		Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Dec 31, 2019	Dec 31, 2018
Nordics	62,244	61,639		59,437	65,239	15,797	19,402		100	113
of which Sweden	37,771	35,388		37,596	35,922	8,153	11,372		107	101
Europe	24,699	34,941		18,953	30,557	6,293	8,402		60	88
USA	98,427	95,462		67,428	55,923	26,938	21,343		98	86
Total	185,370	192,042		145,818	151,719	49,028	49,147		91	96

~~Skansk~~ a Year-end report, January–December 2019 27

Residential Development

Revenue and earnings	Revenue and earnings	Revenue and earnings	Revenue and earnings	Revenue and earnings
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Revenue	12,483	10,739	5,292	4,120
Gross income	1,986	2,181	668	562
Selling and administrative expenses	–791	–676	–291	–179
Operating income	1,195	1,505	377	383
Operating margin, %	9.6	14.0	7.1	9.3
Investments	–9,437	–10,542	–2,590	–3,026
Divestments	11,793	12,146	3,482	4,562
Net divestments(+)/investments(–) Capital employed, SEK bn	2,356 13.0	1,604 13.6	892 –	1,536 –
Return on capital employed, %1	9.8	11.4	–	–
Employees	551	542	–	–

Revenue

Revenue
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Nordics	11,296	9,574	4,874	3,712
of which Sweden	6,569	4,863	3,052	1,719
Europe	1,187	1,165	418	408
Total	12,483	10,739	5,292	4,120

Operating income1	Operating income1	Operating income1	Operating income1	Operating income1	Operating margin, %1 Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating margin, %1 Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating margin, %1 Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Operating margin, %1 Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Nordics	1,034	1,358	350	355	9.2	14.2	7.2	9.6
of which Sweden	675	752	322	216	10.3	15.5	10.6	12.6
Europe	161	147	27	28	13.6	12.6	6.5	6.9
Total	1,195	1,505	377	383	9.6	14.0	7.1	9.3

1 Development gain only. Construction margin reported under Construction.

Homes started	Homes started	Homes started	Homes started	Homes started	Homes sold Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Homes sold Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Homes sold Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018	Homes sold Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018
Nordics	2,847	3,512	1,328	1,623	3,203	2,968	1,350	1,200
of which Sweden	2,003	2,183	790	835	2,057	1,861	941	756
Europe	560	968	350	132	650	685	175	239
Total	3,407	4,480	1,678	1,755	3,853	3,653	1,525	1,439

Homes under construction C n Dec 31, 2019 Dec 31, 2018 Nordics 5,672 5,969 of which Sweden 3,789 3,725 Europe 1,458 1,570	Homes under construction C n Dec 31, 2019 Dec 31, 2018 Nordics 5,672 5,969 of which Sweden 3,789 3,725 Europe 1,458 1,570	Homes under construction C n Dec 31, 2019 Dec 31, 2018 Nordics 5,672 5,969 of which Sweden 3,789 3,725 Europe 1,458 1,570	Homes under construction C n Dec 31, 2019 Dec 31, 2018 Nordics 5,672 5,969 of which Sweden 3,789 3,725 Europe 1,458 1,570	ompleted unsold, umber of homes Dec 31, 2019 Dec 31, 2018 121 301 56 187 13 13	ompleted unsold, umber of homes Dec 31, 2019 Dec 31, 2018 121 301 56 187 13 13	ompleted unsold, umber of homes Dec 31, 2019 Dec 31, 2018 121 301 56 187 13 13	Homes under construction of which sold, %	Homes under construction of which sold, %
	Dec 31, 2019	Dec 31, 2018		Dec 31, 2019	Dec 31, 2018		Dec 31, 2019	Dec 31, 2018
Nordics	5,672	5,969		121	301		69	68
of which Sweden	3,789	3,725		56	187		70	72
Europe	1,458	1,570		13	13		72	68
Total	7,130	7,539		134	314		70	68

28 Skanska Year-end report, January–Decemb ~~er 2019~~

Commercial Property Development

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Revenue and earnings
SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018
Revenue 17,850 16,271 7,063 7,082
of which from divestment of properties 17,133 15,720 6,799 6,943
Gross income 4,101 3,936 1,551 1,559
Selling and administrative expenses –960 –928 –287 –298
Income from joint ventures and associated companies 146 61 3 20
Operating income 3,287 3,069 1,267 1,281
of which gain from divestment of properties [1] 4,275 4,005 1,610 1,653
of which write-downs/reversal of write-downs –89 –107 –19 –104
1 Additional gains included in eliminations 240 321 132 137
Investments –12,946 –11,452 –4,219 –3,249
Divestments 13,713 15,275 7,963 7,278
Net divestments(+)/investments(–) 767 3,823 3,744 4,029
Capital employed, SEK bn 34.5 26.7 – –
Return on capital employed, % 10.5 12.3 – –
Employees 427 414 – –
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Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	Revenue SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 6,665 7,549 1,011 2,446 Europe 4,398 4,421 825 629 USA 6,787 4,301 5,227 4,007	of which from divestments	of which from divestments	of which from divestments	of which from divestments	of which from divestments	of which from divestments
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Jan-Dec 2019	Jan-Dec 2018		Oct-Dec 2019		Oct-Dec 2018
Nordics	6,665	7,549	1,011	2,446		6,435	7,278		945		2,369
Europe	4,398	4,421	825	629		4,283	4,291		771		615
USA	6,787	4,301	5,227	4,007		6,415	4,151		5,083		3,959
Total	17,850	16,271	7,063	7,082		17,133	15,720		6,799		6,943
Operating income SEK M Jan-Dec 2019 Jan-Dec 2018 Oct-Dec 2019 Oct-Dec 2018 Nordics 1,323 1,306 269 207						of which from divestments
SEK M	Jan-Dec 2019	Jan-Dec 2018	Oct-Dec 2019	Oct-Dec 2018		Jan-Dec 2019	Jan-Dec 2018		Oct-Dec 2019		Oct-Dec 2018
Nordics	1,323	1,306	269	207		1,702	1,628		365		285
Europe	695	704	–83	–38		1,155	1,113		91		107
USA	1,269	1,059	1,081	1,112		1,418	1,264		1,154		1,261
Total	3,287	3,069	1,267	1,281		4,275	4,005		1,610		1,653
Capital employed
SEK M								Dec 31, 2019		Dec 31, 2018
Nordics								11,595		9,584
Europe								9,803		7,135
USA								13,097		9,953
Total								34,495		26,672

PPP–Portfolio value

PPP–Portfolio value	PPP–Portfolio value	PPP–Portfolio value
Unrealized development gain in PPP-portfolio SEK bn Dec 31, 2019 Sep 30, 2019 Dec 31, 2018 Present value of cash fow from projects 4.9 5.0 4.7 Present value of remaining investments –1.1 –1.1 –1.1 Net present value of projects 3.8 3.9 3.6 Carrying amount before Cash fow hedge / Carrying amount –2.5 –2.6 –2.5 Unrealized development gain 1.3 1.3 1.1 Cash fow hedge 0.3 0.5 0.3 Effect in unrealized equity1 1.6 1.8 1.4
SEK bn	Dec 31, 2019	Sep 30, 2019
Present value of cash fow from projects	4.9	5.0
Present value of remaining investments	–1.1	–1.1
Net present value of projects Carrying amount before Cash fow hedge / Carrying amount	3.8 –2.5	3.9 –2.6
Unrealized development gain Cash fow hedge	1.3 0.3	1.3 0.5
Effect in unrealized equity1	1.6	1.8

1 Tax effects not included.

~~Skansk~~ a Year-end report, January–December 2019 29

About Skanska

Skanska is one of the world’s leading construction and project development companies, focused on selected home markets in the Nordics, Europe and USA. Supported by global trends in urbanization and demographics, and by being at the forefront in sustainability, Skanska offers competitive solutions for both simple and the most complex assignments, helping to build a sustainable future for customers and communities.

Skanska’s business model

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Financial targets 2016-2020 Free working capital
2019
Investment
Revenue from opportunities
external customers Construction P roject development
External financing
Revenue with associated Internal contracts Development gains are generated ◀
contract profits ◀ and are realized upon divestment
Operating margin ≥ 3.5% Return on capital employed ≥ 10%
Operating margin 2.4% Return on capital employed 10.3%
Return on equity ≥ 18%
Return on equity 21.4%
Dividend 40-70% of profit
◀
◀ ◀
◀
◀
◀
◀
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Internal contracts and cooperation

Operational and financial synergies are, amongst other things, achieved through investments in Project Development, generating internal contracts for Skanska’s Construction stream, as well as through the collaboration between Business Units from different markets. Currently, SEK 23.0 billion of Skanska’s total order backlog are contracts involving more than one Business Unit, with revenue from internal contracts amounting to SEK 20.4 billion.

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Construction revenue from internal
Project Development contracts amounted to:
SEK 20.4 billion
Aqua, Malmö, Sweden
Skanska has invested in a new office project at
Universitetsholmen in Malmö, Sweden. The Aqua office
building comprises nine floors and will have a leasable
areas of about 10,000 square meters. Aqua will be
certified in accordance with the international standard
WELL and LEED, Platinum level. Construction is
underway and the office building is scheduled for
completion during 2022.
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Value of orders in backlog generated through cooperation between Business Units: SEK 23.0 billion Light rail extension, Shoreline – Lynnwood, USA Skanska USA Building and Skanska USA Civil are leading the project to build the the Lynnwood Link extension in Washington, USA. The project is located in the cities of Shoreline, Mountlake Terrace and Lynnwood. The project also include 3.5 kilometers aerial guideway, two elevated stations and a five story parking garage. Construction is underway and is scheduled for completion in the summer of 2024.

Skanska AB

www.skanska.com/investors

Skanska’s home markets

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Sweden
Finland
United States of America Norway
Denmark
United Kingdom Poland
Czech Republic Slovakia
Hungary
Romania
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For further information, please contact:

Magnus Persson, Executive Vice President and CFO, Skanska AB, tel +46 10 448 8900 André Löfgren, Senior Vice President, Investor Relations, Skanska AB, tel +46 10 448 1363 Karolina Cederhage, Senior Vice President, Communications, Skanska AB, tel +46 10 448 0880 Jacob Birkeland, Head of Media Relations, Skanska AB, tel +46 10 449 1957

This report will also be presented via a telephone conference and a webcast at 10:00 a.m. (CET) on February 7, 2020.

The telephone conference will be webcasted live at www.skanska.com/investors, where a recording of the conference will also be available later. To participate in the telephone conference, please dial +46 8 566 426 51, or +44 333 300 0804, or +1 631 913 1422. PIN code 79556082#.

This and previous releases can also be found at www.skanska.com/investors.

The information provided herein is such as Skanska AB is obligated to disclose pursuant to the EU market securities act (EU) no. 596/2014.